The Commissioner Of Income Tax, Karnal v. Shri Ramesh Chaudhary

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No.57 of 2005Date of decision: 27.1.2011 The Commissioner of Income Tax, Karnal -----Appellant Vs. Shri Ramesh Chaudhary ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Yogesh Putney, Sr.Standing Counsel and Mr. Krishan K.Mehta, Advocate for the revenue. Mr. Pankaj Jain, Mr. D.K.Goyal, Mr. Permil K.Goel, Mr. Avneesh Jhingan, Advocate for the respondents in all the cases. Adarsh Kumar Goel,J. 1.This order will dispose of ITA Nos. 316, 368, 370 of 2004, 57 to 60of 2005, 38, 95 of 2005, 355 and 482 of 2006 as it has been stated by learnedcounsel for the parties that all the appeals involve common question of law ofapplicability of section 142A of the Income Tax Act, 1961 (for short, ‘the Act). 2.ITA No.57 of 2005 has been filed under section 260A of the Actagainst order dated 19.5.2004 of the Income Tax Appellate Tribunal, ChandigarhBench (B), Chandigarh (in short, “the Tribunal”) passed in ITANo.555/Chandi/2003 for the assessment year 1999-2000. 3.The assessee constructed a house building and declared investmentmade in the construction. The Assessing Officer did not accept the same andsought the opinion of the District Valuation Officer under section 131(1)(d) of theAct. According to him, there was undervaluation and real value was much higher.The Assessing Officer made addition on that basis. On appeal, the said valuationwas sustained but on further appeal, the valuation was set aside following the lawlaid down by the Hon’ble Supreme Court in Smt.Amiya Bala Paul v. CIT, (2003)262 ITR 407. The order of the Tribunal is dated 19.5.2004 and did not take intoaccount amendment to the Act by way of Section 142A vide Finance Act, 2004which was retrospective with effect from 15.4.1972. By the said amendment, contrary to the view taken in Smt.Amiya Bala Paul, it was provided that theAssessing officer could require Valuation Officer to make estimate of value ofinvestment and report the same to him and after giving opportunity of being heardto the assessee, such report could be taken into account. However, Proviso to thesaid provision is as under:- “Provided that nothing contained in this section shall apply in respectof an assessment made on or before 30[th] Sept.2004, and where suchassessment has become final and conclusive on or before that date,except in cases where a reassessment is required to be made inaccordance with the provisions of section 153A.” 4.Under the proviso, applicability of the provision was excluded toassessments made on or before September 30, 2004 which had become final andconclusive except where reassessment was required to be made as per section153A. In the appeal, following substantial questions of law have been claimed:- “i) Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the case is squarely coveredin favour of assessee by the judgment of Hon’ble Supreme Court inthe case of Smt.Amiya Bala Paul v. CIT (2003) 262 ITR 407 (SC)especially when the reference with regard to the construction ofhouse building was made to the Valuation Officer under section 131(1) (d) and not under section 55A of the Income Tax Act, 1961 andalso newly added provisions of Section 142A in the Income Tax Act,1961? ii) Whether on the facts and in the circumstances of the case, theIncome Tax Appellate Tribunal was right in law in deleting theaddition of Rs.28,557/- made on account of difference in cost ofconstruction shown and that determined by the AO? 5. Learned counsel for the revenue submitted that Section 142A beingretrospective from 15.4.1972 applied for the assessment year in question and theAssessing Officer was justified in acting upon a valuation report and the Tribunalhas based its decision on judgment in Smt.Amiya Bala Paul which decision has ii) Whether on the facts and in the circumstances of the case, theIncome Tax Appellate Tribunal was right in law in deleting theaddition of Rs.28,557/- made on account of difference in cost ofconstruction shown and that determined by the AO? 5. Learned counsel for the revenue submitted that Section 142A beingretrospective from 15.4.1972 applied for the assessment year in question and theAssessing Officer was justified in acting upon a valuation report and the Tribunalhas based its decision on judgment in Smt.Amiya Bala Paul which decision has been superseded by the amendment. The proviso was not applicable as theassessment had not become final and conclusive in view of pendency of appeal inthis Court. Reliance has been placed on judgment of Madhya Pradesh High Courtin CIT v. Omparkash Bagria (HUF), (2006) 287 ITR 523, wherein it was heldthat pendency of appeal under section 260A of the Act before High Court wouldexclude the applicability of the proviso. Appeal was continuation of assessmentproceedings as held in Garikapati v. Subbiah Choudhry, AIR 1957 SC 540,Siemens India Limited v. State of Maharashtra (1986) 62 STC 40 (Bom) andCIT v. Bengal Card Board Industries and Printers(P) Limited, (1989) 176 ITR193 (Cal). 6.Learned counsel for the assessee submits that proviso was applicableas pendency of appeal in this court did not affect the finality of proceedings asappeal to this Court was only on a substantial question of law which should beseen independently of the amending provision. Reliance has been placed onfollowing judgments:- i)CIT v. Smt.Shashi Agarwal, (2007) 210 CTR (All) 205;ii)CIT v. Sudhish Kumar, (2005) 276 ITR 563 (Del)ii)CIT v. Sudhish Kumar, (2005) 276 ITR 563 (Del) iii)CIT v. Naveen Gera, (2010) 328 ITR 516 (Del)iv)CIT v. Krishan Lal Dua, (2005) 277 ITR 477 (P&H)iv)CIT v. Krishan Lal Dua, (2005) 277 ITR 477 (P&H) v)CIT (Central) Ludhiana v. Nabha Solvex (P) Limited, ITRNo.48 of 1994, decided on 7.7.2010 (P&H).No.48 of 1994, decided on 7.7.2010 (P&H). vi)Income Tax Officer and others v. Kajaria Investment andProperties P.Limited, (2008) 297 ITR 45 (Cal).Properties P.Limited, (2008) 297 ITR 45 (Cal). 7. Thus, the question for consideration is whether proviso would applywhen before September 30, 2004, appeal under section 260A was pending in theHigh Court. 8.We are of the view that pendency of appeal in this Court undersection 260A would exclude the applicability of the proviso. The proviso can applyonly if assessment has become final and conclusive before September 30, 2004. Ifappeal is pending in this Court, it cannot be said that the assessment had become final and conclusive. Apart from the fact that appeal is continuation of theproceedings as held by the Madhya Pradesh High Court, section 254(4)specifically provides that finality to the order of the Tribunal will be only subjectto Section 256 or 260A. In the judgments relied upon on behalf of the assesseeexcept in Smt.Shashi Agarwal, there is no discussion on the issue whether inspiteof pendency of an appeal under section 260A on the cut off date, the proviso willapply. In Nabha Solvex, Section 254(4) was not considered and the matter wasconsidered on a reference. In Smt.Shashi Agarwal, the Allahabad High Courtheld that pendency of appeal in the High Court under Section 260A of the Act willnot affect finality of the assessment as appeal under Section 260A was only on asubstantial question of law and was not continuation of assessment proceedings.We respectfully disagree with the said view and agree with the view taken by theMadhya Pradesh High Court holding that appeal under section 260A is alsocontinuation of proceedings. As already observed, Section 254(4) specificallyprovides that finality of order of the Tribunal is subject to appeal under section260A of the Act. 9.In view of above, we answer the questions raised in favour of therevenue and against the assessee. 9.In view of above, we answer the questions raised in favour of therevenue and against the assessee. 10.Since the Tribunal has not considered the merits of the valuationreport, the matters are remitted to the Tribunal for fresh decision in accordancewith law. 11.The appeals are disposed of. (Adarsh Kumar Goel) Judge January 27, 2011‘gs’ (Ajay Kumar Mittal) Judge