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2024 (4) TMI 711 - HC - Income TaxValidity of Reopening of assessment - “tangible material” as may ever give rise to a “reason to believe" - Justice M.B. Shah Commission submitted its Report and only suggested possibility of under invoicing of Iron Ore extracted from mines and exported from the State of Goa - HELD THAT:- Undisputed between the parties that the present re-assessment proceeding has arisen under the unamended law i.e. the law that was in force upto 31.03.2021. Under the law as it then existed, no re-assessment proceedings could ever be initiated except against a valid “reason to believe” recorded by the assessing authority. Second, even in a no assessment case, re-assessment could rise only after such “reason to believe” had been recorded in writing before issuance of notice u/s 148. Thus, recording of “reasons to believe” in writing was a sine qua non for valid assumption of jurisdiction to re-assess an assesse. As to what amounts to a “reason to believe,” the law has remained settled over long decades. In S Ganga Saran and Sons (P) Ltd. [1981 (4) TMI 5 - SUPREME COURT] in the context of the then existing Section 147(a) of the Act, yet, in the context of initiation of reassessment proceedings upon recording of “reasons to believe”, it was established in law that those words were stronger than “is satisfied”; the “belief” must be based on “reasons” that are “relevant and material”. For initiation of reassessment proceedings, there must exist “tangible material” indicating some income had arisen either on accrual or actual/ cash basis and that it has escaped assessment. Merely because the invoices issued by the petitioner were below the international price, it could never be alleged that there was any income on accrual basis as the petitioner earned no legal right to receive any higher amount. Therefore, we have to examine if there exists any material indicating receipt of any income on actual/ cash basis, over and above the invoice price. The entire opinion of the Commission and the recital made in the “reasons to believe” recorded by the petitioner as also reasons recorded by that authority while rejecting the objections raised by the petitioner are directed and confined solely to the observations made by the Commission. The Report is not before us in entirety. To the extent it has been relied by the assessing authority, it only admits of a possibility of higher realizations having been made. Even that possibility exists not on the strength of any material discovered by the commission of higher realizations made by exporters (including the petitioner) but on a presumptuous basis solely by comparing the invoice price with the prevailing international price. Hence, that presumption/ opinion howsoever considered is not based on any hard evidence (either oral or documentary) of any higher price realized. Rather, it is conjectural and in any case on suspicion. Report remains a pure subjective opinion and nothing more. The vital fact of value/ price realized by the petitioner against the invoice issued, was neither gone into nor any definite opinion was expressed thereto. In any case, no material was discovered by the Commission, as may support that “belief”. Thus we find reassessment proceedings initiated against the petitioner for the AY 2011-12 were wholly without jurisdiction. It also being beyond the pale of doubt- unless jurisdiction is first clearly established, the reassessment- proceedings may not survive and an assessee may not be forced to participate in the same. Decided in favour of assessee.
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