Hotel Regal International and Another vs Income Tax Officer and Another

Soumitra Pal, J.—In the writ petition the petitioners have challenged the notice dated July 16, 2009 issued u/s 148 of the Income Tax Act, 1961 (for short "the Act") and the notices issued under Sections 142(1) and 143(2) of the Act dated October 21, 2009 and the order dated December 8, 2009 passed by the Income Tax Officer, Ward-2(1), Asansol respondent No. 1. The assessment year involved is 2006-07. In brief the facts are that after the petitioner filed the return, the case was selected for scrutiny u/s 143(3) of the said Act. Accordingly, notices were issued by respondent No. 1. The petitioners were represented at the time of proceedings. The case was discussed and heard. The submission is the assessee had disclosed fully and truly the material facts. In the assessment order dated December 29, 2008 u/s 143(3) it was recorded that "On examination of the relevant documents no specific and mention-worthy discrepancies were found. Therefore, the return figure is accepted". Thereafter, respondent No. 1 issued the notice dated July 16, 2009 u/s 148 of the Act. The petitioners sought for the recorded reasons. On September 13, 2009 the recorded reasons were provided to the petitioner wherefrom I find that such notice was issued as a sum of Rs. 73,219 had "escaped income" for the said assessment year. Thereafter, on October 21, 2009 notices under Sections 142(1) and 143(2) were issued. On November 11, 2009, the petitioners filed the written objection to the recorded reasons. After objection was filed the matter was considered and order dated December 8, 2009 was passed by respondent No. 1 holding that there was "concealment of investment of Rs. 73,219" and the case fell "under the ambit of Section 148" of the Act and the request to cancel the notices issued under Sections 148, 142(1) and 143(2) of the Act was turned down. It has been recorded in the said order that the petitioner did not produce the valuation report before the valuation cell. Aggrieved, the writ petition.

The questions which fall for consideration are : (i) whether the respondents can shift their stand as notice proposing to reopen the proceeding u/s 148 was on the ground of "escapement of income" however, the order of rejection was on "concealment of investment", (ii) whether the petitioners are required to file valuation report before the valuation cell, (iii) whether notice u/s 148 can be issued as valuation report was received subsequent to the passing of the assessment order; and (iv) whether the objections which were raised by the petitioners on November 11, 2009 were considered in the order dated December 8, 2009.

So far as the first issue is concerned the answer has to be in the negative. Since the petitioners were called upon to file objection to the notice u/s 148 proposing to reopen the assessment on the ground a sum of Rs. 73,219 had "escaped income", the respondents cannot shift their stand and pass an order on the ground of "concealment of investment" as the petitioners had no opportunity to file objection regarding such "concealment".

So far as the second issue is concerned, the question is whether the petitioner is required to produce valuation report before the valuation cell. I find from paragraph 1 of the order dated December 8, 2009 that respondent No. 1 had held that the petitioner did not produce report before the valuation cell. In my view, the said respondent had ignored the provisions contained in Section 142A of the Act which postulates that the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. Therefore, the assessee is under no obligation to file a report before the Valuation Officer. It is to be noted that during the assessment the petitioner had filed a valuation report, as evident from page 41 of the writ petition. During the assessment relevant documents were examined and while passing the order u/s 143(3) the returned figure was accepted.

So far the third issue is concerned I find that the issue is covered by the judgment in Commissioner of Income Tax Vs. Shirinbai Abdullabhai, where it has been held as under (page 898):

The condition precedent is that the Assessing Officer has to justify that the assessee has not disclosed the material facts in respect of his income in the relevant previous year. The report of the inspector has subsequently been obtained in respect of the investment in the construction of the house and also the valuation of the Departmental valuer which is also subsequently obtained. Therefore, it cannot be said that the assessee has not disclosed his income fully and truly.

Therefore, in view of the settled position of law, as the petitioner had disclosed his income fully and truly and the return was accepted, notice u/s 148 cannot be issued on the ground that the valuation report was received subsequent to the passing of the order.

The final question is whether respondent No. 1 while passing the order dated December 8, 2009 in the proceedings u/s 147 had considered the written objection. The apex court in the case of Bhikhubhai Vithlabhai Patel and Others Vs. State of Gujarat and Another, has held that "The term ''consider'' means to think over; it connotes that there should be active application of mind. In other words the term ''consider'' postulates consideration of all the relevant aspects of the matter". Thus, "consideration" means taking into account and dealing with the material on record leading to a decision. However, in the instant case, the impugned order is silent how the objection on record was considered. Rather I find that while passing the order there was no consideration at all of the material placed by the petitioners. Therefore, the logical conclusion would be that the materials on record were not considered. Hence, for the reasons as enumerated, the notice dated July 16, 2009 and all consequential proceedings including the order dated December 8, 2009 cannot be sustained and are, thus, set aside and quashed.

Since the writ petition is disposed of at the admission stage without calling for filing of affidavits controverting the allegations, the allegations made therein are deemed not to have been admitted by the respondents.

The writ petition is allowed.

There will be no order as to costs.

The learned advocates for the parties are permitted to take down the gist of this order for communication and the respondents including respondent No. 1 shall act on the basis of such communication.

Urgent xerox certified copy of this order, if applied for, be furnished to the appearing parties on priority basis.