TaxTMI 
TaxTMI 
2016 (11) TMI 708
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....ted on following two substantial questions of law: "(i) Whether ITAT were justified in holding that certain provisions of building bye laws framed by J.D.A in Jan, 1996 were to apply retrospectively for Wealth Tax assessment on valuation date 31.3.1987. (ii) Whether ITAT were justified in holding that a certain provision of bye laws of J.D.A of Jan, 1996 were to apply in the case of Assessee when this bye laws has itself excluded case of properties like that of Assessee where construction according to sanctioned plan has already been made." 4. In remaining appeals, i.e W.T.A Nos. 292 of 2012, 295 of 2012, 294 of 2012, 241 of 2012, 169 of 2005, 395 of 2012 and 194 of 2006 substantial questions of law are similar above questions but differently worded and read as under: "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that since the regulations of J.D.A were to be operative retrospectively, the assessee was justified in claiming that in view of the Explanation to Rule 6 read with the relevant J.D.A Regulation, the specified area was to be worked out and as such Rule 8(b) read w....
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....se, nothing has been placed on record. The aforesaid house spread over a land measuring 28,824.02 Sq.Mtr. The covered area is 1400 Sq.Mtr and unbuilt area is 27,424 Sq.Mtr. 7. For the assessment year 1987-88, legal heir of Assessee filed return of Wealth Tax on 16.7.1997 declaring total net wealth at Rs. 2,62,180/-. The return did not include value of Jaipur House (hereinafter referred to as 'disputed property'). The Assessment was completed under section 16(3) of Act, 1957 vide Assessment order dated 30.09.1988 at Rs. 3,00,700/- 8. Assessing Officer (hereinafter referred to as 'A.O.') subsequently received information that in Wealth Tax return, value of disputed property was not disclosed. Notices were issued to family members to ascertain ownership of the said house. Assessee thereafter suo-motu filed revised return of Wealth Tax, dated 26.3.1998, wherein disputed property was included in the net wealth of Assessee. A.O treated this "revised return" as nonest since regular proceedings were already completed. Consequently notice u/s 17 of Act, 1957 was issued in reply whereto Assessee submitted that "revised return" filed on 26.3.1998 itself be treated as rep....
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....nt and would have to be considered for assessment of value of disputed property. 3. Regulations, 1996 would operate retrospectively, thus apply from assessment year 1987-88 and "Specified Area" has to be worked out as per aforesaid Regulations read with Rule 6, Schedule III of Act, 1957. 13. Tribunal also said that in view of answers to the aforesaid grounds, a fourth ground that CWT(A) was not justified in upholding increase of value of land in dispute by 29% was not necessary for decision. 14. Counsel for appellant contended that Regulations, 1996, came into force on 25.6.1996/28.6.1996, will have no application for valuation of disputed property on the date i.e. 31.3.1987. The said Regulations, 1996 would have no application to a period prior to its enactment. He also said that purpose of Regulations, 1996 was to regulate future construction and not for assessment of existing one, which was already raised/existed. At that time there was no occasion to raise construction in conformity with Regulations, 1996. 15. Learned counsel for respondent on the contrary sought to advance his submissions to support the view taken by Tribunal and we shall discuss the same in ....
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....r clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice has issued under that sub - section." (emphasis added) 19. Section 17(1) provide that A.O, if has reason to believe that true and full material facts necessary for assessment of net wealth of Assessee for any assessment year etc. have not been disclosed, he will be required to provide such material facts and then A.O. would proceed for assessment or re-assessment for such net wealth. In the present case, this net wealth which according to A.O. has escaped assessment or in respect whereof material facts were not disclosed consisted of disputed property. Hence, its value had to be assessed. For the purpose of assessment of value of a property, a mechanism has been provided in the Act, 1957 itself and that leads us to Section 7 thereof. 20. Since in the ....
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....on 16 A, the value of such asset shall be estimated to be the price, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date or,in the case of an asset being a house referred to in sub-section (4), the valuation date referred to in that sub-section. (4) Notwithstanding anything contained in sub-section (1),the value of a house belonging to the assessee exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became owner of the house, or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later: Provided that where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of this sub-section shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf in the return....
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.... residential unit." (emphasis added) 23. We may also place on record that proviso to Section 7 to sub section (2) has subsequently been omitted by Finance Act 1992 with effect from 1.4.1993. 24. Simultaneous amendments were also made in the Rules 1957 and Rule 1BB was omitted by Wealth Tax (Amendment) Rules, 1989 with effect from 1.4.1989. 25. Since Section 7 now contemplates assessment/determination of value in the manner laid down in Schedule III to Act, 1957, we find that this Schedule III was also inserted by Direct Tax Laws (Amendment) Act, 1989 with effect from 1.4.1989. It contain rules for determining value of assets having several parts but we are concerned only with Part A and B thereof. Part A basically contains Rule 2 defining several words for the purpose of Schedule III and the relevant provisions i.e 3 to 8 for valuation of immovable property are in Part B. For our purposes, Rules 3, 6 & 8 are relevant and the same are reproduced as under: "3. Subject to the provisions of rules 4, 5, 6, 7 and 8, for the purposes of sub-section (1) of section 7, the value of any immovable property, being building or land appurtenant thereto, or part thereof,....
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....e difference between the unbuilt area and the specified area exceeds fifteen percent but does not exceeds twenty percent of the aggregate area, by an amount equal to forty percent of such value. Explanation ─ For the purposes of this rule and rule 6,─ (a) " aggregate area", in relation to the plot of land on which the property is constructed, means the aggregate of the area on which the property is constructed and the unbuilt area; (b) " specified area", in relation to the plot of land on which the property in constructed, means ─ (i) Where the property is situate at Bombay, Calcutta, Delhi or Madras, sixty percent of aggregate area; (ii)Where the property is situate at Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur, Kanpur, Lucknow, Ludhiana, Madurai, Nagpur, Patna, Pune, Salem, Sholapur, Surat, Tiruchirapalli, Trivandrum, Vadodara (Baroda) or Varanasi (Benaras), Sixty-five percent of the aggregate area; and (iii) where the property is situate at any other place, seventy percent of the aggregate area: Provided that where, under any law for the ....
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....y so to do. (2) For the purpose of estimating the value of any asset in pursuance of a reference under sub-section (1), the Valuation Officer may serve on the assessee a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the Valuation Officer may require. (3) Where the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return made by the assessee under section 14 or section 15, he shall pass an order in writing to that effect and send a copy of his order to the Wealth Tax Officer and to the assessee. (4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value declared in the return made by the assessee under section 14 or, section 15, or where the asset is not disclosed or the value of the asset is not declared in such return or where no such return has been made, the Valuation Officer shall serve a notice on the assessee intimating the value which he proposes to estimate and giving the assessee an opportunity to state, on a date to be specified int he notice, his objections either in person....
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....method of valuation is a rule of evidence and thus may have retroactive effect i.e applicable in the pending cases. Different High Courts had taken this view earlier which came up for consideration before Supreme Court in the above matter. We may refer to some of relevant judgments, since observations therein would be helpful to understand real application of provisions in question. 31. Rule 1BB of Rules, 1957 came up for consideration, which, before 1.4.1989, provided method of valuation of an asset, initially before Gujrat High Court in CWT versus Kasturbhai Mayabhai 1987 164 ITR 107. Court held that Section 3 of Act, 1957 is a charging section but for the purpose of computing net wealth, the machinery is provided in Section 7 of Act 1957. Pursuant thereto, Rule 1BB which was inserted with effect from 1.4.1979 in the Rules, 1957 provided a formula for determination of fair market value of a house used wholly or mainly for the purpose of residence. The necessity to provide such formula was realized by the authorities concerned so that determination of market value of a house may not take a longer time and there should be some uniformity in such determination which will help in ....
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....Jaipur being not covered by Clauses (i) and (ii), clause (iii) is applicable to a property situated in Jaipur. That brings in Proviso also which provides an exception, by referring to any law for the time in force, if it requires minimum area of the plot of land required to be kept as open space, exceeding specified area mentioned in Explanation (b) (iii) of Rule 6 Schedule III. 35. Referring to "any law for the time being in force". Tribunal has brought in Regulations 1996 and has held that the same are applicable in the case in hand and shall be retrospectively applicable since they are also procedural in nature. This aspect would require an indepth scrutiny of Regulations, 1996. 36. The said Regulations have been framed in exercise of power under section 16(P) read with Sections 96, 32(3) and, 68 of Jaipur Development Authority Act 1982 (hereinafter referred to as 'JDA Act, 1982'). Section 96 of JDA Act, 1982 confers power to frame Regulations. Section 68 authorizes Development Authority to charge fee for license or permission need be given under the Act or for the purposes of the Act. Section 32 authorizes Development Authority to remove an unauthorized developmen....
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....ent, facilities with regard to structure and design and security requirements as per the prescribed standard. Regulation 5 prohibits any construction without permission of the competent authority and approval of building map. Regulation 5(i) as it was enacted in 1996 permits construction on a plot smaller than 500 sq.mtr. without prior permission of competent authority but in accordance with the standards set out in 9.2.2 of Regulation 1996. The said provision has subsequently been substituted by notification dated 2.1.1999 published in the Gazette of Rajasthan Government dated 16.1.1999. Regulation 6 specifies competent authorities in different Sectors. Regulation 7 specifies special powers and Regulation 8 prohibits that standards for building construction, internal facilities and design and other safety measures shall be such as provided in Regulations 9 to 12. Thereafter Regulations 9 and 10 prohibits different standards for the purposes of constructions of buildings externally and internally, including designs, safety measures etc. Regulation 13 says that for the purpose of permission of competent authority, written application would be required. Regulation 14 provides procedu....
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.... vide Regulations 1996, but there existed Regulations 1989 (repealed by Regulations, 1996) but the Assessee has not taken recourse to such Regulations and the reason for such approach on the part of Assessee is not known. 47. If what has been suggested by Assessee that Regulations framed under JDA Act 1982, would constitute a law for the time being applicable, then Regulation 1989 also ought to have been taken as law applicable at the relevant time, governing matter since 1989 when it came into force. On enforcement of Regulations 1989, field could have been covered by that set of Regulations but that is not so claimed. 48. Thus we have to examine whether the words " the law for the time being in force" mentioned in Rule 6 Explanation (b) (iii) of Schedule III would cover any provision or law irrespective of its purpose and object or it has some specific application and meaning. 49. We have no manner of doubt that the real intention of legislature has to be considered in the context of the purpose a provision has been made. In wider sense, the phrase " law for the time being in force" mentioned in Rule 6 Explanation (b) (iii) proviso to Schedule III may include Regulations....
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....on 1996 are not procedural but substantive made under Act 1982 so as to regulate building and development activities in Jaipur Region and any violation thereof attracts penal provisions. 52. Rules contained in Schedule III are for assessment of value of an asset. It provides guidance to A.O. for determining value of any asset for the purpose of Act, 1957. These provisions are not to regulate certain Act or omission at the option of Assessee. It is evidently in the nature of Rules of evidence, guiding competent authority for the purpose of assessment of value of the assets. The provisions relating to evidence apparently or procedural in nature. But this does not apply to Regulations, 1996. 53. However, when Rule 6 talks of "any law for the time being in force" which provide that a minimum area of plot of land must be maintained as open space exceeding the specified area, particular area of open space then for the purpose of Rule 6 Explanation (b)(iii), instead of 70% of aggregate area, such minimum area as specified in such law for the time being in force, shall be deemed to be the specified area, the "Specified Area" obviously refers to a substantive provision of law regulati....
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....termined by the substantive law; what facts constitute proof of a wrong is a question of procedure.' '...So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.'" 56. In Izhar Ahmad Khan v.Union of India AIR 1962 SC 1052, the distinction of substantive law and procedural law has been discussed by Court and it has said as under: "The division of law into two broad categories of substantive law and procedural law is well known. Broadly stated, whereas substantive law defines and provides for rights, duties and liabilities, it is the function of the procedural law to deal with the application of substantive law to particular cases and it goes without saying that the Law of Evidence is a part of the law of procedure." 57. It is also well established that procedural law, generally speaking, is applicable to pending cases, since no suitor can be said to have a vested right in procedure. There may be a provision which can be partly s....