Case Law Details
RELEVANT PARAGRAPH
From the above provision, it is clear that the authorities mentioned in the definition of AO in section 2(7A) of the Income-tax Act, 1961, must be assigned the jurisdiction to any authorities mentioned in the definition by the CBDT under the provisions of section 120 of the Income-tax Act, 1961, to act as an Assessing Officer. Only in that circumstances that Assistant Commissioner or Dy. Director of Income-tax, other authorities mentioned in the definition u/s 2(7A) of the Income-tax Act, 1961, can act as fee Assessing Officer) In this case, the Dy. Director of Income-tax (Investigation II), Indore, who issued the commission u/s 131(l)(d) has not been assigned jurisdiction to act as an Assessing Officer of the assessee Shri Rajeev Mewara. Therefore, the finding of the CIT(A) that the DDIT (Investigation IT), Indore, is an Assessing Officer by virtue of the provisions of section 2(7A) of the Income-tax Act, 1961, is not valid. Further, the Dy. Director of Income-tax (Investigation) has made reference to the Valuation Officer by virtue of powers conferred on him under sub section (1A) section 131. However, such reference by the Dy. Director of Income-tax (Investigation) , Indore, is illegal and he has exaggerated his jurisdiction as the power under sub section (1A) of Section 131 has been conferred on the Dy. Director of Income Tax (Investigation) for entirely different purposes and not for the purpose of valuation of the house property. For the sake of convenience, the relevant provisions of sub section (1A) of section 131 is reproduced as under:-
“131. (1) The [Assessing] Officer, [Deputy Commissioner (Appeals)], [Joint Commissioner] , Commissioner (Appeals)] and [Chief Commissioner or Commissioner] 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.
[(1A) [If the Director General or Director or [Joint] Director or Assistant Director [or Deputy Director], or die authorized officer referred to in sub-section (1) of section 132 before he takes action under clauses (0 to (v) of that sub-section has reason to suspect that any income has been concealed* or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any inquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority.]”
10. From the above, it is noted that none of the condition mentioned n sub clause (i) to, (v) of sub section (1) of section 132 of the Income-tax Act, 1961. The relevant provision of section 132 is reproduced as under :-
“132. (1) Where the [Director General or Director] or the [Chief Commissioner or Commissioner] [or any such [Joint Director] or [Joint Commissioner] as may be empowered in this behalf by the Board], in consequence of information in his possession, has reason to believe that—
(a) any person to whom a summons under subsection (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under subsection (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or
(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or
(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be, disclosed] for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,—
(A) the [Director General or Director] or the [Chief Commissioner or Commissioner] , as the case may be, may authorize any [Joint Director], [Joint Commissioner] , [Assistant Director [or Deputy Director]], [Assistant Commissioner [or Deputy Commissioner] or Income-tax Officer], or
(B) such [Joint Director], or [Joint Commissioner] , as the case may be, may authorise any [Assistant Director [or Deputy Director]], [Assistant Commissioner [or Deputy ‘ Commissioner] or Inctime-tax Officer],
(the officer so authorized in all cases being hereinafter referred to as the authorized officer) to—]
(0 enter and search any [building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
O’O break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (0 where the keys thereof are not available;
[(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorized officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;]
[(iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of subsection (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorized officer the necessary facility to inspect such books of account or other documents;]
(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:
[Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-in-trade of the business;]
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing:”
11. From the above, it is noted that none of the condition mentioned in sub clauses (i) to (v) of sub section (1) of section 132 has been mentioned for reference to the Valuation Officer to value a house property as has been done in the instant case by the Id. DDIT ( Investigation – II)4ndore. It is also noted that the AO has mentioned in the assessment order that the Departmental Valuation Officer has mentioned that the construction of the house was started in the financial year 1993-94 and continued up to financial year 1998-99 i.e. after 31.3.1999, while the DDIT made reference to the Valuation Officer on 243.1999 i.e. before completing the construction of the house property, which itself is illegal. It is also admitted during the course of hearing before us that no proceeding was pending in the case of the assessee before making reference to the Departmental Valuation Officer by the Dy. Director of Income-tax, Indore. Hence, such reference without any pending proceedings is also illegal. This view is also supported by the decision of I.T.A.T., Allahabad Bench in the case of ACIT vs. Baldeo Plaza, 93 ITD 579. It would not be out of context to mention that new provisions u/s 142A inserted by the Finance Act, 2004, with retrospective effect from 15.11.1972′ also states – (i) for the purpose of making an assessment or reassessment under the Act….” Also authorized the AO to make reference to the DVO, when any assessment proceeding or reassessment proceedings are pending before him and not otherwise. Similar position came for consideration before the High Court of Jammu & Kashmir in the case of Prem Hotel vs. ITO, 93 Taxman 237. In that case, in the return of income, the assessee had declared cost of construction of the building and cost of plant and machinery as per report of the approved valuer. While the assessments were pending (which was later on completed), the Assistant Director of Income-tax (Investigation) / AO referred the matter to the DVO u/s 131(l)(d), read with section 55-A,for determining the cost of construction of building and the cost of installation of machinery. While deciding the writ petition, the Hon’ble High Court has observed as under:-
“It was found that the Assistant Director of Income-tax (Investigation) has formed the opinion that the construction cost was exorbitant. No reasons thereof had been given. It is a settled principle of law that if a person wants to reopen a matter or expresses doubts about the accounts furnished by the assessees, he must at least give a show-cause notice to them. Therefore, the orders impugned by which the Valuation Officer was directed to reassess the property could not have been issued without first giving a hearing to the assessee, particularly, when the Income-tax Department itself had accepted their accounts during the assessment proceedings which had been completed. Besides, the requirement of giving a show-cause notice, the requirement which has to be read into section 55A, the Assistant Director, income-tax, was bound to disclose the reasons for forming the opinion that the property was over valued so that the assessee could meet the objection.
For the aforesaid reason alone, the impugned orders, by which reference was made to the Valuation Officer, were quashed and the writ petition allowed.”
