M/S.t.s.hajee Moosa & Co v. The Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.04.2021 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH W.P. No.13339 of 2020 andWMP.No.16477 of 2020 M/s.T.S.Hajee Moosa & Co.,Represented By its Partner Faheem MoosaNo.33, Godown Street,Chennai-600 001. ...PetitionerVs. 1.The Commissioner of Income Tax-8, BSNL Building (Tower II), Greams Road, Chennai-600 006. 2.The Assistant Commissioner of Income Tax, Non-Corporate Circle – 12, BSNL Building (Tower II), Greams Road, Chennai-600 006. 3.The Assistant Valuation Officer, Unit-II, Valuation Cell, Income Tax Department, Chennai-600 034. ...Respondents Prayer: Writ Petition filed under Article 226 of the Constitu-tion of India praying to issue Writ of Certiorari, calling forthe records relating to the impugned assessment order of the 2[nd]respondent passed under section 143(3) for the assessment Year2015-16 in NCC-12(1)/AAAFT4462D/2020-21 dated 05.08.2020, issuedbased on the report of the 3[rd] Respondent in F.No.AVO-II/CHE/CG(04)/2019-20, dated 04.02.2020 and quash the same as withoutjurisdiction, beyond provision of law and the direction of theTribunal order passed in I.T.A.No.2686/CHNY/2018 dated06.09.2019 and to pass further order after affording dueopportunity in accordance with law. For Petitioner : Mr.A.K.Jayaraj For Respondents : Mrs.Hema Muralikrishnan Senior Standing Counsel O R D E R The petitioner had been assessed for Assessment Year (AY)2015-16 in terms of the provisions of the Income Tax Act, 1961by an order dated 29.12.2017, passed under Section 143(3) ofthe Act. The issue that arose in the course of assessment wasthe valuation of the property sold by the petitioner at PlotNo.33 & 34 (NP), Alandur Hamlet, Adyar Village, Guindy (propertyin question) and the capital gains that would arise from thesale transactions, the cost of acquisition specifically. 2.The order of assessment proceeded on the basis that theindexed cost of acquisition would be in the region of Rs.37lakhs (approx.), as against which the petitioner went on firstappeal and thereafter before the Income Tax Appellate Tribunal(Tribunal) in second appeal. By order dated 06.09.2019, theTribunal set aside the assessment and remanded the matter to theAssessing Officer in the following terms: '4. We heard the rival submissions. In thejudgment of the Supreme Court referred to above,while considering the issue as to whether theland purchased has been undervalued or not, theSupreme Court observed that the guideline valuehas relevance only in the context of section 47Aof the Indian Stamp Act (as amended by T.N. Act24 of 1967) which provides for dealing withinstruments of conveyance which are undervalued.Guideline value will only afford a prima faciebasis to ascertain the true or correct marketvalue. Guideline value is not sacrosanct, butonly a factor to be taken note of if at allavailable in respect of an area in which theproperty transferred lies. When the assesseerelies on the Registered Valuer's report and ifAssessing Officer is not satisfied about suchclaim then, the AO should have referred thematter to the DVO to ascertain the fair marketvalue. Therefore, we deem it fit to remit thisissue back to the AO who shall refer the matterto DVO and proceed to determine the issue inaccordance with law. The assessee's correspondinggrounds of the appeal are treated as allowed forstatistical purpose.' 3.The Tribunal refers to the report of an approved valuer,to the effect that the indexed cost of acquisition of theproperty in question as on 1981, was Rs.48 crores (approx.). 3.The Tribunal refers to the report of an approved valuer,to the effect that the indexed cost of acquisition of theproperty in question as on 1981, was Rs.48 crores (approx.). 4.Therefore, there is a serious dispute/difference betweenthe cost of acquisition as arrived at by the Assessing Officerand as computed by the assessee/petitioner. Perhaps, it wasbearing this gap in mind, that the Tribunal conciously chose torefer the matter to the District Valuation Officer to ascertainfair market value as on 01.04.1981. We cannot thus assume thatthe reference to District Valuation Officer was casual,intending merely that the matter be valued by any authority, inthe Valuation Department, as the revenue would have me believe. 5.On remand, a reference was made by the Assessing Officerto the Valuation Department and the matter was referredinternally to the Assistant Valuation Officer (AVO), Anobjection was raised by the petitioner to a notice issued to himby the AVO, stating that the proper authority to have embarkedon the exercise of valuation would be the District ValuationOfficer (DVO) and not the AVO in terms of the order of Tribunal.This objection has been rejected by the AVO, who proceeded onthe reference, on merits. 6.An order dated 04.02.2020 under Section 16A(5) of theWealth Tax Act, 1957 read with Section 55A of the Act has beenpassed valuing the property in question that has been taken noteof by the Assessing Authority in passing the impugned orderdated 05.08.2020 giving effect to the order of the Tribunal. 7.The main contention urged by the petitioner is that theproper authority to have valued the property in question wouldhave been the DVO and not the AVO, and hence the jurisdictionassumed by the AVO is incorrect and improper. 8.Per contra, learned Senior Standing Counsel would rely onRule 3(a) of the Welath Tax Act, 1957, setting out thebifurcation of officers for the purpose of valuation. Rule 3(a)reads as follows: '3A-Regional Valuation Officers shallexercise, within such areas as the Board maydirect, general supervision over the work ofDistrict Valuation Officers, Valuation Officersand Assistant Valuation Officers. (2)District Valuation Officers, ValuationOfficers and Assistant Valuation Officers shallperform the functions of a Valuation Officer inrespect of such areas and in relation to suchclasses of assets as the Board may direct. (3)Where under any directions issued undersub-rule (2), the functions of a ValuationOfficer in relation to any class of assets, beingbuildings or lands or any rights in buildings orlands, in respect of any area have been assignedto a District Valuation Officer, ValuationOfficer and an Assistant Valuation Officer, suchfunctions shall be performed by the DistrictValuation Officer, the Valuation Officer or, asthe case may be, the Assistant Valuation Officeras provided hereunder:- (i) if the value of the asset as declared inthe return made by the assessee under section14 or section 15 exceeds Rs.300 lakhs or if the asset is not disclosed or the value of theasset is not declared in such return or nosuch return has been made and the value of the asset, in the opinion of the Assessing Officer,exceeds the aforesaid amount, the functionsshall be performed by the District Valuation Officer; (ii) if the value of the asset as declaredin the return made by the assesseeundersection 14 or section 15 exceeds Rs.40 lakhs butdoes not exceed Rs.300 lakhs or if the assetis not declared in such return or no suchreturn has been made and the value of the asset,in the opinion of the Assessing Officer, fallswithin the aforesaid limits, the functionsshall be performed by the Valuation Officer; and (ii) if the value of the asset as declaredin the return made by the assesseeundersection 14 or section 15 exceeds Rs.40 lakhs butdoes not exceed Rs.300 lakhs or if the assetis not declared in such return or no suchreturn has been made and the value of the asset,in the opinion of the Assessing Officer, fallswithin the aforesaid limits, the functionsshall be performed by the Valuation Officer; and (iii) if the value of the asset as declaredin the return made by the assesseeundersection 14 or section 15 does not exceed Rs.40lakhs, or if the asset is not disclosed or thevalue of the asset is not declared in suchreturn or no such return has been made and thevalue of the asset, in the opinion of theAssessing Officer, does not exeed the aforesaidamount, the functions shall be performed by theAssistant Valuation Officer:' Thus according to her, since the petitioner in this case had notfiled a return, Section 3A(3)(iii) would apply and hence, thejurisdiction assumed by the AVO was proper. She points out thatthe valuation as per the AVO was between Rs.35 to Rs.40 lakhsand hence jurisdiction has been assumed validly. 9.As noted by me earlier, there is large gap between thevalues, as relied upon by the petitioner and as computed by theAssessing Authority. Rule 3(a) must take note of the intendmentof the Rule seeks to appoint officers in line with the value ofthe property itself. Thus the pecuniary limit fixed for theofficer is based on the valuation of the property by theassessee in question. The higher value, the more senior theofficer. The petitioner in this case has relied on a valuationreport of an approved valuer valuing the property at Rs.48crores (approx.) and the mere fact that no return has been filedsetting out a value for the property in question, would in myview not, be material. The clear directions of the Tribunal canalso not be ignored by the officer and for this purpose, I drawsupport from the judgment of the Supreme Court in the case ofUnion of India vs. Kamalakshi Finance Corporation Ltd. (55 ELT433). 10.The impugned order as well as the valuation by the AVOare set aside. The exercise of valuation shall be undertaken bythe District Valuation Officer after hearing the petitioner andorders shall be passed within a period of six (6) weeks fromtoday. Effect shall be given to the order of Tribunal within aperiod of four (4) weeks from date of valuation report by theDistrict Valuation Officer. This writ petition is allowed.Connected miscellaneous petition is closed. No costs. vsTo 1.The Commissioner of Income Tax-8, BSNL Building (Tower II), Greams Road, Chennai-600 006. 2.The Assistant Commissioner of Income Tax, Non-Corporate Circle – 12, BSNL Building (Tower II), Greams Road, Chennai-600 006. Non-Corporate Circle – 12, BSNL Building (Tower II), Greams Road, Chennai-600 006. 3.The Assistant Valuation Officer, Unit-II, Valuation Cell, Income Tax Department, Chennai-600 034. Valuation Cell, Income Tax Department, Chennai-600 034. +1 CC to Mr.K. Chozhan, Advocate sr 22565. +1 CC to Mrs. Hema Muralikrishnan, Advocate sr 24628. W.P. No.13339 of 2020 andWMP.No.16477 of 2020 PA(CO)SP(29/06/2021)