TMI Blog2006 (6) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the assessment of a sum for assessment year 1997-98 and assessment year 1998-99 assessed by the Assessing Officer on account of interest income of the assessee on fixed deposits with the bank. It is seen that interest income earned by an assessee on surplus funds of a mutual society deposited with a banking institution are covered by the principle of mutuality, as held by Hon'ble Delhi High Court in their judgment in the case of DIT v. All India Oriental Bank of Commerce Welfare Society [ 2003 (1) TMI 704 - DELHI HIGH COURT] . In my opinion the authorities below have erred in distinguishing the E aforesaid judgment of Hon'ble Delhi High Court on the ground that the assessee is a co-operative housing society whose income was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as asked for by the assessee. No notice under section 143(2) was issued nor any assessment order under section 143(3) was made and, therefore, on the facts of the case provisions of Proviso to section 147 are not attracted. Subsequently the Assessing Officer found that the assessee had derived interest income on bank deposits which had escaped assessment. The Assessing Officer, therefore, proceeded to initiate assessment proceedings under the provisions of section 147 after issuing the notice under section 148. Before issue of notice under section 148 the learned Assessing Officer recorded the following reasons in writing on 28-11-2003:- The return of income was filed by M/s. Shivalika Co-operative Group Housing Society Ltd., a co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to accept these contentions of the assessee. The requirement for initiation of proceedings under section 147 is that the Assessing Officer should have reasons to believe that assessee's income chargeable to tax has escaped assessment. Such reasons to be believe should be based on certain information/material that could reasonably give rise to the belief of the Assessing Officer. The courts have held that while existence of reasons to believe and rational nexus of those reasons with formulation of belief that income chargeable to tax has escaped assessment can be examined in appellate proceedings, the adequacy or sufficiency of reasons to believe cannot be called in question. Reference in this respect may be made to the judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of mind on relevant facts. I, therefore, see no merit in grounds of appeal Nos. 1 and 2 taken by the assessee. The same are rejected. 4. Ground of appeal No. 3 is that the learned Assessing Officer erred in proceeding to complete assessment under section 147 without disposal of preliminary objection against initiation of proceedings under section 147. During the course of hearing before me the learned AR of the assessee explained that after receipt of notice under section 148 the assessee furnished return of income in response thereto and requested the Assessing Officer for supply of reasons that the Assessing Officer did. On receipt of reasons as recorded by the learned Assessing Officer the assessee addressed a letter to the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he so desires, seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in the proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. 6. In the case of Arvind Mills Ltd., the assessee challenged issue of notice under section 17 of Wealth-tax Act for assessment year 1997-98. Following the judgment of Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjections to initiation of proceedings under section 147 before completion of assessment order under section 143(3) read with section 147. Hon'ble Apex Court have held that in a case where initiation of proceedings is objected to by an assessee, the Assessing Officer must dispose of the same by passing a speaking order. It, therefore, follows that in a case where this course is not adopted by the Assessing Officer, the Assessing Officer is required to be directed to decide the preliminary objections of the assessee to the notice under section 147 and pass a speaking g order, as done by Hon'ble Gujarat High Court in the case of Arvind Mills Ltd. It is pertinent to note here that there is a marked distinction in law between want of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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