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TMI Blog1996 (7) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... lenged by the petitioner by a letter dated December 28, 1990, whereby the petitioner stated that the conditions precedent for assumption of jurisdiction under section 147(a) of the Act were not satisfied and as such the notices were bad and illegal. It was stated that there was no reason to believe that income escaped assessment for the assessment years 1984-85 and 1985-86. The case of the petitioner before this court is that the income-tax authorities have no reasons to believe that any income escaped assessment or that the petitioner has failed to disclose material facts truly and fully required for the purpose of making the assessment for the said assessment years. According to the petitioner, all the relevant material facts have been disclosed at the time of filing of the return. The returns for the assessment years 1984-85 and 1985-86 were filed along with the balance-sheets and profit and loss account. The balance-sheet shows that a sum of Rs. 86,911.70 was spent for the construction of the house during the earlier years and a sum of Rs. 95,444.82 was added towards the construction during the assessment year 1984-85 totalling a sum of Rs. 1,82,356.52. The balance-sheet for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(3) of the Act. Without going into the aforesaid disputed questions at this stage, the matter could be disposed of otherwise. It appears that the assessments were completed by passing orders under section 143(1) or under section 143(3) of the Act for the assessment years 1984-85 and 1985-86 on June 26, 1985, and September 30, 1985, respectively. Thereafter, the Income-tax Officer issued notices under section 148 of the Income-tax Act on December 30, 1990, that is beyond the period of four years from the end of the relevant assessment years without however stating in the said notices whether the notices were issued under section 147(a) or under section 147(b) of the Act. Presumably the notices were issued under section 147(a) since they have been issued beyond the period of four years. The reasons recorded for reopening the assessment for the assessment year 1984-85 have been set out in paragraph 7 of the affidavit of the Income-tax Officer which reads as follows : " The original assessment for the assessment year 1984-85 was made under section 143(1) on June 26, 1985, on a total income of Rs. 65,250. In this case, a reference was made to the Departmental Valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2. ---- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :--- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but--- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 143(1) and reference to section 143(3) at the bottom of the order was a mistake and/or a typographical error. As such, there was no necessity for the Assessing Officer to take the approval of the Commissioner for reopening the case which could only be done in cases where the assessment is made under section 143(3) of the Act. Mr. Joshi further refers to Explanation 1 to section 147 of the Act and submits that filing of the balance-sheet or the production of books of account from which material evidence could, with due diligence, have been discovered by the Income-tax Officer which will not necessarily amount to disclosure within the meaning of the foregoing proviso. Mr. Joshi further submitted that as the balance-sheet did not disclose the proper progress of the work like what area was constructed during the said assessment years and how many floors were ready during the said assessment years, it does not amount to a full and true disclosure and as such the Income-tax Officer was justified in issuing notices under section 148 of the Act after obtaining the valuation report of a valuer under section 55A of the Act. Mr. Joshi further contended that the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, the Income-tax Officer may refer the matter of valuation of a property to the Valuation Officer when the assessment is still pending. There is no authority under the said provisions of section 55A to refer for valuation of a property after the assessment is completed by the Income-tax Officer. The reference becomes invalid because the purpose for which the valuation report can be utilised, namely, for completion of the assessment in conformity with the valuation report is no longer in existence, the assessment having been completed in the meantime. The purpose of section 55A is not to arm the Income-tax Officer for making a roving and fishing inquiry for finding out materials for reopening or revising a completed assessment. The same is not permissible in law. In this connection, I refer to three decisions reported in Brig. B. Lall v. WTO [1981] 127 ITR 308 of the Rajasthan High Court ; Smt. Amala Das v. CIT [1984] 146 ITR 216 of the Punjab High Court and Reliance Jute and Industries Ltd. v. ITO [1984] 150 ITR 643 of the Calcutta High Court. The said decisions uniformly stated that pendency of an assessment including reassessment is a sine qua non for giving jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that the foundation or bedrock of the jurisdictional facts necessary for giving jurisdiction under section 16A is that the Wealth-tax Officer must be seized of a return filed by the assessee containing valuation of his assets for which he is to apply his mind and adjudicate the valuation for completing the assessment. The situation contemplated in clauses (a) and (b) of sub-section (1) of section 16A can be visualised only in a case of pending assessment and not a completed assessment. Once the assessment is completed and before the reassessment commences the Wealth-tax Officer becomes functus officio for the purposes of section 16A, as he is not in the process of completing any assessment, for the purpose of which he wants to check up from the Valuation Officer, the correctness of the valuation of the assets disclosed by the assessee in the return and which, according to him, are undervalued, looking to the fair market value or as per the standards laid down in clause (a) or clause (b) of sub-section (1). This makes the opening phrase ' for the purpose of making an assessment ' extremely important and an opening gate through which and through which alone, the Wealth-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the fact that the assessee failed to disclose his income truly and fully. The reason to believe of an Income-tax Officer cannot be substituted by an opinion of a valuer. No condition precedent for assumption of jurisdiction under section 147(a) is satisfied. In the affidavit filed by the Income-tax Officer before this court it is admitted by the Income-tax Officer that the report of the valuer was advisory in nature. If that be so then prima facie the notices issued under section 148 of the Act are without jurisdiction and illegal. According to me, the primary facts relating to the construction of the house from year to year were fully and truly disclosed by the assessee and there was nothing further to disclose, Explanation 1 to section 147 is relevant if the facts disclosed require further elucidation. This was not the case. In construction work, the valuation during the progress of the work, if done by a third person or valuer, could only be a guess or estimate the exact cost of construction could only be found out at the end of the work. In the instant case, the assessee had given out the cost incurred towards the progress of construction made during the year of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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