TMI Blog1998 (3) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the value of the said house. Necessary evidence, viz., vouchers, contractor's bills, etc., showing the cost of construction as Rs. 8 lakhs, relating to the construction of the property were also produced before the respondent and the same were accepted by the respondent by order dated December 24, 1985, accepting the notional property income as disclosed by the petitioner. In fact, the income-tax assessment for the next two assessment years, namely, 1983-84 and 1984-85 were also completed by orders of the respondent dated December 24, 1985. That apart, the value of the said property was also included by the petitioner in the wealth-tax returns as per the valuation as on March 31, 1982, being the valuation date for the assessment year 1982-83. The valuation of the property was made in accordance with rule 1BB of the Wealth-tax Rules, 1957, and accordingly, the wealth-tax assessment for the assessment year 1982-83 was also completed by the order dated March 6, 1987, passed by the respondent acting as the Wealth-tax Officer. But during the course of the proceedings for assessment to income-tax for the assessment year 1985-86 and the assessment to wealth-tax for the year 1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said house property had escaped the assessment within the meaning of section 147 of the Income-tax Act. Mr. P. P. S. Janarthana Raja, learned counsel for the petitioner, contends that there is no reason for the Assessing Officer to believe that the income chargeable to tax for the assessment year 1983-84 had escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. Mr. P. P. S. Janarthana Raja, learned counsel for the petitioner, further contends that the assessing authority failed to apply their mind to consider that the impugned building was constructed long before the assessment year 1985-86 and, therefore, the proposal for reassessing the income chargeable to tax for the assessment year 1983-84 on the basis of a valuation report dated March 24, 1988, and holding that the same had escaped assessment within the meaning of section 147, and the consequential impugned notice issued under section 148 of the Income-tax Act are wholly without jurisdiction. That apart, learned counsel for the petitioner, also contends that the respondent has failed to appreciate the valuation arrived at under rule 1BB of the Wealth-tax Rules, and in any event, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative remedy, and in support of this contention, learned counsel for the petitioner relies upon the decision in Thanthi Trust v. CBDT [1995] 213 ITR 639 (Mad). That apart, placing reliance on the decision in Uma Devi Jhawar (Smt.) v. ITO [1996] 218 ITR 573 (Cal), learned counsel for the petitioner contends that, assuming the petitioner has got an alternative remedy before the appellate authority against the proposed reassessment for the year 198384, when once it is contended that the very jurisdictional facts are lacking for issuing a notice under section 148 of the Act, and if this court is satisfied with the contention relating to the lack of jurisdictional facts, the notice issued under section 148 of the Act goes, and consequently, certainly, the order of assessment also would go. Learned counsel for the petitioner therefore contends that there is no substance in the objections of learned counsel for the respondent to dismiss the writ petition as not maintainable on the ground of alternative remedy. Learned counsel for the petitioner, further, relying upon the decision in Uma Devi Jhawar (Smt.) v. ITO [1996] 218 ITR 573 (Cal), contends that the valuation certificate cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail of the remedy of appeal." In view of the above decision of the Division Bench of this court, I have no other alternative except to accept the contentions of learned counsel for the petitioner that there is no justification in dismissing the writ petition which was admitted in 1988 and kept pending before this court for all these years. Therefore, I hold that even though alternative remedy is available under the Act, as the writ petition was admitted by this court during 1988 and kept pending for ten years, I do not think that it is justified to dismiss the writ petition on the ground of alternative remedy. Points Nos. 2 and 3 : Whether the petitioner is entitled to challenge the notice dated March 28, 1988, under section 148 of the Income-tax Act ? and If the writ petition is maintainable, as the petitioner is entitled to challenge the impugned notice dated March 28, 1988, whether the impugned notice is liable to be quashed ? Points Nos. 2 and 3 are inter-related : In this regard, it is necessary to refer to sections 55A, 147 and 148 of the Income-tax Act, 1961, which read as follows : "55A. With a view to ascertaining the fair market value of a capital asset for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.---Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.---For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :--- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of in come has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the position is slightly different. All that is necessary is that the Assessing Officer should have every reason to believe that a property has escaped assessment, whether by reason of underassessment or assessment at too low a rate or otherwise. The word 'otherwise' has to be given some meaning and it is not possible to contemplate or limit the circumstances under which an assessment can be reopened, because the property has not been correctly valued. All that can be said is that an Assessing Officer should not exercise the power arbitrarily or in a mala fide manner. So long as the Assessing Officer has some reason to believe that the property had escaped proper assessment, he can always exercise the power provided he does so within the period of limitation." No doubt, the Division Bench has held that if an assessing authority has reason to believe that a property has escaped assessment, it can always exercise a power to reassess the same, provided it does so within the period of limitation. Placing reliance on the said decision of the Division Bench by order dated June 26, 1997, in W. A. Nos. 1094 to 1096 of 1992 in K. R. Venkatesalu v. WTO [1999] 237 ITR 293, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 147(a) are satisfied. For invocation of jurisdiction under section 147(a), two conditions are to be satisfied ; firstly, the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, and secondly, he must have also reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to make a return of his income under section 139 or (ii) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both the conditions are conditions precedent to be cumulatively satisfied before the Income-tax Officer could assume jurisdiction to issue notice under section 148, read with section 147(a). When the validity of a notice issued under section 148 is in challenge, it is for the Income-tax Officer to satisfy the court that the aforesaid conditions have been satisfied. The expression 'reason to believe' means that there is a reason coupled with the belief. If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No reply was given by the Income-tax Officer. No copy of the recorded reasons was given to the appellant. The appellant filed a writ petition against the notice which was dismissed by a single judge. On appeal : Held, (i) that the judge was not right in denying the inspection of the records to the appellant ; (ii) that in an affidavit filed by the Income-tax Officer in the appeal it had been stated that the Departmental Valuation Officer had estimated the cost of construction at a higher figure. However, in the original assessment proceedings, the Tribunal had held that the assessee's valuer's report on the basis of which the addition of Rs. 48,182 had been made did not reflect the correct valuation and that since the assessee had maintained books of account the Income-tax Officer could not reject the same without pointing out defects. The Tribunal had accepted the cost of construction furnished by the assessee. This finding had become final and binding on the Income-tax Officer. The decision of the Tribunal was arrived at prior to the issue of the notice under section 148 on March 31, 1976. In the face of the aforesaid findings and the order of the Tribunal, the Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dency of an assessment including reassessment is a sine qua non for giving jurisdiction to the Assessing Officer to make a reference under section 55A of the Act. Section 55A has no relevance and cannot be applied after the assessment is completed and before the reassessment has commenced that is to consider the question whether the completed assessment is based on undervaluation. The Rajasthan High Court in Brig. B. Lall v. WTO [1981] 127 ITR 308, in a wealth-tax matter has succinctly put in the following words : '....notices under section 17 to the petitioners in all the above eight cases is based on the valuation report received under section 16A of the Act wholly and solely. This report is non est as being without jurisdiction, illegal, null and void and, therefore, the entire fabric for reopening these proceedings falls flat and the impugned notices deserve to be quashed. The notices are based on an absence of the existence of any legal foundation which could have given rise to a valid belief or reason to believe, as contemplated by section 17(1)(a) or could have provided information as contemplated by section 17(1)(b) of the Act. It can neither constitute information with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and an opening gate through which and through which alone, the Wealth-tax Officer can have access and approach to the Valuation Officer. The opening gate of section 16A is wholly, solely and exclusively governed and contained in the phrase "for the purpose of making an assessment" which, of course, can include the reassessment as per the definition of assessment as mentioned above.' For the purposes of this case, I am not entering into the controversy as to whether section 55A can at all be resorted to for the purposes of making an assessment or reassessment under section 143(3) or under section 147 of the Act inasmuch as the said section only applies in cases of computing and ascertaining the fair market value of a capital asset for computing the capital gains. The Punjab High Court in the Full Bench decision reported in Jindal Strips Ltd. v. ITO [1979] 116 ITR 825, has held that the section is only applicable in cases of capital gains whereas, the Andhra Pradesh High Court in Daulatram v. ITO [1990] 181 ITR 119, has held that the said provisions of section 55A also apply in cases of assessment under section 143(3) of the Act. For deciding the present case, I am proceeding on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards the progress of construction made during the year of assessment and there were no materials before the Income-tax Officer to challenge the same except an opinion of a valuer and that is not permissible in low. The court if satisfied that the present notices issued by the Income-tax Officer under section 148 of the Act beyond the period of four years were without jurisdiction and not in compliance with the provisions of sections 147 and 148 of the Act." In CIT v. Smt. Prem Kumari Surana [1994] 206 ITR 715 (Raj), it is held as follows : ".... on merits also, we find that the question has to be answered against the Department on the ground that no proceedings under section 147(b) of the Act could be initiated on the basis of the valuer's report. It is only an information which, without being substantiated by convincing evidence or circumstances, could not be the basis for reopening of an assessment order. In L. B. Kharawala v. ITO [1984] 147 ITR 67 (Guj), Dinkarrai Anantrai Mankad v. ITO [1985] 155 ITR 406 (Guj) and Sardar Kehar Singh v. CIT [1992] 195 ITR 769 (Raj), it has been held that the valuation report did not constitute information under clause (b) of section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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