Girish Chandra Gupta, J. - The appeal is directed against a judgment and order dated 18th June, 2003 passed by the Income Tax Appellate Tribunal upholding the conclusions arrived at by the CIT (Appeal). The CIT (Appeal) by his order dated 28th December, 2001 upheld the order imposing penalty under section 18(1)(c) of the Wealth Tax Act. The amount of penalty was, however, reduced by him. The appeal against the order of the Tribunal was admitted by this Court by an order dated 15th December, 2003 and the following questions were formulated:
| (a) |
Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in upholding the imposition of penalty under Explanation 2 to section 18(1)(c) of the Wealth Tax Act, 1957 ? |
(b) |
Whether on the facts and circumstances of the case, the order of the Appellate Tribunal holding that the assessee failed to file the valuer's report along with the return and ignoring the fact the said report was filed in course of assessment proceedings was based on irrelevant considerations ignoring the relevant material and therefore was perverse ? |
(c) |
Whether on the facts and circumstances of the case, the Appellate Tribunal should have held that the penalty order passed by the Wealth (Income) Tax Officer under Section 18(1) of the Wealth Tax Act, 1957 without prior approval of the requisite authority under section 18(3) of the said act was void ab initio and without jurisdiction and authority of law ?" |
The facts and circumstances of the case briefly stated are as follows :
2. There was a dwelling house situate at Premises No.12B, Mandeville Gardens, Kolkata, demolition whereof, was started after 31st March, 1988. During the financial year 1987-88 corresponding to the assessment year 1988-89, the dwelling house was valued at Rs.55,000/- for the purpose of wealth tax, which was duly accepted by the department. The demolition started during the financial year 1988-89. In the corresponding assessment year 1989-90, the assessee filed a return computing the valuation of the said property at a sum of Rs.6,07,000/-, on the basis of a valuation report dated 18th March, 1991 prepared by Sri D.K. Dutta, Chartered Engineer and Government Registered Valuer.
3. The Income Tax Officer arrived at a conclusion that the assessee had furnished inaccurate particulars while filing the Wealth Tax Return for the assessment years 1989-90 and 1990-91 for the following reasons :
"It is most surprising that the valuer Mr. D.K. Dutta has taken the value of land at Rs.6,07,000/- as on 1.4.74 whereas the value is to be taken for the asstt. Years 1989-90 and 1990-91 as on 31.3.89 and 31.3.90 as the case may be. But assessee showed the value in his wealth tax return for the aforesaid property at Rs.6,00,000/- in both the aforesaid assessment years instead of Rs.6,07,000/-. One more thing should be highlighted here that the assessee filed his return of wealth for the asstt. Years 1989-90 and 1990-91 on 9.4.91 and 27.5.91 respectively while aforesaid property was valued by the assessee's valuer Mr. D.K. Dutta on 18.3.91 which was before the submission of wealth tax return. It is not known to the department under what circumstances the assessee failed to enclose the said valuation report along with return of wealth. Why should not this valuation report be treated as manufactured after the submission of return of wealth as because when assessee submitted the return of wealth value shown at Rs.6,00,000/-. From this it can easily be inferred that the assessee just presented an imaginary value of the property at 12B, Mandeville Gardens in his return of wealth.
A/R of the assessee in his aforesaid explanation also claimed that valuation prepared by the D.V.O. or assessee's valuer and then revised by the D.V.O. and finally reduced by the CIT (A) was of difference of opinion among the valuers. In this context I am to mention here that none of the valuers valued the property of 12B, Mandeville Gardens at Rs.6,00,000/-or less viz.,
Designation of the Valuers |
Date of Report |
Value of determined |
1. D.K. Dutta, assessee's valuer |
18.3.91 |
Rs.6,07,000/- |
2. -do- |
10.9.93 |
Rs.44,80,000/-(Revised) |
3. Departmental Valuer |
|
Rs.56,07,000/- |
4. assessing Officer's valuation at the time of asstt as the basis of fair market value of Rs.30/- |
30.2.92 |
Rs.43,68,300/- |
5. C.I.T.(A) |
|
Rs.50,90,700/- |
The above fact was brought into the notice of the assessee by issuance of letter dt. 1.3.2000."
4. The Income Tax Officer, in the circumstances, imposed penalty for both the assessment years, 1989-90 and 1990-91. The CIT(A) agreeing with the order of the Income Tax Officer upheld the imposition of penalty but reduced the amount thereof. The learned Tribunal did not interfere with the order of the CIT(A). Aggrieved by the order of the learned Tribunal, the present appeal was preferred and the aforesaid questions were framed.
5. Mr. Murarka, learned advocate appearing in support of the appeal, submitted that there can be no question of any concealment when the valuation disclosed by the assessee was based on the views of a registered valuer. He added, that the finding that the valuer had valued the property at Rs.6,07,000/-, but the assessee, in fact, returned a sum of Rs.6,00,000/-, was a mistake on the part of the Income Tax Officer because it would appear from the first assessment order dated 30th March, 1992 that the assessee had really valued the property at Rs.6,07,000/-.
6. The second submission advanced by Mr. Murarka was that there was no question of any imaginary figure having been quoted by the assessee because whatever value was indicated in the Wealth Tax return was based on the valuer's report.
7. Mr. Murarka relied on the judgment in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 (SC) wherein the Supreme Court expressed the following views :
"A duty may be enjoined on the assessee to make a correct disclosure of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars."
8. Mr. Murarka also relied upon a Circular dated 7th June, 1968 issued by CBDT being Circular No.4P (LXXVI-65) for the same proposition. Clause 15 of the aforesaid circular contained, inter alia, as follows:
"Thus, where a taxpayer has given relevant particulars of his assets correctly and the value thereof declared by him in the return is in accordance with the valuation made by an approved valuer, the taxpayer will not be subjected to penalty for understatement of the value of any asset merely on the ground that its value has been determined in the assessment at a higher amount."
9. In support of his submission Mr. Murarka also relied upon a Division Bench judgment of the Allahabad High Court in the case of Mohd. Farooq v. CIT [2006] 280 ITR 484/154 Taxman 290, wherein the Division Bench opined as follows:
"It is well settled by a catena of decisions of the apex court that the circular issued by the Central Board of Direct Taxes under section 13 of the Act, as it stood during the relevant period, is binding upon the authorities. Thus, in view of the aforesaid circular which still holds the field, the penalty could not have been imposed as the value of the asset declared by the applicant was as per the report of the approved valuer."
10. The next submission advanced by Mr. Murarka was that the view taken by the forums below that the valuation report was not annexed to the wealth tax return and the inference drawn on that basis that an imaginary valuation was disclosed in the wealth tax return is altogether bad, according to him.
11. He drew our attention to the form of the wealth tax return, which was in use at the relevant time. He submitted that the form no where requires the assessee to annex a copy of the valuation report along with the return. The valuation report was duly submitted at the time of hearing and therefore, the fault found by the authorities including the ITO is without any basis.
12. Mr. Murarka contended that the view taken by the authorities including the Tribunal that there was concealment or inaccurate particulars given as regards the valuation of the property in question was without any merit. He drew our attention to Section 7 of the Wealth Tax Act which provided the method of valuation of the property. Sub Section (1) of Section 7 of the Wealth Tax Act provided as follows;—
"7. Value of assets how to be determined.- (1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule III".
13. Part B of schedule III deals with the valuation of immovable properties on rental method. He submitted that the valuation should have been made or could have been insisted upon by the Revenue to be made only in accordance with part B of schedule III. The appellant in this case made a mistake by not adopting the prescribed method of valuation. The Revenue should, however, have followed the prescribed mode or at rate before arriving at the conclusion that the assessee had concealed or furnished inaccurate particulars as regards the valuation of assets owned by him checked up whether the valuation disclosed by the assessee was less than the valuation on the basis of the prescribed method which the department never did. Therefore, the finding as regards any concealment or as regards furnishing of inaccurate particulars is altogether bad. He submitted that the entire exercise was illegal.
14. The last submission advanced by Mr. Murarka was that under sub Section 3 of Section 18 of the Wealth Tax Act the Income Tax Officer had no jurisdiction to impose penalty exceeding a sum of Rs.10,000/- without the approval of the Deputy Commissioner. The Income Tax Officer imposed penalty well above Rs.1 lakh for each assessment year without prior approval. Therefore, the order imposing penalty is in any event bad and without jurisdiction. He in support of his submission relied upon a judgment in the case of Official Trustee, West Bengal v. Sachindra Nath Chatterjee AIR 1969 SC 823, wherein the following views were expressed:
"From the above discussion it is clear that before a Court can be held to have jurisdiction to decide a particular matter it must not only have jurisdiction to try the suit brought but must also have the authority to pass the orders sought for."
15. Mr. Murarka contended that the order passed by the Income Tax Officer was void. The order of the CIT(A) and the order passed by the Tribunal affirming the order of the Income Tax Officer are equally void and should, therefore, be set aside.
16. Mr. Agarwal, learned advocate appearing for the Revenue, submitted that as regards concealment of the wealth and/or furnishing inaccurate particulars by the assessee, there is a concurrent finding. This Court cannot disturb the same. He in support of his submission relied upon a judgment in the case of CIT v. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 (SC). He read out a sentence from page 289 of the report wherein the apex court held that the High Court misdirected itself as also committed an error in disturbing the concurrent finding of fact. For the same proposition he relied upon a judgment in the case of Sudarshan Silks and Sarees v. CIT [2008] 300 ITR 205/169 Taxman 321 (SC). He drew our attention to the following passage from page 213:
"In the present case, the question of law referred to the High Court for its opinion was, as to whether the Tribunal was right in upholding the findings of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of the question was not as to whether the findings recorded by the Tribunal on facts were perverse, the High Court was precluded from entering into any discussion regarding the perversity of the finding of fact recorded by the Tribunal."
17. For the same proposition he also cited the judgment in the case of Century Flour Mills Ltd. v. CIT [2001] 247 ITR 276/115 Taxman 675 (SC) .
18. Distinguishing the judgment in the case of P. Mohanakala (supra) relied upon by Mr. Murarka, Mr. Agarwal drew our attention to the judgment in the case of Union of India v. Dharmendra Textiles Processors [2008] 306 ITR 277/174 Taxman 571 (SC) in order to show that the views expressed in the case of Dilip N. Shroff (supra), relied upon by Mr. Murarka is no longer good law.
19. Mr. Agarwal contended that Part B of Schedule III to the Wealth Tax Act does not apply to a vacant piece of land. He contended that the Part B is applicable only to a vacant piece of land which is appurtenant to a building.
20. Reverting to the point of concealment, Mr. Agarwal submitted that under Section 3 (n) and (q) of the Wealth Tax Act, there is a provision for "valuation date", which is the last date of the financial year. In the present case, the valuation was made on the basis of a transaction made in the year 1974. Therefore, the fact that the assessee furnished inaccurate particulars does not need any further elaboration. He added that the valuation furnished by the assessee was Rs.6,07,000/-. Ultimately, the property was valued at more than Rs. 50 lakh and the assessee also paid tax on that basis. Therefore, the valuation returned was less than one-eighth. He drew our attention to Explanation 4 appearing from Section 18 of the Wealth Tax Act, which provides as follows:
"Explanation 4. — Where the value of any asset returned by any person is less than seventy per cent of the value of such asset as determined in an assessment under section 16 or section 17, such person shall be deemed to have furnished inaccurate particulars of such asset within the meaning of clause (c) of this sub-section, unless he proves that the value of the asset as returned by him is the correct value."
21. Mr. Agarwal also drew our attention to Section 42C of the Wealth Tax Act, which provides as follows :
" No return of wealth, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of wealth, assessment, notice, summons or other proceeding if such return of wealth, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
22. He contended that the submission that the Income Tax Officer had no jurisdiction to impose penalty exceeding a sum of Rs.10,000/- without the approval of the Deputy Commissioner is a question of fact which was never raised by the assessee at any stage and, therefore, cannot be permitted to be raised at this stage.
23. Mr. Murarka in reply submitted that Explanation 4 appended to Section 18 of the Wealth Tax Act was never invoked against the assessee. He added that Explanation 4 is nothing but a rule of evidence. The authorities were at liberty to apply the rule of evidence at their choice which they did not do. Therefore, it is a no good now saying that the rule of evidence which was not applied at the time of assessment should now be applied. He added that the valuation in this case was not made by the department as per the mandate contained in Section 7 of the Act. There is as such no question of any concealment or inaccuracy in the return because the valuation as per law is not known. He submitted that omission to take prior approval under sub-Section 3 of Section 18 is not a curable defect nor has the legislature included an order without jurisdiction within the fold of Section 42C of the Wealth Tax Act.
24. After hearing the learned counsel appearing for the parties, we are of the opinion that the questions of law which arise for determination in this case are as follows:
| (a) |
Whether the immovable assets can be valued otherwise than in accordance with the provisions contained in Section 7 of the Wealth Tax Act? |
(b) |
Whether on the facts and circumstances of the case, the order of the Appellate Tribunal holding that the assessee failed to file the valuer's report along with the return and ignoring the fact the said report was filed in course of assessment proceedings was based on irrelevant considerations ignoring the relevant material and therefore was perverse ? |
(c) |
Whether on the facts and circumstances of the case, the Appellate Tribunal should have held that the penalty order passed by the Wealth (Income) Tax Officer under Section 18(1) of the Wealth Tax Act, 1957 without prior approval of the requisite authority under section 18(3) of the said act was void ab initio and without jurisdiction and authority of law ? |
(d) |
Whether the omission to take prior approval is a curable defect under Section 42C of the Wealth Tax Act ? |
25. We have considered the rival submissions advanced by the learned advocates for the parties. Section 7 of the Wealth Tax Act is emphatic which provides that valuation shall be made as provided in Schedule III. Therefore, no other mode of valuation was permissible. The contention that schedule III does not apply to a vacant piece of land is not acceptable. The caption of part ' B' of schedule III is "immovable property". It is difficult to proceed on the basis that the expression does not include a vacant piece of land. If that were the intention of the legislature then the vacant piece of land cannot taxed at all. It is no doubt true that the provisions contained chapter ' B' of schedule III refer to a vacant piece of land appurtenant to a building which is not the case before us. Considering that the Act provides for valuation in the manner indicated therein, it is difficult if not impossible to hold that any other mode of valuation is permissible. Therefore, the first question is answered in the negative.
26. Considering the answer given by us to the first question, the second question has become redundant. In any case, we hold that filing of the valuation report along with the return was not mandatory. Production of the same at the time of hearing was enough. The assessee cannot be denied a right to adduce evidence to substantiate his contention at the hearing. The second question is, therefore, answered in the affirmative.
27. The Income Tax Officer had no jurisdiction to impose penalty exceeding a sum of Rs.10,000/- except with the approval of the Deputy Commissioner. Mr. Agarwal submitted that it is a question of fact. We are unable to accept this submission. It was the obligation of the Income Tax Officer to indicate in his order that he passed the order after obtaining requisite approval. Since the order passed by the Income Tax Officer does not contain the requisite recital, it has to be held that no such approval was obtained. The order itself is incompetent. An incompetent order is a nullity and the point as regards nullity can be taken at any stage. It can even be taken at the stage of execution. Even if the orders imposing penalty were not set aside by us, which we propose to do, the order could not have been executed. Therefore, the third question is answered in the affirmative.
28. Section 42C of the act does not apply to imposition of penalty. The expression ' other proceeding' has to be construed ejusdem generis. The expression assessment cannot include imposition of penalty. The power to pass an order is a question of jurisdiction. When the requisite power was not there, the order could not have been passed. The order passed without power is a nullity which cannot be saved by invoking Section 42C. Therefore, the fourth question is answered in the negative.
29. The submission that the judgment in the case of Dilip N. Shroff (supra) is no longer a good law has not impressed us because the Supreme Court in the case of CIT v.Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) opined as follows:
"The basic reason why decision in Dilip N. Shroff (supra) was overruled by this court in Union of India v. Dharamendra Textile Processors, was that according to this court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Shroff v. Jt. CIT. However, it must be pointed out that in Union of India v. Dharamendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff (supra), where the court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff v. Jt. CIT to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff (supra) was overruled."
30. Therefore, it cannot be said that the discussion or the observation made by the apex court in the case of Dilip N. Shroff's case (supra) as regards efficacy of the report of the valuer or the consequences of following the same has also been set aside by any subsequent judgment.
31. For the aforesaid reasons, we are of the opinion that the appeal must succeed. The order under challenge is set aside.
32. Urgent photostat certified copy of this order be supplied to the parties, if applied for, subject to compliance of all requisite formalities.