Delhi High Court
Commissioner Of Income Tax vs Indo-Kenyan Industrial Enterprises on 5 May, 2005
Equivalent citations: (2005)197CTR(DEL)78
Author: Swatanter Kumar
Bench: Swatanter Kumar, S. Ravindra Bhat
JUDGMENT Swatanter Kumar, J.
1. On 28th Oct., 1998, the assessed filed his return of income declaring taxable income of Rs. 10,410. The return was processed under Section 143(1) of the IT Act (hereinafter referred to as the Act). Later, case being taken up for scrutiny, notice under Section 143(2) was issued to the assessed who attended proceedings and where after the AO vide his order dt. 28th March, 2001, assessed the total income at Rs. 49,24,110. Against this addition, the assessed also filed objections which were considered and as the reply was found to be unsatisfactory, the AO directed charging of interest under Sections 234B and 234C of the Act as well as initiated penalty proceedings under Section 271(1)(c) of the Act. The order of the AO was improvement (affirmed) in an appeal preferred by the assessed before the CIT(A), who vide his order dt. 24th Dec., 2002, dismissed the same. Dissatisfied with this, the assessed preferred the appeal before the Tribunal against the order of the first appellate court which was partly accepted by the Tribunal vide its order dt. 4th Dec., 2003.
2. Returning the finding in favor of the assessed, the Tribunal held as under:
"We have considered the rival submission. It is admitted position that except the DVO's report, there is no other material on which reliance was placed by the AO for estimating the cost of construction. Hon'ble Supreme Court in the case of Amiya Bala Paul (supra) has held that the reference to the DVO could be made only for the purpose of Section 55A and Section 269L of the Act. Any reference for other purposes was illegal and ultra vires. Respectfully following the same, we hold that as reference to the DVO under Section 131(1)(d) of the Act itself was illegal, no reliance could be placed on such report. As there is no other material for estimating the higher figure of the construction, the addition sustained by the CIT(A) is not justified and the same is deleted.
7. Ground Nos. 17 to 21 have not been pressed, hence the same are dismissed.
8. In the result, the appeal filed by the assessed is partly allowed.
Sd/- Sd/- (Diva Singh) (Keshaw Prasad) Judicial Member Accountant Member Dated : 4th Dec., 2003"
3. Challenge in the present appeal under Section 260A of the Act is to the above finding of the Tribunal, primarily on the ground that within the correct ambit and scope of provisions of Section 142A read with Section 131(1)(d) of the Act, the AO has the authority to appoint a DVO and ask for the estimated expenditure on construction of the property in question. The assessed had shown Rs. 35.09 lacs under the head "building account" which was for construction of a banquet hall known as Golden Gate. Being dissatisfied with the cost of construction declared, the matter was referred to the DVO who gave the valuation at Rs. 84.09 lacs, thus a difference of Rs. 48.99 lacs between the cost of construction declared by the assessed and given by the DVO.
4. The controversy in the present case, thus, falls in a very narrow compass. Whether the AO has the power to call for the report from the Valuation Officer under the provisions of the Act particularly when it relates to undervaluing an asset during the pendency of the assessment proceedings. The Supreme Court while construing the provisions of Sections 55A, 131, 142(2), as well as the provisions of order 26, Rule 9 of the CPC in the case of Smt Amiya Bala Paul v. CIT , after detailed discussion, held as under :
"From this it is clear that whenever reference to a Valuation Officer appointed under the WT Act is permissible under the IT Act, it has been statutorily so provided.
Apart from the aforesaid, the Valuation Officer is appointed under the WT Act and can discharge functions within the statutory functions. He cannot be called upon nor would he have the jurisdiction to give a report to the AO under the IT 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 AO cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property. The appeal is accordingly allowed and the decision of the High Court set aside. There will be no order as to costs."
5. The provisions of Section 131(1)(d) of the Act deals with powers which would vest in the AO in regard to recovery and production of evidence. Under Clause (d) of Sub-section (1) of Section 131, power is vested in the AO to issue commission. The commissions could be issued as contemplated under order XXVI, Rule 9, CPC. These provisions do not by necessary implication or otherwise empower the AO to appoint such an officer for any purpose which otherwise is not specifically contemplated under the provisions of this Act. The Supreme Court while dealing with this aspect clearly indicated to the provisions of Section 55A of the Act which empower making of a reference to the Valuation Officer in regard to fair market value of a capital asset for the purposes of that Chapter. No such specific power has been vested in the AO for reference to a Valuation Officer under the provisions of Section 142A of the Act for the orders which have been finalised before 30th Sept., 2004. In the present case, the Tribunal had passed an order on 4th Dec., 2003, as such the proceedings under the Act had been determined by the authority which is a final fact-finding authority. These amended provisions cannot be of any help to the appellant before us. Furthermore, the Allahabad High Court in the case of Dr. Avinesh Kumar Agarwal v. Asstt. Director of IT (Inv.) and Ors. while relying upon the judgment of the Supreme Court in Smt. Amiya Bala Paul (supra) took the view that the AO has no power under Section 131(1) and (4) of the Act to appoint a DVO. Reference can also be made to the case of Prakash Chand v. Dy. CIT and Anr. , in this regard.
6. In view of the above settled position of law and the fact that questions proposed in the memorandum of appeal have been answered squarely by the above judgments, we are of the considered view that no question of law much less a substantial question of law arises for consideration in the present appeal. Appeal is dismissed by leaving the parties to bear their own costs.