HOTEL GANGES LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS writ petition is directed against the notice issued under Sections 147 and 148 of the Income-tax Act, 1961, proposing to reopen the assessment of the petitioner for the year 1977-78. The petitioner is a public limited company incorporated on July 4, 1974. The land for the assessee hotel was provided by a Hindu undivided family, Sadiram Ganga Prasad, whereas the building was constructed by D.P. Kanaudia, individual. The said Hindu undivided family and the individual had entered into an agreement to form and promote the petitioner-company. By a resolution of the board of directors of the petitioner-assessee, the board approved the total expenditure incurred by D.P. Kanaudia and directed that the same be incorporated in the books of the assessee for the year ended June 30, 1976, by crediting the account of D.P. Kanaudia. In its return for the assessment year 1977-78, the assessee disclosed the amount spent on the construction of the building.

(2.) IN the assessment proceedings of D.P. Kanaudia for the assessment years 1975-76 to 1977-78, the INcome-tax Officer refused to accept the figure disclosed by the said individual as the amount spent on construction. On the basis of the opinion of the Valuation Officer, the INcome-tax Officer, was of the opinion that the total amount spent on construction was Rs. 14,11,425 and not Rs. 10,04,292 as claimed by the said individual. He, accordingly, sought to add the difference amount as his income for the said years. The assessee challenged the same by way of appeal and the matter was ultimately carried to the Tribunal. The Tribunal held, for the reasons give by it, that the said additions cannot be made to the income of D.P. Kanaudia and that he cannot be asked to explain the source of the said investment. It was observed that the petitioner is responsible for explaining the source of investment in such construction. Para 9 of the Tribunal's order may be quoted. It reads thus ;

(3.) IT may be noticed that the impugned notice is dated May 30, 1988, and it relates to the assessment year 1977-78. Though the notice does not say so expressly, it is undoubtedly one issued under Clause (a) of Section 147 of the Act as it then stood, Indeed, the prior notice dated March 15, 1988, expressly stated that the petitioner's assessment was proposed to be reopened under Section 147(a) of the Act. Since the income alleged to have escaped assessment was more than rupees fifty thousand, it could be reopened at any time within sixteen years. Thus, the reopening of the assessment under Clause (a) of Section 147 of the Act is perfectly within time. Now, admittedly, the approval of the Board was obtained as required by Sub-section (1) of Section 151 of the Act (as it then stood) before issuing the impugned notice. IT is equally beyond dispute that the basis for issuance of the notice is the aforesaid observation/finding of the Tribunal in the appeal of D.P. Kanaudia, The contention of learned counsel for the petitioner is that Section 151 of the Act requires not only the approval of the Board but also the approval of the Commissioner where a notice under Section 147/148 is issued after the expiry of eight years. I am not prepared to agree. Section 151 of the Act at the relevant time read as follows :