TaxTMI 
TaxTMI 
2001 (11) TMI 216
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and without appreciating the fact that no proper opportunity of being heard had been given to the appellant. 4. That the CIT(A) has wrongly rejected the grounds of the appellant that in the absence of any defects in the construction accounts, in the books of account supported by vouchers, no reference could possibly be made to the D.V.O. for making an estimate. 5. That the CIT(A) has wrongly rejected the claims of the appellant for depreciation on the alleged unexplained cost of construction. He finds in this behalf to say the least show his utter ignorance of the provisions of the law. 6. That the CIT(A) has erred in not directing the Assessing Officer the allow the benefit of unabsorbed depreciation for assessment year 1967-68 as had been directed by the appellate authorities in earlier years. It is not understood as how allowance of unabsorbed depreciation for Assessment Years 1984-85 to 1988-89 could govern this position. Even otherwise the necessary claims had duly been made in the return. 7. That the order of the CIT(A) is against law and facts of the case and is liable to be set-aside." 2.1 We will deal with ground Nos. 1 to 4 and 7 since these grounds are in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; 5,562 1990-91 2,73,286 6,94,800 4,21,514 1991-92 2,66,260 6,76,900 4,10,640 1992-93 20,145 51,100 30,955 1993-94 80,560 2,04,700 1,24,140 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....relating to valuation of cost of construction to the Valuation Officer for the assessment year under consideration. However, the Assessing Officer referred the matter of valuation for the assessment year 1992-93 only. The Assessing Officer rejected the above contentions of the assessee and stated that the reference was made to the Valuation Cell to determine true and correct cost of construction of the building, in question, as on 31-3-1992. According to him, no specific assessment year was referred to the Valuation Cell. However, it was requested to the Valuation Cell to determine the cost of construction incurred by the assessee till 31-3-1992. According to the Assessing Officer, after obtaining the valuation report, it was found that the assessee had made unexplained investment in the construction of the above building. The other objections raised by the assessee viz. the valuation of property was done without proper identification of construction and without considering the accounts maintained by the assessee were rejected by the Assessing Officer. Even the objections raised through registered valuer of the assessee were rejected. The Assessing Officer concluded that the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d w.e.f. 1-4-1989 and the new provisions are reproduced below:- '147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year): 7. Most of the decisions relied on by the ld. counsel are not applicable as those were pronounced keeping in view the earlier provisions of section 147 of the I.T. Act. The facts in this case is that the return for assessment year 1989-90 was filed by the assessee on 26-12-1989 showing Nil income which was processed under section 143(1)(a). No further assessment order under section 143(3) were passed in this case. In the depreciation chart, there was reference to addition of building of Rs. 8,610 in c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Hon'ble Gujarat High Court in the case of P.C. Patel v. M.J. Makwana A.C.I.T. 236 ITR 832 (Guj.) and the decision in the case of Gruh Finance Ltd. v. Jt. CIT 243 ITR 482 (Guj.). These two decisions are based on the provisions of section 147 of I.T. Act after these were amended w.e.f. 1-4-1989. In the case of P.C. Patel, it was held that power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been complete disclosure of all relevant facts upon which correct assessment might have been based in first instance and whether it is error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings. The words 'escaped assessment' where the return is filed, cover the case of discovery of a mistake in the assessment caused by either erroneous consideration of transactions or due to its non-consideration or caused by mistake of law applicable to such transfer or transactions even where there has been complete disclosure of all relevant facts upon which correct assessment could have been based. Similar views were expressed by Hon'ble Gujarat High Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 6. On the other hand, Shri B.M. Verma, the learned D.R. strongly supported the orders of the authorities below. 7. We have carefully considered the rival submissions and have also perused the orders of the authorities below, as well as other materials placed on record. We have also considered the decisions which were brought to our notice by the parties at the time of hearing of the appeal. It is noticed that the assessee-company derives income from agricultural operations and running a cold storage. It is an admitted fact that the Assessing Officer processed the return of income under section 143(1)(a) filed on 26-12-1989. In other words, the Assessing Officer has accepted the returned income as true and correct. Subsequently, the Assessing Officer issued notice to the assessee under section 148 of the Act stating that the Valuation Cell of the Income-tax Department determined the cost of construction at Rs. 1,65,600 as against Rs. 65,136 as per the books of the assessee. The Assessing Officer was of the view that there was a difference of Rs. 1,00,464 between the cost of construction shown by the assessee and as determined by the D.V.O. Consequently, the Assessing Officer m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment year):. Section 148 reads as under:- "148(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, (as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.) (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. From the above, it would be clear that under section 147 the Assessing Officer can re-assess any income chargeable to tax if he has "reason to believe" that such income had escaped assessment for any assessment year. The expression "reason to believe has been considered by the Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asthan High Court in the case of Tara Chand Mundhra has held at pages 191-192 as under:- "In view of the law laid down by this court in the cases of Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar [1993] 200 ITR 788 and Smt. Prem Kumari Surana [1994] 206 ITR 715, it has been conclusively held by this court that the report of a valuer cannot singly be made the basis of information as required under section 147(b) of the Act to issue a notice under section 148 of the Act. No separate reasons have been furnished by the Department. The only reason discernible from the reply filed by the Department is that subsequent to the filing of the return by the assessee, the Department came into possession of the report of the official valuer of the Department and, thus, came to issue the notice under section 148 of the Act. As the only ground available with the Department for issuing notice under section 148 of the Act was held bad by this court, it can safely be held that the notice issued for reopening the assessment is a notice without foundation. As and when a notice is held to be without foundation then what would necessarily follow is that the law laid by the Supreme Court in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....geable to tax had escaped assessment far any assessment year. In the said case, re-assessment proceedings were initiated an the ground, that the assessee (petitioner) under-estimated the cost of construction of a commercial complex constructed during the year 1992-93 and the differential cast was attributable to unexplained income. The Hon'ble High Court quashed the notices under section 148 of the Income-tax Act, observing as under:- "Coming to the facts of the present case, the construction of the building complex was admittedly disclosed by the petitioner in the return and in the assessment, the cost of construction and sources of investment were specifically gone into by the Assessing Officer. It appears that there was a search in the year 1993. It is not the case of the Revenue that in the course of search operations any incriminating material which has a bearing on the cost of construction of the building, had come to light. The petitioner or his representative did not make any statement that the construction cost was more than what was disclosed earlier. Nearly four years later, the Deputy Commissioner obtained a report from the Valuation Cell, which revealed that the cos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng counsel for the Department has submitted that the petitioner had shown the differential cost proportionately in the declarations relating to assessment years filed under the Kar Vivad Samadhan Scheme and that itself would furnish a legitimate basis for reassessment. We find it difficult to accept this contention. The decision to initiate reassessment proceedings is not based on that ground. Nothing is mentioned about the declarations filed under the Kar Vivad Samadhan Scheme in the reasons recorded by the Assistant Commissioner. It is well-settled that the Court cannot go beyond the recorded reasons, nor can it take into account any supplementary reasons which did not enter into the mind of the assessing authority at the time of issuing the reassessment notice. For the above reasons, we are constrained to quash the impugned notice issued under section 148 of the Act and allow the writ petition. No costs. 7.4 From the above discussion, it would be clear that in the instant case, the assessee was maintaining proper books of account. The Assessing Officer has not rejected the book results. He has also not stated that the assessee's books of account are not reliable. Therefore....