DR. PRADEEP SIHARE V. INCOME TAX OFFICER

WA/236/2025

AI Insights

The case involves Dr. Pradeep Sihare, a medical professional, who appealed against the dismissal of his writ petition challenging the reassessment of his income tax for the assessment years 2001-02 to 2004-05. The reassessment was based on a report from the District Valuation Officer (DVO) which estimated a higher value for the construction of a nursing home than what was declared by the appellant. The Income Tax Department had initially accepted the appellant's returns, but later, following a survey and the DVO's report, initiated reassessment proceedings. The appellant contested the reassessment, claiming it was based on an invalid DVO report and lacked jurisdictional facts. However, both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal upheld the reassessment, leading to this appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 759079 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 30-04-2025
• Assessment Year: misc
• Other Referred Cases: Amiya Bala Paul v. CIT, Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta, ACIT v. Dhariya Construction Company, Divine Infracon Private Limited v. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: AJAY KUMRANI
• Assessee Lawyers: NEELABH DUBEY
• Keywords: Income escape assessment; Jurisdiction; Reassessment; Undisclosed investment; Valuation Officer
• Section: 147; 148; 133A; 143(1)(a); 131(1)(d)

Judgement Text

" 2025:CGHC:19546-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR WA No. 236 of 2025 Dr. Pradeep Sihare S/o Late Shri G.P. Sihare Aged About 72 Years R/o Nirala Nagar, Bus Stand Bilaspur, Chhattisgarh. ... Appellant(s) versus 1 - Income Tax Officer Ward 1(1), Mahima Complex, Vyapar Vihar, Bilaspur Chhattisgarh. 2 - Additional Commissioner Of Income Tax Range - 1 Mahima Complex, Vyapar Vihar, Bilaspur Chhattisgarh. ... Respondent(s) For Appellant(s) : Mr. Neelabh Dubey, Advocate For Respondent(s) : Mr. Ajay Kumrani on behalf of Mr. Amit Chaudhari, Advocates Hon'ble Shri Ramesh Sinha, Chief Justice Hon'ble Shri Arvind Kumar Verma , Judge Judgment on Board Per Ramesh Sinha, Chief Justice 30.04.2025 1. Heard Mr. Neelabh Dubey, learned counsel for the appellant as well as Mr. Ajay Kumrani on behalf of Mr. Amit Chaudhari, learned counsel, appearing for the respondents. MANPREET KAUR Digitally signed by MANPREET KAUR Date: 2025.05.02 10:43:45 +0530 2. This writ appeal is presented against an order dated 10.02.2025 passed by the learned Single Judge in WPT No. 7129 of 2008 (Dr. Pradeep Sihare vs. Income Tax Officer and another), whereby, the writ petition filed by the writ petitioner/appellant herein was dismissed by the learned Single Judge. 3. Brief facts of the case are that the appellant is a medical professional and he constructed a nursing home in accounting year relevant for Assessment Year 2001-02 to 2003-04. He is regularly assessed and the returns for these assessment years were also submitted duly. The returns submitted by the appellant were accepted by the Income Tax Department under Section143(1)(a) of the Act. In the balance sheet, the cost of construction was incorporated on the asset side. On 28.07.2003, survey operation under S,133A was carried out by the Department at the professional premises of the appellant where a surrender of Rs.5,00,000/- was obtained from the appellant on account of construction of the nursing home. Thereafter, during the course of assessment proceedings for the year 2004-05, the assessing officer referred the matter to the District Valuation Officer [hereinafter referred to as DVO] for determining the investment in construction of the nursing home. The DVO estimated the value of the property at Rs.32,59,004/- as against the total investment shown by the appellant at Rs. 16,45,000/-. Solely on the basis of the DVO's report, the AO added the difference of Rs. 16,14,004/- as undisclosed investment while making assessment for the A.Y. 2004-05. Against the above referred assessment order, the appellant preferred an appeal before the Commissioner Income Tax [Appeals]. Vide order dated 30.04.2007, the addition made on account of construction by the AO was deleted by the CIT [Appeals]. This surrendered amount of Rs.5,00,000 was retracted by the appellant. With regard to this, the appellant submitted that he was immensely pressurized and had no other alternative but concede to all that was put to him by the survey team. Against the order of the CIT [Appeals], the Department preferred an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as the ITAT], Jabalpur. The ITAT, Jabalpur confirmed the order of the CIT (Appeals). In the meantime, proceedings was initiated against the appellant under Section148 of the Act for the Assessment Year 2001-02, 2002-03 and 2003-04. The appellant was served with a notice dated 26.04.2007 under Section 148 of the Act on 01.05.2007. The notice dated 26.04.2007 thus, indicates that reassessment was initiated even prior to the order of the CIT [Appeals] dated 30.04.2007. In response to the notice dated 26.04.2007, the appellant submitted its reply dated 03.05.2007 wherein it requested the Income Tax Officer to treat its return filed for the A.Y. 2001- 02, 2002-03 and 2003-04 as its response to the notices and also requested the Income Tax Officer to provide the copy of the reasons recorded and approval obtained prior to issuance of notice. Instead of providing reasons to the appellant, the Income Tax Officer issued notices under S.143(2) and S.142(1) dated 06.08.2008 calling upon the appellant to furnish the replies as sought in the notices. It is only through a letter dated 29.08.2008, the appellant was provided a copy of the reasons for reopening for all these years. On receipt of the reasons, the appellant supplied a very detailed response /objection to the initiation of proceedings under S.148 of the Act. This response was submitted in the office of the Income Tax Officer Ward-1(1), Bilaspur on 22.10.2008. Vide order dated 12.12.2008, the AO disposed of the objections of the Appellant and proposed to hear the case on 19.12.2008. After the above order was passed, the appellant preferred a petition being W.P. (T) No. 7129/2008 before this Court challenging initiation of reassessment proceedings, notice under S.148 of the Act and all consequential notices issued thereafter. Thereafter on 19-12-2008, the appellant was granted interim by the learned Single Judge. Case was finally heard on 10.02.2025 whereby the learned Single Judge dismissed the case of the appellant. Hence, this writ appeal. 4. Learned counsel for the appellant submits that he learned Single Judge failed to see that there is gross violations of legal provisions and the respondents have deviated from the procedure laid down for reassessment and calling for District Valuation Officer report. The reassessment notice as well as the DVO's report are bad in law and suffer from grave illegality. The reassessment proceeding is without jurisdiction as it lacks reason to believe that there was any income that has escaped assessment. 'Reason to believe\" is the requirement for initiating foundational reassessment proceedings under Section 147 of the Act. In the instant case, there was no new information to suggest that the income of the Appellant has escaped assessment. The jurisdictional facts which are necessary for initiating reassessment proceedings are absent and in such case, reassessment notices and any consequential notice issued pursuant to it, are bad in law and void ab initio. There are catena of decisions of the Hon'ble Supreme Court and various High Courts which have held that in absence of the jurisdictional facts which are essential to initiate a proceeding under S.147 of the Act, all proceedings and consequential notices are illegal and bad in law. Further, the learned Single Judge erred twice in conferring jurisdiction on the AO even in absence of jurisdictional facts. There was no reason to believe even when the AO acted solely on the basis of the DVO's report without applying his own mind as the DVO's report could not have been called for as the AO does not have power to do so which has been clearly held by the Hon’ble Supreme Court in the matter of Amiya Bala Paul v. CIT (2003) 262 ITR 407 (SC). Further, even if the AO had powers to call for DVO's report, in the instant case, the DVO's report could not have been called for as there was no proceeding pending before the AO when the DVO's report was called for. Also, the learned Single Judge in a blatantly arbitrary manner, simply recorded that the cases relied upon by the appellant were either not relevant or distinguishable from the facts of the appellant's case. The AO has not demonstrated independent application of mind to verify whether the valuation difference actually represents undisclosed investment, there is no corroborative evidence showing that the differential amount existed. 5. Learned counsel for the appellant further relied upon the judgment passed by the Hon’ble Supreme Court in the case of ACIT v. Dhariya Construction Company; [2010] 328 ITR 515 (SC), and in the case of Divine Infracon Private Limited v. DCIT (2025) 342 CTR (Del) 46 and submits that the AO made reference to the DVO for ascertainment of cost of construction of the Hospital building on 30.09.2006. It is important to note that as on this date the assessment proceedings for A.Y. 2001-02 to 2003- 04 was concluded. It may also be noted that the construction of the Hospital completed prior to A.Y. 2004-05 and the Hospital was inaugurated on 24.06.2001 and it had become operational. The depreciation claimed by the Appellant for A.Y. 2002-03 and 200304 was allowed. The learned Single Judge erred in conferring jurisdiction to the AO in absence of reasons to believe. The AO failed to apply its mind and relied mechanically on the DVO's report which itself was illegal. The DVO's report could not have been called for as the AO does not have the power to do so under Section131(1)(d) of the Act. He also relied upon the judgment passed by the Hon’ble Apex Court in the matter of Amiya Bala Paul vs. CIT (2003) 262 ITR 407(SC) and in the matter of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta and another AIR 1961 SC 372 (V 48 C 60), relevant paras of which quoted hereinbelow:- “(27) Mr. Sastri next pointed out that at the stage when the Income-tax Officer issued the notices he was not acting judi- cially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate order or directions to prevent such consequences. (28) Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz., whether the Income-tax Officer had reason to believe that under assessment had resulted from non-disclosure of material facts, before the Income-tax Officer himself in the assessment proceedings and if unsuc- cessful there before the appellate officer or the appellate tribunal or in the High Court under S. 66(2) of the Indian Income-tax Act.. The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting with- out jurisdiction from continuing such action.” 6. On the other hand, learned counsel for respondents opposes the submissions made by the learned counsel for the appellant and submits that the learned Single Judge after considering all the aspects of the matter has rightly dismissed the writ petition filed by the writ petitioner / appellant herein, in which no interference is called for. 7. Learned counsel for the respondents further submits that so far as the matter of Calcutta Discount Co. (Supra) relied upon by the appellant is concerned, the facts of the present case are entirely distinguishable and further, in pursuance of the order passed by the learned Single Judge vide order dated 10.02.2025, the Assessing Authority has already passed its fresh order on 08.04.2025 against which, the appellant herein has alternative remedy to raise all his grievance in the CIT appeal under Section 246A of the Income Tax Act before the competent authority, which is reproduced below:- “246A. (1) Any assessee aggrieved by any of the following orders (whether made before or after the appointed day) may appeal to the Commissioner (Appeals) against— (a) an order [passed by a Joint Commissioner under clause (ii) of sub-section (3) of section-115VP or an order] against the assessee where the assessee denies his liability to be assessed under this Act or an intimation under sub-section (1) or sub-section (1B) of section-143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section-143 or section-144, to the income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; [( aa) an order of assessment under sub-section (3) of section-115WE or section-115WF, where the assessee, being an employer objects to the value of fringe benefits assessed; (ab) an order of assessment or reassessment under section-115WG;] (b) an order of assessment, reassessment or recomputation under section-147 or section-150; [(ba) an order of assessment or reassessment under section-153A;] (c ) an order made under section-154 or section- 155 having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under either of the said sections; (d ) an order made under section-163 treating the assessee as the agent of a non-resident; (e ) an order made under sub-section (2) or sub- section (3) of section-170; (f ) an order made under section-171; (g ) an order made under clause (b) of sub-section (1) or under sub-section (2) or sub-section (3) or sub-section (5) of section-185 in respect of an assessment for the assessment year commencing on or before the 1st day of April, 1992; (h ) an order cancelling the registration of a firm under sub-section (1) or under sub-section (2) of section-186 in respect of any assessment for the assessment year commencing on or before the 1st day of April, 1992 or any earlier assessment year; [( ha) an order made under section-201;] [( hb) an order made under sub-section (6A) of section-206C;] (i ) an order made under section-237; (j ) an order imposing a penalty under— (A) section-221; or (B) section-271, section-271A , [ section-271AAA,] section-271F , [ section-271FB,] section-272AA or section-272BB; (C) section-272, section-272B or section-273, as they stood immediately before the 1st day of April, 1989, in respect of an assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment years; [( ja) an order of imposing or enhancing penalty under sub-section (1A) of section-275;] (k ) an order of assessment made by an Assessing Officer under clause (c) of section-158BC, in respect of search initiated under section-132 or books of account, other documents or any assets requisitioned under section-132A on or after the 1st day of January, 1997; (l ) an order imposing a penalty under sub-section (2) of section-158BFA ; (m ) an order imposing a penalty under section- 271B or section-271BB; (n ) an order made by a Deputy Commissioner imposing a penalty under section-271C [, section- 271CA], section-271D or section-271E; (o ) an order made by a Deputy Commissioner or a Deputy Director imposing a penalty under section- 272A; (p ) an order made by a Deputy Commissioner imposing a penalty under section-272AA; (q ) an order imposing a penalty under Chapter XXI; (r ) an order made by an Assessing Officer other than a Deputy Commissioner under the provisions of this Act in the case of such person or class of persons, as the Board may, having regard to the nature of the cases, the complexities involved and other relevant considerations, direct. Explanation.—For the purposes of this sub-section, where on or after the 1st day of October, 1998, the post of Deputy Commissioner has been redesignated as Joint Commissioner and the post of Deputy Director has been redesignated as Joint Director, the references in this sub-section for \"Deputy Commissioner\" and \"Deputy Director\" shall be substituted by \"Joint Commissioner\" and \"Joint Director\" respectively. [(1A) Every appeal filed by an assessee in default against an order under section-201 on or after the 1st day of October, 1998 but before the 1st day of June, 2000 shall be deemed to have been filed under this section. [(1B) Every appeal filed by an assessee in default against an order under sub-section (6A) of section-206C on or after the 1st day of April, 2007 but before the 1st day of June, 2007 shall be deemed to have been filed under this section.] (2) Notwithstanding anything contained in sub- section (1) of section-246, every appeal under this Act which is pending immediately before the appointed day, before the Deputy Commissioner (Appeals) and any matter arising out of or connected with such appeals and which is so pending shall stand transferred on that date to the Commissioner (Appeals) and the Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it was on that day : Provided that the appellant may demand that before proceeding further with the appeal or matter, the previous proceeding or any part thereof be reopened or that he be re-heard. Explanation.—For the purposes of this section, \"appointed day\" means the day appointed by the Central Government by notification in the Official Gazette.]” 8. We have heard learned counsel for the parties and perused the impugned order and other documents appended with writ appeal. 9. From perusal of the impugned order, it transpires that the learned Single Judge has dismissed the writ petition i.e. WPT No.7129 of 2008 vide order dated 10.02.2025, holding that admittedly, a Survey was conducted under Section 133 of the Act on 8.7.2003. During the said Survey, a report has been sought from the DEO with regard to construction of the Nursing Home as well as residential unit made by the assessee. From the report of the DEO, it has been revealed that certain unexplained amount of investment has been made. It was further revealed that the expenditure incurred shown by the assessee was much below the assessed cost of the construction. So considering this clear difference in the cost of construction, a reason to believe has been recorded by the Assessing Officer in respect of the subject Assessment Years and the case was reopened by exercising the powers vested in him under Section 147 of the Act. Even though the Assessee had raised objections for reopening, however, the same was turned down by a speaking order dated 12.12.2008. Thus, it is explicit that the Assessing Officer has recorded the reasons in view of the report of the District Valuation Officer. Moreover, the Survey conducted reveals that the assessee has not truly disclosed his income chargeable to tax which has escaped assessment for the relevant Financial Years. The learned Single Judge concluded that the Assessing Officer has recorded his own valid and proper satisfaction for existence of reason to believe that the income of the relevant assessment years has escaped assessment. Thus, the notice cannot be treated to have been passed without jurisdiction. Even otherwise, the writ petitioner would get full opportunity to raise his defence in the appellate proceedings and accordingly, dismissed the writ petition filed by the writ petitioner on merits. 10. Considering the submissions advanced by the learned counsel for the parties and the fact that the Assessing Authority has already passed its fresh order on 08.04.2025 against which, the appellant herein has alternative remedy to raise all his grievance in the CIT appeal under Section 246A of the Income Tax Act and the finding recorded by the learned Single Judge while dismissing the writ petition filed by the writ petitioner / appellant herein, we notice that the same has been rendered with cogent and justifiable reasons. In an intra-court appeal, no interference is usually warranted unless palpable infirmities are noticed on a plain reading of the impugned order. In the facts and circumstances of the instant case, on a plain reading of order, we do not notice any such palpable infirmity or perversity, as such, we are not inclined to interfere with the impugned order. 11. Accordingly, the writ appeal being devoid of merit is liable to be and is hereby dismissed with liberty to avail the alternative remedy available under the law. No cost(s). Sd/- Sd/- (Arvind Kumar Verma) (Ramesh Sinha) Judge Chief Justice Manpreet "