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2019 (6) TMI 1439 - HC - Income TaxReopening of assessment u/s 147 - income on account of capital gain was not correctly disclosed by the assessee - Non availability of DVO's report - HELD THAT - Any material surfacing after the previous or the original assessment which were not present at the time of original assessment would constitute 'information' and the ITO would have jurisdiction to reopen the original assessment after forming reason to belief on the basis of such information, which was not available at the time of original assessment. In the matter at hand, in the reasons recorded under Section 148 (2) for initiation of action under Section 148 of the Act the facts of the matter has been discussed in detail mentioning that the report of DVO i.e. AVO-II, Mumbai was submitted on 17-3-2015 and that the valuation report was prepared under Section 55A after affording opportunity of hearing to the petitioner. This report prepared in exercise of powers under the Act was not properly considered and given effect to in the original assessment and has, thus, escaped assessment due to inadvertence or a mistake committed by the AO, which amounts to information as held by the Supreme Court in Kalyanji Mavji Co. 1975 (12) TMI 2 - SUPREME COURT . Even otherwise, the final report of DVO was submitted on 12-6-2015, after the assessment. Thus, this was not available earlier. In ACC Ltd. v District Valuation Officer and Others 2012 (5) TMI 505 - DELHI HIGH COURT had an occasion to consider a similar matter where also DVO's report was called, but was not available, therefore, the protective assessment order was passed mentioning that the capital gain is computed on the basis of the revised claim submitted by the assessee, but on receipt of the valuation report, long term capital gain would be recomputed on the basis of the said valuation report. The belief of the ITO/AO being based on the germane and relevant information which has rational connection for formation of belief, the sufficiency of reasons for forming such belief is not for the Court to judge. The Court can interfere only to a limited extent as to whether there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. The writ Court at the stage of issuance of notice for reassessment would not sit in appeal over the sufficiency of reasons See Phool Chand Bajrang LaL 1993 (7) TMI 1 - SUPREME COURT In so far as the issue as to whether the revenue should have resorted to Section 263 of the Act instead of Section 147 is concerned, it is to be noted that if issuance of reassessment notice is on the basis of information or material having foundation for formation of belief and the exercise of power under Section 147 is found permissible in law, Section 263 cannot be invoked. The said provision would attract only when condition precedent for issuance of reassessment notice under Section 147 is not satisfied. The revenue cannot be compelled to resort to some other provision even after finding that the reopening of assessment is based on material or information which has nexus with the subject. Section 263 is invokable when the assessment order is not only erroneous but is also prejudicial to the interest of the Revenue and every loss of tax to the revenue cannot be treated as being prejudicial to the interest of the revenue. The expression prejudicial to the interest of the Revenue while not to be confused with the loss of tax will certainly include an erroneous order which results in a person not paying tax which is lawfully payable to the Revenue. See The Commissioner of Income TaxXIII v Ashish Rajpal 2009 (5) TMI 18 - DELHI HIGH COURT . To sum up the matter, when there existed reason to belief which is formed on the basis of material available having nexus with the subject, writ Court ought not to have entertained the writ petition more so when assessment orders have already been passed during pendency of the writ petition, therefore, we set aside the order passed by the writ Court and relegate the writ petitioner to prefer an appeal against the reassessment order which may be filed within a period of 30 days from today. The writ petitioner would be at liberty to raise all grounds both factual and legal in the said appeal.
Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961. 2. Whether the reassessment was based on valid information. 3. Whether the writ petition was maintainable despite the availability of an alternative remedy. 4. Applicability of Section 263 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961: The Revenue challenged the quashing of reassessment proceedings initiated under Section 147 by the Single Judge. The original assessment for the year 2011-12 was reopened based on information that the assessee did not correctly disclose capital gains from the sale of property. The AO received two different valuation reports from the assessee, leading to a referral to the Departmental Valuation Officer (DVO) under Section 55A. The final valuation report indicated that the capital gains were underreported, justifying the reopening of the assessment under Section 147. 2. Whether the reassessment was based on valid information: The Supreme Court in Kalyanji Mavji & Co. v Commissioner of Income Tax established that "information" for reopening assessments can come from external sources or new facts discovered after the original assessment. The final DVO report, submitted after the original assessment, constituted new information. The Supreme Court in Phool Chand Bajrang Lal emphasized that reassessment could be initiated based on fresh facts or information exposing the untruthfulness of previously disclosed facts. The AO's belief was based on relevant information, which was not available during the original assessment, thus validating the reassessment proceedings. 3. Whether the writ petition was maintainable despite the availability of an alternative remedy: The Revenue argued that the writ petition was not maintainable as the assessee had an alternative remedy of filing an appeal. The Supreme Court in Commissioner of Income Tax v Chhabil Dass Agarwal held that when a statutory forum for redressal exists, a writ petition should not be entertained. The Supreme Court in Bellary Steels and Alloys Limited reiterated that writ petitions should not be filed against show-cause notices without exhausting alternative remedies. The court found that the assessee should have addressed grievances through the appellate mechanism provided under the Income Tax Act before approaching the High Court. 4. Applicability of Section 263 of the Income Tax Act, 1961: The assessee argued that the Revenue should have resorted to Section 263 instead of Section 147. Section 263 is invoked when an assessment order is erroneous and prejudicial to the interests of the Revenue. The court held that if the reassessment notice under Section 147 is justified based on valid information, Section 263 cannot be invoked. The Revenue cannot be compelled to use Section 263 when the conditions for reopening under Section 147 are satisfied, and the reassessment is based on material information. Conclusion: The court concluded that the reassessment notice was validly issued based on new information that surfaced after the original assessment. The writ petition was not maintainable as the assessee had an alternative remedy of appeal. The Revenue's action under Section 147 was justified, and Section 263 was not applicable in this context. The court set aside the Single Judge's order and directed the assessee to file an appeal within 30 days, allowing the appellate authority to decide on merits without raising objections on limitation. The writ appeal was allowed, and parties were directed to bear their own costs.
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