1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR ------------------------------------------------- INCOME TAX APPEAL No. 23 of 2006 C I T JODHPUR V/S M/S POKAR HOTEL JODHPUR Mr. KK BISSA, for the appellant. No body appears for the assessee despite service. Date of Order : 22.9.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER ----- This appeal, has been filed, by the revenue, seeking to challenge the judgment of the Tribunal dated 03.1.2005, affirming the order of the Commissioner, Income Tax (Appeals) dated 19.5.2000, whereby he had set aside the re-assessment order, made by the Dy. Commissioner on 24.3.2000. The appeal was admitted on 09.3.2006 by framing following substantial question of law. 2 “Whether in the facts and circumstances of the case, the Tribunal was right in holding that the proceedings under Sec. 147/148 of Income Tax Act, 1961 were not validly initiated against the assessee”? The necessary facts are, that for the relevant assessment year 1993-1994, the assessee filed return on 01.9.1993, which was processed under Sec. 143 (1) (a) on 23.11.1993. The assessment was re- opened, and notice under Sec. 148 was served, on 29.3.1998. As appears from the assessment order, that action under Sec. 132 (1) was carried out, at the residence of Shri Pokar Bhati, and his sons on 29.11.1994, and simultaneously, survey was conducted at Pokar Hotel under Sec. 133(A). In the course of survey, it was noticed that the assessee made substantial investment in the hotel building, which was constructed, during the period, relevant to the assessment year 1991-1992 to 1995-1996, however major investment was made, in the period, relevant to assessment year under consideration, being 1993-1994, which was not found supported with 3 bills and vouchers, reference was made under Sec. 131 (1) (d), to the valuation cell of the Income Tax Department. The valuation officer vide report dated 19.1.1996, determined the cost of construction of the hotel building, at Rs. 25,30,000/- as against Rs. 18,11,444/-, shown by the assessee. Thus, it is on this basis, that notice under Sec. 148 was issued, and assessing officer, ultimately, made an addition of Rs. 4,92,346/-, as unexplained investment, in construction of the hotel building, and passed the assessment order, and also directed the levy of interests, under Rules 234-A, 234-B, 234-C, and for initiation of penalty proceedings, under Sec. 271 (1) (c). This order was challenged in appeal, on the ground, that the re-opening proceedings have been initiated on the basis of departmental valuation Officer's report, which was contended to be not a permissible ground, for reopening of the assessment, and that contention was decided in favour of the assessee by the learned Commissioner 4 (Appeals) and the learned Tribunal. Both the authorities below relied upon the judgments in CIT Vs. Pratap Singh Amro Singh (reported in 200 ITR 788) and CIT Vs. Hotel Joshi (reported in 242 ITR 478). Assailing the impugned order, it is contended, that both these judgments, in Pratap Singh's case and Hotel Joshi's case, relate to the assessment years, prior to 01.4.1989, while since 01.4.1989, material changes have been brought in the Income Tax Act, and the scope of Sec. 147 was substantially widened, more so, the procedure for processing the return, under Section 143 (1) (a) was introduced, and, therefore, the proceedings could be re-opened even on the basis of departmental valuation Officer's report, and two judgments, relied upon, do not come in the way. The matter came up before this court on 14.8.2008, and the court desired to know the final outcome of the search and survey proceedings, 5 referred to above, and for providing that information, time was also granted. Learned counsel for the appellant made available for our perusal, the assessment order, passed in the case of Shri Pokar Ram Bhati, under Sec. 132 (5) of the Act, being order dated 27.3.1995, and therefrom, we find, that therein unexplained investment in the construction of hotel building has been taken at Rs. 15,000,00/-, for the assessment year, 1994-95. We do not know, as to what has been final outcome of that assessment order, but then, the glaring facts, which emerge from this assessment order dated 27.3.1995, and the orders of the two authorities below, project a glaring picture, even on the basis of which alone, we do not feel, that it would be right to interfere, with the impugned order. In this regard, first of all, we may recall, that departmental valuation officer had determined the cost of construction of the hotel building, Rs. 25,30,000/-, and it has been found by 6 the assessing officer, that out of this, major investment was made, during the period, relevant to assessment year 1993-94, with this, we find from the order of learned Commissioner Annexure/2, that it has been noticed, that the appellant started constructing hotel in April, 1990, and the same was completed in the accounting year, relevant to assessment year 1996-97. The assessee had furnished return for the assessment year 1992-93, and also 1993-94, as business of hotel was started even before the hotel building was completed in all respect. It has also been noticed, that in the assessment year 1991-92, the assessee had invested Rs. 2,20,600/-, and has shown, this investment, in the books of account, then sum of Rs. 2,89,947/-, was shown to have been invested, in the assessment year 1992-93, and further sum of Rs. 11,64,862/- was shown to have been invested in the assessment year 1993-94. On simply adding of these amounts, it is clear, that the assessee, had shown to have invested a sum of Rs. 16,75,409/-, during the three assessment years, being 1991-92, 1992-93 and 1993- 94, with this, vide assessment order dated 7 27.3.1995, obviously, which was passed before the present assessment order, being dated 24.3.2000, a sum of Rs. 15,00,000/- lacks has been considered to have been invested, for construction of the hotel, for the assessment year 1994-95, thus, the total amount taken by the department to have been invested in construction of hotel, comes to Rs. 32,00,000/- and odd, as against the cost of the construction, valued by the Departmental Valuation Officer, at Rs. 25,30,000/-. In such circumstances, we do not find any justification, for the assessing officer, to make the addition, as made in the assessment order, and consequently, do not find any ground to interfere with the impugned orders of the appellate authorities, though for the different reasons. It is needless to say, that the assessee's income could not be assessed, under the head of investment, in construction of building, in an amount, beyond what was shown to be the cost, by the Departmental Valuation Officer, on the ground, that the assessee has shown investment, to be at 8 lesser figure. Thus, though for different reasons, we answer the question, as framed, against the revenue and in favour of the assessee. We thus do not find force in the appeal, and the same is dismissed. ( KISHAN SWAROOP CHAUDHARI ),J. (N P GUPTA ),J. /ns./