Bhagwati Talkies vs Asstt. CIT

By means of the present writ petition, the petitioner is challenging the notice dt. 24-3-1992 issued u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as the ''Act'') for the assessment year 1983-84. The petitioner is a partnership firm and was running a cinema hall in the name of Bhagwati Talkies, Kaimganj, district Farrukhabad. For the assessment year 1983-84, relevant to the accounting period from 1-6-1979 to 30-9-1981, the petitioner has been assessed to tax by the assessment order dt. 5-1-1984. It appears that during the year under consideration, the petitioner made construction in which Rs. 5,61,008 was disclosed towards investment. The proceeding u/s 148 of the Act was initiated after recording the reasons on 29-4-1992. The reasons recorded are as follows:

During course of assessment proceedings for the assessment year 1988-89, the assessee made construction in the building. Consequently, the matter had been referred to Valuation Cell, Agra.

In this case, search & seizure operations took place at the business premises of the assessee firm on 8th & 9-10-1987. During course of search operation, the Authorised Officer, recommended to get the Cinema building valued by the Valuation Officer, regarding cost of construction. On the basis of recommendation, the matter has also been referred to the Valuation Cell, on this score.

In the valuation Report of the Departmental Valuation Officer, the cost of construction has been worked out at Rs. 9,70,000 during the period 1-6-1979 to 30-9-1981 as against the cost of construction declared by the assessee at Rs. 5,61,008. The assessees firm accounting period is ended on 30-6-1982. Consequently, the investment falls in the assessment year 1983-84.

From the facts and circumstances stated above, I am of the opinion that the income amounting to Rs. 4,08,992 (970000 '' 561008) chargeable to tax has escaped assessment within the meaning of section 149(1)(a)(iii) of the Income Tax Act, 1961.

Heard Sri. R.S. Agrawal, learned counsel for the petitioner and Sri. Shambhu Chopra, learned Standing Counsel, appearing on behalf of the respondent.

Learned counsel for the petitioner submitted that the initiation of proceedings on the basis of the Departmental Valuation Officers report is wholly illegal, inasmuch as the assessing authority has no jurisdiction to refer the matter to the Departmental Valuation Officer for the determination of the cost of construction. The assessing authority had only jurisdiction to refer the matter to the Departmental Valuation Officer to determine the value for the purpose of capital gain u/s 55A of the Act. He placed reliance on the decision of the Apex Court in the case of Amiya Bala Paul Vs. Commissioner of Income Tax, Shillong, . He further submitted that the Proviso to section 142A of the Act, which contemplates the powers of the assessing authority to estimate the value of any investment referred to in section 69 of the Act is not applicable to the present case, in view of proviso to section 142A of the Act, which says that the section shall not apply in respect of the assessment made on or before 30-9-2004.

Learned Standing Counsel submitted that the valuation report constitute the material to initiate the proceeding u/s 147 of the Act read with section 148 of the Act and, therefore, the proceeding is wholly justified. In the present case, no counter affidavit has been filed, despite the time being granted.

Having heard learned counsel for the parties, we have perused the material on record.

In the case of Smt. Amiya Bala Paul (supra), the Apex Court held that the assessing authority has no jurisdiction to refer the matter to the valuation cell for determination of the investment for the construction of the house. It appears that to undo the decision of the Apex Court, section 142A of the Act has been substituted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1988 empowering the assessing authority to refer the matter to the valuation cell to make the estimate of the value of any investment referred to in section 69 of the Act. However, the proviso to section 142A of the Act says that the section shall not apply in respect of the assessment made on or before 30-9-2004.

Section 142A of the Act reads as follows :--

142A. (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 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 30-9-2004, 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.

In the present case, the assessment has been made on 5-9-1984 and, therefore, section 142A of the Act is not applicable in the present case and, accordingly, the reference made by the assessing authority to the valuation cell for the determination of the cost of construction for the year under consideration was without any authority of law. Consequently, the valuation report was without authority of law. In the circumstances, the valuers report could not be made the basis for initiation of the proceeding u/s 148 of the Act. In the result, the writ petition is allowed. The notice dt. 25-3-1991 issued u/s 148 of the Act is hereby quashed. There shall be no order as to costs.