Valuer's report on understated construction cost vs books supports s.148 reassessment after s.143(1) intimation; notice upheld.

A notice issued under s.148 was challenged as lacking jurisdiction where only an intimation under s.143(1)(a) had been sent and the alleged escapement arose from a valuer's report indicating that the cost of construction was understated vis-à-vis the books. The HC held that, given the breadth of s.147, reassessment can be initiated even after an intimation, and the Assessing Officer's failure to invoke s.143(2) earlier does not bar recourse to s.148 upon receipt of material. An expert valuation report showing a substantial discrepancy constitutes tangible material and provides "reason to believe" escapement of income. The s.148 notice was upheld and the writ petition dismissed.

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Issues involved: Notice u/s 148 of Income-tax Act, 1961 for escaped assessment based on valuation report discrepancy.

Summary:
The assessee challenged a notice issued u/s 148 of the Income-tax Act, 1961, alleging that the income assessable for the year 1999-2000 had escaped assessment due to a valuation report indicating a higher construction cost than initially reported. The assessee contended that the notice was without jurisdiction as all materials were disclosed with the return, which had been previously accepted under section 143(1)(a). The Revenue argued that the intimation under section 143(1)(a) was not an assessment but a mere acknowledgment of the return, and that a proper assessment could only be made under section 143(3). The court noted that under section 147, a notice u/s 148 can be issued for escaped income or reassessment, regardless of a prior assessment under section 143(3). The court held that the Assessing Officer had valid reason to believe in income escapement based on the valuation report, dismissing the writ petition challenging the notice.

The court analyzed the provisions of sections 140, 153, 199, and 219, along with section 143 itself, to determine the nature of the intimation under section 143(1)(a). It was argued that the intimation constituted an assessment, while the Revenue contended it was not an assessment but a demand under section 156. The court referred to a case law highlighting the distinction between "intimation" and "assessment" under section 143(1)(a), emphasizing that the power to assess escaped income under section 147 is not dependent on a prior assessment under section 143(3).

The court further discussed the requirements of section 147, emphasizing that the Assessing Officer must have a valid reason to believe in income escapement before issuing a notice u/s 148. The reliance on the valuation report to justify the belief of income escapement was deemed appropriate by the court, given the substantial gap in the reported construction cost. The court concluded that the notice u/s 148 was legally valid, dismissing the writ petition challenging its issuance.

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