2005 (1) TMI 73

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....cember 1970. The bifurcation of the expenditure involved in the construction of the properties is as under: Financial year 1968-69, relevant to the assessment year 1969-70   = Rs.   44,210. Financial year 1969-70, relevant to the assessment year 1970-71   = Rs.   60,687. Financial year 1970-71, relevant to the assessment year 1971-72  = Rs. 1,05,500. In the course of the assessment proceedings held for the assessment year 1971-72, the Assessing Officer, vide his letters dated March 25, 1974, and October 31, 1974, called upon the assessee to prove the cost of construction. Along with his reply, the assessee filed a valuation report dated January 21, 1972, prepared by Shri Matti Ram Sharma, valuer and consultant engineer. In that report, the cost of construction was shown as Rs. 3,18,300. The Assessing Officer finalised the assessment vide his order dated March 19, 1975, and assessed the income of the assessee at Rs. 5,660. After six months, he, on the basis of the valuation report prepared by the Departmental Valuation Officer (for short, "the DVO"), issued notice to the assessee under section 148 of the Income-tax Ac....

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....ed September 24, 1984. Both the Commissioner of Income-tax (Appeals) and the Tribunal held that the valuation report submitted by the DVO could be made the basis for initiation of action under section 147(a) of the Act. We have heard Shri Akshay Bhan, learned counsel for the assessee and Shri Rajesh Bindal, learned counsel for the Revenue, and carefully perused the record. Section 147 of the Act (as it stood prior to April 1, 1989) which was invoked by the Assessing Officer for making reassessment, reads as under: "147. If- (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, h....

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....d, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains, chargeable to income-tax has escaped assessment. Mere change of opinion in regard to the particular state of facts cannot be made the basis for initiation of action under section 147(a) of the Act. In Smt. Tarawati Debi Agarwal v. ITO [1986] 162 ITR 606, a learned single judge of the Calcutta High Court quashed the notice under section 147(a) of the Act by making the following observations: " ... in assuming jurisdiction under section 147(a), the Income-tax Officer did not have any prima facie ground for thinking that there had been any non-disclosure of material facts. The primary facts regarding the construction of the house had been disclosed by the assessee and it was for the Income-tax Officer to investigate into facts and find out whether the cost of construction as disclosed was correct or not. In any event, valuation was always a question of opinion and unless there was a clear finding on the basis of the material that....

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.... to reopen the assessment because she had disclosed fully and truly all material facts at the time of the assessments and that it was only on the basis of the subsequent valuation report obtained by the Income-tax Officer from the valuation cell of the Department that he proceeded to initiate the reassessment proceedings. The learned single judge relied on the judgments of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 and the Assam, Calcutta and Madhya Pradesh High Courts in Bajranglal Beria v. ITO [1972] 85 ITR 335; Rasiklal Jivanlal Shah v. ITO [1982] 133 ITR 476 and Jawaharlal Daryavbuxmal v. CIT [1982] 137 ITR 54 and held: "Mere change of opinion cannot be a ground for the Income-tax Officer to reopen an assessment which has already been finalised. A valuation report is nothing more than a mere opinion about the cost of construction or the fair market value of a building .... The Income-tax Officer could not, on the basis of a subsequent valuation report, come to the conclusion that the full cost of construction of the building was not disclosed at the time of the assessments and that the assessee was guilty of not disclosing fully and truly all....