M/s Hotel City Heart, Chamba V. ITO, Dalhousie at, Banikhet

ITA 1369/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5370 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Reopening of assessment; Unexplained investment; Source of fund; Valuation report; Reason to believe
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NOS.1368 TO 1370/CHD/2017 ASSESSMENT YEARS: 2004-05 TO 2006-07 HOTEL CITY HEART VS. THE ITO CHAMBA DISTT. CHAMBA DALHOUSIE AT BANIKHET PAN NO. AAAAH7179N (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. TEJ MOHAN SINGH REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 27/12/2017 DATE OF PRONOUNCEMENT : 05/01/2018 ORDER PER DR. B.R.R. KUMAR, A.M. ALL THE ABOVE APPEALS HAS BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF THE LD. CIT(A), PALAMPUR DT. 02/06/2017. 2. SIMILAR GROUNDS HAVE BEEN TAKEN FOR ALL THE THRE E YEARS IN APPEAL, HENCE THEY ARE BEING DEALT TOGETHER FOR THE SAKE OF CONVENIENCE. 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER RESORTING TO TH E PROVISIONS OF SECTION 148 IN AS MUCH AS THERE HAS BEEN NO ESCAPEMENT OF INCOME WARRANTING I SSUANCE OF NOTICE UNDER SECTION 148 AS THERE WAS NO FIRM IN EXISTENCE AND AS SUCH T HE ASSESSMENT FRAMED IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. THAT THE RE-OPENING IS BASED ON BORROWED INFORMA TION IN THE SHAPE OF VALUERS REPORT WITHOUT THERE BEING A REASON TO BELIEVE WHIC H IS MANDATORY AND AS SUCH THE ASSESSMENT FRAMED IS ILLEGAL, ARBITRARY AND UNJUSTI FIED. 3. THAT PROVISIONS OF SECTION 148 IF ANY COULD HAVE BEEN APPLIED IN THE CASE OF THE PARTNERS WHO HAD INVESTED THE FUNDS OUT OF THEIR IN DIVIDUALS DISCLOSED SOURCES OF INCOME AND AS SUCH THE PROCEEDINGS UNDER SECTION 148 IN TH E CASE OF THE ASSESSEE IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 4. WITHOUT PREJUDICE TO THE ABOVE LEGAL GROUNDS, TH E LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING AN ADDITION OF RS. 4,60,479/- ON ACCOUNT OF ALLEGED INVESTMENT IN PROPERTY OUT OF UNDISCLOSED SOURCES ONLY ON THE BAS IS OF VALUERS REPORT WHICH IS ARBITRARY AND UNJUSTIFIED. 3. THE APPEAL OF THE ASSESSEE IS TIME BARRED BY 3 D AYS. DURING THE HEARING THE ASSESSEE HAS SUBMITTED THAT THE DELAY WAS DUE TO IL L HEALTH OF THE LOCAL COUNSEL. THE ASSESSEE HAS ALSO FILED AFFIDAVIT STATING THAT HE C OULD NOT ATTEND THE OFFICE REGULARLY DUE TO ILL HEALTH. KEEPING IN VIEW THE REASONS GIVEN BY THE ASSESSEE, THE DELAY OF 3 DAYS IS BEING CONDONED. 2 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER HAS ISSUED NOTICE UNDER SECTION 148 UPON RECEIPT OF THE REPORT OF THE VALUATION OFFICER DT. 27/12/2010 WHEREIN THE VALUE OF THE CONSTRUCTION HA S BEEN DETERMINED BY THE DVO WAS RS. 32,49,416/- AS AGAINST THE INVESTMENT D ECLARED BY THE ASSESSEE AT RS. 25,63,996/-. OWING TO THE DIFFERENCE IN THE VAL UATION THE ASSESSING OFFICER HAS REOPENED THE CASE OF THE ASSESSEE FOR THE AY 2004-0 5, 2005-06 AND 2006-07. 5. THE LD. CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER AND ALSO UPHELD THE PROCEEDING INITIATED UNDER SECT ION 147. 6. BEFORE US THE LD. AR HAS POINTED OUT TWO IMPORTA NT ISSUES WHICH ARE AS UNDER: I. THE ASSESSEE HAS FILED RETURN OF INCOME IN THE S TATUS OF FORM FOR THE AY 2006-07 AND THE ASSESSEE BY THE NAME M/S HOTEL CITY HEART WAS NOT EXISTING FOR THE AY 2004-05 & 2005-06. II. AS PER THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. DHARIA CONSTRUCTION CO. PROCEEDINGS UNDER SECTION 147 CANN OT BE INITIATED BASED ON THE REPORT OF THE DVO. 7. LD. DR HAS STRONGLY ARGUED THAT EVEN IF THERE IS NO BUSINESS THE ASSESSEE OUGHT TO HAVE FILE THE RETURNS AND IN THE ABSENCE O F RETURN THE ISSUE OF NOTICE UNDER SECTION 148 IS VALID TO BRING THE UNEXPLAINED INVESTMENT TO TAX. IT WAS ARGUED THAT THE VALUATION REPORT CAN BE AN INFORMAT ION FOR THE PURPOSE OF REOPENING OF THE CASE. THE LD. DR FURTHER RELIED ON VARIOUS CASE LAWS NAMELY RAYMOND WOOLEN MILLS LTD. VS. ITO 236 ITR 34 FOR TH E PROPOSITION THAT A PRIMA FACIE MATERIAL IS SUFFICIENT FOR REOPENING OF THE C ASE. SIMILARLY THE JUDGMENT BY THE HONBLE DELHI HIGH COURT IN THE CASE OF RAJAT E XPORT IMPORT INDIA PVT. LTD. 341 ITR 131 IN WHICH IT WAS HELD THAT FULL PROOF CASE F OR MAKING ADDITION IS NOT NECESSARY. THE LD. DR FURTHER RELIED ON THE JUDGME NT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SWARAJ ENGINEERING PVT. LTD. V S. ACIT 260 ITR 202 WHEREIN IT WAS HELD THAT AT THE STAGE OF NOTICE THE COURT CAN ONLY CONSIDER WHETHER THERE IS A PRIMA FACIE CASE FOR REASSESSMENT. 8. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 9. AS PER THE JUDGMENT OF THE HONBLE SUPREME COURT THE OPINION OF THE DVO PER SE IS NOT INFORMATION FOR THE PURPOSE OF RE OPENING OF ASSESSMENT. THE JUDGMENT IS AS UNDER: 3 ACIT VS. DHARIA CONSTRUCTION CO. 328 ITR 515 (SUPRE ME COURT) REASSESSMENT INFORMATION OPINION OF DISTRICT VA LUATION OFFICER- CANNOT BE BASIS FOR REOPENING ASSESSMENT INCOME TAX ACT, 1 961, S. 147 HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS CA SE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GI VEN BY THE DISTRICT VALUATION OFFICER (DVO). THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CIRCUMSTANCE S, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN T HE ASSESSMENT. THUS BASED ON THE JUDGMENT OF THE HONBLE SUPREME C OURT WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND QUASH THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT. THEREFORE THERE IS NO NEED TO CONSIDER THE OTHER GROUNDS OF APPEAL ON MERIT BECAUSE THEY ARE L EFT FOR ACADEMIC DISCUSSION ONLY. RESULTANTLY THE ADDITION MADE WOULD BE DELETE D. 10. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R.KUMA R) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 05/01/2018 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR