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CASE NO.: Appeal (civil)  4657 of 2000

PETITIONER: Amiya Bala Paul                                          

RESPONDENT: Vs. Commissioner of Income Tax, Shillong     

DATE OF JUDGMENT: 07/07/2003

BENCH: Ruma Pal & B.N. Srikrishna.

JUDGMENT:

                                J U D G M E N T

RUMA PAL, J

       The assessee built a house in a suburb of Kolkata  between the years 1981 to 1983.  She filed a return in respect  of the assessment year 1982 â\200\2231983 in which she disclosed that  she had invested  an amount of Rs.1,75,000 in the construction  of the house. The return was accepted by the Income Tax  Officer (now known as the Assessing Officer).  In respect of the  subsequent assessment year, namely 1983-84, the assessee   disclosed that she had invested a further amount of                     Rs 1,70,000  in the construction of the house.  This was not  accepted by the Assessing Officer, who referred  the question  of the construction cost of the house  to the Valuation Officer  under Section 55(A) of the Income Tax Act, 1961 (hereinafter  referred to as the Act).  The Valuation Officer submitted a report  to the Assessing Officer.  On the basis of the report, the  Assessing Officer re-opened  the assessment in respect of the  assessment year 1982-83. The Income Tax Officer then made  an addition of Rs 2,79,000 in respect of the assessment year  1982 - 83 and Rs 1,77,000 in respect of the assessment year  1983- 84 as undisclosed investment in the construction of the  house.  The assessee’s  appeals from the assessment orders  were turned down by the Commissioner  of Income Tax  (Appeals) Guahati.  The Income Tax Appellate Tribunal,  however, following an earlier decision, allowed the assessee’s  appeal and held that the Assessing Officer could not have  referred the question of the cost of construction of the  assessee’s house to the Valuation Officer.  In this background  the following question was referred to the High Court under  Section 256 (2) of the Act. "Whether on the facts and in the  circumstances of the case, the Tribunal erred  in law by holding that the Assessing Officer  cannot refer the matter to the Valuation        Cell(sic) for estimating the cost of construction  of the house property".  

       The Division Bench of the High Court held that although  the Assessing Officer could not have referred the question of  the cost of construction of the assessee’s house to the  Valuation Officer under Section 55 A of the Act, he had ample  power under Sections  131 (1), 133 (6) and 142 (2) of the Act to  ask for a Valuation Report from the Valuation Officer.  It was  held that each of these sections were "enabling machinery

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provisions which invested ample powers in the Assessing  Authority", and that any wrong mention of the provision on the  requisition memo would not be material.  Accordingly the  question referred was answered in the affirmative and against  the assessee. In the appeal before us, it was contended on behalf of the  assessee that a reference to a Valuation Officer could only be  made strictly in terms of section 55 A of the Act and that if the  circumstances justifying the reference under that Section were  not prevailing, the Assessing Officer did not have  the  jurisdiction to otherwise refer the matter to the Valuation Officer.   It was further pointed out that Section 55 A of the Act only  allows for reference to the Valuation Officer for the purposes of  computing the market value of property in connection with the  computation of capital gains.  It was also submitted that  reference to the Valuation Officer had been specifically  provided for under Section 55A and that this implied that a  reference to the Valuation Officer could not be made under any  of the other provisions which generally empowered the  Assessing Officer to ascertain the income of the assessee.  The  submission of the appellant was that if the power to refer the  determination of the cost of construction to the Valuation Officer  was otherwise available to the Assessing Officer under the  other provisions of the Act,   it was  not necessary  to  specifically empower the Assessing Officer under Section 55A.  Finally, it is submitted that the Valuation Officer is appointed  under the Wealth Tax Act and that he could exercise the power  only in the manner prescribed by  that Act or by  any other  statutory provision like Section      55 A of the Act, and that he  could not be called upon to discharge  functions not statutorily  prescribed, in his capacity as a Valuation Officer. Learned counsel appearing on behalf of the Revenue  Authorities has submitted that under Section 131 (1), the  Assessing Officer has all the powers of the Civil Court including   issuing of commissions  under Section 131(1)(d). Further,  under Section 142 (2), an assessing officer for the purpose of  obtaining full information in respect of the income or loss of any  person, may make "such inquiry  as he considers necessary".  While conceding that Section 55-A would not in terms apply to  the assessee’s case, the respondents’ contention was that  the  Assessing Officer was otherwise empowered under the other  provisions of the Act to refer the matter to the Valuation Officer.  According to the respondents the  powers of enquiry invested in  the Assessing Officer under Secs.131(1),133(6)and142(2) were  wide and that this Court should not read in any limitation to this  power. It was further submitted that there was nothing in the  Wealth Tax Act, 1957 which precluded the Valuation Officer  from giving a valuation report in respect of any matter not  covered by the provisions of that Act. Therefore, it was  submitted, the Assessing Officer’s reference to a Valuation  Officer was correct and could not be held to be without  jurisdiction. The Valuation Officer to whom a requisition was sent by  the Assessing Officer in this case, is an officer appointed under  the Wealth Tax Act 1957.  Section 2 sub-section (r) of the  Wealth Tax Act ,1957,  defines "Valuation Officer" as meaning a  person appointed as a Valuation Officer under Section 12 A of  the Wealth Tax Act and includes a Regional Valuation Officer, a  District Valuation Officer and an Assistant Valuation Officer.   Under section 8 of the Wealth Tax Act, it has been provided  that the Income Tax Authorities specified in Section 116 of the  Income Tax Act shall be the Wealth Tax Authorities for the  purposes of the Wealth Tax Act, and "every such authority shall  exercise the powers and perform the functions of  Wealth Tax  Authorities under this Act in respect of any individual, Hindu

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undivided family or company and for this purpose his  jurisdiction under this Act shall be the same as he has under  the Income Tax Act by virtue of orders or directions issued  under Section 120 of that Act or under any other provision of  that Act".  A brief look at the powers and functions of a  Valuation Officer under the Wealth Tax Act would be apposite  at this stage. Under section 16  A of the Wealth Tax Act for the  purpose of making an assessment under the Wealth Tax Act  and in specified circumstances, the Assessing Officer may refer  the valuation of any asset to a Valuation Officer when, broadly  speaking, the Assessing Officer is of the opinion that the value  of the asset had not been correctly disclosed by the assessee.   Sub section (2) of Section 16 A of the Wealth Tax Act provides  for the Valuation Officer to give a notice to the assessee for  production of various accounts ,records or other documents as  the Valuation Officer may require.  If the Valuation Officer is of  the opinion that the value of the asset had been correctly  declared in the return made by the assessee, he shall, under  sub-section (3) of section 16 A, pass an order in writing to that  effect and  send a copy of his order to the Assessing Officer  and to the assessee.  When, however, the Valuation Officer is  of the opinion that the value of the asset is higher than the  value declared in the return made by the assessee, and in  certain other specified circumstances, the Valuation Officer is  required under sub-section (4) of section 16 A to serve notice  on the assessee intimating the value at which he proposes to  estimate the asset giving the assessee an opportunity to state   his objections either in person or in writing before the Valuation  Officer and to produce or cause to be produced, such evidence  as the assessee may rely in support of his objections.  Under  sub-section (5), the Valuation Officer may pass an order in  writing estimating the value of the asset after hearing such  evidence as the assessee may produce and after considering  such evidence as the Valuation Officer may require and after  taking into account all relevant material which he has gathered,   the Assessing Officer is required to complete the assessment in  conformity with the estimate of the Valuation Officer as far as  the valuation of the particular asset  in question is concerned in  terms of sub-section (6) of section 16 A.               The decision of the Valuation Officer is amendable by  him under section 35 (aaa) of the Wealth Tax Act. The decision    may also be the subject matter of  appeal under Section 23 (ha)  in which event  the Appellate Authority is required, under  section 23 (3A), to give the Valuation Officer an opportunity of  being heard or if necessary direct the Valuation Officer to hold a  fresh inquiry.   There is a  similar provision in respect of appeals    before the Commissioner (Appeals).   It is thus seen that the  Assessing Officer, under Section 16 A does not retain the  power of enquiry.  There is a similar provision in respect of  the  particular asset in respect of which the requisition is made to  the Valuation Officer.  The entire process of inquiry is solely  conducted by the Valuation Officer alone whose responsibility it  is to arrive at a correct valuation of the asset.    The inquiry by the Valuation Officer is distinct from the  power of the Assessing Officer who is otherwise invested with  the power to enquire into the actual wealth of an assessee  under the Wealth Tax Act.   For this purpose, under section  37(1) of the Wealth Tax Act, the Assessing Officer is given, the  powers of a  Court under the Code of Civil Procedure, 1908  when trying a suit in respect of: (a)     discovery and inspection

(b)     enforcing the attendance of any person, including any  officer of a banking company and examining him on  oath;

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(c)     compelling the production of books of account and  other documents; and

(d)  issuing commissions.

       Under section 38 of the Wealth Tax Act, the Wealth Tax  Authority is also given the power to obtain any statement or  information from any individual, company,(including a banking  company) firm, Hindu undivided family or other person and to  "serve a notice requiring such individual, company, firm, Hindu  undivided family or other person, on or before a date to be  therein specified, to furnish such statement or information on  the points specified in the notice, and the individual or the  principal officer concerned or the manager of the Hindu  undivided family, as the case may be, shall, notwithstanding  anything in any law to the contrary, be bound to furnish such  statement or information to such wealth-tax authority".  Thus it  is apparent that the Assessing Officer’s power to enquire under  sections 37(1) and 38 of the Wealth Tax Act is distinct from his  power to refer to the Valuation Officer under Section 16A.  There is no overlapping.        Section 55 A of the Income Tax Act occurs in Chapter IV,  Part E which deals with capital gains.  For the purpose of  assessing the fair market value of a capital asset in connection  

with the computation of capital gains it incorporates several  provisions relating to a Valuation Officer in the Wealth Tax Act  and reads as follows "55A.  With a view to ascertaining the fair  market value of a capital asset for the  purposes of this Chapter, the Assessing  Officer may refer the valuation of capital asset  to a Valuation Officer â\200\223

(a)     in a case where the value of the asset as  claimed by the assessee is in accordance  with the estimate made by a registered  valuer, if the Assessing Officer is of  opinion that the value so claimed is less  than its fair market value;

(b)     in any other case, if the Assessing Officer   is of opinion â\200\223

(i)     that the fair market value of the  asset exceeds the value of the  asset as claimed by the assessee  by more than such percentage of  the value of the asset as so claimed  or by more than such amount as  may be prescribed in this behalf; or

(ii)    that having regard to the nature of  the asset and other relevant  circumstances, it is necessary so to  do,   and where any such reference is made, the  provisions of sub-section (2), (3), (4), 5) and (6) of  section 16A, clauses (ha) and (i) of sub-section  (1) and sub-sections (3A)  and (4) of section 23,  sub-section   (5)   of   Section  24,  section  34AA,  section 35 and section 37 of the Wealth tax Act,  1957 (27 of 1957), shall with the necessary

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modifications, apply in relation to such reference  as they apply in relation to a reference made by  the Assessing Officer under sub-section (1) of  section 16A of that Act.

Explanation â\200\223 In this section, "Valuation Officer"  has the same meaning, as in clause  ( r) of  section 2 of the Wealth-tax Act, 1957 (27 of  1957)."

Clearly this section in terms can have no application to  the assessee’s case.  But can the Assessing Officer otherwise  make a reference to a Valuation Officer for generally computing  the assessee’s taxable income?  The respondents say he can,  and have referred us to Sections 131(1) and 133(6) of the Act.   Section 131 (1)  of the Act is in pari materia with Section 37(1)  of Wealth Tax Act and Section 133 (6) of the Act is substantially  similar to section 38  of the Wealth Tax Act.  On a parity of our  earlier reasoning, the power of the Assessing Officer under the  Sections 131 (1) and 133 (6) of the Income Tax Act is distinct  from and does not include the power to refer a matter to the  Valuation Officer under Section 55A.  Nor does the third   section viz., S.142(2) on which reliance has been placed by the   respondents allow him to do so. Section 142 (2) of the Act  provides: "For the purpose of obtaining full information in  respect of the income or loss of any person,  the Assessing Officer may make such inquiry  as he considers necessary".

The common feature of Sections 133 (6) and 142 (2) is  that the Assessing Officer is the fact-finding authority.  It is his  opinion on the basis of the facts as found on an enquiry  conducted by himself which results in the assessment order.  A  report by the Valuation Officer under Section 55 A is on the  other hand the outcome of an inquiry held by the Valuation  Officer himself and reflects his opinion on the evidence before  him.  Such a report would not be the result of an inquiry by the  Assessing Officer under the provisions of Section 133 (6) or  Section 142 (2). It is true that the Assessing Officer is not  bound by strict rules of evidence and a report of a Valuation  Officer under Section 55A may be considered by the Assessing  Officer as a piece of evidence if it is relevant. (See CIT V. East  Commercial Co. Ltd : 1967 LXIII ITR 449, 457) However, the  power of  inquiry granted to an Assessing Officer under  Sections 133 (6) and 142 (2) does not include the power to  refer the matter to the Valuation Officer for an enquiry by him. Learned counsel for the respondents has however  particularly drawn our attention to clause (d) of sub section (1)  of section 131 which provides inter alia that the assessing  officer shall, "for the purposes of this Act, have the same  powers as are vested in a court under a Code of Civil  Procedure, 1908, (referred to as ’the Code’) when trying a suit  in respect of the following matters, namely: --                         "(d) issuing commissions." The Court’s power to issue commissions is contained in  sections 75 to 78 of the body of the Code and Order XXVI of  the Schedule to the Code.  Sections 76 to 78 are not relevant  for our purposes.  Section 75 which delineates the power of  Court to issue commissions says: "Power of court to issue  commissions.  Subject to such  conditions and limitations as may be  prescribed, the court may issue a  commission â\200\223

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(a)     to examine any person;

(b)     to make a local investigation;

(c)     to examine or adjust accounts; or

(d)     to make a partition;

(e)     to hold a scientific, technical, or  expert investigation;

(f)     to conduct sale of property which  is subject to speedy and natural  decay and which is in the custody  of the court pending the  determination of the suit;

(g)     to perform any ministerial act."

Order XXVI provides for the procedure for issuing  commissions in respect of each of the purposes mentioned in  sections 75.  Thus Rules 1 to 8 are in respect of commissions  to examine witnesses, Rules 9 to 10 C 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.â\200\224In 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-section 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

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investigation".           The Assessing Officer in this case had made a reference  under section 55 A 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. Besides section 55 A having expressly set out the  circumstances under and the purposes for which a reference  could be made to a Valuation Officer, there is no question of the  Assessing Officer invoking the general powers of enquiry to  make a reference in different circumstances and for other  purposes. [ See Padam Sen v. State of U.P: AIR 1961 SC 218  para 8; Arjun Singh v. Mohindra Kumar : AIR 1964 SC 993  (para 19) ]. It is noteworthy that Section 55 A was introduced in  the Act by the Taxation Laws (Amendment) Act, 1972 when  Sections 131 (1), 133 (6) and 142 (2) were already on the  statute book.  Learned counsel for the appellant has correctly  submitted that if the power to refer any dispute to a Valuation  Officer were already available in Sections 131 (1), 133 (6) and  142 (2), there was no need to specifically empower the  Assessing Officer to do so in certain circumstances under  Section 55 A.   We may also note Section 269L of the Act which enables  the competent authority appointed under Section 269B: (1) (a)     "for    the    purpose   of        initiating   proceedings for the acquisition of any          immovable property under section 269C  or for the purpose of making an order  under section 269F in respect of any  immovable property require a Valuation  Officer to determine the fair market  value of such property and report the  same to him;

(b) for the purpose of estimating the  amount by which the compensation  payable under sub-section (1) of section  269J in respect of any immovable  property may be reduced or, as the case  may be, increased under clause (a) or  clause (b) of sub-section (2) of that  section, require the Valuation Officer to  make such estimate and report the same  to him. The Valuation Officer referred to  has, according to the  Explanation to the Section, the same meaning as in clause ( r)  of Section 2 of the Wealth Tax Act, 1957.  Under sub-section  (2) of Section 269L, the Valuation Officer to whom a reference  is made under clause (a) or clause (b) of sub-section (1) is  given all the powers he has under Section 38 of the Wealth Tax  Act, 1957.  And if in an appeal under Section 269G against the  order for acquisition of any immovable property, the fair market  value of such property is in dispute, the Appellate Tribunal  shall, on a request being made in this behalf by the competent  authority, give an opportunity of being heard to any Valuation  Officer nominated for the purpose by the competent authority.    From this it is clear that whenever  reference to a  Valuation Officer appointed under the Wealth Tax Act is  permissible under the Income Tax Act, it has been statutorily so  provided.

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Apart from the aforesaid, a Valuation Officer is appointed  under the Wealth Tax Act and can discharge functions within  the statutory limits under which he is appointed.  It is not open  to a 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  55 A or to a competent authority except under  section 269L.  We are therefore of the view that the High Court  incorrectly answered the question referred to it in the  affirmative.  The Tribunal had not erred in holding that the  Assessing Officer cannot refer the matter to the Valuation  Officer for estimating the cost of construction of the house  property.  The appeal is accordingly allowed and the decision of  the High Court set aside.  There will be no order as to costs.