TaxTMI 
TaxTMI 
2006 (6) TMI 167
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent on the basis of the above decision of the Apex Court, namely, Smt. Amiya Bala Paul's case. In the applications, the Department has placed reliance on the following decisions:- (i) Addl CIT v. India Tin Industries (P.) Ltd. [1987] 166 ITR 454 (Kar.). (ii) CIT v. S. Teja Singh [1959] 35 ITR 408 (SC). (iii) Maneklal Vallabhdas Parikh & Sons v. CIT [1969] 72 ITR 637 (Guj.). 3. During the course of hearing of the applications, the ld. D.R. submitted that the Assessing Officer was competent to make a reference to the Valuation Cell to ascertain the value of the investment in the above property in view of section 142A of the Income-tax Act, 1961. He submitted that the said section has been inserted by the Finance Act, 2004, effective from 15-11-1972. He submitted that the order of the Tribunal dated 9-11-2004, be recalled and the additions made by the Assessing Officer on the basis of the DVO's report be confirmed. On the other hand, the ld. Authorized Representative of the assessee submitted that the cases cited by the Department in the Misc. Applications are not relevant. He further submitted that the Assessing Officer made a reference to the DVO under section 131(1) of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....VO estimated the total cost of the building at Rs. 27,91,300. The year-wise estimate made by the DVO is as under:- ------------------------------------------ Period Estimated year-wise investment ------------------------------------------ 12/94 - 3/95 14,07,281 4/95 - 3/96 12,48,848 4/96 - 9/96 1,35,171 &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt cannot be said to be a valid report. The Tribunal has also relied upon the decision of the jurisdictional High Court in the case of Dr. Avinesh Kumar Agarwal, 184 CTR 587, wherein also it was held that the reference to the DVO under section 131(1) of the Act for estimating the cost of construction was an invalid reference. The Tribunal has held that no addition can be made on the basis of the DVO's report, which has been obtained under section 131(1) of the Act. In the light of the above findings of the Tribunal, the Department has filed application and has stated that in view of the amendment made by the Finance Act, 2004, by inserting section 142A of the Act, which is effective from 15-11-1972, the DVO's report, obtained by the Assessing Officer under section 131 (1) of the Act be deemed to be a valid report and as such the addition made by the Assessing Officer be confirmed. At the outset, we may state that the cases relied upon by the Department, as mentioned in the applications and stated hereinabove, we observe that the said cases are not relevant as the facts and the issues involved in all these cases are not before us. However, we are also of the considered view that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al High Court in the case of Dr. Avinesh Kumar Agarwal. We further observe that the section 142A of the Act does not contain any provision that the report obtained by the Assessing Officer from DVO on a reference under section 131(1) of the Act could be deemed to be the report obtained on a reference made under section 142A(1) of the Act. In view of the above, we hold that the addition made by the Assessing Officer on the basis of the DVO's report obtained under section 131(1) of the Act could not be relied upon by the Assessing Officer for making the addition in the investment of the property in question under section 69B of the Income-tax Act, 1961, for both the assessment years, as the said report was an invalid report. Accordingly, the Tribunal has rightly decided the appeals by confirming the orders of the CIT(A). Therefore, we hold that there is no mistake apparent from the said order of the Tribunal dated 9-11-2004, and accordingly, both the miscellaneous applications filed by the Department are rejected. 6. Before we part with these Misc. Applications, it may be stated that the similar applications filed by the Department on identical issues and facts have been considere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted by Finance (No.2) Act of 2004 or not. Under Chapter IV of the Income-tax Act, dealing with computation of capital gains, the Assessing Officer is entitled to make reference to the Valuation Officer under section 55A of the Act with a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter. The Assessing Officer referred the valuation of property to DVO by invoking his powers under section 131(1)(d) of the Act. The Hon'ble Supreme Court in the case of Smt. Amiya Bala Paul, inter alia, held that the power of the Assessing Officer under sections 131(1) and 133(6) is distinct from and does not include the power to refer a matter to the Valuation Officer under section 55A. It was held that the power to refer any dispute to a Valuation Officer were already available in sections 131(1), 133(6) and 142(2), there was no need to specifically empower the Assessing Officer to do so in certain circumstances under section 55A. It was held that section 55A having expressly set out the circumstances under and the purposes for which a reference can be made to a Valuation Officer, there was no question of the Assessing Officer invoking the general powers o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion which inter alia empowers the Court "to make a local investigation" and also "to hold a scientific, technical or expert investigation". The authority of Valuation Officer was created under the Wealth-tax Act by Taxation Laws (Amendment) Act, 1972, with effect from 15-11-1972. The scope of power under section 131 vested in an Assessing Officer to make a reference to the Valuation Officer for estimating the cost of construction of properties has been a matter of different legal interpretation. With a view to remove any doubt in this regard, it is proposed to insert a new section 142A, with retrospective effect from 15-11-1972, so as to clarify that Assessing Officer has and always had the power to make a reference to the Valuation Officer. Sub-section (1) of proposed section provides that where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B is required for the purposes of making any assessment or reassessment, the Assessing Officer may require the Valuation Officer to make an estimate of the same and report to the Assessing Officer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uture. In stating the principle that 'a change in the law of procedure operates retrospectively and unlike the law relating to vested right, is not only prospective, the Supreme Court has quoted with approval the reason of the rule as expressed in MAXWELL: "No person has a vested right in any course of procedure. He has only the right of prosecution or defense in the manner prescribed for the time being by or for the Court in which the case is pending, and if, by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode'". 8. In my opinion, non-reference of section 131(1)(d) in the newly inserted section 142A is of no consequence because as already noted earlier, it is a procedural section only. This section has been incorporated in the Act in order of overcome the consequences as obtaining after the decision of the Hon'ble Supreme Court in the case of Smt. Amiya Bala Paul. As noted earlier, in Amiya Bala Paul's case the Hon'ble Supreme Court had held that since section 55A has specifically been incorporated, therefore, powers under section 131(1)(d) or 133(6) could not be utilized. In line with this reasoning of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Rs. 5,34,000. Following the Allahabad High Court decision in the case of Madho Mahesh Sugar Mills (P.) Ltd. v. CIT [1973] 92 ITR 503, the Appellate Assistant Commissioner accepted the assessee's claim that the entire gratuity liability had accrued during the previous year as the liability had arisen under the Payment of Gratuity Act, 1972, which had come into force during the previous year only. The Tribunal dismissed the revenue's appeal for more or less identical reasons. Section 40A(7) was introduced in the Income-tax Act, with retrospective effect from 1-4-1973, by the Finance Act, 1975, on 12-5-1975. Since the assessment order and the appellate order of the Appellate Assistant Commissioner were completed long before the insertion of sub-section (7) in section 40A and even the order of the Tribunal was passed on 24-3-1975, this provision was not, rather could not have been considered by any of the authorities below. For considering whether and to what extent the provisions of section 40A(7) inserted with retrospective effect are attracted to the assessee's claim for deduction, so many aspects of the matter will require examination. This, according to him could not be legal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has to be held that the entire liability including the aforesaid amount of Rs. 5,34,000 accrued during the previous year, Accordingly, we answer the reframed question in the affirmative and in favour of the assessee." 11. Thus, the Hon'ble High Court though agreed that the liability for payment of gratuity had accrued in view of the provisions of Payment of Gratuity Act, it directed the Tribunal to decide the issue in accordance with law after taking into consideration certain provisions which had come on the statute book which were applicable in the year under reference. Therefore, if at the reference stage, the Hon'ble High Court held that if a provision had been incorporated with retrospective effect it has to be given due effect. 12. In my humble opinion if it is held that non-reference of section 131(1)(d) will not validate the references made earlier then the proviso to section 142A will become redundant. It is well settled law that no law is brought in by legislation which is redundant. Therefore, in my humble opinion, it is to be held in all such cases where assessment have not attained finality, the references to Valuation Officer will be deemed to be under section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecall the order dated 9-11-2004, in above appeals?" The ld. A.M. has preferred to couch the difference in the following words:- "Whether on the facts and in the circumstances of the case, in view of the newly inserted provisions of section 142A with retrospective effect from 15-11-1972 by the Finance (No.2) Act, 2004, the order dated 9-11-2004, passed in ITA Nos. 1399 & 1400/Alld/1998 should not be recalled as held by the ld. J.M. or be recalled as held by the ld. A.M.?" In substance, there is no difference in the above two questions. However, since the two learned members have not agreed on the framing of the question itself, I propose to reframe the question as follows which will bring out the point of difference quite succinctly:- "Whether on the facts and in the circumstances of the case, the applications filed by the Department should be dismissed or the same should be allowed by recalling the order of the Tribunal in view of the provisions of section 142A of the Income-tax Act, 1961?" 2. A brief background leading to the above controversy will not be out of place here. The assessee constructed a building during the period December, 1994 to September, 1996, in w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it took out of its purview the concluded assessments. The ld. A.M. finally concluded that the proviso to section 142A cannot be rendered redundant merely on account of non-reference of section 131(1)(d) in section 142A. 4. After apprising about the facts, the ld. D.R. stressed upon the applicability of section 142A since it had a retrospective operation with effect from 15-11-1972. It was contended that since the appeals filed by the department were pending as on 30-9-2004, the assessment cannot be said to have been finalized and hence the provision was applicable. In support of the argument that an assessment is deemed to pending till the Tribunal decides the appeal, the ld. D.R. relied on the judgment of the Gujarat High Court in the case of CIT v. Mayur Foundation [2005] 274 ITR 562. Further, it was contended that the speech of the Finance Minister can be relied upon to throw light on the object and purpose of the particular provisions introduced by the Finance Bill. For this proposition, the judgment of the Supreme Court in the case of Kerala State Industrial Development Corpn. Ltd. v. CIT [2003] 259 ITR 51] was relied upon. It was argued that the Memorandum explaining the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntions and have carefully perused the proposed orders of my two learned brothers. After due consideration, I am inclined to agree with the view taken by the ld. Accountant Member (A.M.). At the outset, it may be mentioned that I am in total agreement with the reasoning of the ld. A.M. However, in addition, I proceed to give additional reasons and also to elaborate the reasons given by the ld. A.M. 8. First, let me deal with the decisions relied upon on behalf of the assessee. The first decision relied upon is that of the Allahabad High Court in the case of Dr. Avinesh Kumar Agarwal. This judgment was rendered in September, 2003, i.e., before the insertion of section 142A, and hence, the law declared in the case of Amiya Bala Paul was followed. There cannot be any dispute over that. However, in the present case we are concerned with the issue whether the law laid down in the case of Amiya Bala Paul still applies in the light of the insertion of section 142A. In my view, the judgment of the Allahabad High Court cannot help us to resolve the controversy with which we are presently concerned. 9. The next judgment relied upon is that of Punjab & Haryana High Court in the case of K....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court also. What the proviso provides for is that section 142A will not disturb those assessments which have become final on or before 30-9-2004. But section 142A can certainly disturb those cases where reassessments are to be made under section 153A even where assessments have become final and conclusive on or before 30-9-2004. As an illustration, if in a given case, the assessment has become final, say on 1-9-2004, then section 142A cannot be pressed into service. Now in the same case, if a search has taken place, say on 1-10-2004, which entails reassessment, then section 142A can certainly be pressed into service and the assessee cannot take the shelter of the proviso by contending that assessment in his case had become final before 30-9-2004. This, in my opinion, is the true purport of the proviso and the High Court has also meant the same thing. Thus, to say that section 142A applies only in case of reassessments under section 153A is too much an over-simplification of the provision. Accordingly, this argument is rejected. Neither of the judgments relied upon by the assessee can help resolve the controversy. 11. The next important argument of the assessee is that section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a well-settled principle of law that where the authority making an order has power conferred upon it by the statute to make an order made by it and an order is made without indicating the provision under which it is made, the order would be deemed to have been made under the provision enabling the making of it. In my opinion, the same rule will apply with regard to exercise of power also. Thus, I agree with the ld. A.M. that though the power of reference may have been exercised under section 131 and though section 142A does not refer to section 131, still section 142A shall operate since it has retrospective operation from 15-11-1972. 12. The next argument that why it is effective from 15-11-1972 even though section 131 was on the statute book prior to that date is hardly relevant. The simple reason is that under subsection (2) of section 142A, reference has to be made to the Valuation Officer who exercises powers under section 38A of the Wealth-tax Act, 1957. This authority was created from 15-11-1972. Hence, the effect of section 142A from 15-11-1972 and not before that. 13. The remaining argument about conditions of sections 69, 69A etc. to be fulfilled prior to applying....