Madras H.C : Referring the matter to the Valuation Officer under s. 16A of the WT Act, 1957, is a discretion given by the statute to the AO only and hence the CWT(A) cannot direct the AO to redetermine the value of the property after referring the matter to the valuation cell

High Court Of Madras

Commissioner Of Wealth Tax vs. Prasad Productions (P) Ltd.

Sections WT 16A, WT 23(5)

Asst. Year 1988-89, 1989-90

R. Jayasimha Babu & K. Raviraja Pandian, JJ.

Tax Case Nos. 232 & 233 of 1997

17th September, 2002

Counsel Appeared

T.C.A. Ramanujam, for the Revenue : P.P.S. Janardhana Raja, for the Assessee

JUDGMENT

R. JAYASIMHA BABU, J. :

These references are at the instance of the Revenue. The question referred is : “Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that referring the matter to the Valuation Officer under s. 16A of the WT Act, 1957, is a discretion given by the statute to the AO only and hence the CWT(A) cannot direct the AO to redetermine the value of the property after referring the matter to the valuation cell ?”

The assessment years are 1988-89 and 1989-90.

2. The assessee is a private limited company which owns several flats, three in Chennai, and one at Bombay. The AO did not accept the valuation given by the assessee, but made an estimate of the value. The assessee challenged the estimate made by the WTO of the value of these properties. It was urged by the assessee that the WTO should have referred the matter to the valuation cell, and should not have made an estimate on his own. The CWT(A), in his order at para 2.2, has noted thus: “Learned counsel further submitted before me that in any case, the AO should have referred the matter to the valuation cell in accordance with the mandatory provisions of s. 16A of the WT Act.”

Dealing with that submission, in para 2.3, the CWT(A) has held that, “In my opinion, learned counsel’s contention that the valuation of each property should have been referred to the valuation cell in accordance with the provisions of s. 16A r/w r. 3B of the WT Rules is correct. The AO is accordingly directed to recompute the value of these properties after obtaining reports from the valuation cell.” He, thereafter, remitted the matter to the AO. Strangely enough, the assessee filed an appeal to the Tribunal, in which, it took a stand which was wholly contrary to the plea that it had urged before the CWT(A) and which plea has been accepted by the CWT(A). It is very surprising as to how the Tribunal allowed the assessee to take the plea it did that the CWT(A) should not have directed the WTO to refer the matter to the valuation cell. The Tribunal, not only entertained that plea, but, proceeded to accept the same by placing reliance on two decisions of the Madhya Pradesh High Court in M.V. Kibe vs. CWT (1987) 63 CTR (MP) 156 : (1987) 168 ITR 82 (MP) and M.V. Kibe vs. CWT (1987) 63 CTR (MP) 158 : (1988) 169 ITR 40 (MP).

In the case of M.V. Kibe (supra), the Court observed : “For the purpose of making a reference to the Valuation Officer under s. 16A of the Act, the WTO has to form the requisite opinion as required by s. 16A. That he should form such an opinion cannot be dictated to him by the appellate authority.”

The law so laid down in that case was followed in a subsequent ruling of the same Court in the case M.V. Kibe vs. CWT (supra).

5. The scope of the appellate power under the provisions of the IT Act was considered in the decisions rendered by the Supreme Court in the cases of CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC); Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) and CIT vs. Nirbheram Daluram (1997) 139 CTR (SC) 484 : (1997) 224 ITR 610 (SC). That the power of the appellate authority is as wide as that of the AO was emphatically stated and reiterated in the decisions.

6. In the case of Kanpur Coal Syndicate (supra), which was a decision rendered under s. 31(3)(b) of the Indian IT Act, 1922, which is similar to s. 251(1)(a) of the IT Act, 1961, it was observed that : “The AAC has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do.”

7. In the case of Jute Corporation (supra), the Court held that the IT Act “does not place any restriction or limitation on the exercise of appellate power. Even otherwise, the appellate authority, while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter.” The law laid down in those two decisions was reiterated by the apex Court in the case of CIT vs. Nirbheram Daluram (supra).

8. What was said by the apex Court in relation to the appellate power under the IT Act is equally applicable to the scope of the appellate power under the WT Act, as in that Act also, no restriction or limitation has been placed on the appellate power. Sec. 23, sub-s. (5), of the WT Act, inter alia, provides that the CWT(A) “may pass such order as he thinks fit which may include an order enhancing the assessment or penalty”. The proviso thereunder requires the CWT(A) to give reasonable opportunity to the assessee to show-cause against any proposed enhancement of the assessment or penalty. There is no other restriction placed upon the powers of the CWT(A). The CWT(A), when he entertains the appeal under the provisions of the WT Act, is, therefore, as competent as the WTO is in relation to all matters concerning the assessment which are within the scope of the WTO while making the assessment.

9. There was no error of jurisdiction in the CWT(A) giving the direction that he did after accepting the argument which the assessee itself had advanced before the CWT(A). When an appeal is allowed in whole or in part, the assessment is either required to be redone wholly or in part. When the discretion which the original authority is vested with in relation to that assessment is a matter with regard to which it is open to the appellate authority to give suitable directions, we see no error in the order which the CWT(A) had made. The Tribunal was wholly in error not only in entertaining the plea that was raised by the assessee which had persuaded the CWT(A) to direct the AO to refer the matter to the valuation cell, but in further proceeding to hold that the CWT(A) did not have the power to do so.

10. Having regard to what has been stated by the Supreme Court regarding the scope of the appellate power, the observations and law laid down by the Madhya Pradesh High Court cannot be regarded as having laid down the law correctly.

The question referred is required to be, and is answered in favour of the Revenue, and against the assessee.

[Citation : 259 ITR 88]

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