[2000] 111 Taxman 712 (gau.)

High Court of Gauhati

Commissioner of Income-tax

v.

Smt. Basana Rani Saha

Brijesh Kumar, CJ.

And D. Biswas, J.

IT Reference No. 8 of 1997

January 19, 2000

Section 131, read with sections 133(6) and 142(2), of the Income-tax Act, 1961 - Discovery, production of evidence, power regarding - Assessment years 1972-73 and 1973-74 - Assessing Officer made addition to income under section 69 on basis of report of Depart­mental Valuation Officer to whom reference was made by him under section 55A for valuation of cost of construction of building - Whether Assessing Officer was competent to call for report on valuation of cost of construction from Valuation Officer in view of provisions of sections 131, 133(6) and 142(2) and report of Valuation Officer was piece of evidence with regard to which Assessing Officer had discretion either to accept or to reject if it was otherwise not convincing - Held, yes - Whether wrong men­tion of section 55A in requisition calling for report would not vitiate said report since such power vests with him under other provi­sions also - Held, yes

Facts

The assessee, during the accounting year 1971-72, had constructed a building whose cost of construction was disclosed at Rs. 1,28,290. The Assessing Officer having found the cost of con­struction not satisfactory referred the matter to the Departmen­tal Valuation Officer under section 55A for valuation and, on the basis of the latter’s report, added an amount of Rs. 27,000 each to the income for the assessment years 1972-73 and 1973-74 under the provisions of section 69. On appeal, the AAC confirmed the as­sessment. On second appeal, the Tribunal, relying on the decision in Daulatram v. ITO [1990] 181 ITR 119/51 Taxman 248 of the Andhra Pra­desh High Court, allowed the assessee’s plea holding that under section 55A, the Departmental Valuation Officer could not be asked to assess the cost of construction for the purpose of assessment proceedings under section 69, since that section can be invoked only for ascertaining the fair market value for the purpose of Chap­ter IV and not for any other purpose under the Act.

On reference under section 256(2) :

Held

It is evident from the placement of section 55A and the provisions incorporated therein that it empowers the Assessing Officer to refer the valuation of a capital asset to a Valuation Officer to ascertain the market value thereof for the purpose of capital gain. If one strictly goes by the provisions of section 55A, no interpretation other than that it is only meant for the purposes of Chapter IV appears to be possible. But the position of law is that the charging provisions of a tax statute are to be constructed rigorously true to its intention while some amount of laxity is permissible in the interpretation of the machinery provisions for enforcement of the charging provisions. The ma­chinery sections being collateral for the purpose of effectuating the charging provisions have to be interpreted in tune with the object of the taxing provisions, i.e., the charging sections. Therefore, the sections which provide for the enforcement of the charging provisions are to be constructed liberally.

Under sec­tion 133(6), the assessing authority has the powers to require any person to give information in relation to such points or matters which in his opinion will be useful for value and proof in any enquiry or proceeding under the Act. The words ‘any person’ used in this sub-section would also include a Valuation Officer.

Section 142(2) also shows that the Assessing Officer is authorised to make such enquiry as may be necessary for the purpose of obtaining full information in respect of income or loss of any assessee. Undoubtedly, the provisions in sub-section (2) of section 142 like section 55A or section 133(6) are also enabling provisions and the law envisages interpretation thereof in aid of the object for which the law was enacted.

The Division Bench in the case of CIT v. Smt. Amiya Bala Paul [1999] 240 ITR 378 held that the assessing authority would be competent to call for the report on the valuation of the cost of construction from the Valuation Officer in view of the provisions of sections 131, 133(6) and 142(2). It was further held that any wrong mention of provision on the requisition memo would not be material. The decision rendered in the aforesaid reference case needs no change. There is no compelling reason to make a depar­ture. Interpretation as argued on behalf of the assessee, if conceded to,would only defeat the object sought to be achieved. However, the report collected from the Valuation Officer about the cost of construction was a piece of evidence and the assessing authority would continue to exercise discretion either to accept it or to reject it, if it was otherwise not convincing.

The Tribunal apparently erred in holding that the assessing authority had no powers to refer the valuation of a capital asset to the Valuation Officer for the assessment of the cost of con­struction of the hotel premises.

Cases referred to

Daulatram v. ITO [1990] 181 ITR 119/51 Taxman 248 (AP), CIT v. Roshan Lal Seth [1989] 178 ITR 660/45 Taxman 187 (Punj. & Har.), CIT v. Smt. Amiya Bala Paul [1999] 240 ITR 378 (Gauhati), Murari­lal Mahabir Prasad v. B.R. Vad [1976] 37 STC 77 (SC), Associated Cement Co. Ltd. v. CTO [1981] 48 STC 466 (SC), CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC), Fertilizer Corpn. of India Ltd. v. State of Bihar AIR 1988 SC 361 and Hotel Amar v. CIT [1993] 200 ITR 785 (Ori.).

G.K. Joshi and K. Bhuyan for the Applicant. B.R. Dey, K.K. Nandi, H. Talukdar and A.K. Choudhury for the Respondent.

Judgment

Biswas, J. - The Tribunal, Gauhati Bench, in compliance with the direc­tion of this Court in Civil Rule No. 25(M) of 1991, has referred the following questions of law for decision of this Court :

1. Whether, under the facts and circumstances of the case, the Tribunal did not err in facts as well as in law in holding that section 55A can be invoked by the Income-tax Officer for the purpose of that Chapter, i.e., Chapter IV, whereas the addition made by the Income-tax Officer in the present case, was done under section 69 of the Income-tax Act, 1961, in view of the Andhra Pradesh High Court’s decision in the case of  Daulatram v. ITO [1990] 181 ITR 119 ?

2. Whether the Tribunal had any basis or material to hold that the Income-tax Officer did not refer the matter to the Valuation Officer under section 55A of the Income-tax Act, when the Tribu­nal itself had observed at
para 3 of its order that, according to the Income-tax Officer, the cost of the investment was low and, therefore, the case was referred to the Depart-mental Valuation Officer, Gauhati ?”

2. The respondent, Smt. Basana Rani Saha, is the assessee. The matter pertains to the assessment years 1972-73 and 1973-74. The facts in brief are that the assessee during the accounting year 1971-72 had constructed a building at Station Road, Karimganj Town, with plinth area of 5,875
sq. ft. The building in question is being used as a hotel, viz., Gouri Hotel. The disclosed cost of construction of the building was Rs. 1,28,290. The ITO having found the cost of construction not satisfactory, referred the matter to the Departmental Valuation Officer for valuation. The Departmental Valuation Officer assessed the value thereof at Rs. 1,92,350. Thus,  a difference of Rs. 54,160 (sic) (Rs. 1,92,350 - Rs. 1,28,290) was segregated into two parts of Rs. 27,000 each and added to the income for the assessment years 1972-73 and 1973-74 under the provisions of section 69 of the Income-tax Act, 1961 (‘the Act’).

3. The assessee preferred an appeal before the AAC who dismissed the appeal by order dated 13-10-1987, confirming the assessment by the ITO. The decision of the AAC was challenged in ITA Nos. 137 and 138 (Gauhati) of 1988 before the Tribunal, Gauhati Bench. The Tribunal, by order dated 27-2-1990, set aside the impugned reas­sessment made by the ITO. Eventually as per directions of this Court in C.R. No. 25(M) of 1991, the matter has come up before this Court.

4. The Tribunal have, primarily, relying upon the decisions in Daulatram v. ITO [1990] 181 ITR 119/51 Taxman 248 of the Andhra Pradesh High Court and in CIT  v. Roshan Lal Seth [1989] 178 ITR 660/45 Taxman 187 (Punj. & Har.), held that the DVO cannot be asked to assess the cost of construction for the purpose of assessment proceeding. This view is founded on the conclusion that section 55A of the Act can be invoked for ascertaining the fair market value for the purpose of Chapter IV only and not for any other purpose under the Act.

5. Shri Joshi, the learned senior counsel for the revenue, sub­mitted that the powers of the assessing authority to call upon the DVO to assess the cost of construction for the purpose of assessment proceeding under section 69 can be traced to the provision of sub-section (6) of section 133 of the Act. According to the learned counsel, reference to the DVO even if made as the WTO under the provisions of section 16A of the Wealth-tax Act, 1957, would  make no difference inasmuch as that the purpose behind such reference is to obtain opinion as to the investment made in the construction essential for reassessment under section 69 of the Act.

6. Shri B.R. Dey, the learned counsel for the assessee, relying upon a number  of decisions cited at the Bar, submitted that section 55A has no application in a proceeding under section 69 as the provisions of section 55A are specifically meant for assessment of the market value of the capital asset for the purpose of Chapter IV only which relates to capital gains for the purpose of computation of total income.

7. An identical question of law has been answered by a Division Bench of this Court in Income-tax Reference No. 6 of 1996 - CIT v. Smt. Amiya Bala Paul  [1999] 240 ITR 378. This Court after a threadbare consideration of the provisions of law came to the conclusion that the assessing authority would be quite competent to call for the report of valuation of costs of construction from the Valuation Officer in view of the provisions under sections 131, 133(6) and 142(2) of the Act. Before we prefer to refer to the relevant observation made therein, we would like to quote hereinbelow the relevant provisions of the Act for better appre­ciation of the controversy at hand.

8. Sections 55A, 131(1), 133(6) and section 142(2) of the Act which are relevant for the purpose at hand are quoted below :

“55A. Reference to Valuation Officer.—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 the capital asset to a Valuation Officer—

  (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 Income-tax Officer is of opinion that the value so claimed is less than its fair market value ;

  (b)  in any other case, if the Income-tax Officer is of opinion—

    (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,

131. Power regarding discovery, production of evidence, etc.—(1) The Assessing Officer, . . . . shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely :—

  (a)  discovery and inspection ;

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

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

  (d)  issuing commissions.

133. Power to call for information.—The Assessing Officer . . . . the Deputy Commissioner or the Commissioner (Appeals) may, for the purposes of this Act,—

(1) to (5)       **                                                                                      **                                                                           **

(6) require any person, including a banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs verified in the manner specified by the Assessing Offi­cer . . . . giving information in relation to such points or matters as, in the opinion of the Assessing Officer . . . will be useful for, or relevant to, any enquiry or proceeding under this Act.

142. (2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary.”

9. It is evident from the placement of section 55A and the provisions incorporated therein that it empowers the Assessing Officer to refer the valuation of a capital asset to a Valuation Officer to ascertain the market value thereof for the purpose of capital gain. If we strictly go by the provisions of section 55A, no interpretation other than that it is only meant for the pur­poses of Chapter IV appears to be possible. But the position of law is that the charging provisions of a tax statute are to be construed rigorously true to its intention while some amount of laxity is permissible in the interpretation of the machinery provisions for enforcement of the charging provisions. Here we may refer to the decisions in Murarilal Mahabir Prasad v. B.R. Vad [1976] 37 STC 77 (SC) and Associated Cement Co. Ltd. v. CTO [1981] 48 STC 466 (SC). The decisions indicate that emphasis has been on the strict interpretation of charging sections only. The machinery sections being collateral for the purpose of effectuat­ing the charging provisions have to be interpreted in tune with the object of the taxing provisions, i.e., the charging sections. Therefore, the sections which provide for the enforcement of the charging provisions are to be constructed liberally.

10. Insofar as the provisions of sub-section (6) of section 133 are concerned, it cannot be disputed that the assessing authority has the powers to require any person to give information in relation to such points or matters which in his opinion will be useful for value and proof in any enquiry or proceeding under the Act. We have no doubt that the words “any person” used in this sub-section would also include a Valuation Officer. This Court in Income-tax Reference No. 6 of 1996 decided on 25-8-1999 - Smt. Amiya Bala Paul’s case (supra), also expressed this view. The decision in CIT  v. Taj Mahal Hotel [1971] 82 ITR 44 (SC), relied upon in the said case lends support to the view that the expression ‘any person’ in its larger meaning would include a Valuation Officer.

11. Section 142(2) also shows that the Assessing Officer is authorised to make such enquiry as may be necessary for the purpose of obtaining full information in respect of income or loss of any assessee. Undoubtedly, the provisions in sub-section (2) of section 142 like section 55A or section 133(6) are also enabling provisions and the law envisages interpretation thereof in aid of the object for which the law was enacted.

12. Shri Dey, the learned counsel for the assessee, endeavoured to bring home his contention that section 55A being specific only with regard to the evaluation of the fair market value of a capital asset for the purpose of determining capital gains under Chapter IV(E), has no relevance to the cost of construction of a building essential for reassessment under section 69 of the Act.

13. The learned counsel for the assessee also relied upon the decision in Fertilizer Corpn. of India Ltd. v. State of Bihar   AIR 1988 SC 361, where the Supreme Court held that the settled prin­ciple of construction of taxing statutes is that they should be strictly construed. That apart, the decision in Roshan Lal Seth’s case (supra), has also been relied upon to show that the fair market value determined under the provisions of section 16A of the Wealth-tax Act, cannot be appropriately used in estimating the cost of construction of a house. Reliance has also been placed on behalf of the assessee in the decision in Hotel Amar v. CIT [1993] 200 ITR 785 (Ori.), in order to show that a reference under section 55A to the Valuation Officer could be made only to ascertain the fair market value of the capital asset for the purpose of determining capital gains.

14. It would be pertinent to mention here that the Division Bench of this Court in the judgment delivered in Income-tax Reference No. 6 of 1996  - Smt. Amiya Bala Paul’s case (supra), dealt with the question with reference to the decisions relied upon. We may reproduce the relevant excerpts from the said judgment :

“Insofar as section 133(6) of the Act is concerned, it is submitted that it would not be applicable in the assessment proceedings since the said provision is only for purpose of seeking information. The contention of learned counsel for the assessee is that neither the provision contained in sections 55A, 133(6) nor section 142 applies in case of inquiry before assessment. Reliance has also been placed by  the assessee upon Jindal Strips Ltd. v. ITO [1979] 116 ITR 825 (Punj. & Har.) (FB) at page 830, for the purpose of definition of the word ‘person’ used under section 133(6) of the Act. It is a Full Bench decision of the Punjab and Haryana High Court. It has been held that section 55A of the Act applies to matters relating to capital gains only. It will be necessary to briefly see the facts of the case and the propositions of law as laid down. The expenses incurred in con­struction of a mill in its premises were not properly valued in the previous year. In the reassessment proceedings the assess­ing authority called for the report of the Departmental Valuation Officer under section 55A. On an objection raised against the said report, it has been held that the assessing authority, in the reassessment proceeding, could invoke section 133(6) of the Act for revaluation of the property. Section 133(6) of the Act applies to any proceedings under the Act. Mere mention of a wrong section in the requisition sent to the Valuation Officer, viz., section 55A, will not vitiate the report. It is held that the valuation report could be called under section 133(6) of the Act to evaluate the cost of construction, in reassessment proceed­ings.

We find that section 131 of the Act falls in Chapter XIII of the Act which relates to powers of the authorities regarding discovery and production of evidence, etc. It reads as under :

‘131. (1) The Assessing Officer . . . shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely :—

  (a)  discovery and inspection ;

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

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

  (d)  issuing commissions.’

From the above provision, it is clear that the income-tax author­ities while exercising various jurisdictions under the Act enjoy the power of a civil court as provided in the Code of Civil Procedure, 1908, for certain purposes including for issue of commission. Section 75 of the Civil Procedure Code, empowers the court trying a suit to issue commission for certain purposes as indicated in section 75 itself, which reads as under :

‘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;

  (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 determination of the suit;

  (g)  to perform any ministerial act.’

Clause (e) of section 75 of the Civil Procedure Code, provides that the Court can issue commission for holding scientific, technical or expert investigation. The function of the valuer of a property is a technical function requiring expert investiga­tion for the purpose of estimating the cost of any building. A report of a valuer, if sought for estimating the cost of a construction would only be the opinion of an expert on a techni­cal matter. Therefore, in our view, it would always be open to the assessing authority to seek expert opinion about cost of construction of a building which can broadly be termed as issuing commission for the purpose. By virtue of section 131 of the Income-tax Act, section 75 of the Civil Procedure Code, comes in the aid of the income-tax authorities while carrying on their functions under the provisions of the Act. It will have the same nature as that of machinery provision, namely, to aid and facilitate the levy, quantification of the tax liability under the charging provision of the Act. . . .

In our view, nothing jurisdictional is involved about it and the two decisions relied upon on behalf of the assessee themselves amply clarify the legal position. In the case of Hotel Amar [1993] 200 ITR 785 (Orissa), it has been held that a reference cannot be made to the Valuation Officer under section 55A of the Act in reassessment proceedings, but at the same time it was held that a report obtained under section 55A can be used as a piece of evidence which would be rebuttable. Similarly, in the case of Jindal Strips Ltd. [1979] 116 ITR 825, a Full Bench of the Punjab and Haryana High Court though has held that section 55A of the Act applied to matters relating to capital gains only, but in reassessment proceedings the assessing authority is competent to call for the report of the Valuation Officer under section 133(6) of the Act. Hence, merely wrong mention of the provisions of law, namely, section 55A, in the requisition calling for the report of the Valuation Officer would not vitiate the report. From the above two decisions relied upon by the assessee, it is clear that the assessing authority has power to call for report about the cost of construction from the Valuation Officer and while doing so, if the provision of law has been wrongly mentioned, it would be wholly immaterial, e.g., while calling for the valuation report about the cost of construction section 55A is mentioned, it would not make any difference so long as the report is regard­ing cost of construction, as such power vests under other provi­sion.” (p. 383)

15. In the concluding para, the Division Bench held that the assessing authority would be competent to call for the report on the valuation of the cost of construction from the Valuation Officer in view of the provisions of sections 131, 133(6) and 142(2). It is further held that any wrong mention of provision on the requisition memo will not be material. In our considered opinion, the decision rendered in the aforesaid reference case needs no change. We find no compelling reason to make a depar­ture. Interpretation as argued on behalf of the assessee, if conceded to, would only defeat the object sought to be achieved. We would, however, like to add that the report collected from the Valuation Officer about the cost of construction is a piece of evidence and the assessing authority would continue to exercise discretion either to accept it or to reject it if it is otherwise not convincing.

16. Consequently, our answer to the questions raised is in the affirmative. The Tribunal apparently erred in holding that the assessing authority has no powers to refer the valuation of a capital asset to the Valuation Officer for the assessment of the cost of construction of the hotel premises.

17. No order as to costs.