M/S Shiv Vilas Resorts Pvt. Ltd v. The Asstt. Commissioner Of Income Tax & Ors. (S.b. Civil Writ Petition

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN, JAIPUR BENCH, JAIPUR. JUDGMENT M/s Shiv Vilas Resorts Pvt. Ltd.Vs.The Asstt. Commissioner of Income Tax & Ors. (S.B. Civil Writ Petition No.1090/2010) S.B. Civil Writ Petition under Articles226 & 227 of the Constitution of India. Date of Judgment: January 27, 2011 PRESENT HON'BLE MR. JUSTICE R.S. CHAUHAN Mr.Mahendra Gargieya, for the petitioner. BY THE COURT: REPORTABLE Aggrieved by the reference made to the DistrictValuation Officer ('DVO' for short) under Section 142A of theIncome Tax Act, 1961 ('the Act', for short) by the AssessingOfficer ('AO' for short), vide letter dated 29.12.2009, thepetitioner has approached this Court. Briefly, the facts of the case are that the petitioneris a Private Limited Company, registered under the provisionsof Companies Act, 1956. Styled and running as Shiv VilasResorts Pvt. Ltd, the Company has its registered office at NH-8, Kookas, Jaipur. It is running a hotel in the name of ShivVilas Resorts. The petitioner submitted his return of incomeshowing nil income on 31.1.2007 for the financial year 2006- 07, relating to the assessment year 2007-08. Subsequently,the case was selected for scrutiny. Notices under Section 143(2) of the Act were issued to it. The AO noticed that thepetitioner-assesseehasshownanadditionofRs.15,05,86,228/- under the head “building”. The AO askedthe petitioner to produce the complete details/bills/proofs inrespect of these additions. In response, the petitionerinformed the AO that the vouchers and other records inrespect of the above expenses were destroyed in a fire.Therefore, they are not available with the petitioner.However, the petitioner submitted confirmations from severalparties, who had supplied material to the petitioner. In orderto prove the cost of construction, the petitioner further reliedupon the books of accounts maintained in the regular course.Moreover, he furnished a report of the Registered Valuer,Shri Ravi Vindal, dated 09.08.2002. The petitioner furtherpointed out that the construction of the hotel had commencedin the financial year 2001-02 and ended in the financial yearending on 31.03.2007. While dealing with the return filed by thepetitioner and while dealing with the documents filed therein,the AO noted that the hotel, comprising of 78 rooms, wasconstructed at the cost of Rs.24,81,03,999/-, including theland cost of Rs.15,00,000/-. Thus, each room cost Rs.31,60,000/-. While the petitioner had claimed that it hadinvested Rs.330/- per square feet for each room, the AO notedthat the Park Hotels of Apeejey Surendra Park Hotel hadclaimed that each room had cost between Rs.1 crores toRs.1.5 crores. Moreover, M/s Credit Analyses and ResearchLtd. (CARE) had reported that it had cost the Unison Hotel,Rs.84 lacs to Rs.85.50 lacs per room. Thus, the AO concludedthat the cost declared by the petitioner was too low. Hence,vide letter dated 29.12.2009, he referred the case to the DVO.The petitioner further claims that while completing theassessment, the AO had accepted the income as declaredunder Section 143(3) of the Act vide order dated 30.12.2009.However, as the matter has been referred to the DVO, thepetitioner has approached this Court. Mr. Mahendra Gargieya, the learned counsel forthe petitioner, has raised the following contentions beforethis Court : firstly, the power under Section 142A of the Act,being a vast power, should be exercised sparingly. The saidpower can be exercised only when the AO comes to a firmconclusion that part of the investment made, or part of thevalue declared, is unacceptable. Secondly, once the income asdeclared by the petitioner was accepted, vide order dated29.12.2009, the AO was not justified in referring the case forvaluation to the DVO. Lastly, since the power has been Mr. Mahendra Gargieya, the learned counsel forthe petitioner, has raised the following contentions beforethis Court : firstly, the power under Section 142A of the Act,being a vast power, should be exercised sparingly. The saidpower can be exercised only when the AO comes to a firmconclusion that part of the investment made, or part of thevalue declared, is unacceptable. Secondly, once the income asdeclared by the petitioner was accepted, vide order dated29.12.2009, the AO was not justified in referring the case forvaluation to the DVO. Lastly, since the power has been exercised illegally, the AO has stepped outside hisjurisdiction. Hence, the impugned reference is ultra virus. Heard the learned counsel for the petitioner andperused the impugned order. The petition is highly misconceived. Firstly,according to the notice itself, the petitioner could have filedan appeal under Section 246A of the Act before the IncomeTax Commissioner (Appeals). Thus, an efficacious alternateremedy does exist. However, despite the existence of theefficacious alternate remedy, the petitioner has chosen toinvoke the extraordinary power of this Court under its writjurisdiction. It is, indeed, a settled principle of law that theextraordinary jurisdiction under Article 226 of theConstitution of India cannot be invoked in case an efficaciousalternate remedy exists. Hence, the present petition is liableto be dismissed on this ground along. Even on merits, this petition cannot be accepted. Section 142A of the Act is as under : 142A. Estimate by Valuation Officer in certain cases : (1) For the purposes of making an assessment orreassessment under this Act, where anestimate of the value of any investmentreferred to in section 69 or section 69B or thevalue of any bullion, jewelery or other valuablearticle referred to in section 69A or section 69Breassessment under this Act, where anestimate of the value of any investmentreferred to in section 69 or section 69B or thevalue of any bullion, jewelery or other valuablearticle referred to in section 69A or section 69B or fair market value of any property referred toin sub-section (2) of section 56is required tobe made, the Assessing Officer may require theValuation Officer to make an estimate of suchvalue and report the same to him. (2)The Valuation Officer to whom a reference ismade under sub-section (1) shall, for thepurposes of dealing with such reference, haveall the powers that he has under section 38A ofthe Wealth-tax Act, 1957 (27 of 1957).made under sub-section (1) shall, for thepurposes of dealing with such reference, haveall the powers that he has under section 38A ofthe Wealth-tax Act, 1957 (27 of 1957). (3) On receipt of the report from the ValuationOfficer, the Assessing Officer may, after givingthe assessee an opportunity of being heard,take into account such report in making suchassessment or reassessment:Officer, the Assessing Officer may, after givingthe assessee an opportunity of being heard,take into account such report in making suchassessment or reassessment: Provided that nothing contained in thissection shall apply in respect of an assessmentmade on or before the 30th day of September,2004, and where such assessment has becomefinal and conclusive on or before that date,except in cases where a reassessment isrequired to be made in accordance with theprovisions of section 153A. Explanation — In this section, “ValuationOfficer” has the same meaning as in clause (r)of section 2 of the Wealth-tax Act, 1957 (27 of1957). Provided that nothing contained in thissection shall apply in respect of an assessmentmade on or before the 30th day of September,2004, and where such assessment has becomefinal and conclusive on or before that date,except in cases where a reassessment isrequired to be made in accordance with theprovisions of section 153A. Explanation — In this section, “ValuationOfficer” has the same meaning as in clause (r)of section 2 of the Wealth-tax Act, 1957 (27 of1957). Section 142A was brought into the statute book inorder to empower the AO to seek a valuation report from theDVO. Such a power can be exercised by the AO when in hisopinion the valuation of any of the items mentioned in theSection have not been revealed truly or correctly before him.The relationship between the assessee and the revenueauthority is that of trust. Thus, the assessee is legally boundto reveal the sources of his income and the level of hisinvestment truly and honestly. If the AO is of the opinion thatthe assessee has not revealed the true picture with regard to his income, or with regard to the valuation of itemsmentioned in Section 142A of the Act, then he is empoweredto make a reference to the DVO. In the present case, the assessment had to becompleted by 31[st] December, 2009. Moreover, according tothe petitioner himself, the vouchers and the other recordswith regard to the investment made in the construction ofhotel were lost in a fire. Therefore, the petitioner could notsubmit all the relevant documents that were needed in orderto assess the correct investment made by the petitioner.Moreover, in the impugned order, the AO had clearly notedthat while the petitioner is claiming that the average cost perroom was Rs.31.3 lacs, according to the report published byM/s Credit Analyses and Research Ltd. (CARE), the averagecost per room, in the case of Unison Hotels Ltd., was Rs.84lacs. Therefore, obviously the petitioner was claiming lot lessamount of money after investment in construction of a room,than was being proclaimed by an independent agency likeCARE. In the absence of the relevant evidence, and in theface of a huge difference between what was claimed by thepetitioner and what was announced by CARE, the AO wascertainly justified in making a reference to the DVO. A bare perusal of the order also reveals that theAO had accepted the income as shown by the petitioner. But he had not accepted the investment made on the constructionof the hotel. Thus, merely because, he has accepted theincome as valid, it does not means that he had accepted theinvestment claimed by the petitioner to be valid. Moreover,under Section 148 of the Act, the AO has the power toreassess. In order to exercise the power of reassessment, theAO was certainly justified in first referring the case to theDVO for getting his valuation report, and then reassessingthe investment as claimed by the petitioner. Since the powerhas been exercised for legally cogent reasons, the learnedcounsel for the petitioner is not justified in claiming that AOhas overstepped his jurisdiction. Lastly, merely because, the AO has referred thecase to the DVO for his valuation, it is not the end of the roadfor the petitioner. After all, under Section 143(3) of the Act,after the valuation report from the DVO is received anopportunity of hearing has to be given to the petitioner.Hence, the petitioner would have ample opportunity to rebutthe report of the DVO. For the reasons stated above, this petition isdevoid of any merit. It is, hereby, dismissed. (R.S. CHAUHAN) J.