TMI Blog1997 (7) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in the construction of the hotel building on the basis of the DVO's report? (e) Whether the Assessing Officer was justified in charging interest under sections 139(8) and 217 of the Act? At the time of hearing, the assessee's counsel Shri Pawan Kumar, Advocate did not press for adjudication of issues at 'b', 'c' and 'e' above. No arguments were advanced by both sides. Hence, no decision is given. 2. The decision on the issue at "d" is dependent upon the decision which we may arrive at in relation to issue "a" above. But before we decide the abovementioned two issues the facts have to be fathomed. The assessee is a partnership firm and it started construction of a Hotel Building (Hotel Chetna) at Deoghar and the construction work commenced from 1-1-1981 and got completed by 31st March, 1982. The accounting period or the previous year of the assessee is financial year, i.e., 1st April to 31st March of the following year. The assessee did not file return for the assessment year 1981-82, previous year of which ended on 31-3-1981 nor it filed return for the assessment year 1982-83 which is year under appeal, the previous year of which ended on 31st March, 1982. For the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested out of its income which escaped assessment. Hence, issue notice under section 147/148 for the assessment year 1981-82." While issuing notice for the assessment year 1982-83 (year under appeal), no separate reasons have been recorded except making a note on 17-6-1986 in the assessee's file for the assessment year 1982-83 stating as under: "For the reasons recorded in the order sheet for assessment year 1981-82 issue notice under section 147/148." The above reasons came to our knowledge from xerox copy of the order sheets obtained by the assessee from the Assessing Officer and placed in the paper book which are at page 4 for assessment year 1981-82 and page 7 for assessment year 1982-83. After much correspondence the assessee filed returns for both the assessment years declaring nil in. These returns were filed pursuant to notices issued for both the years under section 148 by the Assessing Officer. Even after filing of the return the assessee objected to the assumption of jurisdiction by the Assessing Officer for issuing notices under section 148, read with section 147(a), of the Act. The Assessing Officer referred the matter to his superior officer, viz., the IAC of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 3,00,160 Add: Land rent paid Rs. 6,000 --------------- Rs. 3,06,160" --------------- As can be seen from the working of the computation of taxable income for these years the Assessing Officer has taken a sum of Rs. 1,07,040 as amount invested by the assessee in the previous year relevant to assessment year 1981-82 and the balance sum of Rs. 4,28,160 is considered as amount invested by the assessee in the construction of the Hotel Building during the previous year ending 31-3-1982 relevant for the assessment year 1982-83 and from this, the sum of Rs. 1,28,000 as found recorded in account books as invested is deducted. Thus, the net unexplained investment in the construction of Hotel Building as per DVO's report was taken by the Assessing Officer in a sum of Rs. 3,06,160. This is considered as income from undisclosed sources and assessed along with the land rent paid. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139(2) was issued to the assessee for filing return for this year. While finalising the assessment for the assessment year 1983-84, the Assessing Officer asked the DVO in terms of section 131(1)(d) of the Act to determine the cost of construction from 1-1-1981 to 31-3-1982 of the building under construction called Hotel Chetna. It was reported by the DVO that the total cost of construction for the referred period was Rs. 5,37,500 which report as recorded by us earlier is placed in assessee's paper book at pages 8 to 16. According to the Assessing Officer, the proportionate amounts worked out on the basis of the report of the DVO was considered as unexplained investment in the construction of the Hotel Building for two years and he, therefore, issued notices under section 148 read with section 147(a) for non-filing of returns for both the assessment years, viz., 1981-82 and 1982-83 to bring to tax the undisclosed investment in the Hotel Building as per DVO's report. 8. We have, therefore, to decide first whether the Assessing Officer on the basis of the said report of the DVO can form a reasonable belief under section 147(a) that income for assessment year 1982-83 chargeable to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the "beneficiary") and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary; (v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59; (va) any sum chargeable to income-tax under clause (iiia) of section 28; (vb) any sum chargeable to income-tax under clause (iiib) of section 28; (vc) any sum chargeable to income-tax under clause (iiic) of section 28; (vd) the value of any benefit or perquisite taxable under clause (iv) of section 28; (vi) any capital gains chargeable under section 45; (vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. When a person borrows money, it is a receipt in his hands and not income because every receipt is not income. The decision of the Bombay High Court in the case of Mehboob Productions (P.) Ltd. v. CIT [1977] 106 ITR 758 may be usefully referred. Borrower is, therefore, under no obligation to file a return as provided in section 139 declaring or disclosing the loan amount until and unless income results from such borrowing and further such income exceeds the chargeable limit prescribed from year to year as per Finance Act of each year passed by the Legislature. The provisions of section 68 says that if a person fails to explain satisfactorily, at the time of finalisation of the assessment, source of the borrowed amount which is not recorded in his account books then the borrowed sum is deemed as income of the assessee of that previous year and added to the returned income. Unless such an eventuality takes place the borrowed sum is not considered or added as deemed income. Similarly, if any amount is spent or invested by an assessee either from his own funds or from borrowed monies in the construction or purchase of a property or asset it is not income in the hands of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omitted to disclose full and true facts relating to his assessment for that year. The second limb of section 147(a) will get attracted when the assessee files the return of his taxable income and fails or omits to disclose truly and fully facts related to or connected with the framing of an assessment by the Assessing Officer. It is also a settled law that it is not the duty of an assessee to instruct or suggest the Assessing Officer what possible inferences he should draw from the disclosed facts. Keeping the above principles, we now turn our attention to the facts of the present case. 13. What first has to be seen is whether the assessee had income which exceeded the chargeable limit and, therefore, was under an obligation to file a return of such income under section 139 of the Act. The assessee's case as narrated above is that it had no chargeable income and, therefore, no return under section 139(1) of the Act was filed. The assessee spent a sum of Rs. 2,47,200 up to 31st March, 1982 in the construction of Hotel Building which is recorded in its account books supported with relevant evidence. This, according to the assessee, is not income and, hence, no return was filed as l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity to explain about the nature and sources of his investment. The Kerala High Court again in another case of CIT v. Smt. P.K. Noorjehan [1980] 123 ITR 3/3 Taxman 276 have observed that phraseology of section 69 in creating the legal fiction employs the word "may" and not "shall". The unsatisfactoriness of the explanation, their Lordships observed, does not automatically result in deeming value of investment to be the income of the assessee, and the matter is still within the discretion of the Assessing Officer. As already indicated earlier the basis on which the Assessing Officer proceeded to assume jurisdiction under section 147(a) and in issuing notice under section 148 was the opinion of the DVO that the cost of construction of the Hotel Building was Rs. 5,37,500 and not Rs. 2,47,200 according to the assessee. We ask; can this report of the DVO expressing his opinion on the cost of construction be taken as sacrosanct document on which a reasonable and honest belief be formed by legally instructed and well informed reasonable person about the escapement of chargeable income? The answer obviously has to be in the negative. Because report given by any valuer or by any exper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel that notice under section 148 was issued at the behest of and under the directions or instructions of his superior officer, viz., IAC and, therefore, the case laws relied upon by the assessee's counsel do not apply. The Assessing Officer merely sought guidance from the IAC when the assessee did not file return and adopted non-cooperative attitude. Moreover, the letter to and from the IAC are after the issue and service of notice under section 148. 16. We are firmly of the opinion that when the Assessing Officer recorded the reasons and issued notice under section 148, he had no reliable and definite material before him to come to a conclusion that whatever amount the assessee spent or invested in the construction of hotel building will remain unexplained and as such will ultimately be added as income from undisclosed sources in terms of section 69 of the Act and, therefore, he could not have formed a reasonable belief that income of the assessee chargeable to tax escaped assessment. We reiterate that the reasons recorded have no live-link or nexus with the facts of the case which could satisfactorily persuade, enable or lead the Assessing Officer for formation of a reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced below for the sake of convenience: "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 21. In view of the express statutory provision, that the value of investment in the above circumstances may be deemed to be income of the assessee, there is no doubt left that it would be part of 'income', notwithstanding that it is not included in the inclusive definition in section 2(24) of the Income-tax Act, 1961. 22. Any other interpretation will lead to absurd result. If it is not treated as 'income', then the Assessing Officer will be prevented from including it in the total income in an assessment. The Assessing Officer will also be prevented from initiating penalty proceedings under section 271(1)(c) of the Act for concealment, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a), read with section 148, of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information." On the same page, i.e., page 477, it was further held: "Since the belief is that of the Income-tax Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Officer is an expert. Therefore, there was a formal source. I, therefore, hold that the information was specific, reliable and relevant. 29. It can also be held that the report of the Valuation Officer was a report under section 55A of the Act. In that case, the report would be binding on the Assessing Officer in the same manner as it is binding under section 16A of the Wealth-tax Act. This view is fortified by decisions of the Madras High Court in C.T. Laxmandas v. Asstt. CIT [1994] 208 ITR 859 and Andhra Pradesh High Court in Daulatram v. ITO [1990] 181 ITR 119, as well as a decision of the Hyderabad Bench of the Tribunal in Laxmi Talkies v. ITO [1995] 53 TTJ (Hyd.) 213. 30. The learned counsel for the assessee had relied before the Bench on a decisions of the Patna High Court in CIT v. Agarwalla Bros. [1991] 189 ITR 786 holding that Inspector's report cannot be taken as an aid, and Chunnilal Surajmal v. CIT [1986] 160 ITR 141/27 Taxman 229, where statement before the Income-tax Appellate Tribunal was not considered adequately. These decisions were given on peculiar facts of those cases and are, therefore, not applicable here. Moreover, the above conclusion is being based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vealed in the report of the DVO and such excess investment would fall to be treated as deemed income under section 69 of the Act. 34. For the above reasons, I hold that proceedings under section 147(a) were validly initiated and the Assessing Officer was justified in issuing notice under section 148 of the Act on the basis of material before us. The assessee's grounds of appeal in this regard are rejected. 35. In the proposed order of my learned brother, the assessee's ground regarding justification of the Assessing Officer in assuming jurisdiction under section 144 of the Act and completing the assessment ex parte has not been disposed of since the learned counsel for the assessee did not press for adjudication. In view of the conclusion arrived at by me, it will be necessary to dispose of this ground also. The assessee cannot be allowed to withdraw this ground. The reason is clear. The appeal was decided earlier by the Tribunal. Thereafter the Tribunal by its order dated 28-10-1991 held that some instructions being not complied with, cannot be said to be non-compliance of notices under sections 142(1) and 143(2) of the Act. The Tribunal, therefore, set aside the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.M.: (1) Whether the Accountant Member is justified in holding that the Assessing Officer is authorised and empowered in law to obtain a report from the Departmental Valuation Officer about the cost of construction of Hotel by the assessee? (2) If answer to the question No. 1 above is in the affirmative, then whether the report of the Departmental Valuation Officer constitutes information to the Assessing Officer enabling and authorising him to initiate reassessment proceedings under section 147 of the Act? (3) If the answer to the question No. 2 above is in affirmative, then whether the reassessment proceedings have been commenced under section 147(a) or under section 147(b) of the Income-tax Act, 1961? (4) If the answer to the above question No. 3 is that the reassessment proceedings are under section 147(a) of the Act, then whether there is live-link or direct rationale and intelligible nexus as laid down by the Hon'ble Supreme Court in the case of Ganga Saran Sons (P.) Ltd. for formation of a reasonable belief on the part of the Assessing Officer that income of the assessee chargeable to tax had escaped assessment? (5) If the answer to question No. 3 above is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in issuing notice under section 148 of the Income-tax Act, 1961 read with section 147(a) of the Income-tax Act, 1961? 2. Whether, on the facts and circumstances of the case and in law, the Assessing Officer was justified in assuming jurisdiction under section 144 of the Act and completing the assessment ex parte?" However, according to the learned Judicial Member, there are 9 points of difference which he seeks to refer to the Third Member for opinion. Those points of difference are the following: "(1) Whether the Accountant Member is justified in holding that the Assessing Officer is authorised and empowered in law to obtain a report from the Departmental Valuation Officer about the cost of construction of Hotel by the assessee? (2) If answer to the question No. 1 above is in the affirmative, then whether the report of the Departmental Valuation Officer constitutes information to the Assessing Officer enabling and authorising him to initiate reassessment proceedings under section 147 of the Act? (3) If the answer to the question No. 2 above is in affirmative, then whether the reassessment proceedings have been commenced under section 147(a) or under section 147( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence among the Members, how to finalise the points of difference. Section 255(4), under which the President has to appoint a Third Member for resolving the point or points of difference among the Division Bench Members, is as follows: "255(4) If the Members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other Members of the Appellate Tribunal, and such point or points shall, be decided according to the opinion of the majority of the Members of the Appellate Tribunal who have heard the case, including those who first heard it." It would show that the point or points of difference shall be referred by the President to a Third Member. Suppose, if there is no unanimity even in identifying the point or points of difference among the differing Members, just like in this case, then I feel it is the duty of the President to identify the real points of difference and ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile required details and informations which could enable him to ascertain and determine the cost of construction from 1-1-1981 to 31-3-1982. The DVO ultimately inspected the Hotel Building on 26-2-1985 and filed his report on 13-5-1985 estimating the total cost of construction at Rs. 5,35,200. He determined the cost of construction falling in assessment year 1981-82 at Rs. 1,07,040 and he also determined the cost of construction which went on in assessment year 1982-83 at Rs. 4,28,160. Since there was a vast difference between the cost of construction determined by the DVO and the cost of construction entered in the books of account of the assessee, the Assessing Officer felt that unexplained money was invested by the assessee in the construction of the Hotel Building and that unexplained money should have been added as the assessee's deemed income under section 69. Since the unexplained money escaped assessment in the hands of the assessee for assessment year 1982-83, the Assessing Officer felt that the assessments should be reopened for assessment years 1981-82 and 1982-83. The Assessing Officer found that the assessee did not file any return whatsoever originally for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed of by the order of the Tribunal dated 28-10-1991. The Tribunal, while upholding the assessment under section 144, restored the matter to the file of the Assessing Officer for making fresh assessment after giving reasonable opportunity of being heard to the assessee. 5. Validity of re-opening and assumption of jurisdiction under section 147(a) were not adjudicated and decided by the Tribunal in the above order. The assessee filed a Writ Petition in the High Court in which certain directions were given. According to the directions given in the order disposing of the Writ Petition by the High Court, an application under section 254(2) was filed before the Tribunal on 21-2-1995. The said application was disposed of on 20-3-1995, whereby the Tribunal recalled the entire order of the Tribunal dated 28-10-1991 and ordered that the second appeal should be heard afresh. Thus, the appeal came to be heard by the Division Bench in which the present difference arose between the Members. 6. As far as tracing or narrating the facts are concerned, there is no difference between the Members. Both the Members agree that a sum of Rs. 1,07,040 was considered as investment by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislative intent where is a duty or obligation cast on a person to file return under section 139 informing the revenue about receipt of loan, investments in properties and assets and such other matters described from sections 68 to 69D or for that matter under any other deeming provisions contained elsewhere in the Income-tax Act, 1961. How can then the Assessing Officer resort to and invoke the provisions contained in section 147(a) or even under section 147(b) of the Act for deemed incomes." Firstly, I cannot agree with the learned Judicial Member because the definition of "income" found in section 2(24) is inclusive but not exhaustive. If deemed incomes under sections 68 and 69 are not incomes at all, then there is no scope to add that type of income at all in the hands of any assessee whomsoever. The Hon'ble Privy Council in a famous case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT [1943] 11 ITR 513, Lord Wright held: "'Income', it is true, is a word and difficult and perhaps impossible to define in any precise general formula. It is a word of the broadest connotation. In Kanga Palkhivala's "The Law And Practice of Income-tax", Eighth Edition, Vol. I, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a type of income which need not be returned but which should be added only while making the assessment and it should not be added at any prior stage and there is no obligation on the assessee to return it. This understanding of the learned Judicial Member, according to me, is wrong under law. I have already quoted from the learned author Palkhivala who explained the circumstances under which the unexplained investment may be added in the hands of the assessee. If the unexplained investment is not recorded in the books of account of the assessee, then the said unrecorded investment may be assessed as income. Addition of unexplained investment should be made regardless of the question whether income sufficiently large to match the investment could possibly have been earned during the period between the commencement of the relevant financial year and the date of investment. So, whether there is scope to earn the income in that financial year or not, the addition of unexplained investment can be made. Therefore, before making an addition under section 69, the amount added need not be of income character strictly so-called. 8. In para 11 of his order, the learned Judicial Member st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Judicial Member scrambles since it has no legal sanctity, in my humble opinion. 9. Another significant finding of the learned Judicial Member was that the DVO's report cannot validly form the basis for reopening. In para 14, the learned Judicial Member states the following: "As already indicated earlier the basis on which the Assessing Officer proceeded to assume jurisdiction under section 147(a) and in issuing notice under section 148 was in the opinion of the DVO that the cost of construction of the Hotel Building was Rs. 5,37,500 and not Rs. 2,47,200 according to the assessee. We ask: can this report of the DVO expressing his opinion on the cost of construction be taken as sacrosanct document on which a reasonable and honest belief be formed by legally instructed and well informed reasonable person about the escapement of chargeable income? The answer obviously has to be in the negative. Because report given by any valuer or by any expert is merely an opinion and always remains an opinion. It is well-known that valuation opinion differ from person to person and from property to property, its location and several other factors and circumstances which again differ from case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the ITO was not an erroneous order, nor was it prejudicial to the interests of the revenue. His order was beneficial to the interests of the revenue, for it was the only order that he could pass at that time; as otherwise the assessment would have been wholly time-barred. The ITO had also the power to act either under section 147(b) or section 154 of the Act after receiving the copy of the order of the Valuation Officer." Thus, it is clear that on the basis of the valuation report, the proceedings can be reopened. 9.1 In the second of the cases mentioned above, before the Andhra Pradesh High Court, the point canvassed was that there was no provision in the Act enabling the ITO to refer the matter to a Valuation Officer for the purpose of ascertaining the cost of construction of a Building. It is only section 55A of the Act that postulates a situation where a reference could be made to the Valuation Officer in respect of capital asset and that too in relation to capital gains alone. The second reference to the Valuation Officer is without any jurisdiction. Answering point No. 1, Their Lordships held at page 133 the following: "Hence, we have no hesitation in hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47/148, the assessee did not file any return except filing a 'Nil' return. Under the circumstances, I fully agree with the learned Accountant Member while stating that the reopening made under section 147(a)/148 is perfectly justified in this case. I wish to state that there is no need for the Assessing Officer to have a concluded, proof in his possession before validly reopening the assessment proceedings under section 147(a). It is enough if the information which came to his knowledge raises a reasonable belief that income chargeable to tax has escaped assessment by virtue of failure of the assessee to furnish return. It is argued before me on behalf of the assessee that in the reasons recorded for reopening, there was no mention of the DVO's report dated 13-5-1985 and when the reasons recorded do not reflect some material which is already secured into the record whether reopening can be made. However, it cannot be denied that valuation report was already secured into the assessment records even on 13-5-1985 and the said DVO's report was very much in the mind of the Assessing Officer while issuing notice of reopening on 17-2-1986. The question, therefore, was when the reasons rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port, the assessee was given due notice and it was called upon to produce all the relevant records like site plan, vouchers for cost of construction, etc., etc. Therefore, even though the report as such is not mentioned in the reasons recorded, I hold that the DVO's report dated 26-2-1985/13-5-1985 obviously should have been kept in the mind of the Assessing Officer before recording the reasons for re-opening and, therefore, the Patna High Court decision does not specifically apply to the facts of the case. I should also consider whether the valuation report of the DVO, which was obtained subsequent to the assessment for assessment year 1982-83, constitutes information, in the securing of which the Assessing Officer can validly reopen the assessment, and I should also consider whether the reopening would be under section 147(a) or 147(b). In this connection, the decision already quoted by the ld. Accountant Member in his order appears to be very apt. This is the decision of the Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal. The facts of this case may be first noted. The assessee-firm belongs to Azamgarh and it claimed to have borrowed an amount of Rs. 50,000 from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but one of acting on fresh information." The DVO's report gave important information to the Assessing Officer about the true cost of construction as Rs. 5,37,500. This information exposes the untruthfulness of the version of the assessee as per its books and which version was believed by the Assessing Officer shows that the cost of construction of the Hotel Building was Rs. 2,47,200. Thus, the DVO's report tends to expose the untruthfulness of the facts and, therefore, it does not amount to mere change of opinion or drawing a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould help the assessing authorities to effectively prevent evasion of tax due to the State. When that is the main object and purport of the introduction of section 55A of the Act, assigning a restrictive meaning or limiting the operation of the section to assessment only of a particular category of income alone would amount to rewriting the provision and defeat the very object of such a provision." The Hon'ble High Court had followed the Andhra Pradesh High Court decision in Daulatram's case while rendering the above decision. The main question agitated before the Madras High Court was, according to the assessee, that there was no provision in the Income-tax Act enabling the Assessing Officer to refer the matter to the Valuation Officer for the purpose of ascertaining the cost of construction of the Building after proceedings for the assessment year have been completed. Section 55A is only an enabling provision to make reference to a Valuation Officer with a view to ascertain the fair market value of the capital asset for the purpose of bringing to assessment capital gains under Chapter IV of the Act. Confronting the above plea, the Hon'ble Madras High Court laid down unequivocal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of underassessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under section 34. Whether these grounds are adequate or not, is not a matter for the Court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. It is, of course, open for the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief." 11.1 In the second of the cases, the following is what is held as part of the head-note at pages 307-308: "The important words under section 147(a) are 'has reason to believe' and these words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or, in other words, it must be based on reasons which are relevant and material. The Court, o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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