Calcutta H.C : The grievance of the petitioner in all these cases is that the concerned AO has no authority or jurisdiction to reopen the assessment under s. 147(a)

High Court Of Calcutta

Kajaria Investment & Properties (P) Ltd. vs. ITO & Ors.

Section 147(a)

Kalyan Jyoti Sengupta, J.

C.R. Nos. 9764 to 9766 of 1976

10th April, 2001

Counsel AppearedJ.P. Khaitan, for the Petitioner : Ram Chandra Prasad, for the Respondents



All these three matters are taken up for hearing and being disposed of by this common judgment and order as the facts and the law involved therein are identically same.

The grievance of the petitioner in all these cases is that the concerned AO has no authority or jurisdiction to reopen the assessment under s. 147(a) since there was no material to have reason to believe that the petitioners did not disclose the material fact and the income which has escaped from assessment. There is an interim order in all the three matters till today. In this kind of cases the only point to be considered is whether any reason has been disclosed by the AO or not. It appears that in the affidavit-in-opposition purported reasons have been disclosed by the officer concerned. The reason, according to him, is that the petitioner did not truly and correctly show the cost of construction in the books of account. After more than four years the officer concerned had entertained the belief that the aforesaid disclosure of cost of construction of the multi-storied building is not true and correct. Therefore, he obtained an opinion from the engineer who opined that the cost of the construction would be around Rs. 14,78,000 (fourteen lakhs seventy-eight thousand) as against the cost of Rs. 7,55,313 (seven lakhs fifty-five thousand three hundred thirteen) shown in the books of account.

Mr. Khaitan assailing the aforesaid reason contends that the opinion of an engineer cannot be a material to entertain any belief that the petitioner has escaped income. Therefore, the authority concerned ought not to have reopened the assessment already done. In support of his submission, he has relied on a decision of this Court in Smt. Tarawati Debi Agarwal vs. ITO (1987) 60 CTR (Cal) 183 : (1986) 162 ITR 606 (Cal) : TC 51R.1118. Placing the aforesaid authority he contends that factually both the cases are identical and the learned Judge did not accept the aforesaid opinion to be a foundation for issuance of the notice under s. 147(a).

Mr. Ram Chandra Prasad, while opposing this application, contends that the Court is not supposed to scrutinise the nature of the material in a case like this. It is good enough if any material is found then the AO can exercise his jurisdiction. It is for the assessee who is to disclose and produce all the relevant materials and documents not the books of account only. So there is no justification for this Court to interfere with this proceeding for reassessment.

Having heard the respective contentions of learned counsel it appears to me that the assessment order was passed long time back and at the time of assessment the petitioner duly produced the books of account. The petitioner is admittedly a limited company and under the Companies Act the books of account are compulsorily audited and scrutinised. The audited accounts gives a presumption as to the correctness of the contents thereof and those must be supported by the documents and vouchers. When the petitioner, the assessee, produced the books of account in support of his returns showing the cost of construction then it cannot be said that the petitioner did not produce any material. It was for the Department concerned at that point of time either to accept or reject or to believe or disbelieve the materials at that juncture.

Now, the question arises whether the Department concerned can procure any material or document in order to frustrate the accepted material previously by the Department or not. In this case, the opinion was procured from the executive engineer after long four years, as to the construction cost and on the basis of this opinion it has been decided by the authority concerned to reopen the case. Justice Sengupta in the aforesaid case cited by Mr. Khaitan has categorically held, amongst others, that valuation was always a question of opinion and unless there was a clear finding on the basis of the material that the assessee had invested in the construction more than what had been shown by it in the course of the assessment proceedings, the ITO could not proceed merely on the basis of the valuation report of the Departmental valuer. In the reported judgment, it was also a case of reopening of the assessment on the basis of the report of the valuation.

Under these circumstances, I am of the view that the very basis of forming a belief is not sustainable under the law and which in fact is not accepted by this Court previously. Therefore, the impugned notices issued by the AO are not sustainable in accordance with law. Hence, those are set aside and quashed. The rule issued is made absolute. The interim orders stand confirmed.

There will be no order as to costs.

[Citation : 250 ITR 619]

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