TMI Blog2010 (7) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... rded in the books of account. While doing so, he erred in ignoring the valuation reports of the registered valuer and the Valuation Officer, but relying on the observation of the Assessing Officer in the matter. The facts of the case are that the assessee filed the return on March 31, 1999 declaring nil income. The assessment under section 143(3) was completed on March 26, 2001 at nil income. It is, inter alia, mentioned that the assessee filed required details, information and documents. The books of account were examined. The factory building of the assessee is in the stage of construction and no business has been carried out in this year. Subsequently, the assessment was reopened for which reasons were recorded on January 10, 2002. These reasons read as under: "During the course of assessment proceedings under section 143(3) for the year under consideration it was noticed that the assessee-company has declared the investment on land and site development, building and civil work at Rs. 1,00,12,252 for total quantity of earth work estimated at 6,75,000 cubic meter. This development of earthwork was stated to be done through 1,397 tractors. The Assessing Officer considered this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pay to IDBI up-front fee at 1.05 per cent. of the amount sanctioned before or on execution of loan agreement. The company was sanctioned total loan of Rs. 8.5 crores by the IDBI on which total up-front fee has to be paid at 1.05 per cent. which comes at Rs. 8,92,500 but the assessee-company has paid this fee at Rs. 12,50,000. Thus, the company has paid excess up-front fee by Rs. 3,75,500, which should be added to the income of the assessee-company. 3. The share application money as on March 31, 1997 was at Rs.16,66,000 and as on March 31, 1998 was at Rs. 2,57,19,000. There is an increase in the share application money by Rs. 1,10,59,000 during the financial year 1997-98, but according to the copy of account filed for the share application money the increase comes to Rs. 1,11,49,000. Thus, there is a difference in increase in the share application money by Rs. 90,000. 4. The details filed for share application money, the closing balance as on March 31, 1998 has been shown at Rs. 31,00,000 which was the opening balance as on April 1, 1998. It is not explained how the closing balance as on March 31, 1998 has been shown at Rs. 2,57,19,000 in the balance-sheet ending on March 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the land, henceforth mentioned that land development, was carried out, which was incomplete. The Assessing Officer made a reference to the District Valuation Officer for estimation of the expenditure incurred on the land development. However, such a report was not made by the District Valuation Officer before finalisation of the original assessment proceedings. The assessee started its manufacturing activities in the previous year relevant to the assessment year 2000-01. Since no business was conducted in this year, nil return was filed and original assessment was also completed accordingly. The case of learned counsel is that the reasons recorded by the Assessing Officer do not conform to the statutory language or the cases decided under section 147. In order to support the aforesaid contention, reference was made to the report of the District Valuation Officer, placed in the paper book on pages 8 to 10. It is his case that this report cannot be said to be a valuation report as no figure was placed in respect of his estimate of the expenditure on landdevelopment for this year or even for the subsequent year. It is only mentioned that the investment declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n given seeking reopening of the assessment for the years 1997-98 and 1998-99 is that suppression of sales has taken place on account of the fact that when average price of the closing stock is multiplied with the quantity of the sales in the year then the value of the sales would be at a higher figure than that as declared by the assessee. Clearly, there is no new material which is alleged to have come to the notice of the Assessing Officer which has caused him to seek reopening of the assessment. Admittedly, the reasons given for seeking reopening of the assessment contain the expression `perusal of the case record reveals' clearly showing that it is on the basis of the same assessment record as was filed by the assessee, during the relevant assessment years and also scrutinised by the Assessing Officer before passing the orders under section 143(3) is the basis for seeking reopening of the assessment. Further the new logic, rationale and opinion which has been formed by the Assessing Officer for seeking reopening of the assessment is nothing but a change of opinion and a new approach to the existing facts and material which the Assessing Officer could well have done during the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings under section 143(3) of the Act. Not only this, it is quite clear that the very aspect of deduction under section 80HHC and section 80-IA means that entries with respect to claims of deductions towards expenditure whether towards provident fund/employees State insurance or the valuation of the stock was very much considered by the Assessing Officer for considering the claim of the assessee under section 80HHC and section 80-IA in the relevant assessment years. It is not, therefore, as if any new material has come on record or that there was bulk material and in respect of which some material could not have been considered by the Assessing Officer. Surely an obvious thing would have been and in fact has been duly considered by the Assessing Officer such as valuation of stock and allowing of the claim of expenditure/contribution towards provident fund and employees State insurance. Once all these aspects were considered and also ought to have been considered from the obvious material available on record which was duly done and brought to the notice of the Assessing Officer, we do not feel that there is any scope for reassessment proceedings under section 147 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on development work is doubtful and it is not susceptible to measurement. He made the following comments before arriving at the aforesaid conclusion : (i) The assessee has failed to supply the initial and final levels of land where such enormous earth work of 6.75 lakhs cubic meter has been done. The registered valuer's estimates submitted by the assessee of M/s. Rajiv Jain and Associates have simply considered the average heights of earth work involved without any actual measurements at site, which can be done only from topographical charts of initial and final levels. In the absence of such details having been furnished by the assessee, the authenticity of such earth work is doubtful and cannot be verified at this end. (ii) The contention of the assessee that no registration of tractor numbers is required by farmers in the U. P. is wrong since it has been ascertained from the U. P. transport authorities that registration of tractor number is a must in the U. P. In the absence of tractor number having been supplied by the assessee, authenticity of development of 1397 tractors is also doubtful. (iii) Further, no log books showing the details of deployment of tractors on day-to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read into the intimation. Since such an intimation is made without the application of mind for computation of income, it cannot be said that any opinion is formed as to correctness or otherwise of the total income declared by the assessee. In such a case, there will be no question of change of opinion when assessment is sought to be made subsequently under section 147. Further, reliance was placed on the decision of the hon'ble Allahabad High Court, the jurisdictional High Court in the case of Smt. Shashi Jain v. ITO [1997] 228 ITR 682. In that case, intimation under section 143(1)(a) was made and subsequently notice was issued under section 148 on the basis of the report of the valuer. The valuer had not given opportunity of being heard to the assessee before making the report. The hon'ble court came to the conclusion that there was no need of issuing a letter before issuance of notice under section 148. The argument that there was no reason to believe was also not accepted by the hon'ble court. Thus, the petition was dismissed subject to the remark that the correctness of import can be contested in the course of assessment proceedings. Reliance was also placed on the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34, in which it was, inter alia, held that what is to be seen is that there is prima facie some material on the basis of which the Revenue reopen the assessment. Reliance was also placed on the decision of the hon'ble Supreme Court in the case of Ess Ess Kay Engineering Co. P. Ltd. v. CIT [2001] 247 ITR 818, in which it was mentioned that there was material available before the Income-tax Officer on the basis of which he could reopen the case and that it was not a case of mere change of opinion. Reliance was also placed on the decision of the hon'ble Bombay High Court in the case of Anusandhan Investments Ltd. v. M. R. Singh, Deputy CIT [2006] 287 ITR 482. Certain conclusions were drawn regarding leviability of capital gains in proceedings of the assessment year 1993-94, on the basis of which the assessment for the assessment year 1992-93 was reopened. The hon'ble court came to the conclusion that the finding in the assessment year 1993-94 furnished good ground for reopening the assessment for the assessment year 1992-93. The argument of the learned Departmental representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid expenditure. His report was not received till the completion of the assessment. In view thereof, the Assessing Officer made an office note to the assessment order to the effect that appropriate action shall be taken after the receipt of the valuation report. Therefore, it can be said that in the absence of full evidence, he could not apply his mind properly to this issue. In the circumstances, he was forced to complete assessment accepting the return as such. In other words, there was no application of mind on his part to come to the conclusion as to whether the investment was recorded at proper amount in the books. The report was received on or about December 27, 2001. There are some arguments from both sides as to whether the aforesaid report constituted a valuation report. The case of learned counsel is that it is merely a letter and not a report as no figure has been put by the District Valuation Officer on the expenditure estimated by him. We tend to agree with this interpretation of the letter as it does not contain the views of the District Valuation Officer in respect of quantification of the expenditure. However, it is also clear from the letter that he could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." The provision contained in the proviso to this section is not applicable for the reason that although the original assessment was made under section 143(3), the action regarding issuance of notice under section 148 was taken before the expiry of four years from the end of the relevant assessment year. The facts in this connection are that the reasons were recorded on January 10, 2002 and return under section 148 was received on February 12, 2002, while four years, mentioned in the proviso, expired on March 31, 2003, about a year and a month after the issuance of notice under section 148. Therefore, what is to be seen is only whether the Assessing Officer had "reason to believe" that the income escaped assessment. The thrust of the arguments of learned counsel is that since assessment was made under section 143(3) and all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applicable to the facts of the case. The facts in the case of Prashant S. Joshi [2010] 324 ITR 154 (Bom) and Upasana Hospital and Nursing Home [1989] 31 ITD 177 (Cochin) are also distinguishable. On the other hand, we find that the facts of this case come closer to the facts of the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500. In that case, the hon'ble court came to the conclusion that there is no question of formation of opinion at the time of making intimation under section 143(1)(a). In this case, the Assessing Officer manifestly did not form any opinion as he had not received any report from the District Valuation Officer. It may be argued here on behalf of the assessee that it was the duty of the Assessing Officer to obtain the report within the limitation period for making original assessment. However, the assessee did not co-operate with the District Valuation Officer or the Assessing Officer as it did not furnish topographical data, which was essential for estimating the cubic feet of earth required for land-development. Therefore, giving benefit to the assessee on this account will amount to placing premium on his non-compliance. It may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment. On the basis of the aforesaid discussion, it can be safely said that there were reasons to reopen the assessment in regard to accounting for of the expenditure incurred on land development. Accordingly, it is held that the learned Commissioner of Income-tax (Appeals) was right in upholding the validity of notice issued under section 148. Since the reopening of the assessment has been held to be valid on the first ground itself, it is not necessary for us to go into other grounds mentioned in the reasons for this purpose. Nonetheless, it may be added that no argument was made from either side in respect of other grounds mentioned in the reasons except that the learned Departmental representative merely drew our attention to those reasons also. In the result, ground No. 1 is dismissed. Ground No. 3 is in regard to the merits of the addition made by the Assessing Officer and sustained by the learned Commissioner of Incometax (Appeals). It is mentioned that he erred in holding that the land development expenditure in this year amounted to Rs. 3,30,423, being 10 per cent. of the amount of Rs. 33,04,232 shown in the books of account. It is further mentioned that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure. Therefore, this amount has not been debited to the profit and loss account. Consequently, this amount has also not been claimed in computing the income. The assessee had filed nil return as the company had not commenced business operations in this year. We do not find any error in the order of the learned Commissioner of Income-tax (Appeals) in this regard. Therefore, his order does not require any interference in the matter. The assessee has also not taken any ground in this behalf. However, the assessee desires to give a finding of the quantum of expenditure in land development. As mentioned earlier, this question is only of academic interest. We do not find any reason to decide this ground. Thus, this ground is dismissed as infructuous. In view of our finding in respect of ground No. 3, it is also not necessary for us to decide whether the Assessing Officer acted in defiance of the directions of the Additional Commissioner of Income-tax, issued under section 144A of the Act. Therefore, ground No. 2, taken in this behalf, is also dismissed as infructuous. I. T. A. No. 3557(Del)/2004-Assessment year 1998-99-Appeal of the Revenue. The only ground taken by the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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