TMI Blog1997 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... Act was received by the AO under DVO's No. DVO-II/Bom/WT-22/94-95/822, dt. 17th Jan., 1995 in which the value of the property in question was determined by him at Rs. 9,64,17,000 on 31st March, 1991, the relevant valuation date for the asst. yr. 1991-92. As per the details of this immovable property, freehold plot of land admeasuring 1845.33 sq. mtrs. (2207 sq. yds.); the access road of 112 sq. yds. and foreshore land admeasuring 683 sq. yds. as reported by the assessee. At the time of inspection by the Valuation Officer there was no structure, as the construction activity was in progress. The DVO was supplied with various documents as mentioned in the order on p. 2, by the representative of the assessee for working of the basic details and relevant information in respect of the property in question. The DVO, according to the Revenue, gave opportunity to the assessee for comments and objections if any, on the proposed estimate of the valuation under s. 16A(4) of the WT Act. The DVO in his final report considered the comments and objections raised by the assessee as mentioned by the DVO in Annexure B to the valuation report and this Annexure B is now forming part of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II. Hence, question of finding out the market value of the property on land and building method of valuation does not arise. 3. The AO, ought to have adopted the value of the property as declared on the basis of r. 3 of Sch. III of the WT Act. After hearing the representative of the assessee and for the detailed discussion given in his order the learned CIT(A) dismissed all the three grounds and held as under: (a) The reference by the AO to the DVO under s. 16A was within the jurisdiction of the AO and hence was valid. He held that the learned CIT(A)-I, Ahmedabad, had set aside the original order for the limited purpose of reframing the assessment on the basis of the final report from the DVO-II, Bombay under s. 16(4) of the WT Act. This order of the CIT(A) was accepted by the assessee as the assessee did not file appeal to the Tribunal. According to the learned CIT(A) it implied that the assessee did not have any objection to the said reference under s. 16A. He accordingly held that it was too late to raise this objection and he accordingly overruled and held that the reference to the DVO was in order and valid. (b) That the DVO, Bombay has rightly valued the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n passed without jurisdiction since the very reference to the valuation officer under s. 16A of the WT Act, 1957, was without jurisdiction; and/or (b) For having been based on such an order of valuation which had itself been passed under s. 16A(5) of the WT Act, 1957, on 17th Jan., 1995 which was long after the assessment proceedings for the present asst. yr. 1991-92 had become time-barred on 31st March, 1994; and/or (c) For having been based on an order of valuation which was itself illegal for the reason that what the Valuation Officer had done was to value the immovable property in question as if it were a plot of land and, accordingly, otherwise than in accordance with the mandatory rr. 3 to 7 of Sch. III to the WT Act, 1957, even though it was the admitted position that the immovable property was a residential building with appurtenant land. In the second ground it has been submitted that the learned CWT(A) has grossly erred in failing to appreciate the merits of the assessee's case for the substitution of the valuation of Rs. 4,82,08,600 of the immovable property in question adopted by the AO on the basis of the valuation report of the Valuation Officer passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d enforceable because of the following facts: (i) Similarly, previous approval said to have been granted by the Dy. CIT having been accorded without notice of hearing and without hearing to the assessee, the same could not have been acted as the base for making reference against the provisions of Sch. III rr. 3 to 7. (ii) That in absence of any requisite material, belief and lawful reference the approval granted mechanically could not have acted as 'foundation' or 'base' for final report from DVO. (iii) Copy of 'Approval' was not supplied to assessee. The learned counsel further submitted that admittedly the property in question on the relevant valuation dates was 'building' and the DVO could not have treated the same as 'open plot' and thus he had exceeded jurisdiction vested in him in determining the nature of the property under valuation. He further submitted that the entire assessment order based on the alleged report dt. 17th Jan.,1995 is not enforceable in absence of any service or supply of the said report to the assessee, the objections having been filed only against 'proposed valuation' and in reply to notice under s. 16(1)(4) of the Act. According to the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property namely, ESSAR group and construction work on a huge scale of a multi-storied building was in progress. He submitted that the property in question was a prime land located in prime locality of Bombay with development potential. According to the learned DVO such development potential plays important role rather than assuming and making details. He further submitted that rr. 3 to 7 of Sch. III were not applicable to the property in question because it was actually sold after a period of 9 months for huge consideration and further the value so worked out was not in consonance with the location, size and potential development of the property in question. He dealt on the details given in the valuation report and maintained that the valuation had been rightly worked out at Rs. 9,64,16,925. 10. We have considered the rival submissions and perused the facts on record. The immovable property under consideration, the valuation of which had been referred by the AO to the Valuation Officer under s. 16A was a building with appurtenant land which the assessee had acquired sometime in the year 1975 jointly with another company viz. Rupa Investment (P) Ltd. (both having 1/2 shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was nothing in r. 20 itself which could entitle the AO to bypass the provisions of rr. 3 to 7 in a case where r. 8 was not attracted. 12. Looking to the facts and circumstances of the assessee's case, and especially considering the nature of the immovable property in question and the fact that it had been subjected to assessment under the head 'Income from house property' for a number of years and further that it had also been subjected to the levy of wealth-tax by the application of r. 1BB of the WT Rules for a number of years, the application of rule of Sch. III was a mere matter of arithmetics and it was impossible to suggest, as envisaged by cl. (a) of r. 8 that it was not practicable to apply the provisions of r. 3 of Sch. III to the assessee's present case. Accordingly we hold that it was not open to the AO to hold the opinion that in the assessee's present case it was not practicable to apply the provisions of the aforesaid r. 3 of Sch. III and accordingly it was not equally open to the Dy. CIT to grant his prior approval to the AO for holding that opinion in a mechanical way. Even if the learned AO were to hold such opinion, it was incumbent upon him to confront th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er laid down in rr. 3 to 7 of Sch. III. Since none of the rr. 3 to 7 envisaged taking into 'market value' of the immovable property in question, it was not at all open to the learned AO to refer its valuation to the Valuation Officer under s. 16A of the WT Act, 1957 as it read after the amendment by the Direct Tax Laws (Amendment) Act, 1989. 16. In CWT vs. Kasturbhai Mayabhai (1986) 51 CTR (Guj) 309 : (1987) 164 ITR 107 (Guj), the Hon'ble Gujarat High Court considered the applicability of r. 1BB. The following is the relevant observation of A.M. Ahmedi, J. (as he then was) speaking for the Division Bench, which delivered the said judgment: "Counsel for the Revenue next contended that s. 16A empowers the WTO to make a reference to the Valuation Officer if in his opinion the returned value is less than the market value of the asset in question. According to him, if r. 1BB were to operate retrospectively, it would render ss. 7(3) and 7(4) as well as s. 16A(6) redundant. Under s. 7(4), the assessee has the option of valuing the property on : (i) the valuation date following the date on which he became the owner; (ii) on the valuation date relevant to the assessment year commencin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio laid down by the Hon'ble Supreme Court we hold in favour of the assessee. 17. As regards the observations of the learned CIT(A) that the original assessment order had been set aside by the learned CIT(A)-I, Ahmedabad, for the limited purpose of reframing the assessment on the basis of the final report from DVO II, Bombay under s. 16A(4) of the WT Act and since the assessee had accepted this order by not preferring the appeal to the Tribunal it was too late to raise this objection, we do not find any merit in the same. No direction of the first appellate authority can confer jurisdiction on the AO or the Valuation Officer if it was not lawfully seized of jurisdiction and the fact that the contention as regards lack of jurisdiction was not urged during the first round of proceedings was beside the point. There could never be a waiver of mandatory provisions such as those of s. 16A or s. 17A of the WT Act, 1957, for the simple reason that jurisdiction cannot be conferred on an authority by mere consent. The learned CIT(A) ought to have appreciated that the assessee's challenge to the legality of the assessment order impugned before him was, in nature, such as to cut at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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