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2014 (12) TMI 438 - AT - Income TaxValidity of reopening of assessment u/s 147 r.w. section 148 – Reason to believe - Whether the information based on which the A.O had reopened the assessment was wholly vague, indefinite, farfetched and remote - Held that:- Section 147 empowers the AO to assess or re-assess income chargeable to tax if he has ‘reason to believe’ that income for any assessment year has escaped assessment - This section authorizes the AO not only to re-assess but also to assess the Assessee in respect of an income which escaped assessment. For initiating the proceedings under this section, no doubt there must be ‘reason to believe’. ‘Reason to believe’ would mean cause or justification - If the AO has cause or justification to know or suppose that income has escaped assessment, it can be said that assessing officer has ‘reason to believe’ that the income has escaped assessment. In Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] it has been held that the expression “reason to believe” means cause or justification and that if the AO had a cause or justification to know that income had escaped assessment it could be said that the AO had reason to believe that the income had escaped assessment - the proceedings u/s 147 cannot be initiated - requirement of fresh material or facts has been interpreted by the court because Sec. 34(1)(b) states that the AO has in consequence of information in his possession ‘reason to believe’ - ‘Reason to believe’ should have arisen in consequence of the information and as the information cannot be based without material or facts, therefore, it has been interpreted by the Court that there must be fresh facts or tangible material with the AO - in Sec. 147, as was in existence prior to 1.4.1989, under sub-clause (b) similar language has been used as had been used in Sec. 34(1)(b). The reasons recorded cannot be regarded to be arbitrary, irrational - The reasons refer to the material i.e. the statement of the partner of the firm recorded u/s 132(4) during the course of the search - It clearly states that during the course of search conducted on Polar group of cases which included the Assessee, two laptop computers were found and seized from the possession of the Partner of the firm, Shri Sunil Kumar Agarwal - Shri Sunil Kumar Agarwal is a key person of Polar group. Subsequently, the Department took out printout LP-1 to LP-10 - These printouts contained entries in respect of business transactions and loan transactions of the Assessee group which were not entered in the regular books of accounts maintained by the Assessee - This is also a fact that all these transactions were cash transactions and the transactions appearing at LP-1, LP-2, LP-9 & LP-10 relate to loan transactions relating to the Assessee - The AO clearly mentioned in the reasons that Shri Sunil Kumar Agarwal has stated in his statement before the DDIT that he has taken cash loan from market which were not entered in the books and introduced this money into various businesses belonging to different concerns of Polar group as loan or share capital/capital – thus, the order of the CIT(A) is set aside and the AO has ‘reason to believe’ to initiate the re-assessment proceedings - CIT(A) has not given any finding on the ground of the assessee that initiation of the proceedings are barred by limitations, this issue will automatically get survived before CIT(A) – Decided in favour of revenue.
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