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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A.L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2008-09, is directed against the order passed by the Commissioner of Income Tax (Appeal)-Asansol, in appeal no. 16/CIT(A)/ASL/Cir-3/Asl/17-18, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 29/12/2010.
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09 2. The grounds of appeal raised by the assessee are as follows: 1. That the ld. Assessing Officer is not justified in sending the matter to Valuation Officer to find the value in building and the ld. CIT(Appeals) is not justified in agreeing to the view of the ld. Assessing Officer.
That the ld. Assessing Officer is not justified in sending the matter to valuation officer to find the value in building without rejection of the books of accounts and pointing out specifically in which year the valuation is above book value.
Brief facts qua the issue are that as per valuation report of the valuation officer (DVO), the value of the building (asset) was to the tune of Rs. 1,76,55,900/- as against Rs.1,66,52,805/- shown by the assessee. Learned CIT(A) was of the view that assessee has invested an amount of Rs. 1,76,55,900/-, as reported by DVO as against Rs. 1,66,52,805/- shown by the assessee in return of income. Therefore, the excess investment of Rs. 10,03,095/- (1,76,55,900 – 1,66,52,805) was treated by the ld. CIT(A) as an unexplained investment u/s 69 of the Act and the said amount had been enhanced by the ld. CIT(A) observing the following:
“The Assessing Officer vide remand report No. ACIT/Cir-3/ASL/2011- 12/AASPH9787M/12 dt. 18.04.2012 further stated as under: Assessment under section 143(3) of the Act for the A.Y. 2008-09 was completed on 29.12.2010 at Rs. 1,48,99,130/- against returned income of Rs. 10,17,810/-. During the course of assessment proceedings for the said assessment year a reference under section 142A/131 (d) of the Income Tax Act, 1961 to the Divisional Valuation Officer, Rafi Ahmed Kidwai Road, 2nd Floor, Room No. 07, Kolkata-700016 has been made vide this office letter No. DCIT/Circle- 3/Asl/2010-11/VO/534 dtd. 22.12.2010 to value the cost of construction of house building/showroom. The assessee has shown the total investment in the said properties at Rs.75,50,406/- in the Schedule-4 of the Balance Sheet as on 31.03.2008. The Valuation Officer has sent the dossier of valuation report of the properties to this office file No-20/EE/Val/Ranchi/IT/2010-11/203 dated 06.06.2011 (i.e. after completion of assessment under section 143(3) for the A.Y. 2008-09) assessing the value of the assets at Rs. 1,76,55,900/-. In view of the above, the valuation report of the properties of the assessee may effect the assessment made under section 143(3) on 29.12.2010. More so, as the case is pending in appeal before your honour, the Valuation dossier sent by the
Dulari Devi Hetamsaria Dulari Devi Hetamsaria ITA No ITA No. 1290/Kol/2018 Assessment Year: Assessment Year:2008-09 valuation officer to this office is enclosed valuation officer to this office is enclosed hereby for your kind for your kind perusal and necessary further action.” necessary further action.”
It is implied that the purpose of the report is for enhancement of income. To take a plied that the purpose of the report is for enhancement of income. To take a plied that the purpose of the report is for enhancement of income. To take a decision in this regard clarification was sought by this office from the Assessing decision in this regard clarification was sought by this office from the Assessing decision in this regard clarification was sought by this office from the Assessing Officer regarding :- -
a) Extent of enhancement, Extent of enhancement, if any
b) Reasons
c) Copy of reasons recorded to make reference to DVO. Copy of reasons recorded to make reference to DVO.
In response, Assessing Officer reported as under: In response, Assessing Officer reported as under:-
“In the instant case, during the course of assessment proceedings for the A.Y. “In the instant case, during the course of assessment proceedings for the A.Y. “In the instant case, during the course of assessment proceedings for the A.Y. 2008-09 reference under section 142A/131 (d) of t 09 reference under section 142A/131 (d) of the Income Tax Act, 1961 to the he Income Tax Act, 1961 to the Divisional Valuation Officer, Kolkata has been made vide this office letter No. Divisional Valuation Officer, Kolkata has been made vide this office letter No. Divisional Valuation Officer, Kolkata has been made vide this office letter No. DCIT/Circle-3/Asansol/2010 3/Asansol/2010-ll/VO/534 dated 22.12.2010 to value the cost of ll/VO/534 dated 22.12.2010 to value the cost of construction of house building/show room (copy of the letter has alrea construction of house building/show room (copy of the letter has alrea construction of house building/show room (copy of the letter has already been sent).
The DVO has sent the dossier of valuation report of the properties to this office The DVO has sent the dossier of valuation report of the properties to this office The DVO has sent the dossier of valuation report of the properties to this office vide File No. 20/EE/Val/Ranchi/IT/2010 vide File No. 20/EE/Val/Ranchi/IT/2010-11 /203 dated 06.06.2011 after 11 /203 dated 06.06.2011 after completion of assessment under section 143 completion of assessment under section 143(3) of the Income Tax Act, 1961. A 3) of the Income Tax Act, 1961. A comparative chart showing value of the asset assessed by the DVO and declared chart showing value of the asset assessed by the DVO and declared chart showing value of the asset assessed by the DVO and declared by the assessee is tabled asunder: by the assessee is tabled asunder:-
Hence the difference amount of Rs. 10,03,095/ Hence the difference amount of Rs. 10,03,095/- is undisclosed investment of the is undisclosed investment of the assessee and assessment may be enhanced to that amount. assessee and assessment may be enhanced to that amount.
On verification of assessment record, no such recorded reasons before making tion of assessment record, no such recorded reasons before making tion of assessment record, no such recorded reasons before making reference to the DVO have been found.” reference to the DVO have been found.”
The above valuation report by the DVO shows that the appellant has invested an The above valuation report by the DVO shows that the appellant has invested an The above valuation report by the DVO shows that the appellant has invested an amount of Rs. 1,76,55,900/ amount of Rs. 1,76,55,900/- as reported by the DVO as against Rs. 1,66, as reported by the DVO as against Rs. 1,66,52,805/- shown by the appellant. Thus, there is an visible excess investment of Rs. shown by the appellant. Thus, there is an visible excess investment of Rs. shown by the appellant. Thus, there is an visible excess investment of Rs. 10,03,095/- made by the appellant, which has not been shown by the appellant in made by the appellant, which has not been shown by the appellant in made by the appellant, which has not been shown by the appellant in Page | 3
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09 his books of account. In view of this, I treat the amount of Rs. 10,03,095/- as unexplained investment u/s 69 of the I T Act and enhance the income of the appellant by Rs. 10,30,095/-. Hence appeal partly allowed.”
Aggrieved by the order of ld. CIT(A) the assessee is in appeal before us.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that as per DVO, the valuation of the property is at Rs. 1,76,55,900/- whereas as per the assessee, the value of said investment was shown at Rs. 1,66,52,805/-. The difference between the two figures is at Rs. 10,03,095/- (1,78,55,900 -1,66,52,805) that is less than Rs. 16,65,280/-, which is 10% of Rs. 1,66,52,805/-. The ld Counsel submitted before us that since the difference in valuation is below 10% therefore it should be ignored. We note that the variation between the value of DVO and value shown by the assessee is less than 10% and such variation in value may be ignored as held by the various Benches of the Tribunal.We rely on the judgment of Co-ordinate Bench of ITAT Kolkata in the case of Chandra Prakash Jhunjhunwala vs. DCIT in ITA No. 2351/Kol/2017 dated 09.08.2019 wherein the tribunal held as follows:
10.We note that now the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically. Hence the insertion of third proviso to section 50C must be given retrospective effect from the point of time when the related legal provision was introduced, as this amendment is procedural one to compute the value of property. At the cost of repetition, we again reproduce the third proviso to section 50C as follows: The following proviso shall be ins. by Finance Act, 2018 (w.e.f. 1-4-2019): Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. Page | 4
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09
We note that this third proviso relates to determination of value of property therefore it cannot be a substantive amendment. Normally substantive amendments in law in applicable prospective. In view of these discussions, as also for the detailed reasons set out earlier, it is a procedural amendment in law to help the assessee to determine the value or to compute the value of property hence this amendment is not to punish the assessee just because there is minor variation between stamp duty value and the sale consideration. We note that the statute such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, for that we rely on the judgment of the Hon`ble Supreme Court in the case of Alom Extrusions Ltd 185 Taxman 416 (SC) wherein it was held as follows: “8. On reading the above provisions, it becomes clear that the assessee(s)- employer(s) would be entitled to deduction only if the contribution stands credited on or before the due date given in the Provident Fund Act. However, the second proviso once again created further difficulties. In many of the companies, financial year ended on 31st March, which did not coincide with the accounting period of R.P.F.C. For example, in many cases, the time to make contribution to R.P.F.C. ended after due date for filing of returns. Therefore, the industry once again made representation to the Ministry of Finance and, taking cognizance of this difficulty, the Parliament inserted one more amendment vide Finance Act, 2003, which, as stated above, came into force with effect from 1-4-2004. In other words, after 1-4-2004, two changes were made, namely, deletion of the second proviso and further amendment in the first proviso, quoted above. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that Finance Act, 2003, was amendatory and it applied prospectively, particularly when the Parliament had expressly made the Finance Act, 2003, applicable only with effect from 1-4-2004. It was also argued on behalf of the Department that even between 1-4-1988 and 1-4-2004, Parliament had maintained a clear dichotomy between payment of tax, duty, cess or fee on one hand and payment of contributions to the welfare funds on the other. According to the Department, that dichotomy continued up to 1-4-2004, hence, looking to this aspect, the Parliament consciously kept that dichotomy alive up to 1-4-2004, by making Finance Act, 2003, come into force only with effect from 1-4-2004. Hence, according to the Department, Finance Act, 2003 should be read as amendatory and not as curative [retrospective] with effect from 1-4-1988. 9. We find no merit in these civil appeals filed by the Department for the following reasons: firstly, as stated above, section 43B [main section], which stood inserted by Finance Act, 1983, with effect from 1-4-1984, expressly commences with a non obstante clause, the underlying object being to disallow deductions claimed merely by making a Book entry based on Mercantile System of Accounting. At the same time, section 43B [main section] made it mandatory for the Department to Page | 5
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09 grant deduction in computing the income under section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act [octroi] and other Tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the Return under the Income-tax Act [due date], the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under Social Welfare legislations by delaying payment of contributions to the welfare funds. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1-4-2004, would become curative in nature, hence, it would apply retrospectively with effect from 1-4- 1988. Secondly, it may be noted that, in the case of Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677(SC), the scheme of section 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under section 43B of the Act while computing the business income of the previous year? That was a case which related to assessment year 1984-85. The relevant accounting period ended on 30-6-1983. The Income-tax Officer disallowed the deduction claimed by the assessee which was on account of sales tax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under section 43B which, as stated above, was inserted with effect from 1-4-1984. It is also relevant to note that the first proviso which came into force with effect from 1-4-1988 was not on the statute book when the assessments were made in the case of Allied Motors (P.) Ltd. (supra). However, the assessee contended that even though the first proviso came to be inserted with effect from 1-4-1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1-4-1984, when section 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P.) Ltd.'s case (supra). This Court, in Allied Motors (P.) Ltd.'s case (supra) held that, when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P.) Ltd.'s case (supra), held that the first proviso was curative in nature, hence, retrospective in operation with effect from 1-4-1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgment in Allied Motors Page | 6
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09 (P.) Ltd.'s case (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively with effect from 1-4-1988 [when the first proviso stood inserted]. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example - in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March [end of accounting year] but before filing of the returns under the Income-tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right up to 1-4-2004, and who pays the contribution after 1-4-2004, would get the benefit of deduction under section 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1-4-1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1-4-2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003.
Before concluding, we extract hereinbelow the relevant observations of this Court in the case of CIT v. J.H. Gotla[1985] 156 ITR 323, which reads as under: "...We should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction...." (p. 339) For the afore-stated reasons, we hold that Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate with effect from 1-4-1988 [when the first proviso came to be inserted]. For the above reasons, we find no merit in this batch of civil appeals filed by the Department which are hereby dismissed with no order as to costs.”
Similarly, the Hon`ble Supreme Court in the case of Allied Moters (P) Ltd, 91 Taxman 205 (SC) held as follows: “A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09 interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. Accordingly, the sales-tax collected by the assessee collected in the last quarter of the relevant previous year and paid after the end of the previous year but within the time allowed under the relevant sales-tax law could not be disallowed under section 43B, while computing the business income of the said previous year.”
We note that the Coordinate Bench of ITAT Mumbai, in the case of M/s John Flower ( India) Pvt. Ltd, in ITA No.7545/Mum/2014, for A.Y. 2010-11, order dated 25.01.2017 held that if the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%, the same should be ignored and no adjustments shall be made. Accordingly, we hold that the insertion of third proviso (noted above) to Section 50C of the Act is declaratory and curative in nature. That is, the third proviso to Section 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the Coordinate Benches of the ITAT used to ignore the variation up to 10%, therefore, the said amendment should be retrospective. Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to Section50C should be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which Section 50C was introduced. We note that Finance Act, 2018, w.e.f. 01.04.2019 provided that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than 5% of the sale consideration. In the assessee’s case under consideration, the stamp duty valuation is Rs. 3,27,01,950/- and sale consideration is Rs. 3,15,00,000/-. The difference of Rs. 12,01,950/- is not more than 5% of the sale consideration. That is, it is at 3.81% [12,01,950 / 3,15,00,000 x 100] of sale consideration, therefore, we delete the addition of Rs. 12,01,950/-.
We note that valuation officer valued the building (asset) at Rs. 1,76,55,900/- whereas assessee had shown in her books of accounts at Rs. 1,66,52,805/- the difference of these two figures is at Rs. 10,03,095/- (1,76,55,900 – 1,66,52,805). The said difference of Rs. 10,03,095/- is less than 10% of the valuation shown by the assessee, that is, at Rs. 16,65,280 (10% of Rs. 2,66,52,805/-). The said variation or difference may arise because of various factors and therefore co- ordination bench in the case of Chandra Prakash Jhunjhunwala (supra) took the view that such minor difference should be ignored and no addition should be made on account of such minor variations. We note that the variation in valuation shown
Dulari Devi Hetamsaria ITA No. 1290/Kol/2018 Assessment Year:2008-09 by DVO and the valuation made by the assessee does not exceed 10% hence relying on the judgment of Co-ordinate Bench(supra), on the identical issue, as noted above, we delete the addition of Rs. 10,03,035/-.
Before parting, it is noted that the order is being pronounced after 90 days of hearing. However, taking note of the extraordinary situation in the light of the Covid-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Co- ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JCB Limited in ITA No. 6264/Mum/2018 and ITA No. 6103/Mum/2018 for A.Y. 2013-14 order dated 14.05.2020.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 12.06.2020
Sd/- Sd/- (S.S.GODARA) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER
कोलकाता /Kolkata; �दनांक/ Date: 12/06/2020 (SB, Sr.PS) Copy of the order forwarded to: 1. Dulari Devi Hetamsaria (L/H of Late Shyam Sundar Hetamsaria) 2. ACIT, Circle-2, Asansol 3. C.I.T(A)- 4. C.I.T.- Kolkata. 5. CIT(DR), KolkataBenches, Kolkata. 6. Guard File.