2006 (6) TMI 167 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reference made by the Assessing Officer to the Departmental Valuation Officer (DVO) under section 131(1) of the Income-tax Act, 1961.
2. Applicability and impact of section 142A of the Income-tax Act, 1961, inserted by Finance (No.2) Act, 2004, with retrospective effect from 15-11-1972.
3. Whether the Tribunal's order dated 9-11-2004 should be recalled in light of section 142A.

Issue-wise Detailed Analysis:

1. Validity of the Reference Made by the Assessing Officer to the DVO under Section 131(1):
The Department contended that the reference to the Valuation Cell for determining the cost of construction of the property was proper and justified. They argued that the Assessing Officer was competent to make such a reference under section 142A, which was inserted by the Finance Act, 2004, effective from 15-11-1972. However, the Tribunal had earlier dismissed the Department's appeals, relying on the Supreme Court's decision in Smt. Amiya Bala Paul v. CIT, which held that a reference to the DVO under section 131(1)(d) was not legal. The Tribunal reiterated that the report obtained under section 131(1) could not be relied upon for estimating the cost of construction as it was not a valid report.

2. Applicability and Impact of Section 142A:
Section 142A was inserted to clarify that the Assessing Officer has the power to make a reference to the Valuation Officer for estimating the value of investments referred to in sections 69 and 69B, with retrospective effect from 15-11-1972. The Department argued that this section validated the reference made by the Assessing Officer to the DVO, and therefore, the Tribunal's order should be recalled. The Tribunal, however, noted that section 142A did not contain any provision that a report obtained under section 131(1) could be deemed to be obtained under section 142A. The Tribunal held that the addition made by the Assessing Officer based on the DVO's report obtained under section 131(1) could not be relied upon for making the addition in the investment of the property under section 69B.

3. Whether the Tribunal's Order Dated 9-11-2004 Should Be Recalled:
The Judicial Member proposed dismissing the Department's applications, maintaining that the DVO's report obtained under section 131(1) was not valid and could not be deemed to be obtained under section 142A. The Accountant Member disagreed, arguing that section 142A, being a procedural section, should apply retrospectively, validating the reference made under section 131(1). The Third Member concurred with the Accountant Member, emphasizing that section 142A should be deemed to be on the statute book from 15-11-1972, thereby validating the reference made by the Assessing Officer. The Third Member further clarified that the proviso to section 142A could not render the provision redundant and that the procedural nature of section 142A allowed it to apply retrospectively.

Conclusion:
In light of the retrospective effect of section 142A, the Tribunal's order dated 9-11-2004, which dismissed the Department's appeals, was recalled. The Tribunal directed the Registry to fix the appeals for hearing before the Bench after giving notices to both parties, thereby allowing the Department's miscellaneous applications.