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2016 (11) TMI 1125 - AT - Income TaxReopening of assessment - income under the head ‘Capital Gains’ arising from the relinquishment of tenancy rights - Held that:- Undisputedly, no new fact or information had come to the knowledge of the AO to form belief that the income in this case had escaped assessment. As noted above, the AO had formed the belief stating that on examination of records, it was observed by him that the assessee was not the tenant for which he had disclosed long term capital gains on account of compensation received for relinquishment of tenancy rights. However, it is also a fact on the file that specific queries were raised by the AO vide letter dated 07.09.06 regarding the tenancy rights of the assessee in the property and the assessee was asked to explain since when the property was in his possession as tenant and also to produce the copy of deed of relinquishment of tenancy rights. The assessee has also proved on the file that the factum of assessee being tenant in the property was not an afterthought version or a colourable device rather in the wealth tax return for the assessment year 1990-91 i.e. prior to the signing of the deed of relinquishment of right/development rights in the year 1995, the assessee was very much shown as a tenant in the property in question. The AO, during the original scrutiny assessment proceedings under section 143(3) of the Act, had thoroughly examined the issue, put the queries to the assessee and thereafter had allowed the claim of the assessee. Without any new fact or information coming into his knowledge and without stating any specific reason merely saying that from the records it is observed that the assessee was not tenant, in our view, is nothing but the change of opinion on the part of the AO. The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". There can be no manner of doubt that the words" reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. - Decided against revenue
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