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TMI Blog2019 (6) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 55A of the Act read with Section 16A(4) of the Act, 1957, however, during pendency of the petition the final assessment order was passed on 20-12-2016, therefore, the writ petitioner amended the writ petition to challenge the said assessment order also. The learned Single Judge has allowed the main prayers made in the writ petition. 3. Relevant facts giving rise to the present appeal are that the case of the assessee for assessment year 2011-12 was reopened after having information that the assessee Smt. Kamala Ojha, had got an amount of Rs. 2,00,02,500/-, as her share of sale consideration of the house property situated at plot No. 13, Vile Parle (East), Mumbai corresponding to CTS No. 917/1 to 917/6. The sale transaction took place on 16-12-2010 i.e. during the financial year 2010-11, assessment year 2011-12, however, the capital gain on the sale of the said property on her share of capital gain was not correctly disclosed in the Return of income(for short 'ROI') for the relevant A.Y. 2011-12, filed belatedly in the year ending on 31-3-2013. During an inquiry by the then Assessment Officer, the assessee had submitted two valuation reports on two different occas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of section 147 of the Act. 6. The assessee was issued notice under Section 148 on 21-9-2015 after obtaining necessary approval of the JCIT. In response the assessee requested for the reasons for reopening of assessment. The reasons recorded were eventually supplied to the assessee after which she filed objections requesting the AO to drop the proceedings. The objection was dismissed by the AO vide order dated 13-12-2016. 7. At this stage the writ petition was filed on 16-12-2016, which was first listed on 21-12-2016. On the said date, learned counsel for the Revenue informed the Court that the assessment order has already been passed. The writ petitioner was thereafter allowed to examine the matter and the petition was posted for hearing on 4-1-2017, 5-1-2017 and 6-1-2017 when the writ Court heard on maintainability of the writ petition. 8. Challenge to the notice under Section 147/148 of the Act has been made on the ground that condition precedent for invoking Section 147 did not exist; the order disposing of objections is not a speaking order; only on the basis of report of DVO proceeding cannot be reopened and lastly the revenue should have taken recourse to Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hariom Rice Mill Private Limited (supra) and M/s. Precision Engineering (supra) were relied before the writ Court. 12 . Shri Siddharth Dubey, learned counsel appearing for the respondent/writ petitioner, per contra, would argue that the condition precedent for invoking Section 147 does not exist inasmuch as there is no foundation or material for forming reason to belief, therefore, the order passed by the learned Single Judge does not call for any interference. Learned counsel would further argue that reassessment is based on DVO's report, which is not permissible. Learned counsel would next argue that in the facts and circumstances of the case bar of alternative remedy is not attracted and the writ petition is maintainable and the learned Single Judge has rightly passed the order impugned. 13. What constitutes an 'informationRs.for the purpose of Section 147 of the Act which is the edifice for formation of belief has been considered by the Supreme Court in Kalyanji Mavji & Co. (supra) wherein the following has been observed: Another pertinent fact which may be mentioned here is that although Section 34 was the subject of several amendments, yet the word 'informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation may be derived from an external source concerning facts or particulars as to law relating to a matter bearing on the assessment: (2) that the information must come after the previous or the original assessment was made. In fact the words "in consequence of information as used in Section 34 (1) (b) clearly postulate that the information must be subsequent to the original assessment sought to be reopened; and (3) that the information may be obtained even on the basis of the record of the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law. These categories are in addition to the categories laid down by this Court in Maharaj Kumar Kamal Singh's case (supra), which has been consistently followed in several decisions of this Court as shown above. On a combined review of the decisions of this Court the following tests and principles would apply to determine the applicability of Section 34(1)(b) to the following categories of cases: (1) Where the information is as to the true and correct state of the law derived from relevant judicial decisions: (2) Where in the original a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment." 16. The Supreme Court in Phool Chand Bajrang Lal and Another v Income Tax Officer and Another AIR 1993 SC 2390 emphasised on the veracity of information supplied previously by the assessee during the course of the regular assessment, while considering the validity of a reassessment notice; it stated as follows: "From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of our order, the reassessment proceedings have now to go on, we do not and we ought not to express any opinion on merits." 19 . In Commissioner of Income Tax and Others v Chhabil Dass Agarwal (2014) 1 SCC 603, the Supreme Court was dealing with a case of reassessment wherein the assessee was issued notice under Section 148 of the Act, 1961. After the assessment was completed, the assessee, instead of preferring an appeal, preferred writ petition before the High Court and the assessment order was quashed occasioning filing of special leave petition before the Supreme Court by the revenue. Allowing the appeal, the Supreme Court held thus in paragraphs 15 & 16:- 15 . Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case {AIR 1964 SC 1419}, Titaghu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus:- 14. In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels and Alloys Ltd. v. CCT, (2009) 17 SCC 547, this Court had allowed the assessee therein to withdraw the original Writ Petition filed before the High Court as the said proceedings came to be filed against the show cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show cause notice. This Court further observed as follows: "3. ...In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue." 15. We are fortified by the decision of this Court in Indo Asahi Glass Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee relied on the judgment rendered by Assistant Commissioner of Income Tax, Gujarat v Dhariya Construction Company (2010) 15 SCC 251, however, distinguishing the said judgment it was observed thus in para 11: 11. The petitioner placed reliance on the judgment of the Supreme Court in ACIT v. Dhariya Construction Co. (supra) and the judgment of Division Bench of this Court in CIT v. Smt. Suraj Devi (supra). In these cases, it has been held that the reopening of an assessment under Section 147 of the Act on the basis of the report of the DVO is bad in law. A deeper study of the judgment of the Supreme Court discloses that what has been held therein is that "the opinion of the DVO per se is not an information for the purpose of reopening assessment under Section 147 of the Income-tax Act, 1961" and that "the Assessing Officer has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the DVO under Section 55A, which was pending when the assessment order was passed (proceedings were completed). This judgment does not touch upon the point raised by the petitioner in the present writ petition. 24. Before the Delhi High Court also the assessee had argued that the DVO's report cannot be treated to be a material for forming reason to belief. Negativing the contention, it is held thus in para 9: 9. A perusal and a plain reading of the section shows the circumstances under which the Assessing Officer may refer the valuation of the property to the DVO. The section can be invoked by the Assessing Officer for ascertaining the fair market value of a capital asset for the purpose of Chapter IV of the Act, which includes the provisions relating to capital gains. Sections 45 to 55 fall under the chapter, under the sub head "E.-Capital Gains". Section 55 (2) (b)(i) gives the assessee the option to substitute the fair market value of the property as on 01.04.1981 in the place of the cost of acquisition thereof, if the property had been acquired by the assessee before 01.04.1981. The option given to the petitioner was exercised by the petitioner by filing the letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational 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 (supra)}. 26. In Chhabil Dass (supra) the Supreme Court has observed that the Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). Similar view has been taken by the Supreme Court in Bellary Steels and Alloys Limited (supra) and Vijaybhai N. Chandrani (supra). 27. In Calcutta Discount Co. Ltd. v Income Tax Officer, Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was with due application of mind and not merely by mechanically referring to the DVO/AVO's report. 31. 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. 32. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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