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2014 (9) TMI 55 - ALLAHABAD HIGH COURTReopening of assessment u/s 147 cancelled on technical grounds –Reason to believe - Held that:- The reasons recorded by the AO mentions about the undisclosed investments in the business, purchase of car, acquisition of immovable properties as well as the deposits in various banks - the addition had been made on account of investments made in the purchase of shares - the reasons recorded by the AO has no nexus or a live link with the addition made by him in the assessment order - There has to be a live link between the reasons recorded and the additions so made in the assessment order - Income chargeable to tax that has escaped assessment has been provided u/s 147 of the Act - With effect from 1st April, 1989, Section 147 underwent an amendment to the effect that if the AO had "reasons to believe" that any income chargeable to tax had escaped assessment, the AO could assess or reassess such income - "Reasons to believe" has been a subject matter of interpretation by various Courts in various decisions – relying upon Indra Prastha Chemicals Pvt. Ltd. and others Vs. Commissioner of Income Tax and another [2004 (8) TMI 86 - ALLAHABAD High Court] - The reason to believe does not mean purely subjective satisfaction on the part of the AO. It means that the belief must be held in good faith - the formation of the opinion and belief is a condition precedent without which the AO will not have jurisdiction to initiate proceedings for reassessment - The reasons for the formation of the belief must have a rational connection, which is germane to the issue and must have a direct nexus - there must be some fresh material, which would give rise to the formation of the belief that income had escaped assessment and, therefore, the fresh material, which comes to the notice of the AO has to have a direct nexus or a live link with the formation of the belief that there has been an escapement of income - The foundational requirement for reopening the assessment is, that there must be a reason to believe that income had escaped assessment - There has to be some tangible material on the basis of which a reason to belief can be formed that some income had escaped assessment - the AO has failed to prove any escapement of income - initiation of proceedings u/s 148 of the Act is invalid – Decided against Revenue.
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