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Hotel Celebration Versus Income Tax Officer

2017 (6) TMI 785 - GUJARAT HIGH COURT

Reopening of assessment - reference to DVO - determination of value of property - Held that:- . Since the Assessing Officer relies only on the DVO's report it is difficult to appreciate how he contends that the present petitioner had made any unaccounted investment in construction. If we peruse the reasons recorded by him more minutely, we find that a rather unconventional approach was adopted by the Assessing Officer to project the cost of construction over the entire span of financial year 200 .....

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er 20.09.2005. In any case, the same could not have been done without basis or further opinion available with the Assessing Officer. Only in the present case, we are concerned with the reopening of an assessment which was previously framed after scrutiny and whet her such notice is issued beyond a period of four years from the end of the relevant assessment year. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 837 of 2014 - Dated:- 15-6-2017 - MR. AKIL KURESHI, AND MR. BIREN VAI .....

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rlier, one of the partners of the firm Mr. Jagdish Bhatt had started construction for the purpose of running a hotel by the name Hotel Celebration as properitory concern. Substantial portion of the construction was carried on between 01.04.2004 and 31.03.2004. Construction continued in the next financial year also. For some point, the proprietor wanted to transfer the business of running the hotel. The present petitioner-partnership firm was constituted, who took over the under-construction hote .....

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ny addition on the score. Subsequently, notice for reopening of the assessment was issued on the basis that according to DVO total investment in construction during the period between 01.04.2004 to 01.07.2005 was ₹ 1.82 crores. According to the Assessing Officer, the assessee had shown the cost of construction upto 20.09.2005 only at ₹ 64.11 lacs. On such basis, the assessment was reopened. 3. In case of the present petitioner, the assessment of the return for the year 2006-07 was si .....

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lue of property, known as Hotel Celebration during the course of assessment proceedings u/s. 143(3) in case of M/s. Hotel Celebration, Jamnagar. However, valuation report was not received till the completion of time barring Assessment year 2006-07 i.e. 31.12.2008. During the course of assessment proceedings total value of land and building was declared by assessee was ₹ 64,11,464/- for land and building up to 20.09.2005 and ₹ 66,87,372/- at the end of year i.e. 31.03.2005. 3. The val .....

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e activity, partnership firm in the name of Hotel Celebration took over the running business of Hotel Celebration as a going concern within effect from 20.09.2005. Copies of ledger accounts of all assets together with copies of bills are submitted herewith. You may kindly note that the opening balance mentioned in the ledger account is balance incurred upto the date of the formation of partnership. 5. It is seen that assessee firm has debited expenditure on its account ₹ 2,75,908 (66,87,37 .....

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377; 1,82,16,349/- against total investment declared by the assessee for ₹ 65,87,372/-. Thus proportionate investment not declared by the firm for the period from 21.09.2005 to 31.03.2006 to the tune of ₹ 4,75,663/- (7,51,571-2,75,908) as per the e detail working in Table A & B below which has escaped the assessment and assessee firm has failed to declare fully and truly all material facts necessary for assessment year 2006-07 regarding expenditure incurred for construction of Ho .....

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2,98,171 2,75,908 Proportionate Expenditure during F.Y. 2005-06 as per valuation report On partner's account Proportionate Expenditure during F.Y. 2005.06 as per valuation report. On Firm's account Proportion Expenditure during F.Y. 2005 as per valuation report. ₹ 70,11,772 62,60,199 7,51,571 In view of the above, I have reason to believe that the income chargeable to income tax escaped assessment at least to the above extent for the above Assessment year within the meaning of sect .....

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377; 1.82 crores during financial years 2004-05 and 2005-06. 5. Though these reasons do not indicate further details of the report of the DVO, reasons recorded by the Assessing Officer in case of the properietor for reopening his assessment for the assessment 2005-06 show that according to the valuer, the said investment of ₹ 1.86 crores was made during the period between 01.04.2004 and 01.07.2005. We have tried to verify whether the latter date 01.07.2005 was a typographical error. Howeve .....

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er the hotel business. The partnership can be made accountable for the cost of construction after the said date. Since the Assessing Officer relies only on the DVO's report it is difficult to appreciate how he contends that the present petitioner had made any unaccounted investment in construction. If we peruse the reasons recorded by him more minutely, we find that a rather unconventional approach was adopted by the Assessing Officer to project the cost of construction over the entire span .....

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