Unreliable valuation material and unproved benami claim led to deletion of additions and writ relief despite alternate remedy.

Reopening of an amnesty-covered assessment year was held unsustainable absent a positive finding that the earlier disclosure or asset valuation was incorrect. Additions based on a higher PWD valuation and an uncorroborated loose slip were deleted because the material was unreliable. Sale proceeds, loans, and jewellery receipts were not treated as unexplained income where supporting records and verification existed, and section 54F benefit was not denied on the facts. The three FDRs were held to belong to Shri Jayanti Lal Patel, as benami ownership was not proved. Mala fides in the assessment orders justified writ relief despite the alternate remedy.

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Issues: (i) whether the assessment for the amnesty-covered assessment year could be reopened without a positive finding that the declared income or asset valuation was incorrect; (ii) whether additions based on the PWD valuation report of the house and on a loose slip said to be found during search were sustainable; (iii) whether the sale proceeds of the plots and the loans and jewellery receipts could be treated as unexplained income, including denial of benefit under section 54F; (iv) whether the three FDRs standing in the name of Shri Jayanti Lal Patel belonged to Dr. Tomar or to Shri Patel; and (v) whether the writ petition could be entertained despite the alternate remedy in view of mala fides.

Issue (i): whether the assessment for the amnesty-covered assessment year could be reopened without a positive finding that the declared income or asset valuation was incorrect.

Analysis: The reopened assessment for the earlier year was not supported by a clear adverse finding that the income earlier disclosed was false or that the asset valuation could lawfully be disturbed. The Court treated the reopening as unjustified in the absence of such a positive basis.

Conclusion: The reopening was not sustainable and was against the assessee.

Issue (ii): whether additions based on the PWD valuation report of the house and on a loose slip said to be found during search were sustainable.

Analysis: The house valuation was supported by the departmental valuer and the approved valuer, while the higher PWD valuation had already formed the basis of a criminal complaint that was quashed. The loose slip was neither shown to be in the assessee's handwriting nor corroborated by the seller's or agent's accounts. The Court found no reliable material to sustain additions on either basis.

Conclusion: The additions based on the PWD valuation report and the loose slip were unsustainable and were against the revenue.

Issue (iii): whether the sale proceeds of the plots and the loans and jewellery receipts could be treated as unexplained income, including denial of benefit under section 54F.

Analysis: The sale transactions with N.K. Enterprises and Roopam Corporation were supported by agreements, receipts, and later departmental verification. The same amount was wrongly added more than once in different hands. The loans were supported by affidavits, departmental status of the creditors, and in some cases civil decrees, while the jewellery sale proceeds had been declared in wealth-tax proceedings. The Court also held that the benefit under section 54F could not be denied on the facts found.

Conclusion: The impugned additions on these counts were not justified and were against the assessee.

Issue (iv): whether the three FDRs standing in the name of Shri Jayanti Lal Patel belonged to Dr. Tomar or to Shri Patel.

Analysis: The FDRs were in the name of Shri Patel, who claimed ownership and explained the source through his NRI bank account and foreign remittances. The burden to prove a benami arrangement lay on the authority asserting it, and the record did not establish that the deposits belonged to Dr. Tomar. The Court also noted the statutory prohibition against benami transactions.

Conclusion: The FDRs were held to belong to Shri Jayanti Lal Patel and not to Dr. Tomar.

Issue (v): whether the writ petition could be entertained despite the alternate remedy in view of mala fides.

Analysis: The Court found the assessment orders to be vitiated by mala fides in fact and in law, and therefore treated the alternate appellate remedy as neither efficacious nor a bar to writ jurisdiction. In the peculiar circumstances, interference under Article 226 was held appropriate.

Conclusion: The writ jurisdiction was properly invoked and the alternate remedy did not bar relief.

Final Conclusion: The assessment orders were set aside, the disputed additions were deleted, the FDRs were directed to be released to Shri Jayanti Lal Patel through Dr. Tomar as custodian, and the matter was finally concluded in favour of the assessee.

Ratio Decidendi: Additions under the income-tax law cannot be sustained on conjecture, uncorroborated loose papers, or unreliable valuation material, and a benami inference must be proved by the party asserting it; where the impugned assessment is shown to be mala fide and unsupported by cogent evidence, writ relief under Article 226 is available despite an alternate remedy.

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