2011 (12) TMI 361 - HC - Income Tax

Reassessment - Reference to DVO - principles of natural justice - the difference amount of Rs. 78,99,152 vide Annex. 6 (Rs. 1,17,92,000 - Rs. 38,92,848) as undisclosed income under s. 69B of the Act of 1961, the assessing authority initiated the impugned reassessment proceedings - The assessee instead of filing his reply on merits or raising his objections against the assessment under s. 69B of the Act, filed the present writ petition - show-cause notices were issued to the respondent-assessing authority by a Co-ordinate Bench of this Court on 29th Nov., 2010, however, no stay was granted to the assessee petitioner against the impugned reassessment proceedings and accordingly when on 29th Nov., 2010, the assessee did not file his reply or objections on merits of his contentions, the assessing authority passed the impugned assessment order after about 28 days on 27th Dec., 2010 - in the absence of any stay order granted by this Court, the assessing authority could very well pass the assessment order on the given date or on any subsequent date - Writ petition challenging reassessment declined - however stay granted subject to pre deposit of 25% to pursue the matter before CIT(A).

Summary

Issues:
Challenging reassessment proceedings under s. 147/148 of the IT Act, 1961 for the assessment year 2006-07 based on a difference in the cost of construction of a hotel building. Breach of principles of natural justice alleged by the petitioner. Alternative remedy available through appeal process under the Act.

Detailed Analysis:

Challenging Reassessment Proceedings:
The petitioner-assessee filed writ petitions challenging the reassessment proceedings under s. 147/148 of the IT Act for the assessment year 2006-07 due to a variance in the cost of construction of a hotel building. The Departmental Valuation Officer estimated the cost at Rs. 1,17,92,000, significantly higher than the Rs. 38,92,848 disclosed by the assessee. The assessing authority initiated reassessment to tax the difference amount as undisclosed income under s. 69B of the Act.

Breach of Principles of Natural Justice:
The petitioner alleged a breach of principles of natural justice, arguing that the assessing authority should have granted further time before passing the impugned assessment order. However, the assessing authority had provided multiple opportunities for the assessee to present objections and explanations. The Court found that the ground of breach of natural justice was not established, as the assessing authority had followed due process in issuing notices and allowing the assessee to respond.

Availability of Alternative Remedy:
The Court emphasized that an appeal lies against the impugned orders under s. 143(3)/147 of the Act and the penalty order under s. 271(1)(c). It stated that writ jurisdiction under Article 226 cannot be invoked if an adequate alternative remedy is available, except in specific circumstances such as the challenge to the vires of the Act, breach of natural justice, or lack of jurisdiction. As none of these exceptions applied, the Court held that the writ petition was not maintainable.

Conclusion and Alternative Relief:
The Court dismissed the writ petition but granted the petitioner liberty to file appeals before the CIT(A) within one month. It directed the appellate authority to decide on the appeals within six months. The petitioner was required to deposit 25% of the demand with the assessing authority and provide solvent security for the remaining amount. The remaining demand would stay pending the appellate authority's decision. The Court found the alternative relief reasonable and permitted the petitioner to pursue the appeal process provided under the Act.