INDUPRASAD CHUNIBHAI PATEL VS CENTRAL BOARD OF DIRECT TAXES AND OTHERS
1993 P T D 1078
[200 I T R 688]
[Gujarat High Court (India)]
Before R.C Mankand Actg., CJ. and S.D. Shah, J
INDUPRASAD CHUNIBHAI PATEL
Versus
CENTRAL BOARD OF DIRECT TAXES and others
Spl. C.A. No.2938 of 1991, decided on 07/10/1991.
(a) Wealth tax---
----Valuers---Registration of valuers---Powers of Chief Commissioner ---Quasi -judicial powers---Condition that person should have practised as Civil Engineer for not less than ten years---Not necessary that experience should be immediately before the application for registration---Discontinuance of practice for a few years---Not relevant---Condition imposed by CBDT that person's professional receipts should not have been less than fifty thousand rupees during the past five years---Condition not valid---Indian Wealth Tax Act, 1957, Ch. VIIB. Ss.10 & 34AB ---Constitution of India, Art.226.
Section 10 of the Indian Wealth Tax Act, 1957, empowers the Central Board of Direct Taxes to issue instructions to subordinate authorities. This provision is in pari materia with section 119 of the Income Tax Act, 1961. The Board is not competent to give directions regarding the exercise of judicial power by the subordinates. There are three requisites, each of which must be fulfilled in order that the act of a body may be a quasi-judicial act, namely, the body of persons (1) must have legal authority, (2) to determine questions affecting the rights of parties, and (3) must have the duty to act judicially. Applying this test it must be held that the Chief Commissioner, while considering the application of a person for registration as a valuer, discharges a qausi-judicial function. The Chief Commissioner has legal authority to render a decision on the application. His decision is likely to affect the right of the applicant to practise as a valuer registered under the wealth Tax. The Chief commissioner is also required to act judicially.
Chapter VIIB of the Wealth Tax Act deals with registered valuers. An assessee is entitled to appear before the Wealth Tax Authorities or the Appellate Tribunal by a registered valuer in connection with any matter relating to valuation of any asset. Section 34AB of the Wealth Tax Act, 1957, provides for registration of valuers and subsection (2) thereof lays down that, any person, who possesses the qualifications prescribed in this behalf may apply to the Chief Commissioner or Director-General in the, prescribed form for being registered as a valuer under that section.
(h) Wealth tax---
----Central Board of Revenue---Powers of---Right to issue directions to subordinate authorities ---C.B.R. cannot give directions interfering with the exercise of quasi-judicial powers of the Chief Commissioner---Indian Wealth "Tax Act, 1957, S.10---Constitution of India, Art.226.
The Central Board of Direct Taxes is not competent to give directions regarding the exercise of judicial power by the Chief Commissioner of Income tax. In other words, it could not have issued instructions directing that persons whose income was less than Rs.50,000 per annum in any of the three years during the last five years could not be considered to be possessing sufficient experience within the meaning of Rule 8A(2)(ii)(B) of the Wealth Tax Rules, 1957. It is for the Chief Commissioner to decide on merits, whether or not an applicant possessed sufficient experience within the, meaning of the rule. It is important to note that what Rule 8A(2)(ii)(B) requires is that, a person possessing the requisite educational qualification, who seeks registration as a valuer must have. teen in practice as a consulting engineer, surveyor or architect for a period of not less than ten years. This rule, however, does not lay down that such experience of ten years must be next before the date of application. Even if a person has ceased to practise as a civil engineer for a few years, his application cannot be rejected on that ground, if he had in fact practised as a consulting civil engineer for not less than ten years.
J. K. Synthetics Ltd. v. CBDT (1972) 83 ITR 335 (SC); Radeshyam khare v. State of M.P. (1959) AIR 1959 SC 107 and Rex v. Electricity commissioner (1924) 1 KB 171 ref;
Jayant Patel for Petitioner.
M.J. Thakore instructed by M.R. Bhatt of M/s. R.P. Bhatt & Co. for Respondents.
JUDGMENT
R.C. MANKAD, ACTG. C.J:---The petitioner who is a civil engineer has filed this petition challenging the decisions of the Chief Commissioner of Income-tax, Ahmedabad, and the Central Board of Direct Taxes, which are at Annexures "A" and "B", respectively, refusing to grant registration to him under section 34AB of the Wealth Tax Act, 1957 ("the Act" for short).
The petitioner passed the B.E. (Civil) examination in the year, 1964. The petitioner started his independent private practice as a civil engineer in 1972, and he was granted registration as valuer under the Wealth Tax Act, on January 6, 1976. Section 34AE was inserted in the Wealth Tax Act, by the Finance Act, 1988, and under the said provision, every person whose name was included in the Register of Valuers, immediately before June 1, 1988, if the intended to continue to be registered under the Act, was required to make an application under subsection (2) of section 34AB within a period of three months from that date, for being registered afresh as a valuer under Chapter VIIB of the Act. The petitioner did not apply for continuing his registration as a valuer under section 34AE within the prescribed time limit. He, however, made an application Annexure `D' dated July 9, 1990, for renewal of his registration as a valuer or in the alternative, to grant him fresh registration as a valuer. The Chief Commissioner of Income-tax, Ahmedabad, however, by his communication Annexure `A' dated December 19, 1990, informed the petitioner that his application for renewal of registration, which was not made within three months from June 1, 1988, could not be entertained. The petitioner was further informed that since he had not carried out any professional activities during the past 3 to 4 years, his case could not be considered under rule 8A(2) of the Wealth Tax Rules ("the Rules" for short). In other words, the Chief Commissioner of Income-tax, refused to register the petitioner as a valuer. The petitioner thereupon made a representation to the Central Board of Direct Taxes, New Delhi ("the Board" for short). The Board, however, by its communication, Annexure `B' dated March 19, 1991, refused to grant the petitioner's request to grant him registration as a valuer. The petitioner has, therefore, approached this Court by way of this petition, challenging the Chief Commissioner's order Annexure `A' and the order of the Board, Annexure `B'
Chapter VIIB of the Act deals with registered valuers. An assessee is entitled to appear before tile wealth-tax authorities or the Appellate Tribunal by a registered valuer m connection with any matter relating to valuation of any asset. Section 34AB provides for registration of valuers and subsection (2) thereof lays down that any person who possesses the qualifications prescribed m this behalf may apply to the Chief Commissioner or Director-General in the prescribed form for being registered .as a value under that section. Section 34AE, which was inserted in the Act with effect from June 1, 1988, provides that every person whose name is included in the Register of Valuers immediately before June 1, 1988, shall, if he intends to continue to be registered under the Act, make an application under subsection (2) of section 34AB within a period of three months from that date, for being registered afresh as a valuer under Chapter VIIB. It is not necessary to consider this provision in detail since it was stated by learned counsel for the petitioner that the petitioner does not press his claim for renewal of registration under section 34AE. Rule 8A of the Rules prescribes qualifications of registered valuers. Rule 8A(2)(ii)(B) is relevant for our purpose and it reads as follows:
"8A. (2) A valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries) shall have the following qualifications, namely:--- .....
(B) he must have been in practice as a consulting engineer, surveyor or architect for a period of not less than ten years and must have, in the opinion of the Board, acquired sufficient experience in any of the following fields:
(a) valuation of buildings and urban lands;
(b) quantity surveying in building construction:
(c) architectural or structural designing of buildings or town planning; or
(d) construction of buildings or development of land."
In the reply filed on behalf of the respondents, it is submitted that, in order to enable formation of opinion whether a person who has made an application for registration as a valuer has acquired sufficient experience within the meaning of rule 8A(2)(ii)(B), the Board has prescribed the following criterion under its letter F. No.326/282/88-OT, dated December 21, 1988 (Instruction No. 1802) read with its letter F.No.325/282/880-OT, dated January 10, 1989:
"The gross receipts as consulting engineer, surveyor or architect, for the purpose of Rule 8A(2)(ii)(B) in any three out of the last five years in which the applicant has been in practice should not be less than Rs.50,000 per annum. In case the applicant is a partner of firm, the proportionate share of the gross receipts should not be less than this figure."
It is not disputed that the Chief Commissioner is competent to grant registration to a person as a valuer. It is submitted that the petitioner's application for continuing his registration or granting him registration afresh under section 34AE(1) could not be entertained as it was not made within the prescribed time. As already stated above, the petitioner is not claiming registration under section 34AE(1) of the Act. It is stated that, in his report made to the Chief Commissioner of Income-tax, the Wealth Tax Officer has stated that:---
"(1)The petitioner has not filed any returns of income or wealth so far, as he has-no taxable income/wealth.
(2)he has started his professional practice in his individual capacity recently.
(3)The professional receipts are below Rs.50,000 during the last five years.
(4)The, conditions laid down as per section 34AE(1) are not fulfilled."
It appears that relying on this report of the Income-tax Officer, the 'Chief Commissioner of Income-tax refused to grant registration as valuer to the petitioner. The petitioner's application for registration has been rejected mainly on two grounds, namely:
(1)that he has restarted his professional practice only recently; and
(2)his professional receipts were below Rs.50,000 during the last five years.
It is not disputed that the petitioner's experience as an engineer was not considered sufficient on the ground that his practice has been less than Rs.50,000 per annum in the last five years, in view of the instructions given by the Board, as referred to above.
There is no dispute that the petitioner does possess the educational qualification, which would entitle him to registration as a valuer under the Act read with the relevant Rules. The only ground on which he is refused registration is that, his income from profession of civil engineer is less than Rs.50,000 per annum in the last five years before the date of the application and that, he has started his practice as a civil engineer only in the recent past before the application. Now, as pointed out above, the petitioner acquired the requisite qualification of B.E. (Civil) in the year 1964. He started independent practice as consulting civil engineer in 1972 and he was granted registration as valuer under the Act on January 6, 1976. It is not disputed by the petitioner that, in the last few years before he made the application for registration, he was not exclusively attending to his profession as a civil engineer as he had also to look after his estate, including cultivation of agricultural lands. It is, however, his case that he had not totally given up his practice as civil engineer and, therefore, it is not correct to say that he had started his practice as civil engineer again only in the recent past before the made the application. The petitioner, however, does not deny that his gross professional income as consulting civil engineer was less than Rs.50,000 per annum during the last five years just before the date of the application. The question, however, is whether the Board should have issued the instruction adverted to above directing that, while considering the sufficiency of experience, the applicant's income should not be less than Rs.50,000 per annum in any three years out of the last five years. If the Board does not have power to give such instruction, the orders passed by the Chief Commissioner and the Board shall have to be set aside since it is not disputed that it is mainly on the ground of the application of the criterion of income that the petitioner's application for registration as valuer has been rejected.
Section 10 of the Act empowers the Board to issue instructions to subordinate authorities. This provision which is in pari materia with section 119 of the Income Tax Act, 1961, reads as follows:
"10. (1) The Board may, from time to time, issue such orders, instructions and directions to other wealth-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:
Provided that no such orders, instructions or directions shall be issued---
(a)so as to require any wealth-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or
(b)so as to interfere with the discretion of the Deputy Commissioner (Appeals) or Commissioner (Appeals) in exercise of his appellate functions,
(2)Without prejudice to the generality of the foregoing power,---
(a)the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue from time to time (whether by way of relaxation of any of the provisions of sections 14, 15, 16, 17, 17B, 18 and 35 or otherwise), general or special orders iii respect of any class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other wealth-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if: the Board is of the opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information:
(b)the Board may, if it considers .it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order authorise any wealth-tax authority, not being a Deputy Commissioner (Appeals) or Commissioner (Appeals), to admit and application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law."
Section 119 of the Income-tax Act, came up for consideration before the Supreme Court in J.K. Synthetics Ltd. v. Central Board of Direct Taxes (1972) 83 ITR 335. The Supreme Court held that the Board is not competent to give directions regarding the exercise of any judicial power by the subordinates. In the case before the Supreme Court, the question was as to the year in which the undertaking in question began to manufacture or produce articles within the meaning of section 80J of the Income-tax Act. In this connection, the Board issued communications. The Supreme Court observed that the opinion expressed in those communications pertained to exercise of judicial powers. by the taxing authorities. as it is for those authorities to determine as to the year in which the undertaking began to "manufacture or produce articles" within the meaning of section 80J of the Income Tax Act. Such communications, it was held, cannot bind the taxing authorities who have to decide the question in issue on its own merits, uninfluenced by extraneous considerations.
In Radeshyam Khare v. State of Madhya Pradesh, AIR 1959 SC 107, the. Supreme Court quoted, with approval, the following celebrated definition of a quasi-judicial body given by Atkin L.J., as he then was, in Rex v. Electricity Commissioners (1924) 1 KB 171 (at page 116 of AIR 1959 SC):
"Whenever any body of persons having legal authority to determine questions affecting rights of subjects, and having the duty to act judicially acts in excess of their legal authority, they are subject to the controlling jurisdiction of the King's Bench Division exercised in these writs."
The Supreme Court observed that this definition insists on three requisites each of which must be fulfilled in order that the act of the body may be a quasi-judicial act, namely, that the body of persons (1) must have legal authority, (2) to determine questions affecting the rights of parties, and (3) must have the due to act judicially.
Now, applying the test laid down by the Supreme Court, it must be held that the Chief Commissioner, while considering the application of the petitioner for registration as a valuer, was discharging a quasi-judicial function. The Chief Commissioner had legal authority to render a decision on the application of the petitioner and his decision obviously was likely to affect the right of the petitioner to practise as a valuer registered under the Act. The Chief Commissioner of Income-tax was also required to act judicially. The test laid down by the Supreme Court is fully satisfied in the instant case. Therefore, as laid down by the Supreme Court in the case of J.K. Synthetics (1972) 83 ITR 335, the Board was not competent to give directions regarding the exercise of judicial power by the Chief Commissioner of Income-tax. In other words, it could not have issued instructions directing that persons whose income was less than Rs.50,000 per annum in any of the three years during the last five years could not be considered to be possessing sufficient experience within the meaning or rule 8A(2)(ii)(B). It was for the Chief Commissioner of Income tax to decide on merits whether or not the petitioner possessed sufficient experience within the meaning of rule 8A(2)(ii)(B). It, however, appears that the Chief Commissioner of Income-tax has, while rejecting the application of the petitioner, been guided by the aforesaid instruction given by the Board. It is also important to note that what rule 8A(2)(ii)(B) requires is that a person possessing the requisite educational qualification, and seeks registration as a valuer must have been in practice as a consulting engineer, surveyor or architect for a period of not less than ten years. This rule, however, does not lay down that ouch experience of ten years must be next before the date of application. In the instant case, it may be that the petitioner did not practise as a civil engineer for some years; but for that reason, it could not be said that he did not have practice of ten years as required by rule 8A(2)(ii)(B). The petitioner, no doubt, has contended that he had never ceased to practise as a civil engineer. But even assuming for the sake of argument that he had ceased to practise as a civil engineer for a few years, his application cannot be rejected on that ground, if he had in fact practised as a consulting civil engineer for not less than ten years.
In the light of the above discussion, it must be held that the orders passed by the Chief Commissioner of Income-tax and the Board are illegal and deserve to be set aside. In the result, this petition is allowed. The orders of the Chief Commissioner at Annexure `A' and the order of the Board at Annexure `B' are quashed and set aside and the Chief Commissioner of Income-tax is directed to consider the petitioner's application for registration as valuer afresh on the merits, in the light of the observations made above. Rule made absolute accordingly with no order as to costs.
M.BA./2308/TOrder accordingly.