| SooperKanoon Citation | sooperkanoon.com/72725 |
| Court | Income Tax Appellate Tribunal ITAT Delhi |
| Decided On | Aug-13-2003 |
| Judge | P Parashar, B Jain |
| Reported in | (2004)89ITD510(Delhi) |
| Appellant | Shri Gulab Singh, Shri Arun Kumar |
| Respondent | Acit |
As reference to DVO, under section 16A, was made by the assessing officer, therefore, he cannot ignore or disregard the order of DVO and if he does so, then the assessment was made without taking into account the estimate made by DVO was a erroneous and prejudicial order, therefore, Commissioner was justified in revising the same under section 25.
Since the Wealth Tax Officer had made reference to the Valuation Officer under section 16A of the Wealth Tax Act for the assessment year under consideration, it was incumbent upon him to have considered the report of the said Valuation Officer which was relevant for this assessment year. He has totally ignored the report of the Valuation Officer and has placed reliance on the report of the Valuation Officer for earlier assessment year to suit his purpose. He has not assigned any reasons for his option. This approach was legally erroneous and patently faulty. It is clear that the DVO passed order after following the procedure laid down in section 16A and the assessment is to be completed in conformity with the estimate of the Valuation Officer in view of sub-clause (6) of section 16A. It is, therefore, clear that the Wealth Tax Officer cannot ignore or disregard the order of the Valuation Officer and if he does so then the assessment made by the Wealth Tax Officer, without taking into account the estimate made by the Valuation Officer cannot be a legally correct order. In the instant case, this legal error has been committed by the Wealth Tax Officer who has totally overlooked the order of the Valuation Officer. It may also be pointed out that legislature intends to give a binding effect to the order of the Valuation Officer so far as the Wealth Tax Officer who has made reference under section 16A is concerned, i.e., the order of the Valuation Officer is binding upon the Wealth Tax Officer who has to adopt the same in the assessment order. This is because the Valuation Officer has to follow entire procedure which procedure is laid down for passing a judicial order, i.e., he has to consider the objections of the assessee and has also to provide him opportunity of hearing and thereafter only he has to pass the order for estimating the value of the asset. In view of the process. involved for passing the order by DVO, the Wealth Tax Officer has no discretion to ignore the order so passed. In the present case also this procedure has been followed by the Valuation Officer. The Commissioner found the assessment order erroneous and prejudicial to the interest of revenue because it was not in conformity with the order of Valuation Officer. The assessing officer has thus given a go-bye to the provisions contained in sub-clause (6) of section 16A which has been referred to above and the Commissioner on examination on his part found this error manifest on record. Thus, the order of the Wealth Tax Officer was rightly held to be erroneous as well as prejudicial to the interest of the revenue by him.
Malabar Industrial Co. Ltd. v. CIT (2000) 14 DTC 146 (SC) : (2000) 243 ITR 83 (SC), CIT v. Electro House (1971) 82 ITR 824 (SC), Smt.
Anantkuverba v. CWT (1993) 201 ITR 42 (Guj), CIT v. Bhagat Shyam & Co.
(1991) 188 ITR 608 (All) and Swarup Vegetable Products Industries Ltd. (No. 1) v. CIT(1991) 187 ITR 412 (All) 1. This appeal has been filed by the assessee against the order of learned CWT dated 11-3-1994 for A.Y. 1988-89. During the pendency of the appeal the appellant expired. Hence the legal heirs have contested this appeal.
2. The appellant has taken as many as five grounds in this appeal for challenging the order of learned CWT dated 11-3-1994 for A.Y. 1988-89 passed Under Section 25(2) of Wealth-tax Act, 1957.
3. Since the grounds are argumentative in nature, we do not consider it proper to reproduce the same in this order.
4. Shri Salil Aggarwal, Advocate, appeared on behalf of the assessee whereas Shri Ram Bilas Meena Sr. D.R. represented the Department.
5. The facts concerning this matter, in brief, are that the assessee filed return of wealth-tax declaring wealth of Rs. 9,92,146/- which included value of immovable property at plot No. S-266, Greater Kailash-II, New Delhi. The assessment Under Section 16(3) of the W.T.Act was completed on 4-2-1992 determining net wealth at Rs. 23,22,500/- which included the value of immovable property at plot no. 266 Greater Kailash-II, New Delhi estimated by the WTO at Rs. 16,50,000/- as against Rs. 6 lacs declared by the assessee. So far as the estimation of the value of plot is concerned the WTO has made following observation in the assessment order: "Value of plot No. S-266, Greater Kailash-II, N. Delhi was declared at Rs. 6,00,000/- as against Rs. 4,50,000/- in the last year. In the asstt. year 1987-88, the value of this plot was taken at Rs. 15,32,400/- as valued by the valuation officer. As the market value of land increasing day by day, I take the value of this plot at Rs. 16,50,000/- during the year." 6. It may also be pointed out that before completion of the assessment for the aforesaid year the WTO had referred the valuation of the said plot to the valuation officer, Income-tax Department. The Departmental Valuation Officer ("DVO" in short) vide his report dated 5-3-191 determined the value of the plot at Rs. 34,25,000/-, Since the WTO did not accept he valuation determined by the DVO but adopted the value at Rs. 16.50 lacs by estimate, the CWT was of the view tha the order was not in conformity with the statutory provisions contained Under Section 16A(6) of the W.T. Act, 1957. He, therefore, issued a show cause notice dated 28-1-1994 to the WTO. The validity of this notice was challenged by the assessee on the ground that it was sent by the WTO working in the Head Quarters of CWT and, therefore, it was not issued properly.
After considering the reply the CWT issued another notice dated 24-2-1994. Against this notice the assessee filed a written reply. The learned CWT rejected the legal plea which was raised by the assessee for challenging the validity of the notice and held that the initiation of proceedings Under Section 25(2) were in accordance with the law.
7. The CWT also considered the issue on merits. He was of the view that in view of the provisions of Section 16A(6), the WTO was bound to complete the assessment in confirmity with the estimation of the Valuation Officer, in cases where reference to the Valuation Officer in regard to valuation of any asset has been made. He, therefore, held that sine the WTO had not taken into consideration the report of the Valuation Officer while determining the value of property in question, the order of WTO was erroneous and prejudicial to the interest of the Revenue.
8. On the basis of the above findings the learned CWT issued the following directions: "In this view of the matter, the assessment made by the Assessing Officer is directed to be modified in respect of the value of the plot NO. S-266, G.K.II, New Delhi and the said issue is restored to him with the direction that the value of the aforesaid plot be determined by him in accordance with the provisions of the Section 16A(6) of the Wealth-tax Act after allowing due opportunity of being heard to the assessee in accordance with law." 9. Before us, the learned counsel for the assessee Shri Salil Aggarwal advocate placed detailed submissions. According to him, the WTO was fully justified in estimating the value of the plot on the basis of valuation of the plot in earlier years. The contention of the learned counsel for the assessee was tha the plot was encroached and occupied by the trespassers which fact was not considered by the Departmental Valuation Officer. The learned counsel also made reference to the detailed reply of the assessee dated 8-2-1994 which is available on pages 3 to 6 of the paper book; the objections of the assessee dead 30^th August; the report of the Valuation Officer; the order of the CIT(A) for A.Y. 1981-82 to 1983-84, available at pages 20 to 22 of the paper book; the order of the ITAT dated 3-8-2002 rendered in WTA No.661/Del/94 for A.Y. 1987-88 (available at pages 23 to 25 of the paper book) and also other documents, copies of which have been field on record. The learned counsel also made reference to the ratio of decision of Hon'ble Supreme Court in the case of Malabar Industrial Co.
Ltd. v. CIT 243 ITR 83.
10. On the other hand the learned Sr. D.R. supported the order of learned CWT.11. We have carefully considered the facts and circumstances relating to this matter and the rival submissions, including the entire material on record.
12. In ground Nos. 2 & 3 the validity of the order passed by the learned CWT is challenged on the ground that the CWT had not initiated the proceedings on his own initiative but upon the suggestion of the subordinate authorities. In this regard objection was also taken by the assessee in reply dated 8^th February 1994 a copy of which is available at pages 3 to 6 of the paper book. It is found that on 28-1-1994 a notice was sent from the office of the Commissioner of Income-tax, Delhi-IV, New Delhi which was signed by the ACIT Shri O.P. Chaudhary.
However, a subsequent notice was sent by the Commissioner himself on 24-2-1994 as is mentioned at page 2 of the order of learned CWT. It is also found that the assessee was given full opportunity by the CWT at the time of proposing action Under Section 25 of the Wealth-tax Act.
Hence, it is not the case of the assessee that no opportunity was given to her. So far as the issue relating to issuance of notice is concerned, in the case of CIT v. Electro House (1971) 82 ITR 824(SC) the Hon'ble Supreme Court while examining the requirement of Section 33B(1) of the Income-tax Act, 1922 corresponding to Section 263(1) of the Income-tax Act, 1961 held that the provisions did not prescribe any notice to be given. In this regard the Hon'ble Supreme Court has observed as under: "It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice.
It is unfortunate that the High Court foiled to notice the difference in language between Sections 33B and 34. For the assumption of jurisdiction of proceed under Section 34 the notice as prescribed in that section is a condition precedent. But no such notice is contemplated by Section 33B. The jurisdiction of the Commissioner to proceed under Section 33B is not dependent on the fulfillment of any condition precedent. All that he is required to do before reaching his decision and not before commencing the enquiry, is that he must give the assessee an opportunity of being heard and make or cause to be made such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner." 13. In the case of Smt. Anantkuverba v. CWT (1993) 201 ITR 42 the Hon'ble Gujarat High Court has also considered the issue relating to the requirement of notices. The Hon'ble Court has observed as under: "The main provision of Section 25(2) of the Wealth-tax Act, 1957, is in pari materia with the main provision of Section 263(1) of the Income-tax Act, 1961. No notice is required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 25(2). The question of giving an adequate opportunity to the assessee has no impact on the question of the jurisdiction of the Commissioner to pass an order under Section 25(2). The question of adequate opportunity will affect only the question of legality of the order of the commissioner. In such a case, the tribunal undoubtedly, has jurisdiction to remand the matter to the commissioner and to direct him to dispose of the proceedings under Section 25(2) afresh, after giving due opportunity to the assessee." 14. It was also argued that the mind of CWT was influenced by his subordinate officer, who originally initiated the proceedings. In the case of CIT v. Bhagat Shyam & Co. (1991) 198 ITR 608 (All.), the facts as brought out on record were that the ITO approached the Commissioner and asked him to invoke his powers Under Section 263 and the Commissioner initiated proceedings Under Section 263. The objection of the assessee was that the Commissioner had initiated the proceedings Under Section 263 without applying his mind to the facts of the case and without being satisfied that the facts of the case did not warrant the exercise of powers Under Section 263. The Tribunal had accepted this plea and observed that the Commissioner had practically abdicated his function to the ITO inasmuch as he acted upon his request. In the reference preferred by the assessee, the submission on behalf of the Department was that there was nothing wrong in ITO approaching the Commissioner with certain information and the exercise of power Under Section 263 was not improper. The Hon'ble High Court although decided the issue in favour of the assessee by holding that the commissioner did not properly consider all the facts and circumstances and did not apply his mind but on the initiation of proceedings the following observation was made:- "We agree with Mr. Katju (Now Hon'ble Mr. Justice Katju) to this extent that merely because the ITO placed certain information or material before the Commissioner and the Commissioner invoked his power Under Section 263, it cannot be said tha the Commissioner has initiated the proceedings without applying his mind or that he has abdicated his function. After all, some one has to place he relevant material or information before the commissioner. There is no bar to the ITO bringing that material to the notice of the Commissioner.
What cannot, however, be denied is that the Commissioner must apply his mind to the material placed before him and satisfy himself that it is a case where he ought to exercise his revisional power. Then he may issue a show cause notice and after affording an opportunity to the affected parties, pass final orders." 15. In the present case, firstly, we find that the Commissioner had issued a detailed notice and on the basis of that notice he had initiated the proceedings. In this notice detail ground for initiating proceedings were mentioned. The assessee was also given opportunity of being heard before taking final action in accordance with the provisions of Section 25(2) of the W.T. Act. Hence, it cannot be said that the Commissioner did not apply his mind or did not examine the record or did not provide opportunity of being heard to the assessee.
16. In view of these facts ground Nos. 2 & 3 taken before us are found to be without any force and the same are rejected.
17. Ground Nos. 1,4 & 5 taken in this appeal challenge the order passed Under Section 25(2) of the W.T. Act. It is alleged in these grounds that the order passed by the WTO dated 4-2-1992 was neither erroneous nor prejudicial to the interest of Revenue. A perusal of the impugned order dated 11-3-94, shows that the order was found to be erroneous and prejudicial to the interest of Revenue because the AO had not considered and followed the report of the valuation officer dated 5-3-1991 determining the value of the property in question at Rs. 34,25,000/-. According to the CWT, the WTO was required to adopt the valuation of the property as determined by the Valuation Officer for assessment purposes in accordance with law and since this was not done, the order was erroneous in so far as it was prejudicial to the interest of Revenue.
18. We have considered the entire material on record placed before us by the learned counsel for the assessee. The AO made reference to the valuation officer for determining the value of the property. The Valuation Officer took the valuation date as 31-3-1988 and determined fair market value at Rs. 34,25,000/-. During the process of determining the value, he provided full opportunity to the assessee. The assessee filed a detailed submission dated 28-2-91, a copy of which is available at pages 16 to 19 of the paper book. This was filed in response to notice of valuation officer dated 8-2-191. The valuation officer has considered all the objections taken in this reply by the assessee. The disposal of these objections was made by him on 5-3-1991, a copy of which is available at pages 16 to 19 of the paper book. The V.O. has considered and disposed of each objection taken in the reply of the assessee and made reference to each para of the reply. He has passed final order by observing as under: "Thus in view of the objections raised by the assessee & para wise replies thereto furnished as above the preliminary valuation estimate needs no change or alteration & FINAL ORDER UNDER SECTION 16A(3) of W.T. Act 1957 are thus passed accordingly." 19. Thus, after considering the relevant material including the reply of the assessee, the valuation of the property was determined at Rs. 34,25,000/- by the Valuation Officer. The WTO has not even made reference to the report of the Valuation Officer nor to the value of plot in question given by him. He has only placed reliance on the valuation determined by the Valuation Officer in A.Y. 1987-88 which was at Rs. 15,32,400/- and was not relevant in view of the valuation done by DVO for this assessment year. Since the WTO had made reference to the Valuation Officer Under Section 16A of the W.T. Act for the asstt.
year under consideration, it was incumbent upon him to have considered the report of the said valuation officer which was relevant for this assessment year. He has totally ignored the report of the valuation officer and has placed reliance on the report of the Valuation Officer for earlier assessment year to suit his purpose. He has not assigned any reason for his option. This approach was legally erroneous and patently faulty.
20. It may be pointed out that reference to Valuation Officer is made Under Section 16A. The provisions contained Under Section 16A lays down the procedure for the Valuation Officer. He is required to serve a notice on the assessee, requiring to produce or cause to produce such accounts or records/documents as the Valuation Officer may require. In case he finds the valuation made by the assessee to be correct, he has to pass order accordingly and to send a copy of his order to the Assessing Officer as well a to the assessee. In case he is of the opinion that the value of the asset is higher than the value declared in the return made by assessee Under Section 16 or 15, he shall serve a notice on the assessee intimating the value which he proposes to estimate and give the assessee an opportunity to state his objection etc. This is to be done in view of the procedure laid down in Sub-clause (4) of Section 16A. As per the procedure laid down in Sub-clause (5), the valuation Officer has to provide hearing to the assessee and has to pass order in writing estimating the value of the asset. A copy of this order is to be sent to the WTO and to the assessee. The order so passed by the Valuation Officer is to be adopted while making assessment order in view of Sub-clause (6), which is as under: "(6) On receipt of the order under Sub-section (3) or Sub-section (5) from the Valuation Officer, the Assessing Officer shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer." 21. In view of the above referred provision, it is clear that the DVO passed order after following the procedure laid down in Section 16A and the assessment is to be completed in conformity with the estimate of the valuation officer in view of Sub-clause (6) of Section 16A. It is, therefore, clear that the WTO cannot ignore or disregard the order of the Valuation Officer and if he does so then the assessment made by the WTO without taking into account the estimate made by the VO cannot be a legally correct order. In the instant case, this legal error has been committed by the WTO who has totally overlooked the order of the Valuation Officer. It may also be pointed out that legislature intends to give a binding effect to the order of the Valuation Officer so far a the WTO who has made reference Under Section 16A is concerned i.e. the order of the valuation Officer is binding upon the WTO who has to adopt the same in the assessment order. This is because the Valuation Officer has to follow entire procedure which procedure is laid down for passing a judicial order i.e. he has to consider the objections of the assessee and has also to provide him opportunity of hearing and thereafter only he has to pass the order for estimating the value of the asset. In view of the process involved for passing the order by DVO, the WTO has no discretion to ignore the order so passed. In the present case also this procedure has been followed by the Valuation Officer.
22. The learned CWT found the assessment order erroneous and prejudicial to the interest of Revenue because it was not in conformity with the order of valuation officer. The AO has thus given a go bye to the provisions contained in Sub-clause (6) of Section 16A which has been referred to above and the CWT on examination on his part found this error manifest on record. Thus, the order of the WTO was rightly held to be erroneous as well as prejudicial to the interest of the Revenue by him.
23. The argument of the learned counsel for the assessee was that the WTO had considered the relevant material i.e. the value of the plot estimated in earlier year and since there was no material change in the facts the WTO was justified in taking the valuation of the earlier date as a guiding factor. In our view this contention cannot be accepted.
The valuation of the earlier year i.e. A.Y. 1987-88 was not relevant for A.Y. 1988-89 particularly when valuation for this assessment year was done by the competent officer after following the procedure laid down as referred to above.
24. In the case of Swamp Vegetables Products Industries Ltd. v. CIT 187 ITR 412 it has been held by the Hon'ble Allahabad High Court that if the AO had accepted the contention of the assessee erroneously and that too without making proper enquiry, the Commissioner had power to set aside the assessment order and send the matter for fresh assessment if he was satisfied that further enquiry was necessary and tha the order of ITO was prejudicial to the interest of Revenue.
25. In the case of Malabar Industrial Co. Ltd. v. CIT 243 ITR 83 (SC) it has been held that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under Section 263 (which is similar to Section 25B of Wealth-tax Act) is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. It was further observed that the Commissioner has to be satisfied of twin conditions, namely- (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. The Hon'ble Supreme Court has also observed that the phrase 'prejudicial to the interests of Revenue' is not an expression of art and is not defined in the Act. It has also been observed that if due to the erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue.
According to the Hon'ble Court, the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. In the instant case, there remains no doubt that the order of the WTO was erroneous as he has not passed the order in compliance to the provisions of Wealth-tax Act, particularly Clause (6) of Section 16A of Wealth-tax Act which has been referred to above.
26. The learned counsel also made reference to the order of the Tribunal in the case of assessee for A.Y. 1987-88. We may observe that every assessment year is a separate assessment year and the order of Tribunal for A.Y. 1987-88 cannot be binding for A.Y. 1988-89 particularly when the facts are also distinguishable. It may be pointed out that in A.Y. 1987-88 the Tribunal has decided appeal preferred by the assessee against the order passed by the learned CIT(A) which was against the order of assessment whereas in the present appeal we are required to decide the legality etc. of the order passed by the Commissioner Under Section 25(2). Hence, the issue before us is different. Otherwise also the correctness of the estimate made by the Valuation Officer in the case of the assessee for that assessment year cannot be decided in this year.
27. Through ground no. 4 it is pleaded that the WTO while completing the assessment has considered the valuation report filed by the Valuation Officer in respect of valuation of plot at S-266 Greater Kailash-II, New Delhi. This ground appears to be vague. As pointed out above, the WTO has not considered the valuation report prepared by the DVO in relation to the assessment year under consideration, rather he has considered the valuation report of earlier year which was not relevant. Hence, the contention raised in this ground is not found to be correct. This ground is, therefore, rejected accordingly.
28. Through ground No. 5 it is averred that the valuation report prepared by the Valuation Officer has not been prepared in accordance with the provisions of Section 16A of Wealth-tax Act and therefore the same could not have been adopted as the basis for determining the value of assets. The assessee has not pointed out any irregularity committed by the DVO. As pointed out earlier the DVO has adopted the procedure laid down Under Section 16A and has considered the objections raised on behalf of the assessee against estimated valuation proposed by him.
Thus, this ground is also bereft of any force.
29. After considering the totality of the circumstances and the entire material on record, we find no error in the order of the learned Commissioner as he has considered the entire relevant material and has passed a detailed and speaking order, after providing full opportunity of hearing to the assessee.
30. In view of the above, the order of Commissioner of Wealth-tax passed Under Section 25(2) of the Wealth-tax Act is upheld and the grounds taken by the assessee to challenge the same are rejected.