1. Heard learned counsel for the parties.
2. The present writ application has been filed on behalf of the petitioner for quashing the order dated February 16, 2004, passed by the Assistant Commissioner of Income-tax, Circle-2, Muzaffarpur, issuing commission with regard to the cost of construction of the residential-cum-commercial complex under Section 131(1)(d) of the Income-tax Act, 1961, (hereinafter referred to as the 'Act'), read with Order XXVI, Rule 9, of the Code of Civil Procedure.
3. The simple question involved in this case is as to whether the Assessing Officer during the course of assessment proceeding can ask the Valuation Officer to elucidate with regard to the cost of construction of the complex in question in exercise of the aforesaid power.
4. In support of their submissions, both the parties have relied upon the recent judgment of the Supreme Court in the case of Smt. Amiya Bala Paul v. CIT : [2003]262ITR407(SC) . According to the petitioner, it has been held in the aforesaid case that no reference can be made to the Valuation Officer to elucidate his opinion with regard to the cost of construction except for the purposes as mentioned under the Act, whereas learned counsel appearing for the respondents, on the other hand, submitted that though no reference can be made by the Assessing Officer to elucidate the cost of construction in exercise of power under Section 55A of the Act the Assessing Officer has power to issue commission to make local inspection with regard to the cost of construction of the premises in exercise of power under Section 131(1)(d) of the Act read with Order XXVI, Rule 9, of the Code of Civil Procedure.
5. To appreciate the facts, it is necessary to give the facts of the aforesaid case and the law laid down in that case. In that case the assessee built a house in the suburb of Kolkata and submitted a return for the assessment year 1982-83 and she disclosed the income with regard to construction of the house and the same was accepted. She again filed a return for the subsequent year 1983-84 and disclosed investments with regard to the construction of the house which was not accepted by the Assessing Officer and the matter was referred to the Valuation Officer under Section 55A of the Act. The Valuation Officer submitted his report and thereafter the assessment was reopened and additions were made by the Assessing Officer. Appeal filed by the assessee was rejected by the Commissioner of Income-tax but the Tribunal allowed the appeal on the ground that the Assessing Officer should not have referred the question of the cost of construction of the house to the Valuation Officer. The question was referred to the Gauhati High Court under Section 256(2) of the Act and the High Court held that though the report was called for from the Valuation Officer under Section 55A of the Act which was not permissible the Assessing Officer has ample power under Sections 131(1), 133(6) and 142(2) of the Act to ask for a valuation report and accordingly the question was answered in the affirmative and decided against the assessee. Dealing with the said matter, the apex court held that so far as Section 55A of the Act is concerned, the same deals with capital gains and the circumstances were specially set out in which reference would be made to the Valuation Officer and as such the Assessing Officer should not have referred the matter to the Valuation Officer for the purpose of ascertaining the cost of construction during the assessment proceeding.
6. It was further held that the action of the Assessing Officer cannot be supported by reference to Sections 131(1)(d), 133(6) or 142(2) of the Act since the circumstances of reference to the Valuation Officer under Section 55A and a commission issued under Section 131(1)(d) read with Section 75 and Order XXVI, Rule 9 of the Code of Civil Procedure are different. It was further held that the Valuation Officer was appointed under the Wealth-tax Act to discharge functions within the statutory limits under which he was appointed. It is not open to the Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions. He cannot be called upon nor would he have the jurisdiction to give a report to the Assessing Officer under the Income-tax Act except when a reference is made under and in terms of Section 55A or to a competent authority under Section 269L of the Act. However, while dealing with the said matter, it was submitted in that case on behalf of the respondents that there is ample power under Section 131(1)(d) to the Assessing Officer to issue commissions in terms of the provisions contained in the Code of Civil Procedure and Order XXVI, Rule 9, of the Code vests power in the Assessing Officer to make local inspection. Dealing with the aforesaid matter at page 414 of 262 ITR, it was observed as follows :
'Order XXVI provides for the procedure for issuing commissions in respect of each of the purposes mentioned in Section 75. Thus Rules 1 to 8 are in respect of commissions to examine witnesses, Rules 9 to 10C are in respect of commissions for local investigations, Rules 11 and 12 relate to commissions to examine accounts and Rules 13 and 14 pertain to commissions to make partitions. If at all the Assessing Officer could have issued a commission to a Valuation Officer it could only be under Rule 9 which lays down that :
'Commissions to make local investigations,--In any suit in which the court deems a local investigation to be requisite or proper for the purpose of elucidating any matter in dispute, or of ascertaining the market value of any property, or the amount of any mesne profits or damages or annual net profits, the court may issue a commission to such person as it thinks fit directing him to make such investigation and to report thereon to the court :
Provided that where the State Government has made rules as to the persons to whom such commission shall be issued, the court shall be bound by such rules.'
Assuming that the Valuation Officer was appointed in terms, of Order XXVI, Rule 9, it is not clear whether the report submitted by the Valuation Officer was in keeping with Rule 10, Sub-rule (1) which requires the Commissioner not only to hold 'such local inspection as he deems necessary' but also to reduce in writing the evidence taken by him and to return such evidence together with his report in writing signed by him to the court. If this were done then the report of the Commissioner and the evidence taken by him 'shall be evidence in the suit and shall form part of the record'. However, the court and any of the parties to the suit, with the permission of the court, may examine the Commissioner personally 'touching any of the matters referred to him or mentioned in his report, or as to his report, or as to the manner in which he has made the investigation'.
The Assessing Officer in this case had made a reference under Section 55A of the Act. This action cannot be supported by reference to Section 131(1) of the Act read with Order XXVI, Rule 9, of the Code since the consequences of reference to a Valuation Officer under Section 55A of the Act and of a commission issued under Section 75 read with Order XXVI, Rule 9, of the Code are different. It is not, therefore, a case of correction of an error in mentioning the section by the Assessing Officer, an error which could be ignored by referring the action to the appropriate source of power.'
7. Thus, it was held by the apex court that though under Section 55A of the Act the Assessing Officer cannot call for an enquiry report, it can issue commission to a Valuation Officer in exercise of power under Section 131(1)(d) of the Act. In this case, from a perusal of annexure 2 it appears that only a commission has been issued to the Valuation Officer in exercise of power under Section 131(1)(d) of the Act read with Order XXVI, Rule 9, of the Code of Civil Procedure and as such the submission advanced on behalf of the respondents is acceptable and the impugned order cannot be assailed on the grounds urged on behalf of the petitioner.
8. In the result, this writ application is dismissed.