C/SCA/13575/2023(GJHC240480492023) CAV JUDGMENT DATED: 03/09/2026

Reserved On : 25/08/2026

Pronounced On : 03/09/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO.13575 of 2023

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-

and

HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-

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Approved for Reporting Yes No



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SLIMTILE PRIVATE LIMITED

Versus

ASSISTANT COMMISSIONER OF INCOME TAX & ANR.

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Appearance:

MR B S SOPARKAR(6851) for the Petitioner(s) No. 1

KARAN G SANGHANI(7945) for the Respondent(s) No. 1,2

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CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA

and

HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

CAV JUDGMENT

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1.At the outset, learned advocate Mr.Soparker

appearing for the petitioner-Company has

submitted that the petitioner-Company is not

pressing the prayer seeking quashing and setting

aside of the show cause notices dated 17.06.2023

and 20.06.2023, issued by respondent No.1-

Assistant Commissioner of Income Tax, Central

Circle-2, but is confining the challenge to

reference dated 24.06.2023 made by respondent

No.1 and respondent No.2-District Valuation

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Officer for determination of the value of the

fixed assets of the petitioner-Company.

BRIEF FACTS OF THE CASE :

2.The petitioner-Company is a Limited Company,

for the Assessment Year (A.Y.) 2021-22, filed

its return of income on 14.03.2022, declaring a

total income of Rs.8,17,74,420/-. The return was

selected for scrutiny, pursuant to which a notice

under Section 143(2) of the Income Tax Act, 1961

(hereinafter referred to as “the Act”) came to be

issued to the petitioner-Company on 29.06.2022.

Thereafter, from time to time, various notices

under Section 142(1) of the Act were issued to

the petitioner-Company, to which the petitioner-

Company duly responded by filing the requisite

replies and furnishing the information and

documents sought by respondent No.1.

3.Subsequently, on 17.06.2023 and 20.06.2023,

respondent No.1 issued the show cause notices to

the petitioner-Company. The petitioner-Company

submitted its detailed reply thereto on

22.06.2023, wherein, apart from dealing with the

allegations and issues raised in the show cause

notices on merits, the petitioner-Company

specifically questioned the very maintainability

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and validity of the notices and the proceedings

initiated pursuant thereto, inter alia, on the

ground that the proceedings were barred by

limitation.

4.In response to the aforesaid objection

regarding limitation, respondent No.1, by an e-

mail dated 21.06.2023 addressed to the

petitioner-Company, which communication,

significantly, is not reflected on the Income Tax

Business Application (ITBA) portal, sought to

contend that the time available for completion of

the assessment stood extended by virtue of the

Explanation to Section 153 of the Act.

Thereafter, on 24.06.2023, respondent No.1 made a

reference to respondent No.2-District Valuation

Officer under Section 142A of the Act, seeking

determination of the value of the fixed assets

allegedly acquired by the petitioner-Company, on

the premise that the said assets had been

acquired in the names of individual owners and

were allegedly not being used for the purposes of

the business of the petitioner-Company.

SUBMISSIONS ON BEHALF OF THE PETITIONER-COMPANY :

5.Learned advocate Mr.Soparker appearing for

the petitioner-Company has submitted that the

reference dated 24.06.2023 made by respondent

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No.1 to respondent No.2 for determination of the

value of the fixed assets constitutes is nothing

but a colourable exercise of power, having been

resorted to with the object and effect of

artificially extending the period available for

completion of the assessment.

6.It is submitted that, significantly, in the

very reference made under Section 142A of the

Act, respondent No.1 sought the opinion of

respondent No.2 for determining the Fair Market

Value of the tangible assets as on 24.06.2023,

while acknowledging that the assessment

proceedings would become time-barred on

25.06.2023. It was, therefore, contended that the

reference could not have been made as a

legitimate step in the assessment proceedings,

but was consciously resorted to at the fag end of

the prescribed period, with the sole object of

invoking the statutory consequence of such

reference and thereby seeking to extend the

period available for completion of the

assessment. On such premise, the reference itself

was assailed as being a colourable and

impermissible exercise of power and,

consequently, as being without jurisdiction and

liable to be quashed and set aside.

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7.Learned advocate Mr.Soparker has further

submitted that the very basis on which the

reference came to be made to the respondent No.2

is wholly misconceived and legally unsustainable.

According to respondent No.1, the petitioner-

Company had acquired the fixed assets in the

names of individual owners, while claiming

depreciation in respect thereof in its books of

account. It was submitted that, even assuming the

aforesaid premise of respondent No.1 to be

correct, the same could at the highest furnish a

ground for examining the claim for depreciation

of the petitioner-Company and, if found

impermissible, for disallowing such claim in

accordance with law. There was, however, no

justification whatsoever for obtaining a

valuation of the fixed assets from respondent

No.2, since the valuation of such assets had no

bearing upon the alleged defect in the claim for

depreciation of the petitioner-Company.

8.It was, therefore, submitted by learned

advocate Mr. Mr.Soparkar that the reference to

respondent No.2 for determination of the value of

the fixed assets was wholly extraneous to the

issue sought to be examined by respondent No.1

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and could serve no legitimate purpose in the

assessment proceedings. The timing and manner in

which the reference was made, particularly on

24.06.2023, immediately before the assessment was

to become time-barred on 25.06.2023, clearly

demonstrated that the reference was not made for

any genuine or bona fide valuation requirement,

but was merely employed as a device to invoke the

statutory extension of time and thereby keep the

assessment proceedings alive. The reference,

therefore, being a colourable and impermissible

exercise of power, was submitted to be without

jurisdiction, illegal and liable to be quashed

and set aside.

9.In support of his submissions he has placed

reliance on the judgment of this Court in case of

Anand Banwarilal Adhukia Vs. Deputy Commissioner

of Income-Tax, Circle-14 , (2016) 75 Taxmann.com

301 (Gujarat) and in case of Me & Mummy Hospital

Vs. Assistant Commissioner of Income-Tax , (2014)

45 Taxmann.com 248 (Gujarat).

SUBMISSIONS ADVANCED BY THE REVENUE

10.Opposing the aforesaid submissions, learned

Senior Standing Counsel Mr.Karan G. Sanghani at

the outset has submitted that as far as the

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impugned reference order dated 24.06.2023

referring the valuation relating to the

depreciation on assets is concerned, he would be

unable to justify the same since it is always

open for the Revenue/ Assessing Officer to

disallow the claim of depreciation, and there is

no requirement of referring it for valuation.

However, with regard to the reference to the

Valuation Officer relating to the unaccounted

cash to the group company of M/s.Ratnakala

Exports Pvt. Ltd., relating to share purchase and

other immovable properties and increase in fixed

asset is concerned the Assessing Officer is

justified in referring the same to the Valuation

Officer.

11.In so far as the period consumed from

28.12.2022 to 17.06.2023, consumed by the

Assessing Officer, learned Senior Standing

Counsel Mr.Sanghani has attempted to justify the

same. It is contended that the Assessing Officer

during this period has scrutinized the seized

material and correlated with the audited reports

of the petitioner-Company and return disclosures

which consumed time, and thereafter, the

Assessing Officer issued show cause notices dated

17.06.2023 and 20.06.2023.

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12.It is submitted by the learned Senior

Standing Counsel that in the matter arising out

of search and incriminating material indicating

cash transactions, two factors are required to be

accepted to make the assessment legally robust

namely, (1) generation/ availability of cash and

(2) utilization of such cash. In the instant

case, the seized material indicated cash

transactions thereby raising an assessment

relevant requirement to examine the issue as to

whether to what extent such cash stood

deployed/invested in tangible assets. It is

submitted that the financial statements for the

year ended on 31.03.2021 disclose significant

additions to tangible assets and further

incriminating material received from the

investigation wing on 28.12.2022 revealed

unaccounted cash transactions within the group

concerns.

13.It is contended that the determination of

true and fair market value of assets vis-a-vis

the declared investment was necessitated and

hence such exercise squarely falls within the

scope of Section 142A of the Act which empowers

the Assessing Officer to obtain expert valuation

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to ascertain the correctness of investment or

value of assets in question.

14.It is submitted that thus the proceedings

were subsisting as on 24.06.2023 and the

reference has been made before expiry of

limitation in accordance with Explanation-1(v) to

Section 153(1) of the Act which contemplates

exclusion of time for obtaining valuation report

and hence the timing of the reference was within

jurisdiction and in consonance with the statutory

framework thus it is urged that the writ petition

may not be entertained.

ANALYSIS AND OPINION

15.We have heard the learned advocates appearing

for the respective parties at length and perused

the documentary evidence on record. The facts,

which are established from the pleadings and the

documentary evidence on record are as under.

(a) A search and seizure under Section 132

was undertaken on 24.09.2021 at M/s.Ratnakala

Exports Pvt. Ltd., after the survey on

22.09.2021. Thereafter, a show cause notice for

transfer of the case under Section 127 of the

Act was issued on 16.11.2021 to the petitioner-

Company, which objected the transfer of the

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case and ultimately, the case was transferred

to the jurisdiction of the petitioner-Company

from Rajkot to Surat with immediate effect.

Ultimately, the petitioner-Company filed its

return of income for A.Y. 2021-22 declaring

total income of Rs.8,17,74,420/- on 14.03.2022.

(b) The case of the petitioner-Company was

selected for scrutiny and a notice under

Section 143(2) of the Act was issued to the

petitioner on 29.06.2022.

(c) The petitioner-Company filed its

response to the notices issued thereafter, on

12.08.2022, 21.11.2022 and 02.12.2022.

(d) On 28.12.2022, the material derived from

search and survey of M/s.Ratnakala Exports Pvt.

Ltd., by Deputy Director of Income Tax (DDIT)

(Investigation), Surat was forwarded and handed

over to Deputy Commissioner of Income Tax

(DCIT), Surat. Thereafter, on 17.06.2023 and

20.06.2023 show cause notice was issued by the

respondent – Assistant Commissioner of Income-

tax, Central, Circle-2 on the basis of the

material gathered during the search for

unaccounted payment of Rs.1,01,00,113/- and

Rs.19,75,00,000/-.

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(e) The petitioner-Company objected to the

show cause notice vide communication dated

22.06.2023 pointing out that assessment has

become time barred and also contesting on

merits.

(f) The petitioner-Company also objected to

the show cause notice, which is sent via email,

is not reflected on the portal.

(g) On 21.062023, the petitioner-Company was

informed that the requisite show cause notice

has already been served to the the petitioner-

Company through email on 20.06.2023 relevant to

A.Y. 2018-19 and A.Y. 2021-22 and the

assessment will be completed based on the

details available on record and merit of the

case in case the petitioner fails to respond.

It was also intimated that the extension of

time was in compliance of the provision of

Section 153 of the Act read with its

Explanation and the period of exclusion of

handling over seized incrementing materials.

(h) Thereafter, by the impugned order dated

24.06.2023, the Assessing Officer referred the

matter to Departmental Valuation Officer.

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16.We may, at this stage, clarify that while

passing the impugned order dated 24.06.2023, the

Assessing Officer has specifically recorded that

the assessment proceedings are pending in this

case and it is getting time barred on 25.06.2023.

Thus, one day prior to the expiry of the

limitation of the assessment proceedings for A.Y.

2021-22, the Assessing Officer refers the

valuation for determining the valuation of fair

market value of tangible assets to the District

Valuation Officer. Further the Assessing Officer

has requested the District Valuation Officer to

send the report earliest and preferably by

30.06.2023.

17.The adjustment of limitation period, under

which the revenue has taken shelter is found in

the provision of Section 153 (Explanation-1)(v)

of the Act. Section 153 (Explanation 1)(v) of the

Act reads as under :-

“No order of assessment shall be made under Section

143 or Section 144 at any time after the expiry of

21 months from the end of the assessment year in

which the income was first assessable.

Explanation 1:

For the purposes of this Section, in computing the

period of limitation,

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(v) the period commencing from the date on which

the Assessing Officer makes a reference to the

Valuation Officer under Sub-Section (1) of Section

142A and ending with the date on which the report of

the Valuation Officer is received by the Assessing

Officer.”

18.It is the case of the petitioner-Company that

the Assessing Officer in order to buy further

time and extend the time beyond 31.12.2022 to

25.06.2023 by resorting to the provision of

Section 153 (Explanation-1)(v) of the Act has

passed the impugned order of reference.

19.We agree with the submissions advanced by

learned advocate Mr.Soparkar on the scrutiny of

the established facts.

20.The Assessing Officer has passed the impugned

order requesting the District Valuation Officer

to determine the fair market value on following

two grounds;

(1) that the search action resulted in

various seized incrementing material which

exhibited that the the petitioner-Company has

paid huge unaccounted cash in crores to the

group company of M/s.Ratnakala Exports Pvt.

Ltd., regarding share purchase and other

movable properties during the year under

consideration and the the petitioner-Company

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has shown the increase in fixed asset which

includes land and building, plant and

machinery, vehicles, computer etc. totaling

to Rs.64,00,02,502/- and;

(2) that during the assessment proceedings it

has been noticed that the the petitioner-

Company has purchased the above mentioned

fixed assets in the name of individual

owners. However, the depreciations are

claimed on the same in the books of accounts

of the the petitioner and thus, it is alleged

that the petitioner-Company has claimed bogus

depreciation on assets which are not

purchased in its name and neither being used

for its business purpose.

21.As far as the second reason mentioned in the

impugned order of reference is concerned, it has

been fairly accepted by learned Senior Standing

Counsel appearing for the revenue that the

reference could not have been made on such issue

as it is always open for the Assessing Officer to

disallow the depreciation, if it is found to be

bogus.

22.In our considered opinion, the Assessing

Officer has acted illegally in order to further

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strengthen his first ground for reference

relating to the valuation of assets and attempted

to create another ground of claim of bogus

depreciation on such assets for extending the

limitation, which was getting time barred on

25.06.2023. It cannot be countenanced that the

Assessing Officer was ignorant of the provision

of the Chapter IV of the Act, which regulates

depreciation, investments etc, while making the

reference on depreciation of assets by alleging

bogus claim, which he could have disallowed.

23.We may now deal with the first reason

assigned in the reference order. The same also

appears to be intentional, and is raised in order

to extend the limitation period of completing the

assessment.

24.We may mention that, as per the case of the

Revenue the material derived from search and

survey action from M/s.Ratnakala group was handed

over to the DCIT, Surat on 28.12.2022. For the

period of six months the Assessing Officer sat

tight on such material and thereafter on

17.06.2023 and 20.06.2023, show cause notices

were issued by the respondent of Rs.1,01,00,113/-

and Rs.90,75,00,000/- for unaccounted payment. A

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perusal of the both the show cause notices reveal

that the petitioner-Company has been called upon

to explain as to why the amount mentioned,

hereinabove above, should not be treated as its

unaccounted payment, however, the notices are

silent so far as the valuation of assets are

concerned. The petitioner-Company in its reply

dated 20.06.2023 had tendered explanation to the

unaccounted payment given by it. As previously

mentioned, the petitioner-Company was issued the

show cause notices on 05.08.2022, 16.11.2022 and

21.11.2022 under Section 142(1) of the Act. None

of these notices refer to search or survey

proceedings. By these notices, the petitioner-

Company was called upon to supply numerous

details of bank accounts, claim of deductions,

cash deposits, profit and loss, repayment of

unsecured loans, details of loans and advances

and investment. In the final notice dated

21.11.2022, the petitioner-Company was asked to

furnish the details of assets during the year in

consideration, expenses of repair and maintenance

of plant and machinery of Rs.4,07,66,736/- along

with copy of ledger account, and supporting

evidence. The petitioner-Company, in its reply

dated 02.12.2022, had explained in detail by

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supplying the necessary material explaining the

payments made on the assets such as computer,

machinery, factory shed, vehicle, furniture,

office equipment etc. The petitioner-Company had

given the details of the payments made through

Bank. After such explanation was tendered by the

petitioner-Company relating to the assets on

02.12.2022, the things did not proceed further

till the issue with regard to the valuation of

the assets was cropped-up on 24.06.2023 in the

impugned order of reference, by which the

Assessing Officer referred the valuation of

assets to the Departmental Valuation Officer. The

show cause notices dated 17.06.2023 and

20.06.2023 are also silent on the aspect of

assets. Hence, it is to be presumed that after

the petitioner-Company tendered its detail reply

dated 02.12.2022 to the show cause notice issued

on 21.11.2022 under the provisions of Section

142(1) of the Act, the Assessing Officer did not

choose to reopen or question the payment on

assets by the petitioner-Company.

25.Thus, on a close scrutiny of the facts and

the documentary evidence on record, we find that

the Assessing Officer in order to save the

assessment proceedings by giving a colorable

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exercise extended the limitation of the

assessment proceedings which was going to be over

on 25.06.2023 by passing the impugned order of

reference. The Assessing Officer, from the

beginning, was very much alive to the limitation

period for the assessment proceedings, which

would get expired on 25.06.2023, as he himself

has referred to in the impugned order. All the

material from the search and survey and from the

petitioner was already available with the

Assessing Officer, however, he showed remissness

in completing the assessment before 25.06.2023.

Thus, by creating an artificial cause of action

of referring determination of valuation of assets

and the claim of depreciation on such assets has

attempted to extend the time by resorting to

Explanation-1(v) to Section 153 of the Act.

26.In addition to the aforesaid aspects, we also

find that no satisfactory explanation has been

tendered by the Revenue to explain the delay from

28.12.2022 i.e. the date when the material was

handed over from the search proceedings to the

DCIT, Surat till the issuance of the notice on

17.06.2023. A lame explanation has been tendered

to the extent that the Assessing Officer consumed

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the time in examining such material. In case, the

Assessing Officer had scrutinized all the

material within time limit then while issuing

notices on 17.06.2023 and 20.06.2023, he could

have re-examined the explanation tendered by the

petitioner-Company to the payments made on the

assets vide his reply dated 02.12.2022 and also

the claim of depreciation, and there would have

been no further need to resurrect the issue,

while passing impugned order dated 24.06.2023

referring the determination of valuation on

assets which he missed in the subsequent notices

issued on 17.06.2023 and 20.06.2023.

27.Thus, the overall analysis and the

appreciation of facts manifest that the Assessing

Officer has very ingeniously raised two issues

for making reference to the District Valuation

Officer in order to cover-up his inaction in

completing the assessment proceedings before

25.06.2023.

28.Hence, the writ petition succeeds. The

impugned order dated 24.06.2023, whereby the

Assessing Officer referred the matter to the

Departmental Valuation Officer a mere day prior

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to the assessment proceedings becoming time-

barred, is hereby quashed.

Sd/- .

(A. S. SUPEHIA, J)

Sd/- .

(VAIBHAVI D. NANAVATI,J)

***

Bhavesh-[PPS]/K.K.SAIYED/1

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