2009 (12) TMI 295 - HC - Income Tax

Reassessment- (i) whether the respondents can shift their stand as notice proposing to reopen the proceeding under section 148 was on the ground of escapement of income however, the order of rejection was on concealment of investment , (ii) whether the petitioners are required to file valuation report before the valuation cell, (iii) whether notice under section 148 can be issued as valuation report was received subsequent to the passing of the assessment? (iv)whether the objections which were raised by the petitioners on November 11, 2009 were considered in the order dated December 8, 2009? Held that- (1) as the first issue is concerned the answer has to be in the negative. Since the petitioners were called upon to file objection to the notice under section 148 proposing to reopen the assessment on the ground a sum of Rs. 73,219 had escaped income , the respondents cannot shift their stand and pass an order on the ground of concealment of investment as the petitioners had no opportunity to file objection regarding such concealment .(2) as the second issue is concerned, the. I find from paragraph 1 of the order dated December 8, 2009 that respondent No. 1 had held that the petitioner did not produce report before the valuation cell. In my view, the said respondent had ignored the provisions contained in section 142A of the Act which postulates that the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. Therefore, the assessee is under no obligation to file a report before the Valuation Officer. (3) So far the third issue is concerned, find that the issue is covered by the judgment in CIT v. Shirinbai Abdullabhai, notice u/s 148 could not be issued on the ground that the valuation report was received subsequent to the passing of the order. (4) that the order was silent how the objection on record was considered. While passing the order, there was no consideration of the material placed by the petitioners. Therefore all the proceedings were unsustainable and were thus set aside.

Summary

Issues:
1. Shifting stand of respondents from "escaped income" to "concealment of investment" in notice under section 148.
2. Requirement of filing valuation report before valuation cell by petitioner.
3. Validity of issuing notice under section 148 after receiving valuation report post-assessment order.
4. Consideration of objections raised by petitioners in the order dated December 8, 2009.

Analysis:

Issue 1: The respondents cannot change their stand from "escaped income" to "concealment of investment" without allowing the petitioner to file objections regarding the new ground. The order based on "concealment of investment" was deemed invalid due to lack of opportunity for objection.

Issue 2: The petitioner was not obligated to produce a valuation report before the valuation cell as per Section 142A of the Income-tax Act. The Assessing Officer's insistence on the report was deemed incorrect, especially when relevant documents were examined during assessment and the returned figure was accepted.

Issue 3: Citing the precedent in CIT v. Shirinbai Abdullabhai, it was established that notice under section 148 cannot be justified solely on the grounds of receiving a valuation report post-assessment order if the assessee had already disclosed income fully and truly.

Issue 4: The order dated December 8, 2009, was found to lack proper consideration of the objections raised by the petitioners. Referring to the standard set by the Supreme Court in Bhikhubhai Vithlabhai Patel v. State of Gujarat, it was emphasized that due consideration must involve active application of mind and dealing with all relevant aspects, which was found lacking in this case. Consequently, the notice dated July 16, 2009, and all related proceedings were set aside and quashed.

The judgment concluded by allowing the writ petition, with no order as to costs. The parties were permitted to take note of the order for communication purposes, and urgent copies were to be provided upon request.