Court No. - 37 Case :- WRIT TAX No. - 960 of 2006 Petitioner :- Shilpi Builders Ltd. Respondent :- Union Of India & Another Petitioner Counsel :- S.D. Singh Respondent Counsel :- S.C. Hon'ble Rajes Kumar,J.
Hon’ble Bharati Sapru,J.
By means of the present petition the petitioner has challenged the
notice under Section 148 of the Income Tax Act, 1961 (here-in-after
referred to as ‘Act) dated 28th March, 2006 for the assessment year
1999-2000.
The brief facts of the case are that the petitioner is a Civil Contractor
and engaged in the business of constructing multi-storied buildings.
There was a search and seizure operation under Section 132(1) of the
Income Tax Act, 1961 at the business premises as well as the
residential premises of the Directors on 17.10.2000.
It appears that the matter has been referred to the District Valuation
Officer Income Tax Department, Kanpur under Section 131(1) (B) of
the Act to ascertain the cost of the construction in multi-storied
buildings including Ratan Apartments, 7/144, Swaroop Nagar, Kanpur
and Ratan Vihar, Phase-II, 127/216, Bara Devi, Kanpur.
The petitioner has filed the Income Tax Return for the assessment
year 1999-2000 on 22nd December, 1999. The assessment order was
passed on 3rd of March, 2000, under Section 143 (1) (a) of the Act. On
the basis of the search and seizure operation an order under Section
158 BC was passed and on the basis of the valuation report the
additions were made, towards unexplained investments in the
construction of the aforesaid buildings.
Being aggrieved by the block assessment order the petitioner filed
appeal before the Commissioner Income Tax (Appeals), Kanpur. The
Commissioner Income Tax (Appeals) vide order dated 22.6.2004 has
deleted the addition on the ground that during the course of search
operation no material or evidence, documents or papers were found
and seized, which could establish that the petitioner had incurred
certain expenses in construction of the above buildings and which
were not recorded in the regular books of account. The order of the
Commissioner Income Tax (Appeals) has been upheld by the Income
Tax Appellate Tribunal vide order dated 12th September, 2005.
After the order of the Commissioner Income Tax (Appeals), which has
been confirmed by the Tribunal the respondent has issued the notice
under Section 148 read with Section 147 of the Tax Act on the ground
mentioned in the reason recorded dated 28th March, 2006, which is
Annexure-7 to the Writ Petition. As per the reasons recorded the notice
under Section 147 has been issued on the basis of the report of
District Valuation Officer wherein the higher cost of construction has
been estimated as against the disclosed cost of construction, which
according to the assessing authority has not been assessed to tax
and, therefore, there was the escaped assessment.
Heard Sri S.D. Singh, learned Counsel for the petitioner and Sri Ashok
Kumar, learned counsel for the respondents.
Learned Counsel for the petitioner submitted that prior to the
introduction of Section 142A the Income Tax Authority had no
jurisdiction to refer the matter to the valuation cell for the determination
of cost of construction. The matter could be referred only for the
determination of the value for the purposes of capital gain. Reliance
has been placed on the Apex Court decision in the case of Smt.
Amiya Bala Paul Vs. Commissioner of Income Tax reported in 262
ITR page 407. He submitted that after the decision of the Apex Court
Section 142A has been inserted by the Finance -2 Act 2004 with effect
from 15.11.1972 which empowers the assessing authority to refer the
matter to the valuation cell for the purposes of making an assessment
or re-assessment under the Act. He, however, submitted that in view of
the proviso, Section 142-A is not applicable in the present case as the
assessment order has already been passed prior to 30th September,
2004 and, therefore, the initiation of proceeding under Section 148 on
the basis of valuation report estimating the cost of construction is
wholly illegal.
Having heard learned counsel for the parties, we have gone through
the records and find substance in the argument of learned Counsel for
the petitioner.
Admittedly, for the assessment year 1999-2000 the petitioner has filed
the Income Tax Return on 22nd of December, 1999 and the
assessment was made on 3rd March, 2000 under Section 143 (1) (A).
It would be appropriate to refer Section 142-A, which has been
inserted by the Finance-2 Act of 2004 with effect from 15.11.1972,
which reads as under:-
(1) For the purposes of making an assessment or reassessment under this Act, where an
estimate of the value of any investment referred to in section 69 or section 69B or the value of
any bullion, jewellery or other valuable article referred to in section 69A or section 69B is
required to be made, the Assessing Officer may require the Valuation Officer to make an
estimate of such value and report the same to him.
(2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the
purposes of dealing with such reference, have all the powers that he has under section 38A of
the Wealth-tax-Act, 1957 (27 of 1957).
(3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving
the assessee an opportunity of being heard, take into account such report in making such
assessment or reassessment:
“Provided that nothing contained in this section shall apply in respect of an
assessment made on or before that 30th day of September, 2004, and where such
assessment has become final and conclusive on or before that date, except in cases
where a reassessment is required to be made in accordance with the provisions of
Section 153A.”
The proviso of Section 142-A provides that this provision will not apply
in case if the assessment has been made on or before 30th day of
September, 2004 and such assessment has become final and
conclusive on or before that day.
In the present case since the assessment has already been made on
3rd of March, 2000 and no appeal was pending on 30th of September,
2004, in view of the proviso to Section 142-A the provisions of Section
142-A(1) is not applicable in the present case and, therefore, no
reference could be made under Section 142-A(1) for the determination
of cost of construction. The Apex Court in the case of Smt. Amiya
Bala Paul Vs. Commissioner Income Tax (Supra) has held that the
assessing authority has no power to refer the matter to the valuation
officer for the determination of the cost of construction under Section
55-A, 131 of the Income Tax Act. It has been held that under Section
55-A the reference to the valuation can be made only for the purposes
of determination of the value for the purposes of capital gain.
Therefore, we are of the view that the assessing authority had no
power to refer the matter to the valuation cell for the determination of
the cost of construction and such valuation report cannot be made
basis for the initiation of proceeding under Section 148 read with
Section 147.
For the reasons stated above, the notice under Section 148 dated 28th
March, 2006 Annexure-5 to the Writ Petition for the assessment year
1999-2000 is not sustainable and is liable to be quashed.
In the result the writ petition is allowed. The notice under Section 148
dated 28th March, 2006 Annexure-5 to the writ petition and all the
consequential proceedings are hereby quashed.
Order Date :- 3.8.2010
S.P.
