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2011 (3) TMI 1576 - HC - Income TaxReopening of Assessment u/s 147 - Notice u/s 148 - Reason to Believe - Time limit for Issuance of Notice u/s 149 - After a period of about six years of asseement of return of income, the impugned notice has been issued along with brief reasons for reopening the assessment - Petitioner objected the reopening of Assessment and requested for a copy of the reasons recorded for such reopening - AO threatened the petitioner with penal proceedings u/s 272A(i)(c) - Petition was filed u/s 226, In response to the petition, an affidavit-in-reply has been filed by AO who had recorded the reasons and initiated the proceedings u/s 147 HELD THAT:- Reasons Recorded by AO - There is nothing whatsoever to indicate as to which is the income that has not been disclosed by the petitioner or that any income chargeable to tax has in fact escaped assessment. The entire tenor of the reasons recorded indicates that on the basis of some unsubstantiated and vague information. Since the reasons recorded do not reflect the requisite belief that income chargeable to tax has escaped assessment, the basic requirements of sec147 have not been satisfied. In the case of SHANKARLAL NAGJI & CO. VERSUS INCOME TAX OFFICER [2009 (2) TMI 70 - GUJARAT HIGH COURT], it was held that a completed assessment cannot be reopened merely to make inquiries. From the reasons recorded it is apparent that the AO has reopened the assessment merely to make inquiries. In the facts of the present case, it is not the case of the AO that any income chargeable to tax has escaped assessment. The case of the AO is that in case the petitioner is a defaulter, under the provisions of the Act. Even if the petitioner were liable to pay penalty, the same would not give rise to a conclusion that income has escaped assessment. Reason to Believe - In CHHUGAMAL RAJPAL VERSUS SP CHALIHA AND OTHERS [1971 (1) TMI 9 - SUPREME COURT], the SC held that "Before issuing a notice u/s 148, the ITO must have either reason to believe that by reason of the omission or failure on the part of the assessee to make a return u/s 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year." It is apparent that the AO did not have any material before him so as to satisfy the requirements of sec. 147. The reasons recorded reflect that the AO feels that the matter requires detailed investigation and further verification. Thus, it appears that the AO has reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. The reason to believe that income chargeable to tax has escaped assessment must be based upon material on record. In the facts of the present case, there is no such material. In the circumstances, in the absence of basic requirements of sec. 147 being satisfied, the assumption of jurisdiction by the AO is invalid and as such, the impugned notice u/s 148 cannot be sustained. Reopening of Assessment beyond limitation period - In the light of sec. 149(1)(b), while reopening the assessment is beyond a period of four years from the end of the relevant AY, since there is a statutory bar against reopening the assessment in case where the amount of income escaping assessment does not amount to rupees one lakh or more, the AO is also required to record a finding to that effect. In the present case, no such finding has been recorded. Except for a bare averment in the affidavit-in-reply wherein it is stated that the income which has escaped assessment is more than rupees one lakh, there is no material on record to indicate the extent of income which has escaped assessment. In fact, as observed hereinabove, there is nothing to indicate that the AO has reason to believe that any income whatsoever has escaped assessment
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