- (1.) WE have heard Shri Govind Krishna, learned counsel for the IT Department. Shri Krishna Agrawal appears for the respondent -assessee. This income -tax appeal under s. 260A of the IT Act, 1961 (in short the Act) has been preferred against the judgment and order dt. 23rd June, 2004 passed by the Tribunal in ITA No. 227/Agra/2001 for the asst. yr. 1997 -98.
(2.) THE appeal was admitted on the following questions of law: "(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the reference made to DVO by AO in the assessment proceedings is beyond the power of the AO in view of the judgment of Hon'ble Supreme Court in the case of CIT vs. Smt. Amiya Bala Paul : (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC)? (2) Whether on the facts and in the circumstances of the case the Tribunal order is not bad in law in view of the new provisions of s. 142A introduced retrospectively w.e.f. 15th Nov., 1972 in the IT Act by the Finance Act, 2004 which empowers the AO to require the Valuation Officer to make an estimate of value of movable/immovable property -
(3.) THE Tribunal has relied upon the judgment of the Supreme Court in CIT vs. Smt. Amiya Bala Paul : (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC), in which the Supreme Court held that the AO did not have power under the then existing provisions of the IT Act, to call for report from Valuation Officer for generally computing the cost of construction of the house property constructed by the assessee. The Supreme Court held: "Clearly, this section in terms can have no application to the assessee's case. But can the AO 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 ss. 131(1) and 133(6) of the Act. Sec. 131(1) of the Act is in pari materia with s. 37(1) of the WT Act and s. 133(6) of the Act is substantially similar to s. 38 of the WT Act. On a parity of our earlier reasoning, the power of the AO under the ss. 131(1) and 133(6) of the IT Act is distinct from and does not include the power to refer a matter to the Valuation Officer under s. 55A. Nor does the third section, viz., s. 142(2), on which reliance has been placed by the respondents allow him to do so. Sec. 142(2) of the Act provides: 'for the purpose of obtaining full information in respect of the income or loss of any person, the AO may make such enquiry as he considers necessary.' The common feature of ss. 133(6) and 142(2) is that the AO 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 s. 55A 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 AO under the provisions of s. 133(6) or s. 142(2). It is true that the AO is not bound by strict rules of evidence and a report of a Valuation Officer under s. 55A may be considered by the AO as a piece of evidence, if it is relevant [see CIT vs. East Coast Commercial Co. Ltd. : (1967) 63 ITR 449 (SC)]. However, the power of inquiry granted to an AO under ss. 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 cl. (d) of sub -s. (1) of s. 131 which provides, inter alia that the AO shall, "for the purposes of this Act, have the same powers as are vested in a Court under a CPC, 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 ss. 75 to 78 of the body of the Code and Order xxvi of the Schedule to the Code. Secs. 76 to 78 are not relevant for our purposes. Sec. 75 which delineates the power of Court to issue commissions says: '75. Power of Court to issue commissions. - -Subject to such conditions and limitations as may be prescribed, the Court may issue a commission - - (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; and (g) to perform any ministerial act.' Order XXVI provides for the procedure for issuing commissions in respect of each of the purposes mentioned in s. 75. Thus, rr. 1 to 8 are in respect of commissions to examine witnesses, rr. 9 to 10C are in respect of commissions for local investigations; rr. 11 and 12 relate to commissions to examine accounts and rr. 13 and 14 pertain to commissions to make partitions. If at all the AO could have issued a commission to a Valuation Officer it could only be under r. 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, r. 9, it is not clear whether the report submitted by the Valuation Officer was in keeping with r. 10, sub -r. (1) which requires the CIT 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 CIT 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 CIT 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 AO in this case had made a reference under s. 55A of the Act. This action cannot be supported by reference to s. 131(1) of the Act r/w Order XXVI, r. 9, of the code since the consequences of reference to a Valuation Officer under s. 55A of the Act and of a commission issued under s. 75 r/w Order XXVI, r. 9, of the Code are different. It is not, therefore, a case of correction of an error in mentioning the section by the AO, an error which could be ignored by referring the action to the appropriate source of power. Besides s. 55A 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 AO invoking the general powers of enquiry to make a reference in different circumstances and for other purposes, [see Padam Sen vs. State of U.P. : AIR 1961 SC 281 and Arjun Singh vs. Mohindra Kumar : AIR 1964 SC 993]. It is noteworthy that s. 55A was introduced in the Act by the Taxation Laws (Amendment) Act, 1972, when ss. 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 ss. 131(1), 133(6) and 142(2), there was no need to specifically empower the AO to do so in certain circumstances under s. 55A." The IT Act was amended by Finance (No. 2) Act, 2004, w.e.f. 15th Nov., 1972, inserting s. 142A authorising the AO for the purposes of making an assessment or reassessment under the Act, where an estimate of the value of any investment referred to in s. 69 or s. 69B or the value of any bullion, jewellery or other valuable articles referred to in s. 69A or s. 69B is required to be made, to refer the matter to Valuation Officer to make an estimate of such value and report the same to him.;