Assistant Commissioner of Income Tax vs M. I. Builders Pvt. Ltd.

All these appeals arise from a common order dated December 31, 2003, in Income Tax Appeals Nos. 1036/Alld/96, 1037/Alld/96, 1038/Alld/96 and 1039/Alld/96 for the assessment years 1989-90 to 1992-93. The facts, in brief, are that a search and seizure operation was carried out in the offices of the assessee-company and its sister concern as well as at the residential premises of its directors on February 4, 1992, u/s 132 of the income tax Act, 1961 (hereinafter referred to as "the Act"). The assessments for the assessment years 1989-90 to 1992-93 had been made by a composite order dated March 28, 1995, by the Assessing Officer after reopening the assessment by issuing notice u/s 148 of the Act. The composite reassessment order was issued u/s 147/143(3) of the Act.

In the course of the proceedings, the Assessing Officer appointed the Valuation Officer for valuing assets and based on that, made certain additions in the income of the assessee. Aggrieved by that order, appeals were preferred by the assessee before the Commissioner of income tax (Appeals) who, by its order dated February 29, 1996, partly allowed the appeals. The learned Commissioner of income tax (Appeals) held that he could not uphold the addition as the report of the Departmental Valuation Officer was arbitrary and the same could not be sustained in the eyes of law and, consequently, the additions made for the assessment years 1989-90 to 1992-93 were deleted.

The Revenue, aggrieved by the said order, preferred the appeals before the income tax Appellate Tribunal. The learned income tax Appellate Tribunal did not agree with the report of the Departmental Valuation Officer and the addition made on that basis. Reference was made to a judgment of the Supreme Court in the case of Amiya Bala Paul Vs. Commissioner of Income Tax, Shillong, , wherein the Supreme Court has held that the Assessing Officer had no authority to make reference u/s 131(1)(d) of the Act to the Departmental Valuation Officer in the income tax proceedings to report the cost of construction, and any such addition made would not be tenable in law and after so holding, the learned Tribunal dismissed the appeals filed by the Revenue by the order impugned in these appeals.

Income Tax Appeal No. 31 of 2004 was admitted by order dated April 28, 2008, on the following question of law:

Whether, on the facts and circumstances of the case, the Tribunal is legally justified in deleting the addition made on account of unexplained investment in the construction of the shops.

Income Tax Appeal No. 32 of 2004 was admitted by order dated September 1, 2007, on the following substantial question of law:

Whether, the learned income tax Appellate Tribunal while allowing the appeal of the assessee by applying the decision of the hon''ble Supreme Court in the case of Amiya Bala Paul Vs. Commissioner of Income Tax, Shillong, , has failed to appreciate that the Valuation Officer in the present case was appointed in terms of Order XXVI, rule 9 of the Code of Civil Procedure, 1908, and as held by the hon''ble Supreme Court in the above case (supra) the report of the Valuation Officer so appointed shall be an evidence and will form part of record for the purpose of assessment order.

In Income Tax Appeals Nos. 36 of 2004 and 37 of 2004, no substantial questions of law had been formulated. The question of law which arises for consideration in these appeals is as under:

Whether, on the facts and circumstances of the case, the Tribunal is legally justified in deleting the addition made on account of unexplained investment in the construction of shops.

At the hearing of these appeals, on behalf of the Revenue, learned counsel has placed reliance on section 142A of the Act, as introduced by the Finance (No. 2) Act, 2004, with effect from November 15, 1972. Section 142A of the Act reads as under:

142A. Estimate by Valuation Officer in certain cases.--(1) For the purposes of making an assessment or reassessment under this Act, 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 or fair market value of any property referred to in sub-section (2) of section 56 is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him.

(2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that he has u/s 38A of the Wealth-tax Act, 1957 (27 of 1957).

(3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment:

Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A.

Explanation.--In this section, ''Valuation Officer'' has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

It is submitted on behalf of the Revenue, on the strength of the above provisions, that it was open to the Valuation Officer to have called for the valuation from the Departmental Valuation Officer.

On behalf of the assessee-respondent, learned counsel has raised two objections. It is contended, firstly, that assuming that an appeal was pending before this court, the said appeal is not a continuation of the proceedings u/s 142A of the Act and that being so, the question as framed, would not arise, as the assessment proceedings were completed before September 30, 2004. Secondly, it is submitted that the appeals arose from the reassessment proceedings and, as such, section 142A of the Act would not apply.

On behalf of the Revenue, in so far as the first contention is concerned, it is contended that the appeal before this court is a continuation of proceedings u/s 142A of the Act. Reliance has been placed on various judgments. In so far as the second contention is concerned, it is pointed out that considering the definition of "assessment" u/s 2(8) of the Act, assessment includes reassessment and, therefore, it was open to appoint a valuer.

We may, firstly, mention that, in so far as the first contention is concerned, a Division Bench of this court in the case of Commissioner of Income Tax Vs. Smt. Shashi Agarwal, , has taken a view that an appeal u/s 260A of the Act is not an appeal under the statute giving a vested right to challenge the assessment order after the assessment proceedings had crossed the stage of the Tribunal and as such, it cannot be said that it is the continuation of the said proceedings.

So far as the second contention is concerned, reliance has been placed on a Division Bench judgment of this court in the case of Commissioner of Income Tax Vs. Gulam Mohammad, , to contend that in respect of the proceedings of reassessment, if an appeal is filed, that would not be a continuation of the proceedings u/s 142A of the Act.

As regards the first contention, it is not necessary to refer to the large number of judgments referred to, as that issue can be considered in an appropriate case as, prima facie, we have some doubt as to the view taken in the case of Commissioner of Income Tax Vs. Smt. Shashi Agarwal, .

However, in so far as the second contention, we are in agreement with the view taken by the learned Bench of this court in Commissioner of Income Tax Vs. Gulam Mohammad, . Though, assessment includes reassessment, none the less it is only the reassessment proceedings u/s 153A of the Act that are saved and no other proceedings of reassessment.

Once that be the case, it will be clear that section 142A of the Act, though retrospective, would not apply to the facts of these cases and, therefore, we hold that the learned Tribunal was right in arriving at the conclusion which it has arrived at. For all the aforesaid reasons, the questions as framed would not arise and, consequently, all the appeals are dismissed.