2018 (1) TMI 91 - HC - Income Tax

Reopening of assessment - Held that - There is a clearcut mention in the reasons that the assessee has wrongly taken cost of the land, being the market value based on the valuation report of S.B.Shuttari, Chartered Engineer & Government approved valuer. It is, thus, not open for the petitioner to contend that the assessee/petitioner was taken by surprise and that the notice has been confirmed or that the order rejecting the objection, raised by the petitioner, records extraneous consideration. In fact, the reasons recorded in the order while rejecting the objection raised by the petitioner cannot be said to be extraneous since the reference in respect of the grounds does appear in the reasons for reopening assessment, communicated on 03.11.2016. Since it is observed by us that the objection raised by the petitioner is devoid of substance and that there is very much reference to the objection in the communication indicating reasons for belief , issued by Respondent Department and that no new material or ground has been introduced in the final order and that the petitioner has not been taken to surprise, we do not find any reason to cause interference in the instant matter. - Decided against assessee

Issues Involved:
1. Issuance of notice under Section 148 of the Income Tax Act.
2. Validity of the reasons recorded for reopening the assessment.
3. Computation of capital gains and the option under Section 55(2)(b)(ii) of the Income Tax Act.
4. Objection to the valuation report and its acceptance by the Income Tax Department.
5. Maintainability of the writ petition under Article 226 of the Constitution.

Issue-wise Detailed Analysis:

1. Issuance of notice under Section 148 of the Income Tax Act:
The petitioner challenged the notice issued on 14.09.2016 by the Assistant Commissioner of Income Tax under Section 148, claiming it was issued beyond the permissible six-year limitation period as per Section 149. The petitioner filed a return of income on 03.11.2016 in response to the notice and requested the reasons for the notice, which were provided by the department on the same day. The petitioner objected to the notice, arguing that the reasons for reopening the assessment were not sustainable in law.

2. Validity of the reasons recorded for reopening the assessment:
The petitioner argued that the reasons recorded for reopening the assessment were vague and did not disclose any failure on their part to disclose fully and truly all material facts necessary for the assessment. They relied on the judgment in Hindustan Lever Ltd. Vs. R.B. Wadkar, which emphasized that reasons must be clear, unambiguous, and based on evidence. The court examined whether the reasons recorded by the Assessing Officer were sufficient and found that the reasons provided were clear and specific, addressing the valuation report and the market value of the property.

3. Computation of capital gains and the option under Section 55(2)(b)(ii) of the Income Tax Act:
The petitioner contended that under Section 55(2)(b)(ii), they had the option to take the market value as of 01.04.1981 for computing capital gains. The Income Tax Department, however, argued that the petitioner should have used the book value of ?1,80,000 as the cost of acquisition. The court noted that the petitioner had exercised their option to use the market value and that the department's rejection of this option was not in line with the provisions of the law.

4. Objection to the valuation report and its acceptance by the Income Tax Department:
The department rejected the valuation report prepared by the government-approved valuer, claiming it was flawed and not in accordance with the guidelines issued by the Directorate of Income Tax. The petitioner argued that the objection to the valuation report was introduced for the first time in the final order and was not part of the initial reasons for reopening the assessment. The court found that the reasons for reopening the assessment did include a reference to the valuation report, and thus, the petitioner was not taken by surprise.

5. Maintainability of the writ petition under Article 226 of the Constitution:
The respondent argued that the petitioner should not be allowed to challenge the order under Section 148 in a writ petition when an alternative remedy was available under the Income Tax Act. The court referred to the judgments in Commissioner of Income Tax Vs. Chhabil Dass Agrawal and others, which emphasized that writ jurisdiction should not be invoked when an effective alternative remedy exists. However, the court proceeded to examine the merits of the petition and found that the objections raised by the petitioner were devoid of substance.

Conclusion:
The court dismissed the writ petition, holding that the reasons recorded for reopening the assessment were clear and specific, and the petitioner was not taken by surprise by any new grounds in the final order. The court also found that the petitioner's option to use the market value for computing capital gains was valid, but the department's rejection of the valuation report was justified. The petition was dismissed, and the rule was discharged with no order as to costs.

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