2006 (6) TMI 144 - ITAT DELHI-A

Reopening of assessment - Income Escaping Assessment before-issuing notice under section 148 of Income-tax Act - void assessment order - Department is in appeal to contend that the CIT(A) was wrong in holding that the Assessing Officer only had reason to suspect and not reason to believe that income chargeable to tax had escaped assessment.

Reasons to disbelieve - HELD THAT:- We have no reasons to disbelieve the Assessing Officer that the there exists the reasons which were recorded under section 148(2) before issue of the reopening notice. The fact that the paragraph has been given by the Assessing Officer within inverted commas permits the inference that it has been extracted from the record. In these circumstances and despite the fact that the record was not produced before us by the department, we consider it proper to infer that the reasons for reopening the assessment were recorded by the Assessing Officer and they are as given here.

Reasons for reopening the assessment were not disclosed to the assessee or formally communicated to her - HELD THAT:- Before us as also before the Assessing Officer, the assessee has been harping that she did not receive the notice herself as she was away to Pakistan. In fact, in her letter dated 10-3-1998 to the Assessing Officer, she has stated, in a very guarded language that the notice under section 148, if served, might have been left unattended by her servant and that the existence of the notice came to her knowledge for the first time on10-3-1998 when her statement was recorded under section 131. We do not see how the assessee can say at the same breath that she was not served will the notice under section 148 and also that she was not being given reasons for reopening the assessment. This again is only a passing observation.

Assessee was not served with the notice under section 148 - HELD THAT:- It is no doubt true that the service of the notice under section 148 is a condition precedent for the validity of the reassessment proceedings. However, in the peculiar facts and circumstances of the present case, we are unable to hold that the reassessment proceedings can be invalidated on that ground.

Objection based on section 151(1) - HELD THAT:- We are unable to entertain the same. Under this provision, in a case where an assessment has been made under section 143(3) or section 147, no notice under section 148 shall be issued by an Assessing Officer who is below the rank of ACIT or DCIT unless the JCIT is satisfied on the reasons recorded by the Assessing Officer, that it is a fit case for issue of such notice. This section applies only where an assessment has already been made under section 143(3) or section 147 and it is sought to be reopened. In the present case, there was no earlier assessment order under section 143(3) or section 147 which was communicated to the assessee - Obvious as it is, the case of the assessee did not fall under sub-section (2) of section 151 and the satisfaction of the JCIT was not required to be obtained on the reasons recorded by the Assessing Officer before issuing the notice under section 148. We therefore reject the contention raised by the learned counsel for the assessee on this issue.

Whether the CIT(A) was right in holding that the Assessing Officer did not have reason to believe that income had escaped assessment, but merely had "reason to suspect"? - HELD THAT:- It has to be remembered that at the stage of recording reasons and issuing notice under section 148 it is only expected of the Assessing Officer to reach a prima facie conclusion that income chargeable to tax has escaped assessment. At that stage, he is not expected to build a fool-proof or cast-iron case against the assessee before proceeding to issue the notice. He is not expected to make a complete investigation before issuing the notice - there is no force in the submission of the learned counsel for the assessee that the Assessing Officer had not held any enquiry into the veracity of the letter received from the CIB or had not conducted an investigation to check the allegation in the letter before issuing the notice.

The view taken by the CIT(A) that the notice under section 148 was prompted by reason to "suspect" and not reason to "believe", cannot be agreed upon - The matter has to go back to the file of the CIT(A) for decision on merits which he has not dealt with, in the view he had taken of the jurisdiction of the Assessing Officer to reopen the case.

Appeal of Revenue allowed.