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TMI Blog2006 (6) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Apex Court, namely, Smt. Amiya Bala Paul's case. In the applications, the Department has placed reliance on the following decisions:- (i) Addl CIT v. India Tin Industries (P.) Ltd. [1987] 166 ITR 454 (Kar.). (ii) CIT v. S. Teja Singh [1959] 35 ITR 408 (SC). (iii) Maneklal Vallabhdas Parikh & Sons v. CIT [1969] 72 ITR 637 (Guj.). 3. During the course of hearing of the applications, the ld. D.R. submitted that the Assessing Officer was competent to make a reference to the Valuation Cell to ascertain the value of the investment in the above property in view of section 142A of the Income-tax Act, 1961. He submitted that the said section has been inserted by the Finance Act, 2004, effective from 15-11-1972. He submitted that the order of the Tribunal dated 9-11-2004, be recalled and the additions made by the Assessing Officer on the basis of the DVO's report be confirmed. On the other hand, the ld. Authorized Representative of the assessee submitted that the cases cited by the Department in the Misc. Applications are not relevant. He further submitted that the Assessing Officer made a reference to the DVO under section 131(1) of the Income-tax Act, 1961, and the Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the difference in the cost of construction disclosed by the assessee and the cost estimated by the DVO. We further observe that the First Appellate Authority reduced the cost of investment in the above premises to Rs. 21,83,330 as against Rs. 27,91,300 considered by the Assessing Officer for all the three assessment years i.e., the assessment year in which the investment was made by the assessee for construction of the above premises. We further observe that the ld. CIT(A) has not given up the break-up of investment in the cost of construction of the property for each of the assessment year i.e., assessment years 1995-96, 1996-97 and 1997-98, while estimating the aggregated cost of investment in the property at Rs. 21,83,330 as against Rs. 20,10,760 disclosed by the assessee. 5. In the appeals before the Tribunal, the Tribunal considered the above facts and has held that the reference made by the Assessing Officer to the DVO under section 131(1)(d) of the Income-tax Act, 1961, to estimate the cost of construction of the above property is not legal as per the decision of the Apex Court in the case of Smt. Amiya Bala Paul. In the above case, the Apex Court has held that the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957). (3) *** *** *** On perusal of the above section, it is evident that the Assessing Officer for the purposes of making the assessment or reassessment under this Act to estimate, inter alia, the value of an immovable property can call upon the Valuation Officer to make an estimate of such value and report the same to him. Subsection (2) further provides that 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 under section 38A of the Wealth-tax Act, 1957. Thus, it is evident that to obtain a valid DVO's report, it is necessary that the reference must have been made by the Assessing Officer to estimate the value, inter alia, of an immovable property for the purpose of assessment or reassessment under the Act as per section 142A(1) of the Act, particularly when the Apex Court has already held in the case of Smt. Amiya Bala Paul that the Assessing Officer has no valid power to call upon the DVO under section 131(1) of the Act, to estimate the cost of construction of the property and the report, if any submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be placed thereon as per decision of the Apex Court in the case of Smt. Amiya Bala Paul. 7. In the result, both the applications filed by the Department are dismissed. Per S.V. Mehrotra, Accountant Member.-In these miscellaneous applications, the Department has sought rectification of Tribunal's order dated 9-11-2004 on the ground that in view of insertion of section 142A with retrospective effect from 15-11-1972, the reference made by the Assessing Officer to DVO was proper and due to non-consideration of section 142A, a mistake has crept into the order of Tribunal. Ld. Judicial Member is of the view that since section 142A of the Act does not contain any provision that the report obtained by the Assessing Officer from DVO on a reference under section 131(1) of the Act could be deemed to be the report obtained on a reference made under section 142A(1) of the Act, therefore, the same could not be relied upon by the Assessing Officer for making the addition in the investment of property in question under section 69B of the Act as the said report was an invalid report. 2. After deliberate consideration of the issue, I am unable to persuade myself to agree with the view taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luation 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 under section 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 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." 5. The memorandum explaining provisions in the Finance (No.2) Bill, 2004, 268 ITR 198 (statute) reads as under: "Estimates by Valuation Officer in certain cases: For determining the cost of construction of properties, an Assessing Officer has been taking the assistance of a Valuation Officer by exercising his power vested in him under section 131 of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conclusive on or before that date. The amendment will take effect retrospectively from 15-11-1972." 6. The proviso to section 142A takes out from the purview of this section all the concluded assessments on or before 30-9-2004 and consequently it applies to all pending assessments. This section has been incorporated in Chapter XIV dealing with procedure for assessment. It is a part of enquiry to be made before the assessment is made. This is a procedural section and since it has specifically been made retrospective in operation, it is deemed to be in existence for all times from 15-11-1972. 7. In this regard, I may quote from the Principles of Statutory Interpretation by the Hon'ble justice G.P. Singh, Eighth Edition 2001 wherein at page 405 it has been observed as under: "(iii) Statute dealing with procedure - In contrast to statutes dealing with substantive rights, statutes dealing with merely matters of procedure are presumed to be retrospective unless such a construction is textually inadmissible, As stated by LORD DENNING: 'The rule that an act of Parliament is not to be given retrospective effect applies only to statutes which affect vested rights. It does not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought on statute in order to regularize the references made by the DVO in all pending proceedings. 10. In this regard, I may also refer to the decision of the Hon'ble Bombay High Court in the case of CIT v. May & Baker India (P.) Ltd. [1991] 192 ITR 239. In this case the question as framed before the Hon'ble Bombay High Court was whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 5,34,000 (being the difference between Rs. 8,65,000 and Rs. 3,31,000) also accrued as liability during the previous year under the payment of Gratuity Act, 1972. The facts of the case were that the assessee was a company. The assessment year involved was 1973-74 for which the previous year ended on 31-12-1972. The Payment of Gratuity Act, 1972, came into force some time in October, 1972. According to the assessee, it became liable to pay gratuity to its employees under the statute for the first time during the previous year. It made a provision of Rs. 8,65,000 in respect of its gratuity liability. The break-up of the amount was Rs. 3,31,000 as the gratuity liability of the previous year and the remaining sum of Rs. 5,34,000 as li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the departmental authorities and the Tribunal under section 37. The disallowance was made by the Income-tax Officer on the footing that gratuity liability for past years did not accrue or arise during the previous year. The disallowance was deleted by the Appellate Assistant Commissioner and the Tribunal also on the sole ground that such a liability had arisen during the previous year. Having regard to the facts and circumstances of the case and in particular the fact that the provision came on the statute book with retrospective effect after the departmental authorities as well as the Tribunal had passed their respective orders, the question should be reframed to bring out the real controversy before the authorities below and then answered. It will then be for the Tribunal to pass such orders as are necessary to dispose of the case conformably to such judgment. The proper question, in our opinion, is: 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 5,34,000 (being the difference between Rs. 8,65,000 and Rs. 3,31,000) also accrued as a liability during the previous year under the Payment of Gratuity Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in allowing the application(s) filed by the Department to recall the order dated 9-11-2004, in above appeals?" Per S.V. Mehrotra, Accountant Member. - In my view the following question be referred:- "Whether on the facts and in the circumstances of the case, in view of the newly inserted provisions of section 142A with retrospective effect from 15-11-1972 by the Finance (No.2) Act, 2004, the order dated 9-11-2004, passed in ITA Nos. 1399 & 1400/Alld/1998 should not be recalled as held by the ld. J.M. or be recalled as held by the ld. A.M.? THIRD MEMBER ORDER Per Pradeep Parikh, Vice President. - Since there is a difference of opinion between the members who heard these applications, the matter was referred to the Hon'ble President under section 255(4) of the Income-tax Act, 1961 (the Act). Vide intimation dated 24-11-2005, the Hon'ble President has been pleased to nominate me as the Third Member and hence I proceed to resolve the point/s of difference arising in the said applications. The point of difference as proposed by the ld. J.M. is as follows:- "Whether on the facts and in the circumstances of the case, the ld. Judicial Member is justified in dismissing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, section 142A was inserted in the Act by the Finance (No.2) Act, 2004. Since the said provision was given retrospective effect from 15-11-1972, the Department filed the present miscellaneous applications under section 254(2) of the Act contending that by virtue of the said provision, since the action of the Assessing Officer to refer the matter to the valuation cell stands validated, the order of the Tribunal suffers from a mistake apparent on record and hence needs rectification. The ld. J.M. in his order proposed the dismissal of the departmental applications. The gist of his reasoning is that to obtain a valid report from the DVO the reference must have been made under section 142A. The report obtained under section 131(1) cannot be deemed to have been obtained under section 142A and hence the report obtained under section 131(1) cannot be termed as a valid report as held in the case of Smt. Amiya Bala Paul. On the other hand, the ld. A.M. held the reference made by the Assessing Officer under section 131(1) to be valid. His reasoning is that "non-reference" of section 131(1)(d) in the newly inserted section 142A is of no consequence because it is merely a procedural section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 254(2) of the Act. 6. Since it was an important legal issue which was being debated, I also sought the help of other counsel present in the court as amicus curie. Shri Kanchan Kaushal extended his help for which I am thankful. His contention was that section 142A was applicable only for the purpose of estimating the value of the assets referred to in sections 69, 69A and 69B of the Act. Hence, before applying section 142A, it was incumbent that the conditions for applying the provisions of sections 69,69A or 69B are fulfilled. Unless the conditions mentioned in those sections are fulfilled, section 142A cannot have any applicability. It was further contended that the proviso has to be applied in toto and that it cannot be split. Therefore, the contention was that the proviso to section 142A was applicable only in case of a reassessment to be made under section 153A and not otherwise. It was also his contention that since there was no reference to section 131 in section 142A, the latter was not applicable where reference was made under section 131 of the Act. Mr. Kaushal's final argument was that if section 131 has to be read in section 142A, then it was a moot question as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the DVO's report. This is altogether a different aspect of the matter where section 142A cannot be pressed into service, and hence the judgment of the Punjab & Haryana High Court. Therefore, this judgment is of no avail to the assessee. 10. Another argument raised in connection with the same judgment was that section 142A cannot be used except for the purpose of making reassessment under section 153A. An argument to this effect was also separately raised by Mr. Kaushal stating that the entire proviso has to be read in totality and that it cannot be split into pieces. I do agree that the proviso has to be applied in toto. However, only for the purpose of understanding the true purport of the proviso, let us split it in the following manner: "Provided that- nothing contained in this section shall apply in respect of an assessment made on or before 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." The straight proposition of Mr. Kaushal is that section 142A can be applied only where reassessment is to be made under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght from the fifteenth day of November, 1972, the Assessing Officer had the power to make reference to the Valuation Officer. Obviously, since section 142A was not actually on the statute book till it was inserted by the Finance Act, 2004, the power could not have been exercised by making a specific reference to section 142A, but now when section 142A is inserted and when the Legislature has clarified that the said provision is deemed to be on the statute book since 15-11-1972, the exercise of the power by the Assessing Officer by reference to any other section does not affect any of the vested rights of the assessee. To further clarify the point, after the insertion of section 142A with retrospective effect, it cannot be disputed that the Assessing Officer had the power since 15-11-1972. If the same power is exercised with reference to section 131, the action of the Assessing Officer cannot be held to be invalid. A Five-Judge Constitution Bench of the Supreme Court in the case of L. Hazari Mal Kuthiala v. ITO [1961] 41 ITR 12 observed at page 16 of the report that exercise of a power will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther on the facts and in the circumstances of the case, in view of the newly inserted provisions of section 142A with retrospective effect from 15-11-1972 by the Finance (No.2) Act, 2004, the order dated 9-11-2004, passed in ITA Nos. 1399 & 1400/Alld/1998 should not be recalled as held by the ld. J.M. or be recalled as held by the ld. A.M.?" 2. However, the ld. Third Member has reframed the question to ring out the point of difference between the Members constituting Division Bench as under:- "Whether on the facts and in the circumstances of the case, the applications filed by the department should be dismissed or the same should be allowed by recalling the order of the Tribunal in view of the provisions of section 142A of the Income-tax Act, 1961?" 3. The Hon'ble Vice President, Shri Pradeep Parikh, sitting as Third Member, by his opinion dated 29-6-2006 has concurred with the view of the Accountant Member who has allowed the miscellaneous applications filed by the department. 4. Therefore, in accordance with the majority view, the issue stands declared in favour of the department. Accordingly, both the miscellaneous applications filed by the department are allowed. 5. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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