Income Tax Appellate Tribunal - Lucknow
Late Sir Padampat Singhania Through Lr vs Deputy Cwt on 29 November, 2001
Equivalent citations: (2004)89TTJ(LUCK)646
ORDER
An. Parashar, J.M. This appeal has been filed by the assessee against the order of CWT(A), Kanpur, dated 27-3-2000, for the assessment year 1987-88.
2. The assessee appellant has taken various grounds to assail the order of learned CWT(A). Since the grounds are in the form of arguments and are elaborate, we are not reproducing the same here and would like to deal with the main, issues, which are involved in these grounds in the body of this order.
3. Shri R.R. Jain, F.C.A., appeared on behalf of the appellant, whereas Shri Prasenjit Singh, learned departmental Representative, represented the department.
Grounds No. 1(a) and 1(b):
4. These grounds are directed against the findings of the learned CWT(A) upholding the action of the assessing officer in applying r. 8(b) read with r. 20(2) of Wealth-tax Rules for determining the value of house property of the assessee known as 'Jaipur House' before us.
5. The facts concerning these grounds may be summarized as below 5.1. The assessee, Late Shri Padampat Singhania was the owner of 'Jaipur House' at Jaipur. After his death, his legal heir, Dr. Gaur Hari Singhania, represented him as legal heir in the wealth-tax proceedings. In the assessment year 1987-88, Dr. Gaur Hari Singhania, the legal heir, filed return of wealth-tax on 16-7-1997, declaring total net wealth at Rs. 2,62,180. The return, however, did not include the value of Jaipur House. The assessment was completed under section 16(3) at Rs. 3,00,700 vide assessment order dated 30th Sept., 1988, under section 16(3) of Wealth Tax Act, 1957.
5.2. The assessing officer received information that in the wealth-tax return of the family members, the value of Jaipur House was not disclosed. Hence, notice was sent to the family members of J.K. family to ascertain the ownership of the said house. Consequent to this query, the assessee suo motu, filed revised return of wealth-tax on 26th March, 1998, wherein property in question, i.e., 'Jaipur House' was also included in the net wealth of the assessee. This return was treated as non est because proceedings for assessment year 1987-88 had already been concluded and as per provisions of Wealth Tax Act, no time was left for filing the revised return. The assessing officer also issued a notice under section 17 of the Wealth Tax Act, in reply to which it was submitted on behalf of the assessee that revised return filed on 26th March, 1998 may be treated as reply in response to notice under section 17 of the Act.
5.3. In the return of wealth-tax, the assessee had shown value of Jaipur House at Rs. 26,77,995. This value was based upon the valuation report of M/s S.K. Ahuja & Associates. The assessing officer found that the value determined by the approved valuer was much below the market value of the property. Hence, after making local inquiries about the prevalent market rents, the assessing officer made reference to Valuation Officer under section 16A of the Wealth Tax Act, who estimated the value of the property at Rs. 5,82,09,605 which was accepted by the assessing officer.
5.4. During the assessment proceedings, the assessee filed objections against the valuation report of the DVO and also contended that the valuation should be made in accordance with r. 3 of Sch. Ill of the Wealth Tax Act. Before the assessing officer, it was also contended that the property was located in 'eco-friendly' area and, therefore, the DVO was not justified in calculating the difference between specified area and unbuilt area. The assessing officer rejected these contentions and upheld the report of departmental Valuer and on that basis determined the value of the property at Rs. 5,82,09,605.
5.5. The assessee preferred appeal before the learned CWT(A), and challenged the order of the assessing officer on legal grounds as well as on merits. Before the learned CWT(A), it was specifically pleaded that r. 3 of Sch. III of Wealth Tax Act, 1957, was applicable for the purpose of valuation of Jaipur House as Sch. III applied to all the pending proceedings, in view of the decision of Hon'ble Supreme Court of India reported in CWT v. Sharvan Kumar Swarup & Sons (1994) 122 CTR (SC) 380 : (1994) 210 ITR 886 (SC). It was also pleaded that in view of sub-cl. (b) to Explanation to r. 6 and keeping in view the J.D.A. Rules, the maximum covered area of construction was allowed up to 5 per cent of the aggregate area and, thus, the difference comes to 42 sq. mtrs. between the built up area and specified area and, therefore, r. 8(b) of Sch. III is not applicable. The learned CWT(A) after considering these submissions held that since notification of J.D.A. became effective only from 25-6-1996, it was not applicable to assessment year 1987-88.
5.6. In the context of above background, we proceed to take up the issue involved in these grounds of appeal.
6. The contention of the learned counsel for the assessee was that Sch. III which came into force with effect from 1-4-1989 was also applicable to assessment year 1987-88 in view of the decision of Hon'ble Supreme Court of India in the case of CWT v. Shravan Kumar Swamp & Sons (supra), wherein the Hon'ble Supreme Court of India held that r. 1BB partakes the character of rule of evidence, and is d rule of procedural law and not a part of substantive law and is applicable to all pending proceedings on the date on which this rule came into force. According to Shri R.R. Jain, the learned counsel for the assessee, in the case of CIT v. Subhash Vohra (1997) 140 CTR (P&H) 243 : (1997) 225 ITR 727 (P&H), Hon'ble Punjab & Haryana High Court has held that Circular No. 455, dated 16th May, 1986, issued by CBDT directing the competent authority to drop proceedings in cases where the apparent consideration of property was less than Rs. 5 lakhs was held to be applicable to the proceedings pending at the appellate stage as a whole. The learned counsel for the assessee also made reference to the decision of Hon'ble Karnataka High Court in the case of CWT v. S.D. Narayansa (2000) 161 CTR (Kar) 366 : (2000) 244 ITR 593 (Kar), wherein the Hon'ble Karnataka High Court has held that Sch. III introduced in Wealth Tax Act, 1957, with effect from 1-4-1989, was procedural and not substantive in nature and all the matters, which were pending on 1-4-1989 were covered by the said Schedule.
7. The learned counsel for the assessee also made reference to the following decisions in support of his contention
(i) Deshmukh Singhfi Kasturchandli v. State of Madhya Pradesh AlR 1967 MP 268
(ii) CWT v. Ganga Pershad Kedia (1990) 185 ITR 30 (Del)
(iii) Govind Hail Singhania v. Asstt. CWT (1992) 104 CTR (All) 337: (1992) 194 ITR 474 (All)
(iv) CWT v. Sunder Lal Gupta (1997) 225 ITR 729 (Raj)
(v) CIT v. S.D. Narayansa (supra)
(vi) CIT v. Gwahor Rayon Silk Mfg. Co. ITD. (1992) 104 CTR (SC) 243: (1992) 196 ITR 149 (SC)
(vii) Kodiyal Foods & Fats (P) ITD. v. CIT, (1991) 97 CTR (Kar) 31 : (1992) 193 ITR 411 (Kar)
(viii) CIT v. Naga Hills Tea Co. ITD. 1973 CTR (SC) 329: (1973) 89 ITR 236 (SC)
8. The learned departmental Representative, on the other hand, supported the order of the assessing officer and also placed reliance on the order of learned CWT(A).
9. We have carefully considered the facts and circumstances relating to this matter, the entire material placed before us, the relevant case laws and the rival submissions. Before dealing with the disputed issue, we consider it proper to state the undisputed facts and relevant statutory provisions, which may be listed as under.
I. Undisputed Facts 10.1. The aggregate area of the residential house, i.e., Jaipur House is 28,824.02 sq. mtrs. The covered area is 1400 sq. mtrs. The unbuilt area is 27,424 sq. mtrs. (As per para 5.2 of assessment order) (Also as per p. 43 of paper book and as per plan of the purchase of land-p 45 of the paper book).
10.2. The land and building of the assessee is covered by Notification No. GSR 29, dated 25-6-1996, which provided for maximum built-up area of 5 per cent of the aggregate area of land on account of land being situated in ecofriendly area.
(The learned Commissioner (Appeals) in his order dated 30-5-2000 for assessment year 1997-98 has recorded findings in this regard in para 2 of his order (available on pp 47 & 48 of paper book).
(Otherwise also, the department has not disputed this aspect.
(Before the learned Commissioner (Appeals), this fact was asserted, but without disputing these details, he held that since J.D.A. Notification comes with effect from the date of its issue, it is not applicable for the valuation of property as on 31st March, 1987-p. 4 of the order of Commissioner (Appeals)).
IT Undisputed Legal Provisions : i 10.3. (1) Section 7 of Wealth Tax Act which lays down the manner in which the value of assets has to be determined provides as follows :
"7.(1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Sch. III.
(2) The value of a house belonging to the assessee and 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 value determined in the manner laid down in Sch. III as on the valuation date next following the date on which he became the owner of the house or the valuation date relevant to the assessment year commencing on the 1st April 197 1, whichever valuation date is later;"
(2) The Central Board of revenue in pursuance of the rule-making power conferred by section 46 of the Act promulgated rules known as WT Rules, 1957. There were amendments from time to time. Rule 1BB was inserted with effect from 1st April, 1979. Thereafter, replacing it, Sch. III was inserted we.f. 1st Apri~ 1989.
(3) In Sch. III, Part B, rr. 3 to 8 lay down how any immovable property being land or building appurtenant thereto is to be valued.
(4) Rules 3 to 6 relate to one method of computation known as rent capitalization method. The adjustment to value arrived are made in accordance with r. 6, which runs as under
"6. Where the unbuilt area of the plot of land on which the property referred to in r. 3 is constructed exceeds the specified area, the value arrived at in accordance with the provisions of r. 3 shall be increased by an amount calculated in the following manner, namely
(a) (b) (c) Explanation-For the purposes of this rule and r. 6,(a)
(b) ****"specified area", in relation to the plot of land on which the property is constructed means-
(i) (ii) (iii) where the property is situate at any other place, seventy per cent of the aggregate area Provided that where, under any law for the time being in force, the minimum area of the plot of land required to be kept as open space for the enjoyment of the property exceeds the specified area, such minimum area shall be deemed to be the specified area;
(c) 'Unbuilt area", in relation to the aggregate area of the plot of land on which the property is constructed, means that part of such aggregate area on which no building has been erected."
10.4. The department does not dispute that, as laid down by the Hon'ble Supreme Court of India in the case of CWT v. Sharvan Kumar Swarup Chand & Sons (supra), Sch. M, though it has itself come into force after the valuation date, will apply as it is part of "machinery provisions" of the Act. In fact, the learned Commissioner (Appeals) has applied r. 8(b) and r. 20 of Sch. M to assessment year 1987-88, when the Schedule containing these rules was not effective.
10.5. The relevant part of r. 8 is being extracted hereunder T. Nothing contained in r. 3 shall apply.
(a)
(b) where the difference between the unbuilt area and the specified area exceeds twenty per cent of the aggregate area; or
(c) and in any case referred to in clause (a) or clause (b) or clause (c), the value of the property shall be determined in the manner laid down in r. 20 Rule 20 lays down as follows "20(1) The value of any asset, other than cash, being an asset which is not covered by rr. 3 to 19, for the purposes of this Act, shall be estimated 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.
(2) Notwithstanding anything contained in sub-r. (1), where the valuation of any asset referred to in that sub-rule is referred by the assessing officer to the Valuation Officer under section 16A, the value of such asset shall be, estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date.
(3) Where the value of any asset cannot be estimated under this rule because it is not saleable in the open market, the value shall be determined in accordance with such guidelines or principles as may be specified by the Board from time to time by general or special order."
11. The Disputed Issue :
The real controversy relates to the nature, scope and applicability of J.D.A. Regulations of 1996.
11.1. On one hand, the claim and contention of the assessee is that Sch. EI is applicable to the property in question and its valuation has to be done in accordance with the rules contained therein and in doing so, the J.D.A. Building Regulations have necessarily to be read with r. 6 of the said Schedule. In other words, the said regulation, which is to be treated as part of r. 6 in view of the Explanation appended with it, is to apply retrospectively as it is part of procedural law in view of the decision of Hon11e Supreme Court of India in the case of Sharvan Kumar Swarup & Sons (supra). It is further argued by the assessee that since J.D.A. Regulations read with r. 6 will apply to the case of the assessee, the specified area becomes 95 per cent and, therefore, r. 8 read with r. 20 will not apply.
11.2 The stand of the department, on the other hand, is that the J.D.A Regulations shall not apply to the case of the assessee as the Regulations came into effect from the date of its issuance, i.e., 25-6-1996, and, thus, the assessee cannot take benefit of this Regulation, which would not apply retrospectively. The relevant observations of the learned Commissioner (Appeals) clarifying this stand are being reproduced below:
'It may be stated that this notification is applicable only in respect of properties after its issuance on 25-6-1996, and not before. It is not a rule which has been made applicable retrospectively by the J.D.A. It cannot override the provisions specified in statutory. Act passed by Parliament. The proviso to sub-clause (b) to Explanation of r. 6 of Sch. III clearly says that "under any law for the time being in force" the minimum area of the plot of land required to be kept as open space for the enjoyment of the property" But for the valuation to be made on 31-3-1987, there was no such law of Jaipur Development Authority which required the appellant to keep minimum area of the plot of land an open space. Therefore, the valuation of the property cannot be done under r. 3 of Sch. III as there was no such rule of J.D.A. or Rajasthan Government as on 31-3-1987, to build up only 5 per cent of the aggregate area. Therefore, no interference is called for and assessing officer's order on this issue is confirmed. Therefore, I hold that the valuation of Jaipur House has been rightly done under r. 8(b) read with r. 20(2) of the WT Rules contained in Sdh. III of the Wealth Tax Act.
12. For deciding the above controversy, we have to examine and decide the nature and scope of Sch. III first and, thereafter, the nature, scope and applicability of J,D.A. Regulations.
12.1. So far as Sch. III is concerned, it is part of procedural law. In the case of Sharvan Kumar Swarup & Sons (supra), Sch. III was not involved, but a similar provision contained in r. 1BB came for consideration before the Hon'ble court and after considering its scope, the Hon'ble Supreme Court held that such a procedural law shall apply to "all proceedings pending at its enactment". While holding so, Their Lordships observed that the basis of distinction between statute affecting rights and those affecting procedure merely, is well regognized. Thereafter, following words of Lord Justice Mellish in Republic of Costa Rica v. Erlanger (1876) 3 Ch. D. 62 (CA) at 69, were quoted "No suitor has any vested interest in the course of procedure, nor any right to complain, if during the litigation the procedure is changed, provided, of course, that no injustice is done."
Their Lordships also quoted following passage from the judgment of Sargant U. "The liability is imposed by the charging section, namely, section 38, the words of which are clear. The subsequent provisions -as to assessment and so on are machinery only. They enable the liability to be quantified, and when quantified to be enforced against the subject, but the liability is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately. "
Reliance was also placed by the Hon'ble court on the following passage from Halsbury's Laws of England "It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions, which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a charge elsewhere clearly imposed."
After making references to various other authorities and decisions, the Hon'ble court held "Rule 1BB thus par-takes of the character of a rule of evidence. It deems the market value to be the one arrived at on the application of a particular method of valuation which is also one of the recognised and accepted methods. Even if a law raised a presumption and renders the presumption irrebuttable it is yet in the domain of the law of evidence. In Izhar Ahmad M2an's case AIR 1962 SC 1052, it was pointed out by this court (at p 1062).
12.2. Thus, so far as Sch. III is concerned, the same construction is to be placed as placed by the Honble Supreme Court on r. 1BB.
12.3. In the Commentary, AlR Manual Vol. 45, Notes under section 8 at p 11A49, following comments is made :
"(49) Sch. III relating to determination of value of property is a procedural law and applies to proceedings pending on date of its enforcement" : (1996) 86 Taxrnan 148 (150):
12.4. In the case of CWT v. S.D. Narayansa (supra), following the decision of the Hon11e Supreme Court of India, in the case of Sharvan Kumar Swarup & Sons (supra) has held as under "The method which is provided under Sch. M has also prescribed the precedence. Sch. M has to be considered as procedural and not substantive as the market value has to be determined in accordance with the provisions of the said rule. All matters which were pending on 1-4-1989, therefore, have to be covered by the said rule. There is another reason for taking this view, i.e., if there are two provisions, the interpretation which is beneficial to the assessee has to be taken in accordance with law. The decision in CWT v. Sharvan Kumar Swarup & Sons (1994) 122 CTR (SC) 380: (1994) 210 ITR 886 (SC), since the provisions for determining the market value have been considered to be procedural law and applicable to all the pending cases in which no right can be vested in respect of the procedure, the procedure as prescribed by Sch. III of the Act has to be applied."
12.5. In the case of Maharaja Dharmendra Prasad Singh & Anr. vs State of U.P. & Ors. AIR 1973 All 174 (V60C59), the Honble Allahabad High Court has held that no person has a vested right in procedure. A change in law of procedure operates retrospectively and unlike the law relating to vested* rights, it is not prospective. In that case, in view of amendment introduced by Act 37 of 1958 by deletion of sections 332, 332A and 332B of Zamindari Abolition and Land Reforms Act (1 of 1980) was held to be a procedural matter. The argument that the suit filed would be governed by the procedure, which was in force when it was filed, and not by one prescribed by law during the pendency of suit, was rejected and it was held that the change in law being procedural took effect retrospectively and that the suit would be governed by the new procedure and the Munsif had no jurisdiction to refer the issue to the revenue court for decision and should, instead have decided the same himself.
13. The real controversy relates to the applicability of J.D.A. 'Regulations. The issue in this regard is as to whether the building regulations to be considered for the purposes of the proviso to the Explanation in r. 6 of Sch. Ill are those that were in force on the valuation date (1987) or those in.force at the time of assessment (1990). The said building regulations had certainly come into force before the assessment was completed by the assessing officer.
13.1. The assessee has filed a book under the title "Compendium of J.D.A. Laws". The Jaipur Development Authority Act, 1982, was made effective in the year 1982. Under section 16 of the Act, the powers and functions of the authority have been enumerated. Vide section 96 of the Act, power has been given to the authority to make regulations for all or any of the matter to be provided under this Act. In view of the provisions contained under section 16, read with section 68, the Jaipur.
Development Authority made regulations known as J.D.A. Regulations, 1996.
These regulations were notified on 25th Jan., 1996. Regulation No. 2 is in the form of a definition clause. Regulation No. 9 lays down the standard for construction of houses and divided the buildings into five categories. Regulation No. 9.2, which relates to residential buildings prescribed the maximum covered area, minimum need for set back and height, etc. Under Regulation No. 9.2.1 for eco-friendly residences, the maximum covered area prescribed was 5 per cent It is this regulation on which the assessee has placed reliance. The contention of the assessee is that the residential building in dispute falls in the category of eco-friendly residence and in view of Regulation No. 9.2.1 more than 5 per cent of the area cannot be covered under construction.
13.2. Regulation No. 20 deals with "Repeals and Savings". It provides that if any building has already been completed or whose construction has started according to sanctioned plan, these new regulations were not to apply, but where the construction has not started at all, then the new regulations shall apply vide Regulation.
13.3. So far as the plot in question is concerned, no construction has so far been made, as per undisputed facts, on 9.5 per cent of the land, which is still open land (unbuilt area). Thus, the regulation will apply to that land, and to that extent, the regulations are retrospective in nature. They have been made applicable to all land which still remains unbuilt, as is the one held by the assessee. The. Assessee cannot be allowed to contend that he has acquired vested right to build according to the old regulations.
13.4. Besides, the above, the phraseology, "for the time being in force" is significant. If the interpretation placed by the assessing authority were to be correct, the legislature would have used the words, "Under any law in force on the valuation date" instead of the words "Under any law for the time being in force". If the intention of the legislature was to apply the proviso only on the basis of the regulations in force on the valuation date, there was no logic in using the words "for the time being in force" and not the words "as in force on the valuation date".
13.5. In the case of Deshmukh Singhli Kasturchandll v. State of Madhya Pradesh (supra), the Honble Madhya Pradesh High Court has held that the expression in the enactment, "for the time being in force" does not mean an enactment, which was already in force at the time of imposition of tax but means any legislation enacted whether before or after the imposition of tax by the Corporation. According to the Honble Madhya Pradesh High Court, the general sense of the phrase "for the time Ming in force" is that of time 42 indefinite and refers to indefinite state of facts, which will arise in future, which may vary from time to time. In view of this decision of Hon'ble Madhya Pradesh High Court, the regulations referred to above shall be covered under the expression 'Laws for the time being in force'.
13.6. The phrase "For the time being in force" came up for the interpretation before the Hon'ble Supreme Court of India in the case of Municipal Corpn. of Delhi v. Prem Chand (2000) 10 (sic), (Sec. 115 at pp. 124 and 125 vide paras 12 and 13 of the report). In this case, the dispute related to conditions of service of a municipal employee. The regulation provided that "The rules for the time being in force and applicable to Government servants" shall regulate the conditions of service of municipal employees as well. Their Lordships held in para 13 as follows"
"13. In this connection, one submission of learned counsel for the respondent workman may be noted. He submitted that as laid down by regn. 4(1), the rules for the time being in force as mentioned therein would refer to only those rules which were in force when the Service Regulations of 1959 were promulgated and not any later rules. It is difficult to countenance this submission. Rules for the time being in force will have a nexus with the regulation of condition of service of the municipal officers at the relevant time as expressly mentioned in regn. 4(1). Therefore, whenever the question of regulation of conditions of service of the municipal officers comes up for consideration, the relevant rules in force at that time have to be looked into. This is the clear thrust of regn. 4(1). Its scope and ambit cannot be circumscribed and frozen only to the point of time in the year 1959, when the Service Regulations were promulgated. If such was the intention of the framers of the Regulation, regn. 4(1) would have employed a different phraseology, namely, "rules at present in force" instead of the phraseology "rules for the time being in force." The phraseology "rules for the time being in force" would necessarily mean rules in force from time to time and not rules in force only at a fixed poirkt of time in 1959 as tried to be suggested by learned counsel for the respondent workman."
This is a clear authority for the view that the building regulations applicable would be those in force "at the time the question comes up for the consideration". In the case of an assessment the question comes up for consideration at the time when the assessment comes to be made.
In view of this clear authority the building regulations of 1996 will apply in every case where the assessment is made at any time after the enforcement of the regulations.
13.7. In view of the above, there remains no doubt that the J.D.A. Regulations are covered within the ambit of and are part of the "Laws for the time being in force". Further, since the Rules of Sch. III are to be made operative retrospectively and apply to C pending matters, the J.D.A. regulations which are to be treated as part of r. 6, and which are to be read with Explanation to r. 6 of Sch. III, are also to be applied retrospectively. Thus, these regulations would apply to pending proceedings irrespective of the fact that the proceedings of assessment relate to earlier years, i.e., assessment years prior to the enforcement of the regulations.
14. There is another aspect of the matter which relates to the construction of taxing statutes. In the celebrated treatise of Justice G.P. Singh, on the Principles of Statutory Interpretation, 8th Edn. (2001), p. 635, following comment has been made :
"A taxing statute is to be strictly construed. The well established rule, in the familiar words of Lord Wenslydale, reaffirmed by Lord HaIsbury and Lord Simonds means; "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words."
At p. 638, the following comment has been made "The Supreme Court has enunciated in similar words the principle of interpretation of taxing laws.',' 14.1. In the case of A.V. Fernandez v. State of Kerala AIR 1957 SC 657 at p. 661, Hon'ble Bhagwati, J., stated the principle as follows:
"In construing fiscal statutes and in determining the liability of subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into intentions of the legislature or by considering what was the substance of the matter. "
15. It may not be out of relevance to point out here that even if there is any doubt about interpretation, the ambiguity has to be resolved in favour of the tax payer.
In Hindustan Lever ITD. v. Municipal Corpn. (1995) 3 SCC 716, para 11, the Hon'ble Supreme Court has held as under
In any case, as we are concerned with a taxing provision, an interpretation beneficial to the assessee, in case two interpretations be reasonably possible, has to be given. This is a well-settled position in law."
Similarly, in Sun Export Corpn. v. Collector of Customs (1997) 6 SCC para 13, it was held :
"Even assuming that there are two views possible, it is well-settled that one favourable to the assessee in matters of taxation has to be preferred."
16. It may be pointed out that at any rate, the construction placed by us on the applicability of Sch. III and J.D.A. Regulations, appears to be more sound and logical, because if Sch. III can apply to an assessment year prior to its enactment, there is no reason why the building regulations subsequently made cannot apply likewise. It is also a fair approach in consonance with the settled canons of natural justice because when at the time of assessment, the assessee is already prohibited from building on 95 per cent of the open land he should fairly get compensated for the likely consequential determination of market value of the land through reduction in his wealth-tax liability.
17. Thus, from this point of view also, the correct view would be that the building regulations of 1996 will apply, even though they were not in force on the valuation date but came in force before the date of actual assessment.
17.1. In our view, therefore, the learned CWT(A) was not justified in taking the view that the J.D.A. Regulations prescribing the minimum and maximum built up area will not apply to assessment year 1987-88, on the ground that these regulations came into effect in 1996 only. In our view, since the regulations of J.D.A. are to be operative retrospectively, the assessee was justified in claiming that in view of the Explanation to r. 6 read with the relevant J.D.A. Regulations, the specified area was to be worked out and as such r. 8(b) read with r. 20 shall not be applicable.
18. In view of the aforesaid, we allow ground Nos. (Ma) and 1(b) in favour of the assessee.
Ground Nos. 3(a), (b), (c) and (d)
19. These grounds raise a preliminary legal issue and challenge the. validity of the reference made by the assessing officer to the DVO as well as challenge the method of valuation adopted by the DVO.
19.1. In ground No. 3(a), it is pleaded that there was no material whatsoever on record to enable the assessing officer to form a reasonable belief that the value as returned by the assessee was less than fair market value of the property in question and as such the reference made to the Valuation Officer was void ab initio.
19.2. In support of this ground, it was contended before us by the learned counsel for the assessee that in view of the provisions contained under section 16AM(a) of the Wealth Tax Act, reference to- the Valuation Officer can be made, where the value of any asset as returned is in accordance with estimate made by the registered valuer, if the assessing officer is of the view that the value so returned is less than its fair market value of the asset or that the fair market value exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such, amount as may be prescribed in this behalf.
19.3. The learned counsel for the assessee has submitted before us that the news report did not pertain to the assessment year under consideration nor was it sufficient and solid material to place reliance without making further inquiry.
19.4. We have considered this argument of the learned counsel also. A perusal of the assessment order shows that the assessing officer made some local enquiry, but he has not given details of any such local inquiry in the assessment order. Hence, in our view, the mere newspaper items cannot be treated to be a sufficient and solid basis for making reference to ihe DVO. It may be pointed out that the matter pertains to assessment year 1987-88 and the assessing officer was initiating action after 10 years. Hence, the alleged report of Economic Times dated 4th April, 1997 stating the value of the property at Rs. 70 crores could not be relied upon. It may further be pointed out that there are certain norms and procedure for valuing the property and the news items do not come under any norms. In his revised return, the assessee had made the valuation on the basis of the report of approved valuer. Hence for making reference to the DVO, the assessing officer was required to make further probe into the matter by taking examples of adjoining lands and valuation thereof in the period relevant to assessment year 1987-88. Hence the plea of the learned counsel for the assessee carries much force. Since the assessing officer has not made reference to any material, result of inquiry or example, nor has recorded reasons or satisfaction for making the reference, his action in making reference to the Valuation Officer without such material cannot be legally upheld.
20. In view of the above, we are of the considered opinion that the assessing officer has not made reference to the Valuation Officer in accordance with the relevant statutory provisions. Hence, on this basis, these grounds are also allowed in favour of the assessee.
Ground Nos. 2(a) and 20)
21. These grounds challenge the method of valuation adopted by the departmental authorities. The assessee has taken specific ground (Ground No. 2(b) against the approach of the learned Commissioner (Appeals) in upholding the further increase by 29 per cent of the alleged value of land in question as adopted by DVO on account of time gap between the date of sale of another property and his valuation date.
22. Since we have allowed legal grounds viz., Ground Nos. 1 and 3 in favour of the assessee, we do not consider it necessary to examine the facts and merits of valuation of the property and method adopted for doing so by the DVO and the departmental authorities. Hence, this ground does not require to be decided.
23. In the result, assessee's appeal stands allowed.