TMI Blog2019 (6) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... a mistake committed by the AO, which amounts to information as held by the Supreme Court in Kalyanji Mavji Co. [ 1975 (12) TMI 2 - SUPREME COURT] . Even otherwise, the final report of DVO was submitted on 12-6-2015, after the assessment. Thus, this was not available earlier. In ACC Ltd. v District Valuation Officer and Others [ 2012 (5) TMI 505 - DELHI HIGH COURT] had an occasion to consider a similar matter where also DVO's report was called, but was not available, therefore, the protective assessment order was passed mentioning that the capital gain is computed on the basis of the revised claim submitted by the assessee, but on receipt of the valuation report, long term capital gain would be recomputed on the basis of the said valuation report. The belief of the ITO/AO being based on the germane and relevant information which has rational connection for formation of belief, the sufficiency of reasons for forming such belief is not for the Court to judge. The Court can interfere only to a limited extent as to whether there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. The wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Single Judge, thereby quashing the reassessment proceedings under Section 147 of the Income Tax Act, 1961 (for short 'the Act') by issuing notice under Section 148 of the Act; also quashing the order rejecting the preliminary objection preferred by the assessee and imposing cost of ₹ 15,000/- on the revenue. 2. When the writ petition was filed on 16-12-2016 the challenge was only to the notice issued on 21-9-2015 (Annexure - P/6 to WP) under Section 147 of the Act; order dated 13-12-2016 (Annexure - P/9 to WP); order dated 12-6-2015 (Annexure P/5 to WP) under Section 55A of the Act read with Section 16A(5) of the Wealth Tax Act, 1957 (for short 'the Act, 1957'); and the notice under Section 55A of the Act read with Section 16A(4) of the Act, 1957, however, during pendency of the petition the final assessment order was passed on 20-12-2016, therefore, the writ petitioner amended the writ petition to challenge the said assessment order also. The learned Single Judge has allowed the main prayers made in the writ petition. 3. Relevant facts giving rise to the present appeal are that the case of the assessee for assessment year 2011-12 was reopened after ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r before 31-3-2015 and requested the AO to pass protective assessment order subject to rectification on receipt of final valuation report as it was a time barring case. 5. In the above circumstances, the AO passed the protective order of assessment on 31-3-2015 subject to receiving the final valuation report. The AO received the final valuation report dated 12-6-2015, on 18-6-2015 and thereafter the Department proceeded against the assessee for taxing the capital gain amount which has escaped the assessment, as the AO reached to the conclusion that the income on account of capital gain was not correctly disclosed by the assessee and hence there was reason to believe that the said income under the head Capital gain has escaped assessment within the meaning of section 147 of the Act. 6. The assessee was issued notice under Section 148 on 21-9-2015 after obtaining necessary approval of the JCIT. In response the assessee requested for the reasons for reopening of assessment. The reasons recorded were eventually supplied to the assessee after which she filed objections requesting the AO to drop the proceedings. The objection was dismissed by the AO vide order dated 13-12-2016. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner of Income Tax Others [WPT No.234 of 2018 (decided on 5-4-2019) and other connected matter]. Reliance is also made to the decision rendered by the Delhi High Court in R. Dalmia v Union of India (UOI) and Others (Civil Writ Petition No.316-D of 1965 (decided 27-7-1971), The Commissioner of Income Tax Another v Sri N. Nagaraja [ITA No.1302/2006 ITA No.1304/2006 (decided on 13-8-2012)] and S. Narayanappa and Others v Commissioner of Income Tax, Bangalore [(1967) AIR (SC) 523]. 11. Referring to the compilation submitted by the appellant, learned counsel has distinguished the judgments relied by the writ Court while allowing the writ petition. It is further submitted that the orders passed by this Court in Arun Kumar Agrawal (supra), Hariom Rice Mill Private Limited (supra) and M/s. Precision Engineering (supra) were relied before the writ Court. 12 . Shri Siddharth Dubey, learned counsel appearing for the respondent/writ petitioner, per contra, would argue that the condition precedent for invoking Section 147 does not exist inasmuch as there is no foundation or material for forming reason to belief, therefore, the order passed by the learned Single Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Courts of law which decide Income-tax matters. Whether the ground on which the original assessment is based is held to be erroneous by a Supreme Court in some other case, that will also amount to a fresh information which comes into existence subsequent to the original assessment. A subsequent Privy Council decision is also included in the word 'information'. Thus it is very difficult to lay down any hard and fast rule. But this Court has in two leading cases laid down some objective tests and principles to determine the applicability of Section 34(1)(b) of the Act which we shall now discuss. xxx xxx xxx An analysis of this case would clearly show that the information as contained in Section 34(1)(b) must fulfill the following conditions: (1) the information may be derived from an external source concerning facts or particulars as to law relating to a matter bearing on the assessment: (2) that the information must come after the previous or the original assessment was made. In fact the words in consequence of information as used in Section 34 (1) (b) clearly postulate that the information must be subsequent to the original assessment sought to be reopened; and (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment. 15. In Assistant Commissioner of Income-Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC) the Supreme Court spelt out the twin requirements which had to be satisfied as a sine qua non for a valid reassessment notice: firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. 16. The Supreme Court in Phool Chand Bajrang Lal and Another v Income Tax Officer and Another AIR 1993 SC 2390 emphasised on the veracity of inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. It is held therein that since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge. 18 . In Income Tax Officer, Calcutta v Selected Dalubrand Coal Co. Pvt. Ltd. (1997) 10 SCC 68, the Supreme Court held as follows: At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was a invalid. Inasmuch as, as a result of our order, the reassessment proceedings have now to go on, we do not and we ought not to express any opinion on merits. 19 . In Commissioner of Income Tax and Others v Chhabil Dass Agarwal (2014) 1 SCC 603, the Supreme Court was dealing with a case of reassessment wherein the assessee was issued notice under Section 148 of the Act, 1961. After the assessment was completed, the assessee, ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition as the said proceedings came to be filed against the show-cause notice. We have repeatedly held that in the absence of factual foundation, it would be impossible to decide matters of this kind. When the doctrine of promissory estoppel is invoked, the doctrine needs to be based on factual data which has not been pleaded. The High Court should not have interfered in the matter. In these cases, the writ petition was filed without reply to even the show-cause notice. In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue. 21 . In Commissioner of Income-tax, Gujarat Vs. Vijaybhai N. Chandrani 2013 AIR SCW 4675, it has been held thus:- 14. In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted on 17-3-2015 and that the valuation report was prepared under Section 55A after affording opportunity of hearing to the petitioner. This report prepared in exercise of powers under the Act was not properly considered and given effect to in the original assessment and has, thus, escaped assessment due to inadvertence or a mistake committed by the AO, which amounts to information as held by the Supreme Court in Kalyanji Mavji Co. (supra). Even otherwise, the final report of DVO was submitted on 12-6-2015, after the assessment. Thus, this was not available earlier. 23. In ACC Ltd. v District Valuation Officer and Others (2013) 357 ITR 160 the Division Bench of Delhi High Court {Sanjiv Khanna, J. {as His Lordship then was} and R.V. Easwar, J.} had an occasion to consider a similar matter where also DVO's report was called, but was not available, therefore, the protective assessment order was passed mentioning that the capital gain is computed on the basis of the revised claim submitted by the assessee, but on receipt of the valuation report, long term capital gain would be recomputed on the basis of the said valuation report. The assessee relied on the judgment r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and cannot be relied upon without the books of account maintained by the assessee being rejected. While coming to this conclusion, the Court relied on the judgment of the Supreme Court dated 19.10.2009 in Civil Appeal No. 6973/2009, in which case the Supreme court had held that without rejecting the books of accounts, the Assessing Officer could not have referred the matter to the DVO for the purpose of making an addition for undisclosed investment. It will be noticed that the judgment of this Court in Smt. Suraj Devi's case was not concerned with the validity of a reference made to the DVO under Section 55A of the Act for the purpose of estimating the fair market value of a property as on 01.04.1981 for computing the capital gains nor was the Court concerned with the validity of a reference made to the DVO under Section 55A, which was pending when the assessment order was passed (proceedings were completed). This judgment does not touch upon the point raised by the petitioner in the present writ petition. 24. Before the Delhi High Court also the assessee had argued that the DVO's report cannot be treated to be a material for forming reason to belief. Negativing the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair market value of the land as on 01.04.1981 was ₹ 21,72,95,000/-. It was on this basis that the Assessing Officer took the view that the valuer's report filed by the petitioner showed the figure on higher side and came to the conclusion that the matter should be referred to the DVO for valuation. The Assessing Officer obviously had the registered valuer's report filed by the petitioner before him. It cannot, therefore, be said that he had no basis or material to form the opinion that a reference ought to be made to the DVO. The reference was made before the assessment order was passed and during the pendency of the assessment proceedings. The contention of the petitioner to the contrary is therefore rejected. 25. The belief of the ITO/AO being based on the germane and relevant information which has rational connection for formation of belief, the sufficiency of reasons for forming such belief is not for the Court to judge. The Court can interfere only to a limited extent as to whether there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. The writ Court at the stage of is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the writ petition challenging the reassessment notice in Arun Kumar Agrawal (supra), Hariom Rice Mill Private Limited (supra) and M/s. Precision Engineering (supra) on the basis of law laid down by the Supreme Court in Phool Chand Bajrang Lal (supra) and Chhabil Dass (supra). In those matters the writ petitions were dismissed as not maintainable. 30. In so far as the decision of the Supreme Court in Dhariya Construction Company (supra) is concerned, it is to be seen that when the reassessment notice is issued only on the basis of DVO's report without application of mind, the same may not be permissible in law, but in the case in hand, the writ petitioner herself submitted two different valuation reports and thereafter, the DVO's report was called for under Section 55A of the Act and thereafter, the reasons recorded was with due application of mind and not merely by mechanically referring to the DVO/AVO's report. 31. In so far as the issue as to whether the revenue should have resorted to Section 263 of the Act instead of Section 147 is concerned, it is to be noted that if issuance of reassessment notice is on the basis of information or material having founda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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