M/S Royal Garden v. Income Tax Officer, Una

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.CWP No. 7731 of 2012-D. Decided on: July 09, 2013. M/s Royal Garden ……Petitioner. Versus Income Tax Officer, Una. …….Respondent. Coram The Hon’ble Mr. Justice A. M. Khanwilkar, Chief Justice. The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting? For the petitioner:M/S. C.S.Anand, S. Kapoor and Ashish Verma, Advocates. For the respondent:Ms. Vandna Kuthiala, Advocate, vice counsel. ---------------------------------------------------------------------------------------------- Justice A. M. Khanwilkar, C.J. (Oral) Heard counsel for the parties. 2. Rule. Rule made returnable forthwith, by consent. Counsel for the respondent waives notice. As short question is involved, the petition is taken up for final disposal forthwith, by consent. 3. The petition essentially takes exception to the show-cause notice issued by the Income Tax Officer, Una dated 5.10.2011. It is not in dispute that the assessment year in question is 2007-08. Notice issued is under Section 148 of the Income Tax Act, 1961. The reasons recorded for issuing the said notice are as follows: “Annexure M/S. Royal Garden Hotel, Nichla Tahliwal, Distt. Una-A.Y. 2007-08- Reasons:- In this case assessment was completed u/s 143(3) of the I.T. Act vide order dated 30-12-2009 at total income of Rs. 125000/-. The assessee had made investment in the construction of Hotel during the period under assessment and subsequent years. The matter was referred to the Department Valuer for estimating the investment made in the hotel vide this office letter dated 07-10-2009 and he was requested to send the report by 15-11-2009. However, the valuation report was not received from the departmental valuer till 30-12-2009. Since the case was barred by time limitation on 31-12-2009, the assessment was completed subject to valuation of building by the departmental valuer. The departmental valuer submitted his report vide his letter No. VO/PTA/IT-14/2009-10/104 dated 03-06-2010. As per valuation report total investment in the building during the period relevant to the assessment year 2007-08, was estimated at Rs. 4831300/- as against at Rs. 3462128/- declared by the assessee resulting in diference of Rs. 1369172/- in the investment declared by the assessee and estimated by the departmental valuer. Hence the assessee has made investment of Rs. 1369172/- out of its undeclared sources of income. I therefore, have reasons to believe that income of Rs. 1369172/- has escaped assessment in this case. It is requested that sanction for issue of notice u/s 148 as required u/s 151(1) of the I.T. Act may kindly be accorded. (R.K.PAWLA) Income Tax Officer , Una.” 4. According to the petitioner, the Income Tax Officer cannot take recourse to remedy under Section 148 by relying on the valuation report made available to him at a later point of time. This position is well settled. 4. According to the petitioner, the Income Tax Officer cannot take recourse to remedy under Section 148 by relying on the valuation report made 5. Counsel for the department, however, submits that the basis on which this argument is canvassed is incorrect. According to the learned counsel for the department, the valuation report was very much available with the Assessing Officer as it was sought by making reference under Section 142A of the I.T. Act. Counsel for the department, relies on the un-reported decision of the Delhi High Court in case ACC Ltd. Versus District Valuation Officer and ors. decided on 21.5.2012, in support of the argument that if the valuation report has been obtained pursuant to reference, that can certainly be the basis to invoke 4. According to the petitioner, the Income Tax Officer cannot take recourse to remedy under Section 148 by relying on the valuation report made 5. Counsel for the department, however, submits that the basis on which this argument is canvassed is incorrect. According to the learned counsel for the department, the valuation report was very much available with the Assessing Officer as it was sought by making reference under Section 142A of the I.T. Act. Counsel for the department, relies on the un-reported decision of the Delhi High Court in case ACC Ltd. Versus District Valuation Officer and ors. decided on 21.5.2012, in support of the argument that if the valuation report has been obtained pursuant to reference, that can certainly be the basis to invoke powers under Section 148 of the Act. However, this is not a fact stated in the reasons recorded. In this view of the matter, the petition ought to succeed. 6. Counsel for the department submits that in that case, the Income Tax Officer will withdraw the impugned reasons recorded, which are the basis for issuing the said notice and record fresh reasons incorporating the correct factual position and then proceed in the matter in accordance with law. In view of this submission, the petition is disposed of on the understanding that the show-cause notice dated 5.10.2011 does not survive and is effaced from the record since reasons recorded on the basis of which the same was issued have been withdrawn by the Income Tax Officer with liberty to record fresh reasons and proceed in the matter, in accordance with law. We are not expressing any final opinion given on the merits of the contention. 7. The petition is disposed of, leaving all questions open. ( A. M. Khanwilkar), Chief Justice. July 09, 2013, (karan/tr) ( Kuldip Singh), Judge.