Commissioner Of Income Tax (Central), Ludhiana v. Nabha Solvex (P) Ltd

ITR No. 48 of 1994 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 48 of 1994Date of Decision: 7.7.2010 Commissioner of Income Tax (Central), Ludhiana Versus Nabha Solvex (P) Ltd. ....Petitioner. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the revenue. Mr. Pankaj Jain, Advocate for the assessee. ADARSH KUMAR GOEL, J. 1.The Income Tax Appellate Tribunal, Chandigarh Bench (inshort “the Tribunal”) has referred for opinion of this Court the followingquestions of law arising out of its order dated 26.4.1993 in ITA No.828/Chandi/88 relating to the assessment year 1984-85:- “1.Whether, on the facts and in the circumstancesof the case, the I.T.A.T. was right in law inupholding the order of the first appellateauthority deleting the addition of Rs.4,36,780/-made as income from undisclosed sources onaccount of difference between the cost ofconstruction declared by the assessee and that ITR No. 48 of 1994 estimated by the DVO? 2.Whether, on the facts and in the circumstancesof the case, the I.T.A.T. was right in law inupholding the order of the first appellateauthority deleting the disallowance of interestattributable to borrowed money utilized forpurchase of machinery which was not put touse during the year under consideration?” 2.Learned counsel for the revenue fairly states that questionNo.2 is covered against the revenue in view of the judgment of theHon'ble Supreme Court in Deputy Commissioner of Income-Tax v.Core Health Care Ltd., (2008) 298 ITR 194 (SC). Accordingly, weanswer the said question in favour of the assessee and against therevenue. 3.We have heard the learned counsel for the parties onquestion No.1. 4.Briefly the facts may be noticed. The assessee is a privatelimited company and filed return on 30.10.1984 for assessment year1984-85 declaring an income of Rs.1,04,490/-. The assessee raisedcertain construction in the factory building and the Assessing Officerreferred the matter to the Valuation Cell. The Departmental ValuationOfficer (in short “the DVO”) estimated the cost of construction atRs.8,89,540/-. The assessee also got the services of a registeredvaluer who estimated the cost at Rs.4,56,900/- but the AssessingOfficer adopted the valuation made by the DVO. On that basis, additionof Rs.4,36,780/- to the income was made. On appeal, the CIT (A) deleted the addition made at Rs.4,36,780/-. The CIT (A) held that sincethe construction of unit No.2 was not complete in the previous yearrelevant to assessment year 1984-85, the valuation by the DVO waspremature. On further appeal by the revenue, the Tribunal affirmed theorder of CIT (A) and held that the Assessing Officer was not justified inreferring the case to the DVO as the building was still underconstruction. Hence, the present reference by the revenue. 5.The Tribunal while adjudicating the matter against therevenue recorded that there was no justification for the AssessingOfficer to refer the case of the assessee to the Valuation Cell as thebuilding was still under construction. It was also recorded that theconstruction of two units of the factory building was mixed up andseparate details were not available. The Tribunal had relied upon thedecision of Madras High Court in CWT v. S. Venugopalan Konar andothers [(109) ITR 520] to delete the addition. 6.Learned counsel for the revenue submitted that evenincomplete construction had the valuation and, therefore, the Tribunalwas not justified in holding that in case of incomplete construction, thereference to DVO was premature and that the judgment of Madras HighCourt in S. Venugopalan Konar's case (supra) was distinguishable asthe issue considered therein was different. Learned counsel for therevenue has sought to draw support from the insertion of Section 142Ain the Act w.e.f. 15.11.1972. 6.Learned counsel for the revenue submitted that evenincomplete construction had the valuation and, therefore, the Tribunalwas not justified in holding that in case of incomplete construction, thereference to DVO was premature and that the judgment of Madras HighCourt in S. Venugopalan Konar's case (supra) was distinguishable asthe issue considered therein was different. Learned counsel for therevenue has sought to draw support from the insertion of Section 142Ain the Act w.e.f. 15.11.1972. 7.On the other hand, learned counsel for the assesseesubmitted that the case related to the assessment year 1984-85 duringwhich period there was no specific provision on the basis of which reference could be made to the DVO. According to him, the referencemade by the Assessing Officer to the DVO could be said to one underSection 55A of the Income Tax Act, 1961 (in short “the Act”). Accordingto the learned counsel, as there was no provision on the basis of whichreference could be made to the DVO, the said reference was bad inview of the decision of the Apex Court in Smt. Amiya Bala Paul v.Commissioner of Income-Tax, (2003) 262 ITR 407 (SC). Learnedcounsel further submitted that even if reliance is placed on Section142A of the Act which has been inserted by Finance (No.2) Act, 2004w.e.f. 15.11.1972, the assessments which stood completed on or before30.9.2004 and where such assessment had become final andconclusive on or before that date, valuation in those cases could not bereferred to DVO in view of the proviso. In support of his submissions,learned counsel has placed reliance on the judgment of this Court inCommissioner of Income-Tax v. Krishan Lal Dua (2005) 277 ITR477 (P&H), Delhi High Court in Commissioner of Income-Tax v.Sudhish Kumar, (2005) 276 ITR 563, Calcutta High Court in IncomeTax Officer and others v. Kajaria Investment and Properties P. Ltd.,(2008) 297 ITR 45 (Cal.) and Allahabad High Court in Commissionerof Income Tax v. Smt. Shashi Agarwal, (2007) 210 CTR (All) 205.Learned counsel further submitted that even if the judgment of MadrasHigh Court in S. Venugopalan Konar's case (supra) was not applicable,yet there was no material before the Assessing Officer to reject thevaluation declared by the assessee by appointing registered valuer.8.We have given our thoughtful consideration to therespective submissions made by the learned counsel for the parties. 9.It would be advantageous to refer to Section 142A of theAct as inserted by Finance (No.2) Act, 2004 w.e.f. 15.11.1972 whichreads thus:- “142A. Estimate by Valuation Officer in certaincases.- (1) For the purposes of making anassessment or re-assessment under this Act, wherean estimate of the value of any investment referred toin section 69 or section 69B or the value of anybullion, jewellery or other valuable article referred toin section 69A or section 69B is required to be made,the Assessing Officer may require the ValuationOfficer to make an estimate of such value and reportthe same to him. (2)The Valuation Officer to whom a reference ismade under sub-section (1) shall, for the purposes ofdealing with such reference, have all the powers thathe has under section 38A of the Wealth-tax Act,1957 (27 of 1957). (3)On receipt of the report from the ValuationOfficer, the Assessing Officer may, after giving theassessee an opportunity of being heard, take intoaccount such report in making such assessment orre-assessment: Provided that nothing contained in this sectionshall apply in respect of an assessment made on orbefore the 30[th] day of September, 2004, and where such assessment has become final and conclusiveon or before that date, except in cases where areassessment is required to be made in accordancewith the provisions of section 153A.” (2)The Valuation Officer to whom a reference ismade under sub-section (1) shall, for the purposes ofdealing with such reference, have all the powers thathe has under section 38A of the Wealth-tax Act,1957 (27 of 1957). (3)On receipt of the report from the ValuationOfficer, the Assessing Officer may, after giving theassessee an opportunity of being heard, take intoaccount such report in making such assessment orre-assessment: Provided that nothing contained in this sectionshall apply in respect of an assessment made on orbefore the 30[th] day of September, 2004, and where such assessment has become final and conclusiveon or before that date, except in cases where areassessment is required to be made in accordancewith the provisions of section 153A.” 10.A plain reading of sub-section (1) makes it clear that formaking an assessment or reassessment under the Act, an estimate isrequired to be made in respect of any investment referred to in section69 or section 69B or the value of any bullion, jewellery or other valuearticle referred to in section 69A or section 69B is required to be made,the Assessing Officer may refer the matter to the Valuation Officer forestimating the said value and reporting the matter to him. Sub-section(2) stipulates that the Valuation Officer to whom the reference is madeunder sub-section (1) shall, have all the powers similar to Section 38Aof the Wealth Tax Act, 1957 while dealing with such reference.According to sub-section (3), the Assessing Officer on receipt of reportfrom the Valuation Officer may take the same into consideration whilemaking assessment or reassessment after providing an opportunity ofbeing heard to the assessee. However, a proviso has been added,according to which this section shall not apply in respect of anassessment made on or before 30.9.2004 where such assessment hasbecome final and conclusive on or before that date except in caseswhere a reassessment is required to be made in accordance with theprovisions of section 153A. The amendment is inserted retrospectivelyfrom 15.11.1972. 11.The question regarding the applicability of Section 142A ofthe Act was subject matter of consideration before this Court in Krishan ITR No. 48 of 1994 Lal Dua's case (supra) wherein the assessment had become final on31.3.1995 and the same was not liable to reassessment under Section153A of the Act, it was held that Section 142A of the Act would not beapplicable as the proviso was attracted. The Allahabad High Court inSmt. Shashi Agarwal's case (supra) had held that where the Tribunalhad passed the order before the cut off date prescribed under theproviso to Section 142A of the Act and the appeal under Section 260Aof the Act being maintainable before the High Court only on substantialquestion of law, therefore, it could not be said to be continuation of theassessment proceedings within the meaning of proviso to Section 142Aof the Act. The Assessing Officer, thus, had no power to refer thematter to the DVO. Similar view has been taken by Delhi and CalcuttaHigh Courts. 12.In view of the above, we hold that Section 142A of the Actis not attracted to the facts of the present case and, thus, no reliancecan be placed upon that. Once that is so, then as laid down by theApex Court in Smt. Amiya Bala Paul's case (supra), the reference madeby the Assessing Officer to the DVO was not justified. Consequently,the addition sought to be made on the basis of report of the DVO cannotlegally be done. 13.Accordingly, question No.1 referred to above is alsoanswered against the revenue and in favour of the assessee. (ADARSH KUMAR GOEL) JUDGE July 7, 2010gbs (AJAY KUMAR MITTAL)JUDGE