M/s. Hotel Revine Palace vs Government Of India And Others

Ramesh Ranganathan, CJ

The application seeking condonation of delay is not opposed by Mr. H.M. Bhatia, learned Senior Standing Counsel for the Income Tax department i.e. respondent Nos. 2 & 3; and the delay is, therefore, condoned.

This appeal is preferred by the assessee against the order passed by learned Single Judge in WPMS No. 3699 of 2018 dated 14.05.2019. The appellant herein filed WPMS No. 3699 of 2018 against the order dated 27.11.2018 whereby proceedings were initiated under Section 147/148 of the Income Tax Act, 1961, along with the notice dated 23.03.2018, against the petitioner for the assessment year 2016-17; and for a mandamus, directing and commanding the respondent-Income Tax department to drop the assessment/reassessment proceedings initiated under Section 147/148 of the Income Tax Act, 1961 in relation to the assessment year 2016-17 being void ab initio, illegal, arbitrary and without jurisdiction.

By his proceedings dated 23.03.2018, the Income Tax Officer recorded reasons for initiating proceedings under Section 147 of the Act. By his proceedings dated 27.11.2018, the Income Tax Officer informed the petitioner that their case had been selected for assessment, under Section 147 of the Income Tax Act, 1961, based on the valuation report of the Government approved valuer approved by the Chief Commissioner of Income Tax. The valuation report dated 28.03.2016 was submitted by the assessee himself to the State Bank of India, Main Branch, Kotdwar for sanction of a loan. In the said valuation report dated 28.03.2016, the total cost of the partially constructed Hotel building had been declared as Rs.2,40,41,000/-, whereas, in the balance-sheet for the financial year 2015-16, the assessee had declared the value of the very same hotel building as Rs. 85,53,821/-.The assessee was alleged to have suppressed the value of the partially constructed hotel building, in its books, by Rs. 1,54,87,179/-; and the valuation had been made by the Government approved valuer. The petitioner's objection to the notice under Section 148 was rejected.

While the appellant invoked the jurisdiction of this Court well within time, no interim order was passed therein restraining the Income Tax Officer from passing a re-assessment order; and, consequently, a re-assessment order was passed by the Income Tax Officer on 31.12.2018. Aggrieved thereby, the appellant herein preferred an appeal to the Commissioner of the Income Tax (Appeal) on 26.01.2019; and the said appeal is said to be still pending.

In the order under appeal, the learned Single Judge observed that, since the appellant had already submitted himself to the jurisdiction of the Appellate Authority and the appeal was still pending consideration, all issues pertaining to the procedural flaws which had resulted in issuing a notice under Section 147/148 of the escaped assessment, would be the subject matter of scrutiny before the Appellate Authority. The writ petition was dismissed, leaving it open to the petitioner to raise all grounds, pertaining to the procedural flaws of the notice of re-assessment, before the appellate authority. Aggrieved thereby, the present appeal.

Mr. Jitendra Chaudhary, learned counsel for the appellant, would submit that, since the petitioner had approached this Court by filing this writ petition on 06.12.2018 long before the re-assessment order was passed on 31.12.2018, the learned Single Judge ought not to have dismissed the writ petition on this ground; it is always open to the petitioner to invoke the jurisdiction of this Court contending that the Income Tax Officer lacks jurisdiction to initiate proceedings under Section 147/148 of the Income Tax Act, 1961; and since the order passed by the Income Tax Officer suffers from inherent lack of jurisdiction, this Court ought not to have relegated the petitioner to avail the remedy of an appeal before the appellate authority.

While referring to the judgments of the Supreme Court in Assistant Commissioner Income Tax vs. Dhariya Construction Co.:2010 (238) ITR 515 (SC) and Smt. Amiya Bala Paul vs. Commissioner of Income Tax, Shillong : 2003(4) Supreme 577, and several other High Court judgments, Mr. Jitendra Chaudhary, learned counsel for the appellant, would submit that the Income Tax Officer was not justified in initiating proceedings for re-assessment on the basis of the valuation report submitted by the assessee to the Bank, for sanction of a loan.

Mr. Hari Mohan Bhatia, learned Senior Standing Counsel for Income Tax, would submit that, unlike in cases where the department seeks a valuation report, in the present case, a survey was conducted under Section 132(A) of the Income Tax Act, 1961; the documents in the custody of the petitioners were taken over by Officials during the course of survey; and from these documents, it came to the light that the assessee had itself submitted a valuation report to the Bank, the contents of which were not disclosed to the Income Tax Officer, during the course of the original assessment.

While relying on the judgments of the Supreme Court in Indi-Aden Salt Mfg. & Trading Co. (P.) Ltd. Vs. Commissioner of Income-tax : (1986) 25 Taxman 356 (SC), Mr. H.M. Bhatia, learned Senior Standing Counsel for Income Tax, would also rely on other judgments of the High Courts. He would further submit that the learned Single Judge has rightly observed that all the contentions raised in the writ petition, including the jurisdiction of the Income Tax Officer to initiate proceedings for re-assessment by the notice under Section 147 of the Income Tax, the validity of the proceedings whereby reasons were recorded for initiating such re-assessment etc, could also be challenged by way of an appeal preferred against the order of re-assessment and the learned Single Judge cannot, therefore, be said to have erred in refusing to entertain the writ petition, while granting liberty to raise all the contentions before the Appellate Authority.

It is not in dispute that proceedings were initiated for re-assessment by way of notice issued under Section 148, followed by the order passed under Section 147 of the Income Tax Act; and the re-assessment order passed thereafter can always be challenged by way of an appeal.

While this Court may also be justified in entertaining a challenge to the initiation of proceedings for re-assessment, on the ground of complete lack of jurisdiction, we must bear in mind that the learned Single Judge is not a Court subordinate in as much as both the Division Bench and the learned Single Judge exercise the very same Jurisdiction under Article 226 of the Constitution of India. It is only if the order under appeal suffers from a patent illegality, or the view taken by learned Single Judge is not even a possible view, would interference, in an intra-court appeal, be justified. Even if the learned Single Judge has taken one of the possible views, the Division Bench would still refrain from interference even if it were to be satisfied that the other view, canvassed before it, is more attractive.

In the present case, the learned Single Judge has exercised his discretion to permit the appellant to raise all the contentions, urged in the writ petition, before the Appellate Authority in the appeal preferred by the assessee against the order of re-assessment. Such an order passed by the learned Single Judge, in the exercise of his discretionary jurisdiction under Article 226 of the Constitution of India, cannot be said to suffer from a patent illegality necessitating interference in an intra-court appeal.

Leaving it open to the appellant-writ petitioner to raise all such contentions as are available to them in law, including those raised in the writ petition, in the appeal preferred by them before the Commissioner of Income Tax (Appeals), the Special Appeal fails and is, accordingly, dismissed. No costs.