TMI Blog2015 (11) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 of the Act is without authority of law, and hence, the impugned notice cannot be sustained. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 12303 of 2014 - - - Dated:- 4-11-2015 - MS. HARSHA DEVANI AND MR. A.G.URAIZEE, JJ. FOR THE PETITIONER : MR RK PATEL, ADVOCATE FOR THE RESPONDENT : MR NITIN K MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. This petition under Articles 226 and 227 of the Constitution of India is directed against the notice dated 28th March, 2014 issued by the second respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), reopening the assessment of the petitioner for assessment year 2007-08. 2. The petitioner, a firm, filed its return of income for assessment year 2007-08 on 17.10.2007, which came to be processed under section 143(1) of the Act. The second respondent has thereafter issued the impugned notice under section 148 of the Act seeking to reopen the assessment of the petitioner for assessment year 2007-08. In response to the notice, the petitioner requested the respondent Assessing Officer to furnish the reasons recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef that income chargeable to tax has escaped assessment and hence, the assumption of jurisdiction on the part of the Assessing Officer by issuance of notice under section 148 of the Act is without authority of law. Reliance was also placed upon the decision of the Supreme Court in the case of Sargam Cinema v. Commissioner of Income Tax , (2010) 328 ITR 513 (SC) , wherein the court held that the Tribunal decided the matter rightly in favour of the assessee, inasmuch as, the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer without the books of account being rejected. The court noted that in the facts of the said case, a categorical finding was recorded by the Tribunal that the books were never rejected. The court, accordingly, held that the reliance placed upon the report of the DVO was misconceived. It was submitted that in the facts of the present case, the Assessing Officer has referred the matter to the DVO without rejecting the books of account and hence also, no reliance can be placed upon such report of the DVO. 4. Vehemently opposing the petition, Mr. Nitin Mehta, learned Senior Standi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court cannot examine the sufficiency of the material. On facts, the court was of the opinion that the reference made to the Departmental Valuation Cell for the purposes of determination of the investment in the construction of building cannot be said to be without the authority of law. The valuation report disclosed higher investments in the constructions which had not been disclosed in the books of account. Thus, there was escaped assessment. The court was of the opinion that the Departmental Valuer s report constitutes material for entertaining a belief of escaped income in the years under consideration. Reliance was placed upon the decision of the Delhi High Court in the case of Bawa Abhai Singh v. Deputy Commissioner of Income Tax , (2002) 253 ITR 83, wherein, it was held that the report of the District Valuation Officer constitutes the reasons for entertaining a belief about escapement of an income. The court held that there was material on record to form the belief that there was escaped assessment for the assessment years under consideration. It was submitted that the above decision would be squarely applicable to the facts of the present case and therefore, the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.2(3)/DVO/2013-14/1001 dated 13.03.2014, the DVO has determined the cost of construction as ₹ 30,68,87,047/- in place of ₹ 27,73,76,009/- claimed by the assessee. Therefore, there is difference of ₹ 2,95,11,038/- in total cost of construction as claimed by assessee and as estimated by DVO. As per DVO s report yearwise cost of construction is as follows: Financial Year Cost of Investment (Rs.) 2006-07 Rs. 1,12,99,370/- ₹ 1,35,76,068.44 2007-08 ₹ 8,30,30,382/- ₹ 9,40,35,567.90 2008-09 Rs.14,89,87,108/- Rs.16,38,51,540.39 2009-10 ₹ 3,16,64,004/- ₹ 3,30,74,509.01 2010-11 ₹ 18,71,192/- ₹ 18,36,932.23 2011-12 ₹ 5,23,953/- ₹ 5,12,429.23 Total Rs.27,73,76,009/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12, had referred the matter to the DVO for determining the cost of construction of the project of the assessee. Based upon the report of the DVO, the Assessing Officer has sought to reopen the assessment for the year under consideration on the ground that the assessee has under reported the cost of investment to the tune of the difference between the cost of investment as declared by the assessee and as estimated by the DVO s office. It is the case of the learned counsel for the respondents that the Assessing Officer has duly applied his mind by referring to the return of income and noting that no expenses have been debited in the profit and loss account and also that the balance sheet or the return of income does not indicate any inventory or stock in process. Therefore, there is application of mind on the part of the Assessing Officer to the report of the DVO warranting assumption of jurisdiction under section 147 of the Act. 8. The record of the case reveals that for the year under consideration, the petitioner had not claimed any deduction under section 80IB (10) of the Act and therefore as there was no profit, the same was not indicated in the profit and loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of inquiry made by him, except for the report of the DVO, there was no tangible material for the Assessing Officer to form the belief that income chargeable to tax has escaped assessment. As held by the Supreme Court in the case of Assistant Commissioner of Income Tax v. Dhariya Construction Co. (supra), the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Act. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. 11. In the light of the above discussion, this court is of the view that on the reasons recorded by the Assessing Officer, he could not have formed the belief that the income chargeable to tax has escaped assessment. Under the circumstances, the very assumption of jurisdiction under section 147 of the Act on the part of the Assessing Officer by issuing the impugned notice under section 148 of the Act is without authority of law, and hence, the impugned notice cannot be sustained. 12. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 28th March, 2014 issued by the second re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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