Akil Abdul Hamid Kureshi, J.

1. This petition is filed by the assessee to challenge a notice dated 14.03.2013 issued by the respondent-Assessing Officer to reopen assessment for the assessment year 2006-07.

2. Brief facts are as under:

"The petitioner is a partnership firm and is engaged in the business of running a hotel. Earlier, one of the partners of the firm Mr. Jagdish Bhatt had started construction for the purpose of running a hotel by the name Hotel Celebration as proprietary concern. Substantial portion of the construction was carried on between 01.04.2004 and 31.03.2004. Construction continued in the next financial year also. For some point, the proprietor wanted to transfer the business of running the hotel. The present petitioner-partnership firm was constituted, who took over the under-construction hotel business on 20.09.2005. According to the petitioner, some finishing work was left out, which was done by the partnership firm after the said date. The return of the erstwhile proprietor for the assessment year 2005-06 was taken in scrutiny. During such scrutiny, the question of cost of construction came up for consideration. Assessing Officer referred the issue for valuation. The DVO's report, however, did not arrive within time. The Assessing Officer framed the assessment without making any addition on the score. Subsequently, notice for reopening of the assessment was issued on the basis that according to DVO total investment in construction during the period between 01.04.2004 to 01.07.2005 was Rs. 1.82 crores. According to the Assessing Officer, the assessee had shown the cost of construction upto 20.09.2005 only at Rs. 64.11 lacs. On such basis, the assessment was reopened."

3. In case of the present petitioner, the assessment of the return for the year 2006-07 was similarly carried out and completed. To reopen such assessment also the Assessing Officer issued the impugned notice. In order to do so, he relied on the same report of the valuation and recorded following reasons:

"In this case, assessment was finalized u/s. 143(3) on 31.12.2008 and income assessed at Rs. 15640/-. During the course of assessment proceedings investment in construction of hotel building was examined.

2. A reference was made to the valuation officer on 17/08/2007 to determined value of property, known as Hotel Celebration during the course of assessment proceedings u/s. 143(3) in case of M/s. Hotel Celebration, Jamnagar. However, valuation report was not received till the completion of time barring Assessment year 2006-07 i.e. 31.12.2008.

During the course of assessment proceedings total value of land and building was declared by assessee was Rs. 64,11,464/- for land and building up to 20.09.2005 and Rs. 66,87,372/- at the end of year i.e. 31.03.2005.

3. The valuation officer prepared report on 02.12.2011 and submitted it on 08.12.2011 determining total cost of investment Rs. 1,82,16,349/- for financial year 2004-05 and 2005-06 against declared cost of Rs. 66,87,372/- by the assessee firm.

4. During the course of assessment proceedings, the firm made submission vide letter dated 30.10.2008 as under:

"Shri Jagdishchandra P. Bhatt originally commenced the business in the name of Hotel Celebration as proprietary concern. With a view to broad base the activity, partnership firm in the name of Hotel Celebration took over the running business of Hotel Celebration as a going concern within effect from 20.09.2005. Copies of ledger accounts of all assets together with copies of bills are submitted herewith. You may kindly note that the opening balance mentioned in the ledger account is balance incurred upto the date of the formation of partnership."

5. It is seen that assessee firm has debited expenditure on its account Rs. 2,75,908 (66,87,372-64,11,464) which is required to be determined true value of investment proportionate to total cost of value determined as per valuation report received on 08.12.2011 from the Departmental Valuer as menti