Union Of India v. C A V Judgment

HIGH COURT OF CHHATTISGARH, BILASPUR Judgment reserved on 25-4-2019 Judgment delivered on 25-6-2019 WA No. 293 of 2017 1.Income Tax Officer -1 Mahanadi Complex, Niharika Road,Korba Chhattisgarh.Korba Chhattisgarh. 2.Income Tax Officer, Ward 3, Mahanadi Complex, NiharikaRoad, Korba, Chhattisgarh Road, Korba, Chhattisgarh 3.Deputy Commissioner Of Income Tax, Korba, MahanadiComplex, Niharika Road, Korba, Chhattisgarh Complex, Niharika Road, Korba, Chhattisgarh 4.Assistant Valuation Officer Il, Income Tax Department, 2ndFloor, Piramal Chamber, Parel, Mumbai 12 Maharashtra Floor, Piramal Chamber, Parel, Mumbai 12 Maharashtra 5.Union Of India, Through Its Secretary, Ministry Of FinanceDepartment Of Revenue, North Block New Delhi Department Of Revenue, North Block New Delhi ---- Appellants Versus 1.Smt. Kamala Ojha W/o Shri Pankaj Ojha, Aged About 71Years R/o Qr.No. MIG-II-06, M P Nagar, Korba Chhattisgarh.Years R/o Qr.No. MIG-II-06, M P Nagar, Korba Chhattisgarh. ---- Respondent For AppellantsShri Amit Choudhary, Adv. with Ms. Naushina Ali with Shri Ajay Kumrani,AdvocateNaushina Ali with Shri Ajay Kumrani,AdvocateFor RespondentShri Siddharth Dubey, Advocate Hon'ble Shri Prashant Kumar Mishra, J Hon'ble Shri Parth Prateem Sahu, J C A V Judgment The following judgment of the Court was passed by Prashant Kumar Mishra, J. 3. Revenue has preferred the instant appeal challenging the orderpassed by the Single Judge, thereby quashing thereassessment proceedings under Section 147 of the IncomeTax Act, 1961 (for short 'the Act') by issuing notice underSection 148 of the Act; also quashing the order rejecting thepreliminary objection preferred by the assessee and imposingcost of Rs.15,000/- on the revenue. When the writ petition was filed on 16-12-2016 the challengewas only to the notice issued on 21-9-2015 (Annexure – P/6to WP) under Section 147 of the Act; order dated 13-12-2016(Annexure – P/9 to WP); order dated 12-6-2015 (Annexure –P/5 to WP) under Section 55 A of the Act read with Section16A(5) of the Wealth Tax Act, 1957 (for short 'the Act, 1957');and the notice under Section 55 A of the Act read with Section16A(4) of the Act, 1957, however, during pendency of thepetition the final assessment order was passed on 20-12-2016,therefore, the writ petitioner amended the writ petition tochallenge the said assessment order also. The learnedSingle Judge has allowed the main prayers made in the writpetition. Relevant facts giving rise to the present appeal are that thecase of the assessee for assessment year 2011-12 was reopened after having information that the assessee Smt.KamalaOjha,hadgotanamountofRs.2,00,02,500/-, as her share of sale consideration of thehouse property situated at plot No.13, Vile Parle (East),Mumbai corresponding to CTS No. 917/1 to 917/6. The saletransaction took place on 16-12-2010 i.e. during the financialyear 2010-11, assessment year 2011-12, however, the capitalgain on the sale of the said property on her share of capitalgain was not correctly disclosed in the Return of income(forshort 'ROI') for the relevant A.Y. 2011-12, filed belatedly inthe year ending on 31-3-2013. During an inquiry by the thenAssessment Officer, the assessee had submitted two valuationreports on two different occasions, one dated 28-6-2013prepared by the registered valuer Mr. Anmol Sekhri valuingthe subject property for Rs.11,13,000/- as on 1-4-1981 and thesecond report dated 24-10-2013 prepared by a registeredvaluer Shri Kiran Sowani valuing the subject property forRs.30,00,000/- as on 1-4-1981. On applying the index cost,the value of the property during financial year 2010-11 comesto Rs.79,13,430/-. For half share of the assessee the cost ather hands came to be Rs.39,56,715/-. Thus, the capital gainon the sale of the said property in the hands of the assesseecame to be assessed at Rs.1,60,45,785/-, but this income on account of capital gain was not correctly disclosed by theassessee in the ROI filed on 31-3-2013, therein showingreturn income of Rs.69,983/- only. Since two valuation reports were filed by the assessee herselfwithin a span four months the first showing value ofRs.11,13,000/- and the second showing value ofRs.30,00,000/- the AO felt it necessary to enquire andexamine the genuineness of the valuation reports. Duringassessment proceedings the property was referred to theApproved Valuer of the Department to know the fair marketvalue as on 1-4-1981 by invoking Section 55A of the Act forwhich the notice along with report Annexure – P/3 was servedon the writ petitioner. In the report the fair market value of theproperty as on 1-4-1981 was valued at Rs.8,34,300/-. Initiallythe assessee did not reply to the notice, but eventually shefiled objections two days prior to 31-3-2015, therefore, theDVO (Departmental Valuation Officer) expressed his inabilityto send the final report on or before 31-3-2015 and requestedthe AO to pass protective assessment order subject torectification on receipt of final valuation report as it was atime barring case. 5. 6. 7. In the above circumstances, the AO passed the protectiveorder of assessment on 31-3-2015 subject to receiving thefinal valuation report. The AO received the final valuationreport dated 12-6-2015, on 18-6-2015 and thereafter theDepartment proceeded against the assessee for taxing thecapital gain amount which has escaped the assessment, as theAO reached to the conclusion that the income on account ofcapital gain was not correctly disclosed by the assessee andhence there was reason to believe that the said income underthe head “Capital gain” has escaped assessment within themeaning of section 147 of the Act. The assessee was issued notice under Section 148 on21-9-2015 after obtaining necessary approval of the JCIT. Inresponse the assessee requested for the reasons for reopeningof assessment. The reasons recorded were eventually suppliedto the assessee after which she filed objections requesting theAO to drop the proceedings. The objection was dismissed bythe AO vide order dated 13-12-2016. At this stage the writ petition was filed on 16-12-2016, whichwas first listed on 21-12-2016. On the said date, learnedcounsel for the Revenue informed the Court that theassessment order has already been passed. The writ petitioner was thereafter allowed to examine the matter andthe petition was posted for hearing on 4-1-2017, 5-1-2017 and6-1-2017 when the writ Court heard on maintainability of thewrit petition. Challenge to the notice under Section 147/148 of the Act hasbeen made on the ground that condition precedent forinvoking Section 147 did not exist; the order disposing ofobjections is not a speaking order; only on the basis of reportof DVO proceeding cannot be reopened and lastly the revenueshould have taken recourse to Section 263 of the Act and notfor reassessment. The learned Single Judge has allowed thewrit petition; accepting the grounds raised in the writpetition. Assailing the order impugned, Ms Naushina Ali, learnedcounsel for the Revenue would submit that once theassessment order has been passed during pendency of the writpetition the appropriate remedy for the petitioner was toprefer an appeal and the writ petition was not maintainable.She would submit that the condition precedent for invokingS.147 existed in the matter as there was information for thepurpose of invoking the said provision providing necessaryfoundation and formation of belief. It is putforth that the WA No.293 of 2017 report of DVO being not available at the time of originalassessment it is not a case of change of opinion. Assailing the order impugned, Ms Naushina Ali, learnedcounsel for the Revenue would submit that once theassessment order has been passed during pendency of the writpetition the appropriate remedy for the petitioner was toprefer an appeal and the writ petition was not maintainable.She would submit that the condition precedent for invokingS.147 existed in the matter as there was information for thepurpose of invoking the said provision providing necessaryfoundation and formation of belief. It is putforth that the WA No.293 of 2017 report of DVO being not available at the time of originalassessment it is not a case of change of opinion. 10.Learned counsel for the Revenue would refer to the decisionsrendered in the matter of Kalyanji Mavji & Co. vCommissioner of Income Tax[1], Assistant Commissioner ofIncome Tax v Rajesh Jhaveri Stock Brokers PrivateLimited[2], Commissioner of Income Tax and Others vChhabil Dass Agarwal[3] and Lalita Ashwin Jain v Income. Tax Officer[4]Learned counsel has also placed reliance on theorders passed by this Court in Arun Kumar Agrawal v ThePrincipal Commissioner of Income Tax & Others[5], HariomRice Mill Private Limited & Another v AssistantCommissioner of Income Tax & Others[6], M/s PrecisionEngineering & Another v Assistant Commissioner ofIncome Tax & Others[7. ]Reliance is also made to the decisionrendered by the Delhi High Court in R. Dalmia v Union ofIndia (UOI) and Others[8], The Commissioner of Income Tax& Another v Sri N. Nagaraja[9] and S. Narayanappa and.Others v Commissioner of Income Tax, Bangalore[10] 1(1976) 102 ITR 287 (SC)2(2008) 14 SCC 20182(2008) 14 SCC 2018 3(2014) 1 SCC 603 4(2014) 363 ITR 343 (Guj)5WPT No.163 of 2016 (decided on 1-12-2016) and other connected matters6WPT No.69 of 2018 (decided on 5-4-2019) and other connected matter7WPT No.234 of 2018 (decided on 5-4-2019) and other connected matter8Civil Writ Petition No.316-D of 1965 (decided 27-7-1971)9ITA No.1302/2006 & ITA No.1304/2006 (decided on 13-8-2012)5WPT No.163 of 2016 (decided on 1-12-2016) and other connected matters6WPT No.69 of 2018 (decided on 5-4-2019) and other connected matter7WPT No.234 of 2018 (decided on 5-4-2019) and other connected matter8Civil Writ Petition No.316-D of 1965 (decided 27-7-1971)9ITA No.1302/2006 & ITA No.1304/2006 (decided on 13-8-2012) 10 (1967) AIR (SC) 523 11. Referring to the compilation submitted by the appellant,learned counsel has distinguished the judgments relied by thewrit Court while allowing the writ petition. It is furthersubmitted that the orders passed by this Court in Arun KumarAgrawal (supra), Hariom Rice Mill Private Limited (supra)and M/s Precision Engineering (supra) were relied before thewrit Court. 12. Shri Siddharth Dubey, learned counsel appearing for therespondent/writ petitioner, per contra, would argue that thecondition precedent for invoking Section 147 does not existinasmuch as there is no foundation or material for formingreason to belief, therefore, the order passed by the learnedSingle Judge does not call for any interference. Learnedcounsel would further argue that reassessment is based onDVO's report, which is not permissible. Learned counselwould next argue that in the facts and circumstances of thecase bar of alternative remedy is not attracted and the writpetition is maintainable and the learned Single Judge hasrightly passed the order impugned. 13.What constitutes an 'information' for the purpose of Section147 of the Act which is the edifice for formation of belief has been considered by the Supreme Court in Kalyanji Mavji &Co. (supra) wherein the following has been observed : 13.What constitutes an 'information' for the purpose of Section147 of the Act which is the edifice for formation of belief has been considered by the Supreme Court in Kalyanji Mavji &Co. (supra) wherein the following has been observed : Another pertinent fact which may be mentionedhere is that although Section 34 was the subjectof several amendments, yet the word'information' which was introduced in 1939 hasnot been defined at all. Since the word'information' has not been defined, it is difficultto lay down any rule of universal application.At the same time it cannot be disputed that theobject of the Act was to see that the taxcollecting machinery is made as perfect andeffective as possible so that the tax-payer is notallowed to set away with escaped income-tax.The fact, that the adjective 'definite' qualifiedthe word 'information' and the word 'discovers'which were introduced in the Income-tax(Amendment) Act, 1939 were deleted by theAmendment Act of 1948 would lead to theirresistible inference that the word 'information'is of the widest amplitude and comprehends avariety of factors. Nevertheless the powerUnder Section 34(1)(b), however wide it maybe, is not plenary, because the discretion of theIncome-tax Officer is controlled by the words"reason to believe". It was so held by this Courtin Bhimraj Pannalal v. Commissioner ofIncome-tax (1961) 41 ITR 221 (SC) : TC 51 R.300, while affirming the decision of the PatnaHigh Court in Bhimraj Panna Lal v.Commissioner of Income-tax, (1957) 32 ITR289 (Pat) : TC51R.301. This legal proposition,however, is not disputed. It, therefore, followsthat information may come from externalsources or even from materials already on therecord or may be derived from the discovery ofnew and important matter or fresh facts. Theword 'information' will also include true andcorrect state of the law derived from relevantjudicial decisions either of the Income-taxauthorities or other Courts of law which decideIncome-tax matters. Whether the ground onwhich the original assessment is based is held to be erroneous by a Supreme Court in someother case, that will also amount to a freshinformation which comes into existencesubsequent to the original assessment. Asubsequent Privy Council decision is alsoincluded in the word 'information'. Thus it isvery difficult to lay down any hard and fastrule. But this Court has in two leading caseslaid down some objective tests and principles todetermine the applicability of Section 34(1)(b)of the Act which we shall now discuss. An analysis of this case would clearly show thatthe information as contained in Section 34(1)(b)must fulfill the following conditions: (1) theinformation may be derived from an externalsource concerning facts or particulars as to lawrelating to a matter bearing on the assessment:(2) that the information must come after theprevious or the original assessment was made.In fact the words "in consequence ofinformation as used in Section 34 (1) (b) clearlypostulate that the information must besubsequent to the original assessment sought tobe reopened; and (3) that the information maybe obtained even on the basis of the record ofthe previous assessment from an investigationof the materials on the record, or the factsdisclosed thereby or from other enquiry orresearch into facts or law. These categories arein addition to the categories laid down by thisCourt in Maharaj Kumar Kamal Singh's case(supra), which has been consistently followedin several decisions of this Court as shownabove. On a combined review of the decisions of thisCourt the following tests and principles wouldapply to determine the applicability of Section34(1)(b) to the following categories of cases:(1) Where the information is as to the true andcorrect state of the law derived from relevantjudicial decisions: (2) Where in the original On a combined review of the decisions of thisCourt the following tests and principles wouldapply to determine the applicability of Section34(1)(b) to the following categories of cases:(1) Where the information is as to the true andcorrect state of the law derived from relevantjudicial decisions: (2) Where in the original assessment the income liable to tax has escapedassessment due to oversight, inadvertence or a-mistake committed by the Incometax Officer.This is obviously based on the principle that thetax-payer would not be allowed to takeadvantage of an oversight or mistake committedby the Taxing Authority: (3) Where theinformation is derived from an external sourceof any kind. Such external source wouldinclude discovery of new and important mattersor knowledge of fresh facts which were notpresent at the time of the original assessment:(4) Where the information may be obtainedeven from the record of the original assessmentfrom an investigation of the materials on therecord, or the facts disclosed thereby or from.other enquiry or research into facts or law If these conditions are satisfied then theIncome-tax Officer would have completejurisdiction to re-open the original assessment.It is obvious that where the Income-tax Officergets no subsequent information, but merelyproceeds to re-open the original assessmentwithout any fresh facts or materials or withoutany enquiry into the materials which form partof the original assessment, Section 34(1)(b)would have no application. (Emphasis supplied) 14.It is, thus, clearly held by the Supreme Court that any material surfacing after the previous or the original assessment whichwere not present at the time of original assessment wouldconstitute 'information' and the ITO would have jurisdiction toreopen the original assessment after forming reason to beliefon the basis of such information, which was not available atthe time of original assessment. Stock Brokers Pvt. Ltd.[11] the Supreme Court spelt out thetwin requirements which had to be satisfied as a sine qua nonfor a valid reassessment notice: "firstly the AO must have reason to believe thatincome profits or gains chargeable to incometax have escaped assessment, and secondly hemust also have reason to believe that suchescapement has occurred by reason of either (i)omission or failure on the part of the assessee todisclose fully or truly all material factsnecessary for his assessment of that year. Boththese conditions were conditions precedent tobe satisfied before the AO could havejurisdiction to issue notice under Section 148read with Section 147(a). But under thesubstituted Section 147 existence of only thefirst condition suffices. In other words, if theassessing officer for whatever reason has reasonto believe that income has escaped assessment,it confers jurisdiction to reopen theassessment." 16.The Supreme Court in Phool Chand Bajrang Lal and Another v Income Tax Officer and Another[12] emphasised onthe veracity of information supplied previously by theassessee during the course of the regular assessment, whileconsidering the validity of a reassessment notice; it stated asfollows: "From a combined review of the judgments ofthis Court, it follows that an Income-tax Officeracquires jurisdiction to reopen an assessment 11 [2007] 291 ITR 500 (SC) 12 AIR 1993 SC 2390 16.The Supreme Court in Phool Chand Bajrang Lal and Another v Income Tax Officer and Another[12] emphasised onthe veracity of information supplied previously by theassessee during the course of the regular assessment, whileconsidering the validity of a reassessment notice; it stated asfollows: "From a combined review of the judgments ofthis Court, it follows that an Income-tax Officeracquires jurisdiction to reopen an assessment 11 [2007] 291 ITR 500 (SC) 12 AIR 1993 SC 2390 under Section 147(a) read with Section 148 ofthe Income-tax Act, 1961, only if on the basisof specific, reliable and relevant informationcoming to his possession subsequently, he hasreasons, which he must record, to believe that,by reason of omission or failure on the part ofthe assessee to make a true and full disclosureof all material facts necessary for hisassessment during the concluded assessmentproceedings, any part of his income, profits orgains chargeable to income-tax has escapedassessment. He may start reassessmentproceedings either because some fresh facts hadcome to light which were not previouslydisclosed or some information with regard tothe facts previously disclosed comes into hispossession which tends to expose theuntruthfulness of those facts. In such situations,it is not a case of mere change of opinion or thedrawing of a different inference from the samefacts as were earlier available but acting onfresh information. Since the belief is that of theIncome-tax Officer, the sufficiency of reasonsfor forming this belief is not for the court tojudge but it is open to an assessee to establishthat there in fact existed no belief or that thebelief was not at all a bona fide one or wasbased on vague, irrelevant and non- specificinformation. To that limited extent, the courtmay look into the conclusion arrived at by theIncome-tax Officer and examine whether therewas any material available on the record fromwhich the requisite belief could be formed bythe Income-tax Officer and further whether thatmaterial had any rational connection or a livelink for the formation of the requisite belief." 17.In Phool Chand Bajrang Lal (supra) the Supreme Court hasheld that the Assessment Officer may start reassessmentproceedings either because some fresh facts had come to lightwhich were not previously disclosed or some informationheld that the Assessment Officer may start reassessmentproceedings either because some fresh facts had come to lightwhich were not previously disclosed or some information with regard to the facts previously disclosed comes into hispossession which tends to expose the untruthfulness of thosefacts. In such situations, it is not a case of mere change ofopinion or the drawing of a different inference from the samefacts as were earlier available but acting on fresh information.It is held therein that since the belief is that of the Income-taxOfficer, the sufficiency of reasons for forming this belief isnot for the court to judge. 18.In Income Tax Officer, Calcutta v Selected Dalubrand Coal Co. Pvt. Ltd.[13], the Supreme Court held as follows: "At the stage of the issuance of the notice, theonly question is whether there was relevantmaterial, as stated above, on which a reasonableperson could have formed the requisite belief.Since we are unable to say that the said lettercould not have constituted the basis for formingsuch a belief, it cannot be said that the issuanceof notice was a invalid. Inasmuch as, as a resultof our order, the reassessment proceedings havenow to go on, we do not and we ought not toexpress any opinion on merits." 19.In Commissioner of Income Tax and Others v Chhabil Dass Agarwal[14], the Supreme Court was dealing with a case of re-assessment wherein the assessee was issued notice underSection 148 of the Act, 1961. After the assessment wascompleted, the assessee, instead of preferring an appeal, 13 (1997) 10 SCC 68 14 (2014) 1 SCC 603 WA No.293 of 2017 19.In Commissioner of Income Tax and Others v Chhabil Dass Agarwal[14], the Supreme Court was dealing with a case of re-assessment wherein the assessee was issued notice underSection 148 of the Act, 1961. After the assessment wascompleted, the assessee, instead of preferring an appeal, 13 (1997) 10 SCC 68 14 (2014) 1 SCC 603 WA No.293 of 2017 preferred writ petition before the High Court and theassessment order was quashed occasioning filing of specialleave petition before the Supreme Court by the revenue.Allowing the appeal, the Supreme Court held thus inparagraphs 15 & 16:- 15.Thus, while it can be said that this Court hasrecognised some exceptions to the rule ofalternative remedy i.e. where the statutoryauthority has not acted in accordance with theprovisions of the enactment in question, or indefiance of the fundamental principles ofjudicial procedure, or has resorted to invoke theprovisions which are repealed, or when an orderhas been passed in total violation of theprinciples of natural justice, the proposition laiddown in Thansingh Nathmal case {AIR 1964SC 1419}, Titaghur Paper Mills case {(1983) 2SCC 433} and other similar judgments that theHigh Court will not entertain a petition underArticle 226 of the Constitution if an effectivealternative remedy is available to the aggrievedperson or the statute under which the actioncomplained of has been taken itself contains amechanism for redressal of grievance still holdsthe field. Therefore, when a statutory forum iscreated by law for redressal of grievances, awrit petition should not be entertained ignoringthe statutory dispensation. 16.In the instant case, the Act providescomplete machinery for the assessment/reassessment of tax, imposition of penalty andfor obtaining relief in respect of any improperorders passed by the Revenue Authorities, andthe assessee could not be permitted to abandonthat machinery and to invoke the jurisdiction ofthe High Court under Article 226 of theConstitution when he had adequate remedyopen to him by an appeal to the Commissionerof Income Tax (Appeals). The remedy under the statute, however, must be effective and not amere formality with no substantial relief. InRam and Shyam Co. v. State of Haryana{(1985) 3 SCC 267} this Court has noticed thatif an appeal is from “Caesar to Caesar’s wife”the existence of alternative remedy would be amirage and an exercise in futility.” 20.In Bellary Steels and Alloys Limited Vs. Deputy Commissioner, Commercial Taxes (Assessments) andOthers[15], the Supreme Court held thus:- 3.Before concluding, we may state that wehave allowed the appellant(s) to withdraw theoriginal writ petition as the said proceedingscame to be filed against the show-cause notice.We have repeatedly held that in the absence offactual foundation, it would be impossible todecide matters of this kind. When the doctrineof promissory estoppel is invoked, the doctrineneeds to be based on factual data which has notbeen pleaded. The High Court should not haveinterfered in the matter. In these cases, the writpetition was filed without reply to even theshow-cause notice. In the circumstances, wecould have dismissed these civil appeals onlyon the ground of failure to exhaust statutoryremedy, but for the fact that huge investmentsinvolving the large number of industries is inissue. 21.In Commissioner of Income-tax, Gujarat Vs. Vijaybhai N. Chandrani[16], it has been held thus :- 14.In our considered view, at the said stageof issuance of the notices under Section 153C,the assessee could have addressed hisgrievances and explained his stand to theAssessing Authority by filing an appropriate 15 (2009) 17 SCC 547 16 2013 AIR SCW 4675 21.In Commissioner of Income-tax, Gujarat Vs. Vijaybhai N. Chandrani[16], it has been held thus :- 14.In our considered view, at the said stageof issuance of the notices under Section 153C,the assessee could have addressed hisgrievances and explained his stand to theAssessing Authority by filing an appropriate 15 (2009) 17 SCC 547 16 2013 AIR SCW 4675 reply to the said notices instead of filing theWrit Petition impugning the said notices. It issettled law that when an alternate remedy isavailable to the aggrieved party, it must exhaustthe same before approaching the Writ Court. InBellary Steels and Alloys Ltd. v. CCT, (2009)17 SCC 547, this Court had allowed theassessee therein to withdraw the original WritPetition filed before the High Court as the saidproceedings came to be filed against the showcause notice and observed that the High Courtshould not have interfered in the matter as theWrit Petition was filed without even reply tothe show cause notice. This Court furtherobserved as follows: "3....In the circumstances, we could havedismissed these civil appeals only on theground of failure to exhaust statutoryremedy, but for the fact that hugeinvestments involving the large number ofindustries is in issue." 15.We are fortified by the decision of thisCourt in Indo Asahi Glass Co. Ltd. v. ITO,(2002) 10 SCC 444, wherein the assessee hadapproached this Court against the judgment andorder of the High Court which had dismissedthe Writ Petition filed by the assessee whereinchallenge was made to the show cause noticeissued by the Assessing Authority on the groundthat alternative remedy was available to theassessee. This Court concurred with the findingsand conclusions reached by the High Court anddismissed the said appeal with the followingobservations: “5. This and the other facts cannot betaken up for consideration by this Courtfor the first time. In our opinion, the HighCourt was right in coming to theconclusion that it is appropriate for theappellants to file a reply to the show-causenotice and take whatever defence is opento them." 16.In the present case, the assessee hasinvoked the writ jurisdiction of the High Courtat the first instance without first exhausting thealternate remedies provided under the Act. Inour considered opinion, at the said stage ofproceedings, the High Court ought not haveentertained the Writ Petition and instead shouldhave directed the assessee to file reply to thesaid notices and upon receipt of a decisionfrom the Assessing Authority, if for any reasonit is aggrieved by the said decision, to questionthe same before the forum provided under theAct.” 22.In the matter at hand, in the reasons recorded under Section 148 (2) for initiation of action under Section 148 of the Actthe facts of the matter has been discussed in detail mentioningthat the report of DVO i.e. AVO-II, Mumbai was submitted on17-3-2015 and that the valuation report was prepared underSection 55A after affording opportunity of hearing to thepetitioner. This report prepared in exercise of powers underthe Act was not properly considered and given effect to in theoriginal assessment and has, thus, escaped assessment due toinadvertence or a mistake committed by the AO, whichamounts to information as held by the Supreme Court inKalyanji Mavji & Co. (supra). Even otherwise, the finalreport of DVO was submitted on 12-6-2015, after theassessment. Thus, this was not available earlier. 148 (2) for initiation of action under Section 148 of the Actthe facts of the matter has been discussed in detail mentioningthat the report of DVO i.e. AVO-II, Mumbai was submitted on17-3-2015 and that the valuation report was prepared underSection 55A after affording opportunity of hearing to thepetitioner. This report prepared in exercise of powers underthe Act was not properly considered and given effect to in theoriginal assessment and has, thus, escaped assessment due toinadvertence or a mistake committed by the AO, whichamounts to information as held by the Supreme Court inKalyanji Mavji & Co. (supra). Even otherwise, the finalreport of DVO was submitted on 12-6-2015, after theassessment. Thus, this was not available earlier. 23.In ACC Ltd. v District Valuation Officer and Others[17]theDivision Bench of Delhi High Court {Sanjiv Khanna, J. {asHis Lordship then was} and R.V. Easwar, J.} had an occasionto consider a similar matter where also DVO's report wascalled, but was not available, therefore, the protectiveassessment order was passed mentioning that the capital gainis computed on the basis of the revised claim submitted by theassessee, but on receipt of the valuation report, long termcapital gain would be recomputed on the basis of the saidvaluation report. The assessee relied on the judgmentrendered by Assistant Commissioner of Income Tax, Gujaratv Dhariya Construction Company[18], however, distinguishingthe said judgment it was observed thus in para 11 : 17 (2013) 357 ITR 160 18 (2010) 15 SCC 251 11.The petitioner placed reliance on thejudgment of the Supreme Court in ACIT v.Dhariya Construction Co. (supra) and thejudgment of Division Bench of this Court inCIT v. Smt. Suraj Devi (supra). In these cases,it has been held that the reopening of anassessment under Section 147 of the Act on thebasis of the report of the DVO is bad in law. Adeeper study of the judgment of the SupremeCourt discloses that what has been held thereinis that "the opinion of the DVO per se is not aninformation for the purpose of reopeningassessment under Section 147 of the Income-tax Act, 1961" and that "the Assessing Officerhas to apply his mind to the information, if any,collected and must form a belief thereon". Itmay be possible to contend that the judgment of 18 (2010) 15 SCC 251 11.The petitioner placed reliance on thejudgment of the Supreme Court in ACIT v.Dhariya Construction Co. (supra) and thejudgment of Division Bench of this Court inCIT v. Smt. Suraj Devi (supra). In these cases,it has been held that the reopening of anassessment under Section 147 of the Act on thebasis of the report of the DVO is bad in law. Adeeper study of the judgment of the SupremeCourt discloses that what has been held thereinis that "the opinion of the DVO per se is not aninformation for the purpose of reopeningassessment under Section 147 of the Income-tax Act, 1961" and that "the Assessing Officerhas to apply his mind to the information, if any,collected and must form a belief thereon". Itmay be possible to contend that the judgment of the Supreme Court interdict only a mechanicalor robot-like reliance on the report of the DVOfor the purpose of reopening the assessmentunder Section 147 and that if the reopening isbased on an independent application of themind of the Assessing Officer to the reportobtained from the DVO and an independentformation of a belief on that basis, then thereopening would be valid. We are not to beunderstood as expressing any opinion on theapplicability of the judgment to the action, ifany, that may be taken on the basis of the reportof the DVO. The judgment of the SupremeCourt has been adverted to by the DivisionBench of this Court in CIT v. Smt. Suraj Devi(supra). The question before this Court was notwith regard to the validity of the reopening ofthe assessment on the basis of the report of theDVO. There, on the basis of a search conductedin the premises of the assessee, in which aregistered purchase deed for a property wasrecovered, the Assessing Officer, suspectingthat the market value of the property was morethan the disclosed purchase price, made areference to the DVO under Section 142A. TheDVO estimated the market value of theproperty at an amount which was much higherthan the amount shown in the document. TheAssessing Officer added the difference betweenthe two figures as undisclosed investment. Itwas in this background that this Court held thatthe report of the DVO, per se, is notinformation and cannot be relied upon withoutthe books of account maintained by theassessee being rejected. While coming to thisconclusion, the Court relied on the judgment ofthe Supreme Court dated 19.10.2009 in CivilAppeal No.6973/2009, in which case theSupreme court had held that without rejectingthe books of accounts, the Assessing Officercould not have referred the matter to the DVOfor the purpose of making an addition forundisclosed investment. It will be noticed thatthe judgment of this Court in Smt. Suraj Devi‟scase was not concerned with the validity of a reference made to the DVO under Section 55Aof the Act for the purpose of estimating the fairmarket value of a property as on 01.04.1981 forcomputing the capital gains nor was the Courtconcerned with the validity of a reference madeto the DVO under Section 55A, which waspending when the assessment order was passed(proceedings were completed). This judgmentdoes not touch upon the point raised by thepetitioner in the present writ petition. 24.Before the Delhi High Court also the assessee had argued thatthe DVO's report cannot be treated to be a material forforming reason to belief. Negativing the contention, it is heldthus in para 9 : reference made to the DVO under Section 55Aof the Act for the purpose of estimating the fairmarket value of a property as on 01.04.1981 forcomputing the capital gains nor was the Courtconcerned with the validity of a reference madeto the DVO under Section 55A, which waspending when the assessment order was passed(proceedings were completed). This judgmentdoes not touch upon the point raised by thepetitioner in the present writ petition. 24.Before the Delhi High Court also the assessee had argued thatthe DVO's report cannot be treated to be a material forforming reason to belief. Negativing the contention, it is heldthus in para 9 : 9.A perusal and a plain reading of thesection shows the circumstances under whichthe Assessing Officer may refer the valuation ofthe property to the DVO. The section can beinvoked by the Assessing Officer forascertaining the fair market value of a capitalasset for the purpose of Chapter IV of the Act,which includes the provisions relating to capitalgains. Sections 45 to 55 fall under the chapter,under the sub head "E.-Capital Gains". Section55 (2) (b)(i) gives the assessee the option tosubstitute the fair market value of the propertyas on 01.04.1981 in the place of the cost ofacquisition thereof, if the property had beenacquired by the assessee before 01.04.1981.The option given to the petitioner was exercisedby the petitioner by filing the letter dated18.11.2010 before the Assessing Officer underwhich the original computation of the capitalgains was sought to be substituted by a revisedcomputation in which the cost of the propertywas taken at the fair market value as on01.04.1981 at `21,72,95,000/- on the basis ofthe registered valuer‟s report. This letter was filed about 1½ months before the date on whichthe assessment would have become barred bytime. The Assessing Officer while examiningthe computation of the capital gains was ofopinion that the figure of `21,72,95,000/-shown as the fair market value of the propertyas on 01.04.1981 was on the higher side andaccordingly referred the matter to the DVO,Government Valuation Cell, New Delhi on20.12.2010. In doing so, he was only exercisinghis power under Section 55A (b)(ii) of the Actunder which he may refer the valuation to theDVO if he considers it necessary so to do,having regard to the nature of the asset andother relevant circumstances. The contention ofthe petitioner that the Assessing Officer had nobasis to form the opinion is not acceptable. Theoriginal computation of the capital gains as perthe return filed by the petitioner was `130.19crores as seen from para 14.1 of the assessmentorder. After the revised computation/modification of the capital gains was filed, thefigure of capital gains came down drastically to`14,07,16,551/- there was thus a reduction ofapproximately `116 crores in the computationof the capital gains and this was significantlydue to the claim that the fair market value of theland as on 01.04.1981 was `21,72,95,000/-. Itwas on this basis that the Assessing Officertook the view that the valuer‟s report filed bythe petitioner showed the figure on higher sideand came to the conclusion that the mattershould be referred to the DVO for valuation.The Assessing Officer obviously had theregistered valuer‟s report filed by the petitionerbefore him. It cannot, therefore, be said that hehad no basis or material to form the opinionthat a reference ought to be made to the DVO.The reference was made before the assessmentorder was passed and during the pendency ofthe assessment proceedings. The contention ofthe petitioner to the contrary is thereforerejected. 25. 25. The belief of the ITO/AO being based on the germane andrelevant information which has rational connection forformation of belief, the sufficiency of reasons for formingsuch belief is not for the Court to judge. The Court caninterfere only to a limited extent as to whether there in factexisted no belief or that the belief was not at all a bona fideone or was based on vague, irrelevant and non-specificinformation. The writ Court at the stage of issuance of noticefor reassessment would not sit in appeal over the sufficiencyof reasons {See: Phool Chand Bajrang Lal (supra)}. In Chhabil Dass (supra) the Supreme Court has observed thatthe Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtainingrelief in respect of any improper orders passed by theRevenue Authorities, and the assessee could not be permittedto abandon that machinery and to invoke the jurisdiction ofthe High Court under Article 226 of the Constitution when hehad adequate remedy open to him by an appeal to theCommissioner of Income Tax (Appeals). Similar view hasbeen taken by the Supreme Court in Bellary Steels and AlloysLimited (supra) and Vijaybhai N. Chandrani (supra). In Calcutta Discount Co. Ltd. v Income Tax Officer,Companies District I, Calcutta[19] the only ground forreopening was that the company had failed to disclose the trueintent behind the sale of shares, therefore, in the said factualbackground the Supreme Court held that non disclosure oftrue intentions behind sale of shares cannot be said to be anomission on the part of the assessee to disclose the materialfact, however, in the case at hand, the impugned notice hasbeen issued on the basis of report of DVO which was notappreciated by the AO at the time of original assessment andthe said constitutes information/material fact. Thus, in ourconsidered opinion the decision rendered in CalcuttaDiscount Co. Ltd. (supra) is distinguishable on the basis ofbackground facts being different in the matter. Similarly, inJeans Knit Pvt. Ltd. Bangalore v DCIT, Bangalore[20], theorder of remand has been passed on the basis of judgmentrendered in Calcutta Discount Co. Ltd. (supra). 28. In so far as the judgments rendered in Asian Paints Ltd. vDCIT and Another[21]and Aroni Chemicals Limited v The DCIT-2(1) and another[22] is concerned, the same were not in acase where the assessment was time barring. In the case at 19 AIR 1961 SC 372 : 1960 LawSuit (SC) 246 20 2016 SCC Online SC 1536 21 (2008) 296 ITR 90 (Bom) 22 2014 SCC Online Bom 221 29. 30. WA No.293 of 2017 hand, the assessment orders have to be passed within aparticular date, therefore, the ratio laid down by the BombayHigh Court in the aforesaid decisions would not apply. It also needs to mention here that a Single Bench of this Courthas decided the issue regarding maintainability of the writpetition challenging the reassessment notice in Arun KumarAgrawal (supra), Hariom Rice Mill Private Limited (supra)and M/s Precision Engineering (supra) on the basis of lawlaid down by the Supreme Court in Phool Chand BajrangLal (supra) and Chhabil Dass (supra). In those matters thewrit petitions were dismissed as not maintainable. In so far as the decision of the Supreme Court in DhariyaConstruction Company (supra) is concerned, it is to be seenthat when the reassessment notice is issued only on the basisof DVO's report without application of mind, the same maynot be permissible in law, but in the case in hand, the writpetitioner herself submitted two different valuation reportsand thereafter, the DVO's report was called for under Section55A of the Act and thereafter, the reasons recorded was withdue application of mind and not merely by mechanicallyreferring to the DVO/AVO's report. In so far as the decision of the Supreme Court in DhariyaConstruction Company (supra) is concerned, it is to be seenthat when the reassessment notice is issued only on the basisof DVO's report without application of mind, the same maynot be permissible in law, but in the case in hand, the writpetitioner herself submitted two different valuation reportsand thereafter, the DVO's report was called for under Section55A of the Act and thereafter, the reasons recorded was withdue application of mind and not merely by mechanicallyreferring to the DVO/AVO's report. 31.In so far as the issue as to whether the revenue should haveresorted to Section 263 of the Act instead of Section 147 isconcerned, it is to be noted that if issuance of reassessmentnotice is on the basis of information or material havingfoundation for formation of belief and the exercise of powerunder Section 147 is found permissible in law, Sectio 263cannot be invoked. The said provision would attract onlywhen condition precedent for issuance of reassessment noticeunder Section 147 is not satisfied. The revenue cannot becompelled to resort to some other provision even after findingthat the reopening of assessment is based on material orinformation which has nexus with the subject. 32.Section 263 is invokable when the assessment order is notonly erroneous but is also prejudicial to the interest of theRevenue and every loss of tax to the revenue cannot betreated as being prejudicial to the interest of the revenue. Theexpression "prejudicial to the interest of the Revenue" whilenot to be confused with the loss of tax will certainly includean erroneous order which results in a person not paying taxwhich is lawfully payable to the Revenue. [See : TheCommissionerofIncomeTax-XIIIvAshish Rajpal[23]]. 33. WA No.293 of 2017 To sum up the matter, when there existed reason to beliefwhich is formed on the basis of material available havingnexus with the subject, writ Court ought not to ha