Hon'ble Kaushal Jayendra Thaker,J.
(Delivered by Hon'ble Sudhir Agarwal,J)
1. We have heard Shri Shubham Agrawal, learned counsel for the appellant and Shri S.D.Singh, learned Senior Counsel for respondent.
2. These appeals under section 27-A of Wealth Tax Act, 1957 (hereinafter referred to as 'Act, 1957') have arisen from judgment and orders dated passed by Income Tax Appellate Tribunal Lucknow Bench, Lucknow (hereinafter referred to as 'Tribunal').
3. WTA Nos.68 of 2007, 206 of 2012, 579 of 2011, 204 of 2012, 576 of 2011, 575 of 2011, 578 of 2011, 205 of 2012 were admitted on following two substantial questions of law:
"(i) Whether ITAT were justified in holding that certain provisions of building bye laws framed by J.D.A in Jan, 1996 were to apply retrospectively for Wealth Tax assessment on valuation date 31.3.1987.
(ii) Whether ITAT were justified in holding that a certain provision of bye laws of J.D.A of Jan, 1996 were to apply in the case of Assessee when this bye laws has itself excluded case of properties like that of Assessee where construction according to sanctioned plan has already been made."
4. In remaining appeals, i.e W.T.A Nos. 292 of 2012, 295 of 2012, 294 of 2012, 241 of 2012, 169 of 2005, 395 of 2012 and 194 of 2006 substantial questions of law are similar above questions but differently worded and read as under:
"1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that since the regulations of J.D.A were to be operative retrospectively, the assessee was justified in claiming that in view of the Explanation to Rule 6 read with the relevant J.D.A Regulation, the specified area was to be worked out and as such Rule 8(b) read with Rule 20 shall not be applicable?
2. Whether on the facts and in the circumstances of the case, the view taken by the Income Tax Appellate Tribunal that by virtue of Explanation to Rule 6 of the Schedule III of the Wealth Tax Act, 1957 being applicable retrospectively, the Notification GSR-29 dated 25.06.1996 issued by the Jaipur Development Authority will also have retrospective effect, is correct in law?"
5. The above appeals relate to different assessment years. Details of appeals, relevant assessment years, date of Tribunal's judgment and appeal details in Tribunal, are as under:
S.N.
Wealth Tax Appeal no.
Assessment year Date of order of Tribunal Wealth Tax Appeal no. before Tribunal 1 68 of 2007 1987-88 29.11.2001 37/Alld/2000 2 575 of 2011 1988-89 06.07.2004 14/Luc/2002 3 292 of 2012 1989-90 06.07.2004 29/Luc/2002 4 576 of 2011 1990-91 06.07.2004 22/Luc/2002 5 205 of 2012 1991-92 06.07.2004 23/Luc/2002 6 295 of 2012 1992-93 06.07.2004 24/Luc/2002 7 578 of 2011 1993-94 06.07.2004 25/Luc/2002 8 294 of 2012 1994-95 06.07.2004 26/Luc/2002 9 204 of 2012 1995-96 06.07.2004 27/Luc/2002 10 579 of 2011 1996-97 06.07.2004 28/Luc/2002 11 241 of 2012 1997-98 06.09.2004 16/Luc/2000 12 206 of 2012 1998-99 06.07.2004 15/Luc/2002 13 169 of 2005 1999-2000 06.07.2004 30/Luc/2005 14 194 of 2006 2000-01 06.11.2005 03/Luc/2002 15 395 of 2012 2001-02 06.11.2005 04/Luc/2005
6. Assessee, (late) Shri Padampat Singhania, through legal heir Dr.Gaur Hari Singhania, (hereinafter referred to as 'Assessee'), is owner of 'Jaipur House' at Jaipur. From the record and in particular, para 5.2 of the assessment order dated 31.3.1999, passed in relation to assessment year 1987-88, it is evident that the house in question was constructed much before August 1964, since it was the case set up on behalf of Assessee that the disputed property was leased out to a company and in this regard minutes dated 28.8.1964 were relied. Hence construction of house is very old and at least in 1964 it was in existence. Thereafter, there was any addition/alteration in the house with respect to the constructed area or otherwise, nothing has been placed on record. The aforesaid house spread over a land measuring 28,824.02 Sq.Mtr. The covered area is 1400 Sq.Mtr and unbuilt area is 27,424 Sq.Mtr.
7. For the assessment year 1987-88, legal heir of Assessee filed return of Wealth Tax on 16.7.1997 declaring total net wealth at Rs.2,62,180/-. The return did not include value of Jaipur House (hereinafter referred to as 'disputed property'). The Assessment was completed under section 16(3) of Act, 1957 vide Assessment order dated 30.09.1988 at Rs. 3,00,700/-
8. Assessing Officer (hereinafter referred to as 'A.O.') subsequently received information that in Wealth Tax return, value of disputed property was not disclosed. Notices were issued to family members to ascertain ownership of the said house. Assessee thereafter suo-motu filed revised return of Wealth Tax, dated 26.3.1998, wherein disputed property was included in the net wealth of Assessee. A.O treated this "revised return" as nonest since regular proceedings were already completed. Consequently notice u/s 17 of Act, 1957 was issued in reply whereto Assessee submitted that "revised return" filed on 26.3.1998 itself be treated as reply in response to the said notice. In the revised return of Wealth Tax, Assessee had shown value of disputed property at Rs. 26,77,995/-, based upon valuation report of M/s S.K. Ahuja and Associates.
9. A.O. being not satisfied, made reference to District Valuation Officer (hereinafter referred to as 'D.V.O.') u/s 16A of Act, 1957 who estimated value of disputed property at Rs.5,82,09,605/-.
10. Assessee filed objection to valuation report of D.V.O and also contended that, valuation should be made in accordance with rule 3 of Act, 1957, D.V.O. has not considered the fact that disputed property was located in Eco friendly area:, and that, it was also not justified in calculating difference between specified area and unbuilt area.
11. Assessee's objections were rejected and A.O., accepting report of D.V.O., determined value of disputed property at Rs. 5,82,09,605/-. Assessee preferred appeals before Commissioner, Wealth Tax (Appeals) [hereinafter referred to as ''CWT(A)'] who partly upheld valuation made by D.V.O., taking appreciation of land rate by 9% from June 1986 to March 1987 and 20% for its existence at a prime location and point. He however did not approve 10% appreciation for wider road taken separately as it was already included in 20% for its location on a prime point. Similarly 5 % for low encumbrance was also disapproved. Thus CWT(A) partly allowed appeal, directing 15% reduction of value of land, granting relief of Rs. 6398932/- to Assessee, hence, reduced value of disputed property to Rs.50586155/-.
12. Assessee then preferred appeals before Tribunal which have been allowed. Tribunal held that A.O. did not make reference to D.V.O. in accordance with relevant statutory provisions . It also held that valuation of house was not correctly done. On all the grounds, Tribunal took a view in favour of Assessee and appeals were allowed. Similar reasoning of earlier judgments were followed in later orders of Tribunal. In brief, grounds on which Tribunal decided appeals in favour of Assessee, are as under:
1. No proper reference was made by A.O. to D.V.O. in accordance with relevant statutory provisions.
2. Jaipur Development Authority Regulation 1996 (Jaipur Region Building) (hereinafter referred to as ''Regulations, 1996') would constitute part of schedule III for the purpose of assessment and would have to be considered for assessment of value of disputed property.
3. Regulations, 1996 would operate retrospectively, thus apply from assessment year 1987-88 and "Specified Area" has to be worked out as per aforesaid Regulations read with Rule 6, Schedule III of Act, 1957.
13. Tribunal also said that in view of answers to the aforesaid grounds, a fourth ground that CWT(A) was not justified in upholding increase of value of land in dispute by 29% was not necessary for decision.
14. Counsel for appellant contended that Regulations, 1996, came into force on 25.6.1996/28.6.1996, will have no application for valuation of disputed property on the date i.e. 31.3.1987. The said Regulations, 1996 would have no application to a period prior to its enactment. He also said that purpose of Regulations, 1996 was to regulate future construction and not for assessment of existing one, which was already raised/existed. At that time there was no occasion to raise construction in conformity with Regulations, 1996.
15. Learned counsel for respondent on the contrary sought to advance his submissions to support the view taken by Tribunal and we shall discuss the same in detail while considering issues on merits.
16. Tribunal has held that in view of Rule 6 Explanation (b) (iii), Proviso, to Schedule III of Act, 1957, since a minimum area is required to be kept open and it being "any law for the time being in force" shall prevail over "specified area" mentioned in Rule 6 Explanation (b) (iii) of Schedule III of Act, 1957. Moreover Regulations, 1996 being a procedural statute, will have to be read retrospectively for the purpose of determining market value, the said Regulations have to be read with Rule 6 Explanation (b) (iii) of Schedule III to ascertain "Specified Area".
17. Substantial questions of law basically involve interpretation and application of provisions relating to assessment/valuation of an asset for the purpose of Wealth Tax and also whether the words "law for the time being in force" used in Rule 6 Explanation (b) (iii) proviso would cover Regulations 1996 so as to make the same applicable retrospectively as it is a procedural statue or Regulations, 1996 have some different kind of application.
18. It is not in dispute that in the regular returns filed, there was no disclosure of disputed property and only when a notice under section 17 was issued, Assessee filed a revised return wherein value of disputed property as per his own estimate was included. Section 17 as it was applicable before 1.4.1989 reads as under:
"(1) If the Assessing Officer ─
(a) has reason to believe that by reason of the omission or failure on the part of any person to make a return under section 14 of his net wealth or the net wealth of any other person in respect of which he is assessable under this Act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under assessment or assessment at too low a rate or otherwise : or
(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of underassessment or assessment at too low a rate or otherwise, he may, in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice has issued under that sub - section."
(emphasis added)
19. Section 17(1) provide that A.O, if has reason to believe that true and full material facts necessary for assessment of net wealth of Assessee for any assessment year etc. have not been disclosed, he will be required to provide such material facts and then A.O. would proceed for assessment or re-assessment for such net wealth. In the present case, this net wealth which according to A.O. has escaped assessment or in respect whereof material facts were not disclosed consisted of disputed property. Hence, its value had to be assessed. For the purpose of assessment of value of a property, a mechanism has been provided in the Act, 1957 itself and that leads us to Section 7 thereof.
20. Since in the present appeals, we are concerned with assessment years 1987-88 to 2001-02, we find that Section 7 in between the aforesaid period of assessments has undergone amendment and therefore, the earlier provision as well as subsequently amended provision both will have to be examined.
21. Section 7 as it was up to 31.3.1987, read as under:
"7. Value of assets, how to be determined- (1) Subject to any rules made in this behalf, the value of any assets,other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date.
Explanation.- For the removal of doubts, it is hereby declared that the price or other consideration for which any property may be acquired by or transferred to any person under the terms of a deed of trust or through or under any restrictive covenant in any instrument of transfer shall be ignored for the purpose of determining the price such property would fetch if sold in the open market on the valuation date.
(2) Notwithstanding anything contained in sub-section (1),-
(a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Assessing Officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the asset of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as may be prescribed ;
(b) where the assessee carrying on the business is a company not resident in India and a computation in accordance with clause (a) cannot be made by reason of the absence of any separate balance sheet up for the affairs of such business in India, the Assessing Officer may take the net value of the assets of the business in India to be that proportion of the net value of the assets of the business as a whole wherever carried on determined as aforesaid as the income arising from the business in India during the year ending with the valuation date bears to the aggregate income from the business wherever arising during that year.
(3) Notwithstanding anything contained in sub-section (1), where the valuation of any asset is referred by the Assessing Officer to the Valuation Officer under section 16 A, the value of such asset shall be estimated to be the price, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date or,in the case of an asset being a house referred to in sub-section (4), the valuation date referred to in that sub-section.
(4) Notwithstanding anything contained in sub-section (1),the value of a house belonging to the assessee exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became owner of the house, or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later:
Provided that where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of this sub-section shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf in the return of net wealth.
Explanation- For the purposes of this sub-section,-
(i) where the house has been constructed by the assessee he shall be deemed to have become the owner thereof on the date on which the construction of such house was completed;
(ii)"house", includes a part of a house,being an independent residential unit."
(emphasis added)
22. Sub section(1) of Section 7 as it was up to 31.3.1987 shows that it was subjected to any Rules made in this behalf. The Rule Framing Authority had framed Rule 1BB under Wealth Tax Rules, 1957 (hereinafter referred to as "Rules, 1957"). It was inserted by Wealth Tax (Amendment) Rules, 1979 and came into force on 1.4.1979 and laid down a detailed guidelines for the purpose of determining value of a house wholly or mainly used for residential purposes. Thereafter, substantial amendment came to be made and Section 7 was substituted by Direct Tax Laws (Amendment) Act, 1989 with effect from 1.4.1989. The substituted Section 7 reads as under:
"7. (1) Subject to the provisions of the 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.
(2) The value of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date, may, at the option of the assessee, be taken to be the value determined in the manner laid down in Schedule III as on the valuation date next following the date on which he became the owner of the house or the valuation date relevant to the assessment year commending on the 1st day of April, 1971, whichever valuation date is later:
"Provided that where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of this sub-section shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf in the return of net wealth."
Explanation - For the purposes of this sub-section,-
(I) where the house has been constructed by the assessee, he shall be deemed to have become the owner thereof on the date on which the construction of such house was completed;
(II) "house" includes a part of a house being an independent residential unit."
(emphasis added)
23. We may also place on record that proviso to Section 7 to sub section (2) has subsequently been omitted by Finance Act 1992 with effect from 1.4.1993.
24. Simultaneous amendments were also made in the Rules 1957 and Rule 1BB was omitted by Wealth Tax (Amendment) Rules, 1989 with effect from 1.4.1989.
25. Since Section 7 now contemplates assessment/determination of value in the manner laid down in Schedule III to Act, 1957, we find that this Schedule III was also inserted by Direct Tax Laws (Amendment) Act, 1989 with effect from 1.4.1989. It contain rules for determining value of assets having several parts but we are concerned only with Part A and B thereof. Part A basically contains Rule 2 defining several words for the purpose of Schedule III and the relevant provisions i.e 3 to 8 for valuation of immovable property are in Part B. For our purposes, Rules 3, 6 & 8 are relevant and the same are reproduced as under:
"3. Subject to the provisions of rules 4, 5, 6, 7 and 8, for the purposes of sub-section (1) of section 7, the value of any immovable property, being building or land appurtenant thereto, or part thereof, shall be the amount arrived at by multiplying the net maintainable rent by the figure 12.5 :
Provided that in relation to any such property which is constructed on leasehold land, this rule shall have effect as if for the figure 12.5, :─
(a) Where the unexpired period of the lease of such land is fifty years or more, the figure 10.0 had been substituted: and
(b) Where the unexpired period of the lease of such land is less than fifty years, the figure 8.0 had been substituted:
Provided Further that where such property is acquired or construction of which is completed after the 31st day of March, 1974, if the value so arrived at is lower than the cost of acquisition or the cost of the property, the cost of acquisition or, as the case may be, the cost of construction whereof is completed after the 31st day of March, 1974, and the house is exclusively used by the assessee for his own residential purposes throughout the period of twelve months immediately preceding the valuation date and the cost of acquisition or, as the case may be, the cost of construction, as increased, in either case, by the cost of any improvement to the house, does not exceed ─
(a) if the house is situate at Bombay, Calcutta, Delhi or Madras, fifty lakh rupees;
(b) if the house is situate at any other place, twenty-five lakh rupees:
Provided also that where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of the third proviso shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf.
6. Where the unbuilt area of the plot of land on which the property referred to in rule 3 is constructed exceeds the specified area, the value arrived at in accordance with the provisions of rule 3 shall be increased by an amount calculated in the following manner, namely:-
(a) Where the difference between the unbuilt area and the specified area exceeds five percent but does not exceed ten percent of the aggregate area, by an amount equal to twenty percent of such value;
(b) Where the difference between the unbuilt area and the specified area exceeds ten percent but does not exceed fifteen percent of the aggregate area, by an amount equal to thirty percent of such value;
(c) Where the difference between the unbuilt area and the specified area exceeds fifteen percent but does not exceeds twenty percent of the aggregate area, by an amount equal to forty percent of such value.
Explanation ─ For the purposes of this rule and rule 6,─
(a) " aggregate area", in relation to the plot of land on which the property is constructed, means the aggregate of the area on which the property is constructed and the unbuilt area;
(b) " specified area", in relation to the plot of land on which the property in constructed, means ─
(i) Where the property is situate at Bombay, Calcutta, Delhi or Madras, sixty percent of aggregate area;
(ii)Where the property is situate at Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur, Kanpur, Lucknow, Ludhiana, Madurai, Nagpur, Patna, Pune, Salem, Sholapur, Surat, Tiruchirapalli, Trivandrum, Vadodara (Baroda) or Varanasi (Benaras), Sixty-five percent of the aggregate area; and
(iii) where the property is situate at any other place, seventy percent of the aggregate area:
Provided that where, under any law for the time being in force, the minimum area of the plot of land required to be kept as open space for the enjoyment of the property exceeds the specified area, such minimum area shall be deemed to be the specified area:
(c) "unbuilt area", in relation to the aggregate area of the plot of land on which the property is constructed, means that part of such aggregate area on which no building has been erected.
8. Nothing contained in rule 3 shall apply ─
(a) Where, having regard to the facts and circumstances of the case, the Assessing Officer, with the previous approval of the Deputy Commissioner, is of opinion that it is not practicable to apply the provisions of the said rule to such a case: or
(b) Where the difference between the unbuilt area and the specified area exceeds twenty percent of the aggregate area; or
(c) Where the property is constructed on leasehold land and the lease expires within a period not exceeding fifteen years from the relevant valuation date and the deed of lease does not give an option to the lessee for the renewal of the lease, and in any case referred to in clause (a) or clause (b) or clause (c), the value of the property shall be determined in the manner laid down in rule 20."
(emphasis added)
26. There is one more provision which we may refer here at which deals with reference to D.V.O. and this is provided in Section 16A which reads as under:
"16-A (1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, the Wealth Tax Officer may refer the valuation of any asset to a Valuation Officer ─
(a) in a case where the value of the asset as returned is in a accordance with the estimate made by a registered value,if the Wealth-tax Officer is of opinion that the value so returned is less than its fair market value;
(b) in any other case, if the Wealth Tax Officer is of opinion─
(i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf ; or
(ii) that having regard to the nature of the asset and other relevant circumstance, it is necessary so to do.
(2) For the purpose of estimating the value of any asset in pursuance of a reference under sub-section (1), the Valuation Officer may serve on the assessee a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the Valuation Officer may require.
(3) Where the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return made by the assessee under section 14 or section 15, he shall pass an order in writing to that effect and send a copy of his order to the Wealth Tax Officer and to the assessee.
(4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value declared in the return made by the assessee under section 14 or, section 15, or where the asset is not disclosed or the value of the asset is not declared in such return or where no such return has been made, the Valuation Officer shall serve a notice on the assessee intimating the value which he proposes to estimate and giving the assessee an opportunity to state, on a date to be specified int he notice, his objections either in person or in writing before the Valuation Officer and to produce or cause to be produced on that date such evidence as the assessee may rely in support of his objections.
(5) On the date specified in the notice under sub-section (4), or as soon thereafter as may be, after hearing such evidence as the assessee may produce and after considering such evidence as the Valuation officer may require on any specified points and after taking into account all relevant material which he has gathered, the Valuation Officer shall, by order in writing, estimate the value of the asset and send a copy of his order to the Wealth Tax Officer and to the assessee.
(6) On receipt of the order under sub-section (3) or sub - section (5) from the Valuation Officer, the [Assessing Officer] shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer."
27. Valuation of assets is the most important consideration for the purpose of Act, 1957 and that is why Section 7 provides that subject to the rules or Schedule III made in this behalf, value of assets shall be estimated with the price, which, in the opinion of A.O., would fetch, if sold in the open market on the valuation date. Therefore, it is the market value in other words which has to be assessed by A.O. as on valuation date. Valuation date has been defined in Section 2(q) and reads as under:
"(q) "valuation date", in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in Section 3 of the Income-tax Act, if an assessment were to be made under that Act for that year."
28. It is last day of the previous year as defined in Section 3 of Income-tax Act, 1961, if an assessment were to be made under that Act for that year. Thus valuation date for assessment year 1987-88 would be 31.3.1987 i.e the last date of previous year and so on.
29. Apparently, up to assessment year 1989-90, the machinery for determination of value of disputed property was governed by Section 7 of Act, 1957 read with Rule 1BB of Rules, 1957 and thereafter Section 7 of Act, 1957 and Schedule III are governing it.
30. It is in this context, in Commissioner of Wealth Tax, Meerut versus Sharvan Kumar Swarup & Sons (1994) 6 SCC 623, Court held that a Rule providing method of valuation is a rule of evidence and thus may have retroactive effect i.e applicable in the pending cases. Different High Courts had taken this view earlier which came up for consideration before Supreme Court in the above matter. We may refer to some of relevant judgments, since observations therein would be helpful to understand real application of provisions in question.
31. Rule 1BB of Rules, 1957 came up for consideration, which, before 1.4.1989, provided method of valuation of an asset, initially before Gujrat High Court in CWT versus Kasturbhai Mayabhai 1987 164 ITR 107. Court held that Section 3 of Act, 1957 is a charging section but for the purpose of computing net wealth, the machinery is provided in Section 7 of Act 1957. Pursuant thereto, Rule 1BB which was inserted with effect from 1.4.1979 in the Rules, 1957 provided a formula for determination of fair market value of a house used wholly or mainly for the purpose of residence. The necessity to provide such formula was realized by the authorities concerned so that determination of market value of a house may not take a longer time and there should be some uniformity in such determination which will help in speedy disposal of the matters involving question of valuation of asset and also there will be lesser scope of variation in such assessment. When a rule sets out a method or formula for determining market value of any particular asset, Court held that it can be said to be a procedural provision and not substantive one. Such rule does not have the effect of impairing or creating any obligation and therefore, it is not substantive in character.
32. This decision was followed by Gujrat High Court in CWT v. Niranjan Narottam (1988) 173 ITR 693. Similar view was taken by Karnataka High Court in CWT v. Vidyavathi Kanpur (1984) 150 ITR 319 (Kant); Madhya Pradesh High Court in CWT v.Lachmandas Bhatia (1987) 163 ITR 586 (MP); Delhi High Court in CWT v.O.P.Tandon (1992) 195 ITR 688; Calcutta High Court in Manjushree Biswas (Smt) v.CWT (1988) 171 ITR 348: and Dilip Kumar Mitra v.CWT (1993) 200 ITR 336 (Cal). All these judgments were confirmed by Supreme Court in Commissioner of Wealth Tax, Meerut versus Sharvan Kumar Swarup & Sons (Supra), and it held in paragraph 25 of the judgment as under:
"25. On a consideration of the matter we are persuaded to the view that Rule 1-BB is essentially a rule of evidence as to the choice of one of the well accepted methods of valuation in respect of certain kinds of properties with a view to achieving uniformity in valuation and avoiding disparate valuations resulting from application of different methods of valuation respecting properties of a similar nature and character. The view taken by the High Courts, in our opinion, cannot be said to be erroneous."
(emphasis added)
33. Rule 1BB now having been omitted, the matter is governed by Schedule III but the nature of provisions providing method of assessment of value of the asset is same. Therefore, Rule 6 is a rule of evidence, procedural in nature and can be made applicable to all pending cases.
34. Schedule III, Rules 6 Explanation (b) (iii) proviso contemplates as to what should be "Specified Area" in relation to the plots of land on which the property is constructed and that has been taken differently in different cities categorized in three, i.e., clauses (i), (ii) and (iii) of Explanation (b) of Rule 6 in Schedule III. Clause (iii) is a kind of residuary category and applicable to all cities which are not specified in clauses (i) and (ii). Admittedly Jaipur being not covered by Clauses (i) and (ii), clause (iii) is applicable to a property situated in Jaipur. That brings in Proviso also which provides an exception, by referring to any law for the time in force, if it requires minimum area of the plot of land required to be kept as open space, exceeding specified area mentioned in Explanation (b) (iii) of Rule 6 Schedule III.
35. Referring to "any law for the time being in force". Tribunal has brought in Regulations 1996 and has held that the same are applicable in the case in hand and shall be retrospectively applicable since they are also procedural in nature. This aspect would require an indepth scrutiny of Regulations, 1996.
36. The said Regulations have been framed in exercise of power under section 16(P) read with Sections 96, 32(3) and, 68 of Jaipur Development Authority Act 1982 (hereinafter referred to as 'JDA Act, 1982'). Section 96 of JDA Act, 1982 confers power to frame Regulations. Section 68 authorizes Development Authority to charge fee for license or permission need be given under the Act or for the purposes of the Act. Section 32 authorizes Development Authority to remove an unauthorized development and lays down procedure which had to be followed before such removal.
37. JDA Act, 1982 was enacted by State Legislature of Rajasthan for establishment an Authority for the purposes of planning, co-ordinating and supervising the proper, orderly and rapid development of Jaipur Region, and, for executing plans, projects and schemes for such development and to provide for connected matters.
38. Section 21 talks of a "Master Development Plan" for Jaipur Region. It is supposed to define quality of life that a citizen of Jaipur Region could desirably be expected to lead in medium range perspective of the year 1991 and long term perspective of the year 2001 and thereafter such other intermediate stages, as the State Government may direct. Section 22 talks of "Zonal Development Plan".
39. Section 29 provides for Declaration of "Development Areas" after a plan comes into operation as provided in section 24 and thereafter by virtue of sub section (3), there is a mandate that no person shall institute or change use of any land or carry out any development of land without permission in writing of Development Authority. There are certain contingencies when permission would not be necessary, provided in Section 29 itself, which are not relevant for our purpose, hence, are not being discussed. Any person who violates the aforesaid provisions and proceed for unauthorized development is liable for penalty under section 31 which may extend to five thousand rupees, and in case of a continuing offence to rupees hundred per day. The conviction and fine does not validate unauthorzied development and Section 32 confers power upon Development Authority to remove unauthorized development.
40. In furtherance of the aforesaid provisions, Regulations 1996 were framed which contain details about the development which is permissible and the manner in which it has to be observed by residents in Jaipur Region.
41. Thus order to regulate constructions and other development in Jaipur Region, aforesaid Regulations were framed. Regulation 1.2 specifically says that it shall be applicable from the date of publication in the Gazettee i.e 25.6.1996. Regulation 2 contains lots of definitions. Regulation 3 divides Jaipur Region in six Sectors. Regulation 4 provides that construction of building in Jaipur Region may be made in accordance with the building standard, internal requirement, facilities with regard to structure and design and security requirements as per the prescribed standard. Regulation 5 prohibits any construction without permission of the competent authority and approval of building map. Regulation 5(i) as it was enacted in 1996 permits construction on a plot smaller than 500 sq.mtr. without prior permission of competent authority but in accordance with the standards set out in 9.2.2 of Regulation 1996. The said provision has subsequently been substituted by notification dated 2.1.1999 published in the Gazette of Rajasthan Government dated 16.1.1999. Regulation 6 specifies competent authorities in different Sectors. Regulation 7 specifies special powers and Regulation 8 prohibits that standards for building construction, internal facilities and design and other safety measures shall be such as provided in Regulations 9 to 12. Thereafter Regulations 9 and 10 prohibits different standards for the purposes of constructions of buildings externally and internally, including designs, safety measures etc. Regulation 13 says that for the purpose of permission of competent authority, written application would be required. Regulation 14 provides procedure for permission. Regulation 15 lays down certain procedure to be observed by the person concerned who undertakes construction as per permission granted or in accordance with the standards set out in Regulations 1996. Regulation 16 talks of domicile certificate and Regulation 17 is a penal provision. Regulation 18 talks of regularization in respect to certain alternatives not consistent with standards set out in Regulations 9 to 10 but may be compounded in certain circumstances. Regulation 20 repeals earlier Regulations i.e JDA (Building Regulations) 1989, as amended from time to time.
42. Regulations 1996, therefore, is a delegated legislation enacted by Rajasthan Government, controlling and regulating building activities in Jaipur Region. Neither, Regulations 1989 nor Regulations 1996 provided that buildings and constructions, already raised or existing on the date shall have to be brought in consonance with standards set out in those Regulations.
43. Act 1982 as well as Regulations framed there under do not require any change in existing constructions already raised but provide that any development on and after the date of enforcement of relevant provisions, shall satisfy the standards and requirements of such provisions. These Regulations have not been framed for the purposes of providing standards for assessment of Revenue but objective of Regulations is coordinated Planned Development of Jaipur Region so as to provide better standards of living to residents and to regulate and control any indiscrete unplanned development by anyone.
44. Admittedly, in respect to the disputed property, no development has ever been undertaken in accordance with Regulations 1996 read with J.D.A Act, 1982, since it was already an existing construction in a particular manner and existing constructions remain unaffected by the provisions of Act 1982 and Regulations 1996, unless renovation of new construction etc. is to be made.
45. There is neither any provision nor anything otherwise to show that legislature or delegated Rule Framing Authority, ever intended to make Regulations applicable retrospectively. On the contrary, Regulation 1.2 specifically says that Regulations 1996 shall be applicable from the date of publication in the Gazettee.
46. Moreover, we find that provisions governing standards, designs, facilities etc., were not set out for the first time vide Regulations 1996, but there existed Regulations 1989 (repealed by Regulations, 1996) but the Assessee has not taken recourse to such Regulations and the reason for such approach on the part of Assessee is not known.
47. If what has been suggested by Assessee that Regulations framed under JDA Act 1982, would constitute a law for the time being applicable, then Regulation 1989 also ought to have been taken as law applicable at the relevant time, governing matter since 1989 when it came into force. On enforcement of Regulations 1989, field could have been covered by that set of Regulations but that is not so claimed.
48. Thus we have to examine whether the words " the law for the time being in force" mentioned in Rule 6 Explanation (b) (iii) of Schedule III would cover any provision or law irrespective of its purpose and object or it has some specific application and meaning.
49. We have no manner of doubt that the real intention of legislature has to be considered in the context of the purpose a provision has been made. In wider sense, the phrase " law for the time being in force" mentioned in Rule 6 Explanation (b) (iii) proviso to Schedule III may include Regulations 1996 within its ambit, provided activities of construction of building would have been governed or required to conform with the standards etc. set out in Regulations 1996. That is not the claim of Assessee at all. It is not stated before us also that Regulations 1996 had to be complied with by Assessee for the purposes of designing, constructions, security and safety arrangement etc. of disputed property. It is also not disputed that any further development would have to conform with Regulations framed under JDA Act 1982 in respect to disputed property, if proposed by Assessee but the existing property, in the manner it was on the date relevant for assessment, the said Regulation did not require any such observance. Reasons are quite obvious. The disputed property is an old construction. There was either no mandate to raise constructions in a particular manner, if any, same may have been observed. With regard to valid constructions raised earlier, there is no dispute but the question is whether for such old construction Regulations of 1989 or Regulations 1996 which prescribed standards and operate prospectively may have any application. We have not been shown that either Regulations 1989 or Regulations 1996 sets out any standards, designs and other guide lines or restrictions or regulations in respect to existing building or existing construction and apparently they are applicable to development which is to be undertaken on or after the date of enforcement of the said Regulations.
50. Proviso to Rule 6 Explanation (b) (iii) of Schedule III would be applicable where a property is situate in an area which requires a minimum area of plot to be kept as open space for enjoyment of property under some specified statute and that exceeds the "Specified Area" under Rule 6 of Schedule III. It contemplates that a building, if has been raised as per standards or guidelines set out in a law for the time being in force, that is, at the relevant time when such development took place, which mandates the person concerned to keep a particular area as open space, such law shall prevail and would be considered under Rule 6. That is not the case in hand for the reason that Assessee had no such restrictions or Regulations in respect to disputed property when it was developed.
51. The provisions made for guiding process of assessment or valuation are procedural but Regulation 1996 are not procedural but substantive made under Act 1982 so as to regulate building and development activities in Jaipur Region and any violation thereof attracts penal provisions.
52. Rules contained in Schedule III are for assessment of value of an asset. It provides guidance to A.O. for determining value of any asset for the purpose of Act, 1957. These provisions are not to regulate certain Act or omission at the option of Assessee. It is evidently in the nature of Rules of evidence, guiding competent authority for the purpose of assessment of value of the assets. The provisions relating to evidence apparently or procedural in nature. But this does not apply to Regulations, 1996.
53. However, when Rule 6 talks of "any law for the time being in force" which provide that a minimum area of plot of land must be maintained as open space exceeding the specified area, particular area of open space then for the purpose of Rule 6 Explanation (b)(iii), instead of 70% of aggregate area, such minimum area as specified in such law for the time being in force, shall be deemed to be the specified area, the "Specified Area" obviously refers to a substantive provision of law regulating construction, development etc. and will bring within its ambit Regulations 1986 but mere reference to such Regulations will not make Regulations 1996, rules of evidence and procedural in nature for the reason that these Regulations on their own, substantive provisions. Regulations did neither affected existing rights of any person nor created an obligations which one has to observe, if it opts to proceed for development by way of construction of a building in the area where Regulations 1996 are applicable. For mere reference in Rule 6, Regulations 1996 which are otherwise substantive, cannot be taken to be procedural in nature and therefore, cannot be made applicable to the pending matters. In fact, these Regulations would be applicable only where asset in question has been developed under the constraints provided by Regulation 1996 and not to the property which is not regulated, i.e existing constructions.
54. Distinction between substantive law and procedural provisions has been indicated in Black's Law Dictionary (Sixth Ed., p. 1203), which reads as under:
"As a general rule, laws which fix duties, establish rights and responsibilities among and for persons, natural or otherwise, are 'substantive laws' in character, while those which merely prescribe the manner in which such rights and responsibilities may be exercised and enforced in a count are 'procedural laws'."
55. It has also been considered in Salmond's Jurisprudence (Twelfth Edn., p.462), which reads as under:
"What, then, is the true nature of the distinction? The law of procedure may be defined as that branch of the law which governs the process of litigation. It is the law of actions - jus quod ad actiones pertinet - using the term action in a wide sense to include all legal proceedings, civil or criminal. All the residue is substantive law, and relates, not to the process of litigation, but to its purposes and subject-matter. Substantive law is concerned with the ends which the administration of justice seeks. Procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated.
'...What facts constitute a wrong is determined by the substantive law; what facts constitute proof of a wrong is a question of procedure.' '...So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.'"
56. In Izhar Ahmad Khan v.Union of India AIR 1962 SC 1052, the distinction of substantive law and procedural law has been discussed by Court and it has said as under:
"The division of law into two broad categories of substantive law and procedural law is well known. Broadly stated, whereas substantive law defines and provides for rights, duties and liabilities, it is the function of the procedural law to deal with the application of substantive law to particular cases and it goes without saying that the Law of Evidence is a part of the law of procedure."
57. It is also well established that procedural law, generally speaking, is applicable to pending cases, since no suitor can be said to have a vested right in procedure. There may be a provision which can be partly substantive and partly procedural but the factum that a particular provision, if substantive, if referred in another law, the referred law will not ipso facto become procedural but will have to be examined on its own whether it is a substantive or procedural law.
58. In the matter of taxation, unless things are is very clear, no attempt shall be made to make a provision retrospective, if it is otherwise. Regulations 1996 neither explanatory nor clarificatory nor provides any machinery for assessment or valuation etc. but containing a substantive provisions made by delegated legislation under J.D.A. Act, 1982 to regulate construction and development activities in Jaipur Region. The persons in Jaipur Region are obliged to follow and observe those provisions and if violate, are liable to be punished since a violation thereof has been declared an offence as we have already noticed above. Apparently the purpose of Regulations 1996 is different and unless a particular building has been developed with constraints i.e requirement of Regulations 1996. The said Regulations are not to be taken as a law made for the purpose of assessment of valuation of an asset which was already in existence much before enforcement of Regulations 1996.
59. A Constitution Bench in Commissioner of Income Tax Verus Vatika Township (P) Limited, (2014) 271 CTR (SC) 1 has held that statutes which are not declaratory or clarificatory or procedural, are prospective unless provided otherwise and in tax matters, there should not be any approach so as to make a provision retrospective if it is not otherwise.
60. In the present case, in our view, Regulations 1996 for the purpose of assessment of valuation of disputed property are not at all applicable unless it is shown that the disputed property has been developed or constructed observing the standards and requirements of Regulations 1996 or any other Regulations under J.D.A. Act, 1982. To us it appears that JDA Regulations 1996 have not been appreciated by Tribunal in the light of the provisions of JDA Act 1982. The purpose and object of such Regulations has been misconstrued.
61. We, therefore, have no hesitation in holding that for the purpose of valuation of property in dispute, reliance placed on Regulations 1996 was neither correct nor valid nor in accordance with law. In the present case, the said Regulations will have no application for the purpose of valuation of building in dispute and it will have to be made only in accordance with Schedule III, as it is.
62. We therefore, answer substantial questions of law formulated above, by holding that Regulations 1996 are not retrospective but operates on and after 28.6.1996 that is the date of publication of notification in the Gazette but it would make no difference in the present case, for the reasons that these Regulations have no application to the disputed property which has to be valued as per the procedure prescribed in Schedule III of Act, 1957.
63. All the questions are therefore, answered in favour of Revenue and against Assessee.
64. Appeals are allowed. The judgments and orders of Tribunal dated 29.11.2001, 6.7.2004 and 6.11.2005 passed by Income Tax Appellate Tribunal, Lucknow Bench, Lucknow in respective appeals are hereby set aside and judgments of CWT(A) in Reference nos. 37/Alld/2000, 14/Luc/2002, 29/Luc/2002, 22/Luc/2002, 23/Luc/2002, 24/Luc/2002, 25/Luc/2002, 26/Luc/2002, 28/Luc/2002, 16/Luc/2000, 15/Luc/2002, 30/Luc/2005, 03/Luc/2002 and 04/Luc/2005 are hereby restored.
65. No costs.
Order Date :- 10.11.2016 IB