Punjab-Haryana High Court
Commissioner Of Income-Tax vs Harchand Palace on 23 February, 2004
Equivalent citations: [2004]269ITR251(P&H)
Author: N.K. Sud
Bench: N.K. Sud, J.S. Narang
JUDGMENT N.K. Sud, J.
1. The Revenue has filed these two appeals under Section 260A of the Income-tax Act, 1961 (for short "the Act"), against the order of the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short "the Tribunal"), dated September 19, 2003, whereby its appeals against the order of the Commissioner of Income-tax (Appeals) (for short "the CIT(A)"), dated February 10, 1999, for the assessment years 1987-88 and 1988-89, have been dismissed.
2. During the course of proceedings relating to the assessment years 1989-90 and 1990-91, the Assessing Officer referred the matter of valuation of the cinema building owned by the assessee to the District Valuation Officer. The District Valuation Officer, vide his report dated April 2, 1992, estimated the cost of construction at Rs. 42,26,000 as against the sum of Rs. 24,40,000 debited in the books of Account of the assessee. Since the construction had been effected from September 1986, to April, 1990, the cost of construction was bifurcated year-wise as under :
____________________________________________________________________ Assessment year Investment as Cost estimated by Difference per assessee District Valuation Officer ___________________________________________________________________ 1987-88 7,05,000 12,21,016 5,16,016 1988-89 4,02,000 6,96,418 2,94,418 1989-90 8,12,000 14,06,248 5,94,248 1990-91 5,11,000 8,85,033 3,74,033 1991-92 10,000 17,267 7,267 ___________________________________________________________________
3. The report of the District Valuation Officer was confronted to the assessee during the course of assessment proceedings relating to the assessment years 1989-90 and 1990-91. The assessee submitted its objections to this report and also filed the valuation report of an approved registered valuer in support of the investment as per books. The Assessing Officer referred the objections of the assessee along with the report of its approved registered valuer to the District Valuation Officer for his comments. The District Valuation Officer did not respond to the objections of the assessee nor did he comment on the report of the approved registered valuer. The Assessing Officer, however, allowed deductions for self-supervision at 10 per cent, and builder's efforts at 1.5 per cent, from the cost of construction estimated by the District Valuation Officer and consequently made additions of Rs. 4,92,428 and Rs. 2,74,033 on account of unexplained investment in the construction in the assessment years 1989-90 and 1990-91, respectively. The assessee preferred appeals for the assessment years 1989-90 and 1990-91 before the Commissioner of Income-tax (Appeals), who after considering the submissions of the assessee, deleted the additions. He observed that the report of the approved registered valuer furnished by the assessee was based on detailed calculations of each item and was more comprehensive and scientific as compared to the report of the District Valuation Officer, who had neither appeared before him personally nor had offered any comments on the various objections raised by the assessee. The Commissioner of Income-tax (Appeals) also held that even otherwise the Assessing Officer could not make any addition under Section 69 of the Act on account of unexplained investment in the construction of cinema without first rejecting the books of account maintained by the assessee.
4. The Revenue preferred appeals before the Tribunal for the two assessment years, viz., assessment years 1989-90 and 1990-91, which were dismissed vide orders dated January 31, 2003. The Tribunal upheld the findings of the Commissioner of Income-tax (Appeals) that the report of the approved registered valuer, which was based on detailed measurements and in which the cost of construction was estimated at the scheduled rates of the PWD, was more scientific and reliable. Accordingly, it was held that without pointing out any discrepancy in the said report, no addition could be made. The Tribunal also upheld the additional reason for deleting the addition that unless and until the books of account were rejected, no addition on account of unexplained cost of construction could have been made.
5. In this factual back-drop, the Assessing Officer also initiated proceedings under Section 147 of the Act for assessing the unexplained investment as per the District Valuation Officer's report for the assessment years 1987-88 and 1988-89 to which the present appeals relate. For this purpose, notices under Section 148 of the Act for the two assessment years were issued on August 22, 1996. In response to these notices, the assessee filed returns of income declaring "nil" income as it had no business during those two years. The Assessing Officer once again relied on the report of the District Valuation Officer. He, however, allowed some deductions and determined the cost of construction as under :
Rs.
Estimate : Cost of construction before rebate and building efforts as per DVO's report 45,01,100 Less : Expenses for deploying farm laborers and tractor and trollies (-) 1,00,000 Balance 44,01,100 Less : Rebate for self-supervision 4,40,100 Total cost of construction 39,61,000 He bifurcated the cost of construction year-wise as under :
Assessment year Cost of construction (Rs.) 1987-88 11,31,714 1988-89 6,60,163 1989-90 13,20,326 1990-91 8,21,919 1991-92 18,861
6. On the basis of the above, he determined unexplained investment in the construction of the cinema building for the assessment year 1987-88 at Rs. 4,26,714 (11,31,714-7,05,000) and Rs. 2,58,163 (6,60,163-4,02,000) for the assessment year 1988-89. Since there was no other income, the assessment was framed vide a common order dated August 6, 1998, at the aforesaid figures.
7. The assessee preferred appeals before the Commissioner of Income-tax (Appeals) which were allowed by a common order dated February 10, 1999. The Commissioner of Income-tax (Appeals) observed that although, in the relevant two assessment years, no books of account had been maintained, yet in view of his findings in the assessment years 1989-90 and 1990-91, that the report of the registered valuer filed by the assessee being comprehensive and scientific was preferable to the report of the District Valuation Officer, no addition was called for in the assessment years 1987-88 and 1988-89.
8. The Revenue preferred appeals against the aforesaid order of the Commissioner of Income-tax (Appeals) which have been dismissed by the Tribunal on September 19, 2003. Hence, these appeals.
9. We have heard counsel for the appellant and perused the order of the Tribunal and are satisfied that no substantial question of law arises out of the order of the Tribunal. The Commissioner of Income-tax (Appeals) and the Tribunal in their orders in the assessment years 1989-90 and 1990-91 after appraising the evidence on record, have given detailed reasons for rejecting the estimate of cost of construction made by the Assessing Officer and for accepting the report of the registered valuer. In the impugned order also, the Tribunal has relied on its earlier findings. These findings are pure findings of fact and suffer from no legal or factual infirmity warranting interference by this court. Similar view was taken by this court in CIT v. Trilok Chand Karta [2004] 265 ITR 286.
10. The matter can be viewed from another angle also. The foundation for initiation of proceedings under Section 147 of the Act as also the additions made by the Assessing Officer on account of unexplained investment is the report of the District Valuation Officer. It is now settled law that no reference can be made by the Assessing Officer to the Valuation Officer for estimating the cost of construction of house property under the Act. For this purpose, we may refer to the observations of the Supreme Court in Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407, wherein it has been held as under (page 416) :
"From this it is clear that whenever reference to a Valuation Officer appointed under the Wealth-tax Act is permissible under the Income-tax Act, it has been statutorily so provided.
Apart from the aforesaid, the Valuation Officer is appointed under the Wealth-tax Act and can discharge functions within the statutory limits under which he is appointed. It is not open to a Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions. He cannot be called upon nor would he have the jurisdiction to give a report to the Assessing Officer under the Income-tax Act except when a reference is made under and in terms of Section 55A or to a competent authority under Section 269L.
We are, therefore, of the view that the High Court incorrectly answered the question referred to it in the affirmative. The Tribunal had not erred in holding that the Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property."
11. In view of the above, it is evident that the report of the District Valuation Officer in the present case is without jurisdiction. Once this report is excluded from consideration, the very foundation for initiation of proceedings under Section 147 of the Act and for making additions on account of unexplained investment disappears. There is no other material on record to support the estimate of the Assessing Officer. Thus, viewed from any angle, we find no merit in these appeals which are dismissed in limine.