The Commissioner of Income Tax vs Shambhoo Lal Damodar Das

We have heard the learned Counsel for both sides.

The following two questions have been referred by the Tribunal:

Whether on the facts and the circumstances of the case, the Tribunal''s view that report of the valuation officer obtained subsequent to the completion of the original assessment could not be treated as ''information'' for the purpose of re-opening the assessment u/s 147(b) of the Act is correct in law?

Whether on the facts and the circumstances of the case the Tribunal was legally correct in holding that there was neither any information before the assessing officer nor he could have reason to believe that income chargeable to tax had escaped assessment so as to enable him to take action u/s 147(b) of IT. Act, 1961?

Briefly, it appears that the original assessment was completed. The Assessing Officer received a report of the valuation officer on the basis of which he re-opened the assessment u/s 147(b), as it stood prior to its amendment by direct Tax Laws (Amendment) Act 1987 with effect from 1/4/1989. For ready reference the said sub-section is reproduced below:

147(b) - notwithstanding that there has been no omission or failure as mentioned in cause (a) on the part of the assessed, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,

he may...assess or reassess such income.

Thus at that time under Clause (a) of Section 147 re-assessment could tack place where there was a fault of the assessee and under Clause (b) it could be made irrespective of the assessee''s fault provided;

There was information in possession of the ITO, and

The ITO on the basis of such information had reason to believe that income had escaped assessment.

The precise issue is that if after the original assessment is completed a report of valuation officer is received under old Section 55A or present Section 142A, whether such report can be held to be information within the meaning of 147(b) and more importantly whether on the basis of such report the ITO can entertain a reason to believe about income escaping assessment.

So far as the second aspect pointed out above is concerned, it is well settled that mere change of opinion of the Assessing Officer on the same material is not a good ground for re-opening the assessment.

The Supreme Court has held in the case of Indian and Eastern News Paper Society v. CIT (1979) 119 ITR 196 that an audit report on a question of fact and not on an issue of law, can be sufficient ground u/s 147(b).

However, the High Courts of Bombay, Punjab and Haryana, Rajas than and Gauhati have held that the report of a valuer is just an opinion of the valuer and without confirmation of that opinion about the fact of the actual value of investment, such information cannot form the basis for reason to believe on the part of the Assessing Officer.

It is obvious that audit report about facts that discrepancies exists in the accounts is not a mere information but is a statement of a positive fact found upon audit of the accounts and in that sense cannot be equated with the report which is a mere opinion of a valuer. The report of a valuer is merely an estimate and as held by the aforesaid High Courts at best, is an opinion of the valuer.

The information contemplated by Section 147(b) is an information about a fact on the basis of which a reason to believe can exist. The valuer''s report not being such an information about a fact is therefore in our opinion not a sufficient ground by itself for re-opening the assessment u/s 147(b).

The decisions of the aforesaid High Courts are:

Tulsidas Kilachand v. D.R. Chawla and Ors. 1979 ITR (122) 458.

Commissioner of Income Tax (Central) Vs. Smt. Bimla Vati,

Commisisoner of Income Tax v. Smt. Prem Kumari Surana 1993 (206) ITR 715 .

Bishnu Talkies v. Commissioner of Income Tax (2007) 208 CTR (Gau) 248.

Thus cur answer to the questions referred are that the Tribunal''s view that the report of the valuation officer obtained subsequent to the completion of the original assessment could not be treated as ''information'' for the purpose of re-opening the assessment u/s 147(b) is correct.

So far as the answer to question No. 2 is concerned, it has not been brought to our notice that there was any other material or information apart from the valuation officer''s report and, therefore we hold that the Tribunal was legally correct in its decision referred to in the question No. 2.

This reference is disposed of as above.