TaxTMI 
TaxTMI 
1997 (5) TMI 105
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....construction to the Departmental Valuation Cell. According to the Valuer's Report, the estimated cost of construction was Rs.12,08,000. On the other hand, the assessee filed a Report from a Registered Valuer, according to which, the cost of construction was Rs. 5,06,000 only. The assessee submitted various objections to the valuation by the Departmental Valuer but the Assessing Officer rejected them saying that they were the same which were made before the Valuation Cell. He, accordingly, estimated the investment up to the year at Rs.12,08,000. The pro rata investment in this year was taken at 19.32% of Rs.12,08,000 i.e., Rs.2,33,144 as against Rs.95,440 shown by the assessee. The difference of Rs.1,37,404 was added to the assessee's income for the year as "Income from undisclosed sources". 3. The CIT(A) went into the matter in a greater detail. He summarised the objections to the report of the Valuation Cell and made out a comparative chart of the valuation as per Departmental Valuer and as per Registered Valuer as under: "3. Before me, the A.R. has reiterated the objections taken before the ITO and has also assailed the valuation made by the Valuation Cell on other grounds ....
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.... @ 7.5% 44,052 @ 10% 25,000 -------------- ---------- 5,43,309 2,37,407 First Floor: As per Departmental Valuer ....
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.... 4,62,147 2,70,965 Second Floor Cost (including services) 2,46,915 24,801 Less: Less: Self supervision Self supervision @ 7.5% ....
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....hat year, was about Rs.2,50,000. 5. The assessee is now in appeal before us for the addition sustained by the CIT(A) whereas the Department is in appeal before us for the relief allowed by the CIT(A). 6. The ld. counsel for the assessee reiterated the same arguments and emphasised that the cost for second floor, retained by the CIT(A), was still excessive as the actual construction was only of one room 21 X 11 and some pillars of 7' height each. Our attention was invited to a photograph, which was made available at the earlier stages also. According to him, the registered valuer has rightly taken the valuation at Rs.22,421 only. The ld. counsel further emphasised that the foundation was an old one, built in 1974-75, for Rs.30,000 only. Thereafter, further construction had been done from assessment years 1982-83 to 1988-89. The Valuation Cell had not given any credit for lower cost of foundation in the assessment year 1974-75. 7. The ld. counsel also stated that initially the assessment was completed under section 143(1) of the Act but was re-opened under section 143(1)(b) which was not permissible. 8. The ld. D.R., on the otherhand, submitted that excessive relief had b....
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....o reliance can be placed on such books of account. It is true that the Income-tax Officer has no option but to rely on the valuation report, which is a document prepared by an expert and is admissible." 11. We have to see whether the estimate, made by the Valuation Cell, is reasonable and whether the relief allowed by the CIT(A) is reasonable. The CIT(A) has given a comparative chart of the valuation by the Valuation Cell and by the Registered Valuer. However, there is one factor due to which two cannot be compared on. The Valuation Cell has proceeded on the basis of the plinth area rates, which takes into account the quantity of material and labour in a specified unit of area. On the otherhand, the Registered Valuer has taken the quantities involved in the construction, ie., the cubic content of the pillars, No. of bricks and so on. It is further stated in the Registered Valuer's report that the P.W.D. rates have been adopted, whereas the Valuation Cell has adopted C.P.W.D. rates as duly adjusted for Gaya. In our opinion, it is better to proceed on the basis of plinth area rates, which are verifiable and are not in dispute, whereas the quantities involved in construction, as ad....
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....76 to 1981-82, no construction was done. The effective construction started from the assessment year 1982-83 and continued till assessment year 1988-89. The previous year of the assessee is financial year, that is to say; from 1-4-1985 to 31-3-1986. During that period, the assessee spent a sum of Rs.95,440 on construction and declared the same before the Assessing Officer. The Assessing Officer wanted to know the actual amounts spent by the assessee on construction of the hotel complex during that period and he perhaps, thought that since the Departmental Valuation Cell which is functioning under section 16A and section 55A, for determining the fair market value of properties and assets, under the Wealth-tax Act as well as under the Income-tax Act respectively, the matter for knowing the real and actual cost of construction should be referred to Departmental Valuation Officer (DVO). Keeping this in mind, the Assessing Officer made a reference to the DVO to ascertain the cost of construction made by the assessee. Here, I would like to say that there is no express statutory provision or rule either under the Income-tax Act or the Rules framed thereunder empowering, enabling or author....
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....sclosed the amounts spent for construction of the building. Needless to say that this enquiry is part of assessment process and, thus, a quasi-judicial function. Such quasi-judicial function in my view cannot be abdicated, surrendered, assigned or delegated to or in favour of third persons or strangers until and unless specifically authorised by law. To my mind and knowledge, I reiterate, there is no specific power or authorisation given to the Assessing Officer either under the Income-tax Act or the Rules. In such a situation, the Assessing Officer cannot refer the matter to the DVO and ask him to determine the cost of construction on which basis he can make an addition, under the deeming provisions of section 69 of the Act to assessee's income from some undisclosed sources. 4. The only power an Assessing Officer has under the Income-tax Act, 1961 for reference to the DVO is as contained in section 55A of the Act and that is for the purpose of ascertaining the fair market value of a capital asset for the purpose of levying capital gain as found in Chapter IV-E of the Act. This authorisation under section 55A to the Assessing Officer for making a reference to the DVO cannot be i....
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....orised by law to tender such opinion. 7. Cost and value are the two different concepts. The value of an article or thing may be say "X" amount, but an assessee may purchase it for a lesser amount for variety of reasons. In such a case, the cost to such purchaser assessee will be lesser than the real market value. It is common knowledge that Doctors, Lawyers, Chartered Accountants, Engineers, Architects and lot of other persons occupying high posts and status in society (which I refer them as Big People) get substantial concessions and reductions in the purchase price of several commodities, article and things in the market compared to other common citizens or lesser mortals (whom I refer as Small People). The cost of articles or things to such Big People will be less compared to the cost of the same article to Small People. I pose a question to my sale can the Assessing Officer make addition under any deeming provision of Income-tax Act in the case of Big People on the ground that market price/value of a particular article or thing is opined by an expert to be more than what was spent while purchasing? The answer obviously will have to be "No". 8. The Valuation Cell of the De....
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....o make an application on 4-2-1988 and pay money for obtaining such a report which is adverse to him and being used by the Assessing Officer for making addition under the deeming provisions of section 69 of Income-tax Act, 1961. These facts are mentioned at page 22 of the paper book filed in this appeal. The Assessing Officer has brushed aside the objections raised by the assessee that the opinion given by the DVO was imaginary and incorrect. The assessee brought out the anomalies in the report of the DVO and also supported his case by obtaining another report from a private registered valuer which is placed at pages 23 to 32A of the assessee's paper book. The Assessing Officer has not applied his mind to the facts and figures furnished by the expert Registered Valuer of the assessee. 11. It is well-settled law that valuation reports given by experts are nothing but opinions and I reiterate, it is not fair, just and equitable to subject the assessee to tax on the basis of such opinions under the deeming provisions contained in the Income-tax Act, 1961 without there being on record any corroborative, cogent and tangible evidence that the assessee did spend more than what is declar....
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....troversy involved relates to an addition of Rs.1,37,400 made by the Assessing Officer towards unexplained investment in the construction of a building by the assessee under section 69 of the Income-tax Act, 1961 (hereinafter referred to as "the Act" for brief). 4. The assessee constructed a hotel complex in the name and style "M/s. Shanti Complex' for which investment during the year under consideration was shown at Rs.95,440, the cumulative figure of investment up to that point of time standing at Rs.9,94,522 as mentioned in the assessment order but claimed by the learned counsel for the assessee to stand at Rs.5,02,656. 5. It is an admitted position that proper books of account in respect of the construction in question were not maintained by the assessee which led to a reference by the Assessing Officer to the Departmental Valuation Cell for the determination of the cost of construction. The Departmental Valuation Officer (hereinafter referred to as Valuation Officer) reported this figure at Rs.12,08,000 which far exceeds the figure of Rs.5,06,000 claimed by the assessee on the strength of a report submitted by him from a Registered Valuer. 6. Various objections were ta....
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....lly-tenable, in the submission of the department, the Assessing Officer was well within his legal competence to have done so. 11. Reference in this respect has been firstly made to section 55A of the Act, but a position taken on behalf of the assessee that the sole provision entitling in the Income-tax Law an Assessing Officer to make a reference could be made use of only with a view to ascertain the 'fair market value' of a 'capital asset' for the purposes of Chapter IV of the Act, which dealt with "computation of income from capital gains". As against this, it was submitted on behalf of the department that the office of the Valuation Officer was created by a Parliamentary Legislation, viz., section 16A contained in Wealth-tax. Act, 1957, making him as part and parcel of Income-tax Department. He was not a stranger to the administration of the Direct Tax Laws. Even under the Income-tax Act he could be appointed as a Commissioner by virtue of the provisions of clause (d) of sub-section (1) of section 131 vesting the various income-tax authorities with the power to 'issue commissions'. This has been seriously opposed on behalf of the assessee on the count that in income-tax proce....
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....verified in the manner specified by the (Assessing Officer), the Deputy Commissioner (Appeals), the (Deputy Commissioner), or the Commissioner (Appeals), giving information in relation to such points or matters as, in the opinion of the (Assessing Officer), the Deputy Commissioner (Appeals), the (Deputy Commissioner) or the Commissioner (Appeals), will be useful for, or relevant to, any proceedings under this Act." 13. Turning to the facts of the instant case, consider the plight of the Assessing Officer before whom a claim is lodged by an assessee stating a figure having been invested qua a particular investment. He himself is not an expert, in most of the cases neither a construction engineer nor an architect and perhaps having no background whatsoever of a Civil Engineer. Prima facie he is not satisfied with the assessee's claim which he wants to have verified. Why cannot he refer the matter for such verification to a Departmental Valuation Officer. No doubt, he can also request a private valuer or a valuer approved by the CBDT or a Departmental Valuation Officer for such job. One should not feel irked by the mere fact that a Departmental Valuation Officer appointed under the....
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.... cases and have also been made subject to the liability of being removed from the register abovestated in the event of certain contingencies. It is also important to mention that the Registered Valuers have been authorised to attend before any wealth-tax authority and even before the Appellate Tribunal, the final fact-finding body in the implementation of Direct Tax Laws in the country in connection with any matter relating to the valuation of an asset in pursuance of section 34AA of the Wealth-tax Act. All these rigours would mean that a Registered Valuer is a qualified person, not a stranger or a man from the street, has been vested with certain powers by a Parliamentary Legislation and correspondingly subjected to certain liabilities. If one ventures to make a comparison between a "Valuation Officer" on the one hand, and "registered Valuer" on the other hand, often he would be justified in saying that two are the species of same genus, one of the main differences being that while a Valuation Officer for all practical purposes is an Officer of Income-tax Department, a Registered Valuer is not and is entitled to practice and advice privately. However, this difference would not mak....
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....that while the valuation of an asset is its market value on a particular date in the particular part of the country or town, its cost to a citizen may be less or more depending upon his resourcefulness, wisdom and caution used by him in making the purchases in a discrete/callous manner, as the case may be, yet it Is not as if a Valuation Officer ceases to be an expert in ascertaining the cost of an asset. Valuation on a particular date, he would arrive at in the normal manner by considering the plot, area, the magnitude and the quality of construction made thereon, etc., while, if the cost of a project is intended to be claimed at a figure lower than at which it is valued, it being within the special knowledge of an assessee, in law it is he who is required to plead the relevant facts and that is why, inter alia, the Valuation Officer is obliged both in law and in equity to provide an oppurtunity of being heard to the concerned assessee. Any mitigating or extenuating circumstances which favour the assessee would, thus, be taken care of by the Assessing Officer. In my considered opinion, the Valuation Officer in this background would, therefore, be able to arrive at the valuation as....
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....e Departmental Valuation Officer as is evident from the document prepared by him results in my inability to appreciate as to how and from where the Assessing Officer could be said to justify the observations made by him extracted above that "the statement made before me are the same which were made before the Valuation Officer at the time of inspection of the building and later on, no new materials have been brought on record". Primary evidence in law, inter alia, is that what one hears, what one seens or say what one reads, all my himself. it is inconceivable to think that the Assessing Officer would be present at the time of inspection of the building by the Valuation Officer and, therefore, had the opportunity of hearing/objections of the assessee. Similarly, in the absence of any narration of this aspect of the matter, such objections could also not come to the notice of the Assessing Officer by studying and examining the contents of the valuation report. In that situation, the conclusion drawn by him that the objections made by the assessee were the same which were made before the Valuation Officer is non-sequitur and cannot be given any credence. 24. Not only this, I feel ....
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....s.1,37,404 is added back as income of the assessee from undisclosed sources." 25. The use of the word 'Private' to the extent that the Registered Valuer is not a Government Officer nor on the pay-roll of the Income-tax Department may be justified but not further. The demeaning of the report of the Registered Valuer by the Assessing Officer, as the above language suggests, is wholly unjust, unwarranted and uncalled for. It is the report of an expert appointed under the provisions of Wealth-tax Act after a rigorous procedure is followed in making such an appointment. It is not a spurious document or something from 'anybody' from the street. The legal value and sanctity which it carried ought to have been accorded to it by the learned Assessing Officer who totally ignored it, accepted the report of a coordinate authority, namely, Valuation Officer appointed by the department, lock stock and barrel and that too without any demur. As a quasi-judicial authority, the Assessing Officer should have arrived at a conclusion with fair hearing to the assessee and proper consideration of material placed and relied by him, in which he has failed. Interestingly even the report of the Valuation ....