Royal Garden V. Income Tax Officer, Una

CWP/7732/2012

AI Insights

The case involves M/s Royal Garden, the petitioner, contesting a show-cause notice issued by the Income Tax Officer, Una, under Section 148 of the Income Tax Act, 1961, for the assessment year 2008-09. The notice was based on a valuation report obtained under Section 142A, which indicated a discrepancy between the declared investment in a hotel building and the estimated investment by the valuation officer. The petitioner argued that the Income Tax Officer could not rely on the later-obtained valuation report to issue the notice. The respondent's counsel contended that the valuation report was part of the assessment proceedings and thus could be the basis for invoking Section 148. The court found that the reasons recorded for issuing the notice did not state the correct factual position regarding the timing of the valuation report's availability, leading to the decision to allow the petition and efface the notice.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 797325 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 09-07-2013
• Assessment Year: misc
• Other Referred Cases: ACC Ltd. Versus District Valuation Officer and ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VANDNA KUTHIALA
• Assessee Lawyers: C S ANAND KAPOOR; ASHISH VERMA
• Keywords: Escape assessment; Show cause notice; Valuation report; Undeclared sources of income
• Section: 147; 148; 143(3); 142A

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No. 7732 of 2012-D. Decided on: July 09, 2013. M/s Royal Garden ……Petitioner. Versus Income Tax Officer, Una. …….Respondent. Coram The Hon’ble Mr. Justice A. M. Khanwilkar, Chief Justice. The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting? For the petitioner: M/S. C.S.Anand, S. Kapoor and Ashish Verma, Advocates. For the respondent: Ms. Vandna Kuthiala, Advocate, vice counsel. ---------------------------------------------------------------------------------------------- Justice A. M. Khanwilkar, C.J. (Oral) Heard counsel for the parties. 2. Rule. Rule made returnable forthwith, by consent. Counsel for the respondent waives notice. As short question is involved, the petition is taken up for final disposal forthwith, by consent. 3. The petition essentially takes exception to the show-cause notice issued by the Income Tax Officer, Una dated 27.6.2011. It is not in dispute that the assessment year in question is 2008-09. Notice issued is under Section 148 of the Income Tax Act, 1961. The reasons recorded for issuing the said notice are as follows: “INCOME TAX DEPARTMENT Name and address of the assessee. M/S. Royal Garden Hotel, Nichla Tahliwal, Distt. Una- (H.P.) Assessment Year 2008-09 PAN AAJFR7591L Status Firm REASONS RECORDED U/S 147 FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT, 1961. 2 The assessee firm filed his return of income on 31-03-2009 declaring total loss of Rs. 425536/-. The assessee firm derives income from Hotel Business. The assessee firm has made investment in the construction of Hotel Building in different years. Assessment for the assessment year 2007-08 was completed u/s 143(3) of the I.T. Act. During the course of assessment proceeding the case was referred u/s 142A of the Act for evaluating the investment made in the construction of house. As per valuation report, the investment made in the construction of building during the year under consideration is as under:- 1. Investment declared by the assessee Rs. 6194918/-. 2. Investment estimated by the V.O. Rs. 8644900/-. 3. Difference Rs. 2449982/-. The assessee firm has made investment of Rs. 2449982/- out of undeclared sources of his income. I therefore, have reason to believe that income of Rs. 2449982/- has escaped assessment in this case due to failure on the part of assessee firm to declare particulars of his income fully and truly. As such, I consider it a fit case for issue of notice u/s 148. Hence notice under the said section is accordingly issued. (R.K.PAWLA) Dated: 27-06-2011 Income Tax Officer , Una.” 4. According to the petitioner, the Income Tax Officer cannot take recourse to remedy under Section 148 by relying on the valuation report made available to him at a later point of time. This position is well settled. 5. Counsel for the department, however, submits that the basis on which this argument is canvassed is incorrect. According to the learned counsel for the department, the valuation report was very much available with the Assessing Officer as it was sought by making reference under Section 142A of the I.T. Act. Counsel for the department, relies on the un-reported decision of the Delhi High Court in case ACC Ltd. Versus District Valuation Officer and ors. decided on 21.5.2012, in support of the argument that if the valuation report has 3 been obtained pursuant to reference that can certainly be the basis to invoke powers under Section 148 of the Act. However, this is not a fact stated in the reasons recorded. In this view of the matter, the petition ought to succeed. 6. Counsel for the department submits that in that case, the Income Tax Officer will withdraw the impugned reasons recorded, which are the basis for issuing the said notice and record fresh reasons incorporating the correct factual position and then proceed in the matter in accordance with law. In view of this submission, the petition is disposed of on the understanding that the show- cause notice dated 27.6.2011, does not survive and is effaced from the record since reasons recorded on the basis of which the same was issued have been withdrawn by the Income Tax Officer with liberty to record fresh reasons and proceed in the matter, in accordance with law. We are not expressing any final opinion given on the merits of the contention. 7. The petition is disposed of, leaving all questions open. ( A. M. Khanwilkar), Chief Justice. July 09, 2013, ( Kuldip Singh), (karan/tr) Judge. "