The Commissioner Of Income Tax, Patiala v. Sukhdev Kumar & Co. Rice Sheller, Sirhind

ITR No. 119 of 1999 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 119 of 1999 Date of Decision: 1.9.2010 The Commissioner of Income Tax, Patiala ....Petitioner. Versus Sukhdev Kumar & Co. Rice Sheller, Sirhind ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the petitioner. AJAY KUMAR MITTAL, J. In this reference filed under Section 256(1) of the IncomeTax Act, 1961 (in short “the Act”), the Income-Tax Appellate TribunalChandigarh Bench, Chandigarh (in short “the Tribunal”) has referred thefollowing question of law for the opinion of this Court:- “Whether on the facts and in the circumstances of thecase, the Tribunal was right in holding that reopening ofassessment was invalid, as the primary facts weredisclosed by the assessee before AO with reference tocost of construction of the sheller building?” Briefly, the facts of the case are that during the period,October, 1980 to September, 1983, the assessee-firm, i.e. SukhdevKumar & Co. Rice Sheller, Sirhind constructed a building for purpose of ITR No. 119 of 1999-2- sheller. The assessee declared the cost of construction atRs.3,56,500/- whereas the Departmental Valuation Officer(DVO)assessed it at Rs.8,93,200/-. The assessing officer observed that thecost of construction of the building, during assessment year 1983-84,worked out to Rs.4,87,940/-. It was further observed that since theassessee had failed to disclose full and true material facts necessaryfor assessment and had also not disclosed correct amount ofconstruction of the building during the year under reference, the casewas required to be re-opened under Section 147(a) of the Act. A noticeunder Section 148 of the Act was issued to the assessee that wasserved on it on 14.3.1990. The assessing officer, thereafter complyingwith the necessary formalities as enshrined in the relevant provisionsincluding issuance of notice to the assessee and no response from theassessee on the issue, adopted the unexplained investment in thebuilding at Rs.4,87,940/-. The assessee preferred appeal before the Commissionerof Income-tax (Appeals) {in short “CIT(A)”} inter alia, on the ground thatthe notice issued under Section 148 of the Act was illegal, invalid andwithout jurisdiction. It was stated that assessment was completed underSection 143(3) vide order dated 24.3.1986 at net income ofRs.2,35,182/-. The assessee pointed out that an order under Section154 was passed owing to some mistake in the record. The income wasdetermined at Rs.2,42,182/- against which an appeal was preferred.The CIT(A) set aside the assessment on 20.1.1989 for framing de novoassessment which came to be completed vide order dated 07.02.1989at an income of Rs.2,82,682/-. The matter was taken in appeal which The assessee preferred appeal before the Commissionerof Income-tax (Appeals) {in short “CIT(A)”} inter alia, on the ground thatthe notice issued under Section 148 of the Act was illegal, invalid andwithout jurisdiction. It was stated that assessment was completed underSection 143(3) vide order dated 24.3.1986 at net income ofRs.2,35,182/-. The assessee pointed out that an order under Section154 was passed owing to some mistake in the record. The income wasdetermined at Rs.2,42,182/- against which an appeal was preferred.The CIT(A) set aside the assessment on 20.1.1989 for framing de novoassessment which came to be completed vide order dated 07.02.1989at an income of Rs.2,82,682/-. The matter was taken in appeal which was disposed by the CIT(A) vide order dated 9.6.1989 against whichthe Revenue preferred appeal. But in the meantime, the assessingofficer issued notice under Section 148 on 7.3.1990 to the assesseewherein it was indicated that the assessee had shown cost ofconstruction at Rs.3,56,500/- whereas according to the ValuationOfficer the cost of construction was Rs.8,93,200/- and thus, thedifference between the two amounts was the undisclosed income of theassessee for the assessment year 1983-84. Since no return was filedby the assessee in response to the notice under Section 148, theassessing officer completed the assessment under Section 143(3)instead of Section 144. It was asserted on behalf of the assessee thatthe assessment was completed on 24.3.1986 under Section 143(3) andat that time the fact regarding construction of the building for the ricesheller was very much in the knowledge of the assessing officer.Emphasizing that in view of the aforesaid facts the assessee could notbe blamed of any omission or failure on its part to disclose materialfacts and, thus, the provisions under Section 147(a) of the Act could nothave been resorted to and assessment re-opened. The assessee, thus,submitted that re-opening of the assessment in the aforesaid facts andcircumstances of the case was without jurisdiction. The CIT(A) videorder dated 27.5.1991 (Annexure B), after critically examining allrelevant aspects held that re-opening of assessment under Section 147(a) was illegal and issue of notice under Section 148 was invalid andalso that the assessment framed pursuant to an illegal notice was voidab initio. The assessment was consequently annulled by the CIT(A). In further appeal carried before the Tribunal at the instance of the Revenue, the order of the CIT(A) was affirmed. It is how the question as noticed above has come to bereferred by the Tribunal for determination by this Court. We have heard learned counsel for the appellant and havegone through the record. The issue, whether the assessing officer could have re-opened an assessment on the report of the DVO was considered bythis Court in I.T. Appeal No. 71 of 2003 decided on 14.7.2010Commissioner of Income Tax vs. Devki Devi widow of late Kasturi Lalwherein it was held as under:- “6.The apex Court in Smt. Amiya Bala Paul v.Commissioner of Income-Tax, (2003) 262 ITR 407 (SC)had held that in an assessment of the assessee to incometax, the reference by the assessing officer to the DVOregarding question of cost of construction of a property builtby the assessee cannot be made. Once that is so, thereliance on the report of the DVO by the assessing officerfor reopening the assessment was not justified. 7.Even after insertion of Section 142A of the Act byFinance (No. 2) Act, 2004, w.e.f. 15.11.1972, this Courtwhile considering the scope of its applicability toproceedings under the Act, in Income-tax Reference No. 48of 1994, Commissioner of Income Tax (Central), Ludhianav. Nabha Solvex (P) Ltd. decided on 7.7.2010, has held asunder: “11. The question regarding the applicability of Section 7.Even after insertion of Section 142A of the Act byFinance (No. 2) Act, 2004, w.e.f. 15.11.1972, this Courtwhile considering the scope of its applicability toproceedings under the Act, in Income-tax Reference No. 48of 1994, Commissioner of Income Tax (Central), Ludhianav. Nabha Solvex (P) Ltd. decided on 7.7.2010, has held asunder: “11. The question regarding the applicability of Section 142A of the Act was subject matter of considerationbefore this Court in Krishan Lal Dua's case (supra)wherein the assessment had become final on 31.3.1995and the same was not liable to reassessment underSection 153A of the Act, it was held that Section 142A ofthe Act would not be applicable as the proviso wasattracted. The Allahabad High Court in Smt. ShashiAgarwal's case (supra) had held that where the Tribunalhad passed the order before the cutoff date prescribedunder the proviso to Section 142A of the Act and theappeal under Section 260A of the Act beingmaintainable before the High Court only on substantialquestion of law, therefore, it could not be said to becontinuation of the assessment proceedings within themeaning of proviso to Section 142A of the Act. TheAssessing Officer,thus, had no power to refer the matterto the DVO. Similar view has been taken by Delhi andCalcutta High Courts. 8. In view of the above, we hold that Section 142A of theAct is not attracted to the facts of the present case and,thus, no reliance can be placed upon that.Consequently, the initiation of reassessmentproceedings on the basis of report of the DVO cannotlegally be sustained. In view of the above, the Department could not legally takerecourse to the issue of notice under Section 148 of the Act once the ITR No. 119 of 1999 report of the DVO was taken out of consideration as held above. Thequestion of law referred to above for opinion of this Court, is, thus,answered against the Revenue and in favour of the assessee. (AJAY KUMAR MITTAL) JUDGE September 01, 2010rkmalik/gbs (ADARSH KUMAR GOEL)JUDGE