ITA No.57 of 2005 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No.57 of 2005 Date of decision: 27.1.2011 The Commissioner of Income Tax, Karnal -----Appellant Vs. Shri Ramesh Chaudhary ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Yogesh Putney, Sr.Standing Counsel and Mr. Krishan K.Mehta, Advocate for the revenue. Mr. Pankaj Jain, Mr. D.K.Goyal, Mr. Permil K.Goel, Mr. Avneesh Jhingan, Advocate for the respondents in all the cases. Adarsh Kumar Goel,J. 1. This order will dispose of ITA Nos. 316, 368, 370 of 2004, 57 to 60 of 2005, 38, 95 of 2005, 355 and 482 of 2006 as it has been stated by learned counsel for the parties that all the appeals involve common question of law of applicability of section 142A of the Income Tax Act, 1961 (for short, ‘the Act). 2. ITA No.57 of 2005 has been filed under section 260A of the Act against order dated 19.5.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench (B), Chandigarh (in short, “the Tribunal”) passed in ITA No.555/Chandi/2003 for the assessment year 1999-2000. 3. The assessee constructed a house building and declared investment made in the construction. The Assessing Officer did not accept the same and sought the opinion of the District Valuation Officer under section 131(1)(d) of the Act. According to him, there was undervaluation and real value was much higher. The Assessing Officer made addition on that basis. On appeal, the said valuation was sustained but on further appeal, the valuation was set aside following the law laid down by the Hon’ble Supreme Court in Smt.Amiya Bala Paul v. CIT, (2003) 262 ITR 407. The order of the Tribunal is dated 19.5.2004 and did not take into account amendment to the Act by way of Section 142A vide Finance Act, 2004 which was retrospective with effect from 15.4.1972. By the said amendment, 1 ITA No.57 of 2005 contrary to the view taken in Smt.Amiya Bala Paul, it was provided that the Assessing officer could require Valuation Officer to make estimate of value of investment and report the same to him and after giving opportunity of being heard to the assessee, such report could be taken into account. However, Proviso to the said provision is as under:- “Provided that nothing contained in this section shall apply in respect of an assessment made on or before 30th Sept.2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A.” 4. Under the proviso, applicability of the provision was excluded to assessments made on or before September 30, 2004 which had become final and conclusive except where reassessment was required to be made as per section 153A. In the appeal, following substantial questions of law have been claimed:- “i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the case is squarely covered in favour of assessee by the judgment of Hon’ble Supreme Court in the case of Smt.Amiya Bala Paul v. CIT (2003) 262 ITR 407 (SC) especially when the reference with regard to the construction of house building was made to the Valuation Officer under section 131 (1) (d) and not under section 55A of the Income Tax Act, 1961 and also newly added provisions of Section 142A in the Income Tax Act, 1961? ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in deleting the addition of Rs.28,557/- made on account of difference in cost of construction shown and that determined by the AO? 5. Learned counsel for the revenue submitted that Section 142A being retrospective from 15.4.1972 applied for the assessment year in question and the Assessing Officer was justified in acting upon a valuation report and the Tribunal has based its decision on judgment in Smt.Amiya Bala Paul which decision has 2 ITA No.57 of 2005 been superseded by the amendment. The proviso was not applicable as the assessment had not become final and conclusive in view of pendency of appeal in this Court. Reliance has been placed on judgment of Madhya Pradesh High Court in CIT v. Omparkash Bagria (HUF), (2006) 287 ITR 523, wherein it was held that pendency of appeal under section 260A of the Act before High Court would exclude the applicability of the proviso. Appeal was continuation of assessment proceedings as held in Garikapati v. Subbiah Choudhry, AIR 1957 SC 540, Siemens India Limited v. State of Maharashtra (1986) 62 STC 40 (Bom) and CIT v. Bengal Card Board Industries and Printers(P) Limited, (1989) 176 ITR 193 (Cal). 6. Learned counsel for the assessee submits that proviso was applicable as pendency of appeal in this court did not affect the finality of proceedings as appeal to this Court was only on a substantial question of law which should be seen independently of the amending provision. Reliance has been placed on following judgments:- i) CIT v. Smt.Shashi Agarwal, (2007) 210 CTR (All) 205; ii) CIT v. Sudhish Kumar, (2005) 276 ITR 563 (Del) iii) CIT v. Naveen Gera, (2010) 328 ITR 516 (Del) iv) CIT v. Krishan Lal Dua, (2005) 277 ITR 477 (P&H) v) CIT (Central) Ludhiana v. Nabha Solvex (P) Limited, ITR No.48 of 1994, decided on 7.7.2010 (P&H). vi) Income Tax Officer and others v. Kajaria Investment and Properties P.Limited, (2008) 297 ITR 45 (Cal). 7. Thus, the question for consideration is whether proviso would apply when before September 30, 2004, appeal under section 260A was pending in the High Court. 8. We are of the view that pendency of appeal in this Court under section 260A would exclude the applicability of the proviso. The proviso can apply only if assessment has become final and conclusive before September 30, 2004. If appeal is pending in this Court, it cannot be said that the assessment had become 3 ITA No.57 of 2005 final and conclusive. Apart from the fact that appeal is continuation of the proceedings as held by the Madhya Pradesh High Court, section 254(4) specifically provides that finality to the order of the Tribunal will be only subject to Section 256 or 260A. In the judgments relied upon on behalf of the assessee except in Smt.Shashi Agarwal, there is no discussion on the issue whether inspite of pendency of an appeal under section 260A on the cut off date, the proviso will apply. In Nabha Solvex, Section 254(4) was not considered and the matter was considered on a reference. In Smt. Shashi Agarwal, the Allahabad High Court held that pendency of appeal in the High Court under Section 260A of the Act will not affect finality of the assessment as appeal under Section 260A was only on a substantial question of law and was not continuation of assessment proceedings. We respectfully disagree with the said view and agree with the view taken by the Madhya Pradesh High Court holding that appeal under section 260A is also continuation of proceedings. As already observed, Section 254(4) specifically provides that finality of order of the Tribunal is subject to appeal under section 260A of the Act. 9. In view of above, we answer the questions raised in favour of the revenue and against the assessee. 10. Since the Tribunal has not considered the merits of the valuation report, the matters are remitted to the Tribunal for fresh decision in accordance with law. 11. The appeals are disposed of. (Adarsh Kumar Goel) Judge January 27, 2011 (Ajay Kumar Mittal) ‘gs’ Judge 4