CIT PATIALA vs. M/S SUKHDEV KUMAR AND CO RICE

ITR/119/1999HC Punjab & HaryanaPHHC01038549199901 September 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL6 pages
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What were the facts?

The assessee, Sukhdev Kumar & Co. Rice Sheller, constructed a sheller building between October 1980 and September 1983, declaring its cost at Rs. 3,56,500. The Departmental Valuation Officer (DVO) assessed the cost at Rs. 8,93,200. The Assessing Officer (AO) calculated the construction cost for assessment year 1983-84 at Rs. 4,87,940 and initiated reassessment proceedings under Section 147(a) of the Income Tax Act, 1961, alleging failure to disclose material facts. A notice under Section 148 was issued on March 7, 1990. The assessee contended that the original assessment, completed on March 24, 1986, was based on facts known to the AO, making the reopening invalid. The Commissioner of Income-tax (Appeals) annulled the assessment, holding the reopening and notice invalid. The Income-Tax Appellate Tribunal affirmed this decision, leading to the present reference.

What did the High Court hold?

The High Court held that the reopening of assessment was invalid. The Court referred to its earlier decision in Commissioner of Income Tax vs. Devki Devi widow of late Kasturi Lal, which followed the Supreme Court's ruling in Smt. Amiya Bala Paul v. Commissioner of Income-Tax. These precedents established that an Assessing Officer cannot refer the cost of construction of a property built by the assessee to the DVO. Consequently, the AO's reliance on the DVO's report for reopening the assessment was not justified. The Court also noted that Section 142A of the Act, even after its insertion, was not applicable to the facts of the present case, as confirmed by other High Court decisions. Therefore, the initiation of reassessment proceedings based on the DVO's report could not be legally sustained. The question of law was answered against the Revenue and in favour of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reopening of assessment was invalid, as the primary facts were disclosed by the assessee before the AO with reference to the cost of construction of the sheller building, thereby invoking Section 147(a) of the Income Tax Act, 1961? Assessee's contentions: The assessee argued that the reopening of assessment under Section 147(a) was invalid because the primary facts regarding the construction of the sheller building were already disclosed to the AO during the original assessment proceedings, which were completed on March 24, 1986. Therefore, the assessee could not be blamed for any omission or failure to disclose material facts, and the AO lacked jurisdiction to reopen the assessment based on the DVO's report. Revenue's contentions: The Revenue contended that the AO was justified in reopening the assessment based on the DVO's valuation report, which indicated a significant difference between the declared cost and the assessed cost of construction, suggesting undisclosed income. The Revenue relied on the AO's observation that the assessee had failed to disclose full and true material facts necessary for assessment.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 147(a),Section 148,Section 143(3),Section 154,Section 142A,Section 153A,Section 260A

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 1.9.2010 The Commissioner of Income Tax, Patiala ....Petitioner.

Versus Sukhdev Kumar & Co. Rice Sheller, Sirhind ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the petitioner. AJAY KUMAR MITTAL, J.

In this reference filed under Section 256(1) of the Income Tax Act, 1961 (in short “the Act”), the Income-Tax Appellate Tribunal Chandigarh Bench, Chandigarh (in short “the Tribunal”) has referred the following question of law for the opinion of this Court:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that reopening of assessment was invalid, as the primary facts were disclosed by the assessee before AO with reference to cost of construction of the sheller building?”

Briefly, the facts of the case are that during the period, October, 1980 to September, 1983, the assessee-firm, i.e. Sukhdev Kumar & Co. Rice Sheller, Sirhind constructed a building for purpose of -2- sheller. The assessee declared the cost

The order continues below.

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