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2014 (11) TMI 220 - AT - Income TaxReopening of assessment u/s 147 – Reason to believe - Held that:- The assessee is a FUND and a resident of Denmark - Along with its return of income, in India, the assessee had submitted ‘Tax Residency Certificate’ issued by the Danish Authorities in order to claim the benefit of Article 14 of India-Denmark DTAA – the AO is first of all, is not clear whether the assessee is tax resident of Denmark or not, and secondly, whether AOP-Trust is taxable unit in Denmark or not - This is evident from the reasons where he observes that, there is a possibility that AOP is not a taxable unit under the tax laws of Denmark and because of this, there is possibility of loss of revenue - for assuming the jurisdiction to reopen the case u/s 147, the AO must have `reasons to believe’ that any income chargeable to tax has escaped assessment - The belief entertained by the AO must not be irrational or hypothetical but must be held in good faith and not merely as a pretence - The formation of belief must have rational connection with or relevant bearing from the material on record having live link nexus with income escaping assessment - The reasons recorded by the AO clearly shows that the reopening has been done merely on some kind of a possibility for which he himself is not sure - There is even no reference to any material that assessee’s claim for benefit under Article 14 of DTAA is false or incorrect - the reopening is merely pretence to examine, whether the assessee is a taxable unit or not and whether there could be possibility of loss of revenue. Once the Tax Residency Certificate was there in the record, then there could not have been any ground for presumption that the assessee is not a taxable entity in Denmark - He has not referred to any other information or material that the assessee is not a tax resident of Denmark and there was loss of revenue because the assessee has falsely claimed the benefit under Article 14 of the DTAA - The reasons as recorded by the AO falls in the realm of surmises and presumption de hors any material fact having live link nexus with the formation of `reasons to believe’ that income chargeable to tax has escaped assessment - on the face of the “reasons recorded”, the AO cannot assume jurisdiction to reopen the case in the case of the assessee - the entire proceedings initiated vide notice u/s 148 is bad in law and deserves to be quashed – Decided in favour of assessee.
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