2008 (2) TMI 479 - AT - Income Tax

Tribunal upholds reassessment based on valuation report, citing valid reasons.

Income-Tax Officer. Versus Dr. Dinesh Dua.

Income-Tax Officer. Versus Dr. Dinesh Dua. - ITD 123, 409, TTJ 120, 545, Issues Involved:1. Validity of the reassessment order based on the valuation report.2. Applicability of the decision in Girdhar Gopal Gulati vs. Union of India & Ors.3. Whether the reopening of the case under Section 147 was a change of opinion.4. Validity of the reference to the Valuation Officer post the decision in Smt. Amiya Bala Paul vs. CIT.5. Distinguishability of facts between the present case and cited precedents.Issue-wise Detailed Analysis:1. Validity of the Reassessment Order Based on the Valuation Report:The Revenue contested the CIT(A)'s decision to annul the reassessment order, arguing that the reassessment was validly based on the valuation report from the District Valuation Officer (DVO). The original assessment was completed under Section 143(3), and the reassessment was initiated after receiving a DVO report that indicated a higher cost of construction than initially declared by the assessee. The Tribunal found that the DVO's report constituted sufficient reason to believe that income chargeable to tax had escaped assessment, thus justifying the reassessment under Section 147.2. Applicability of the Decision in Girdhar Gopal Gulati vs. Union of India & Ors.:The CIT(A) relied on the decision in Girdhar Gopal Gulati to annul the reassessment, holding that the notice under Section 148 was issued solely based on the DVO's report, which constituted a change of opinion. However, the Tribunal distinguished the facts of the present case from Girdhar Gopal Gulati, noting that in the latter, the AO had conducted detailed inquiries and accepted the assessee's valuation, whereas in the present case, the AO had not conducted any inquiry into the cost of construction before completing the assessment. Therefore, the Tribunal held that the decision in Girdhar Gopal Gulati was not applicable.3. Whether the Reopening of the Case Under Section 147 was a Change of Opinion:The Tribunal examined whether the reopening of the assessment constituted a change of opinion. It was noted that the AO had not formed an opinion on the cost of construction during the original assessment, as he had merely placed the approved valuer's report on record without any discussion or inquiry. The Tribunal referred to the decision in Consolidated Photo & Finvest Ltd. vs. Asstt. CIT, which clarified that a change of opinion occurs only when the AO has consciously applied his mind to an issue and formed an opinion. Since no such conscious application of mind occurred in the present case, the Tribunal concluded that the reopening was not a change of opinion.4. Validity of the Reference to the Valuation Officer Post the Decision in Smt. Amiya Bala Paul vs. CIT:The CIT(A) had held the reference to the valuation officer invalid based on the Supreme Court's decision in Smt. Amiya Bala Paul vs. CIT. However, the Tribunal noted that this decision was rendered ineffective by the insertion of Section 142A by the Finance (No. 2) Act, 2004, which authorized references to the Valuation Officer with retrospective effect. Therefore, the Tribunal held that the reference to the DVO was valid.5. Distinguishability of Facts Between the Present Case and Cited Precedents:The Tribunal distinguished the present case from various precedents cited by the assessee, noting differences in the factual scenarios and the legal provisions applicable at the time. For instance, many cited cases involved pre-amendment Section 147, which required 'information' for reopening assessments, whereas the present case fell under the post-amendment Section 147, which only required 'reason to believe' that income had escaped assessment.Conclusion:The Tribunal concluded that the CIT(A) was not justified in annulling the assessment. The matter was restored to the CIT(A) for a fresh examination on merits, with directions to provide an opportunity for hearing to both the assessee and the AO. The appeal filed by the Revenue was allowed for statistical purposes.