TMI Blog2010 (5) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer erred in law and on facts in resorting to section 147 of the IT Act without having valid reasons to believe that income has escaped assessment." 3. The relevant material facts are as follows. The assessee is a charitable trust and is duly granted registration by the CIT, under section 12A of IT Act, and is also notified, for the relevant period, under section 10(23C)( iv ) of the Act. On 29-10-2001, the assessee filed its IT return for the relevant assessment year, and in view of exemption available to the assessee under section 10(23C), declared nil taxable income. This IT return was processed under section 143(1)( a ). However, on 26-5-2004, the assessee was served a notice under section 148 and income of the assessee was proposed to be reassessed. The reasons for reopening the assessment were stated to be as follows : "On verification of the accounts filed along with the return of income for the assessment year 2001-02, it is seen that the auditors have pointed out that investment of Rs. 1,02,00,000 which was to be made in 11.5 per cent Government of India loan 2015 was not effected and the certificates regarding investments were not delivered to the assessee trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at p. 2 of the assessment order, has incorporated a speaking order under section 148 pursuant to Hon ble Bombay High Court s guidelines in their order on writ petition. The Assessing Officer, in clauses 1 to 4 of the order under section 148, has very clearly and specifically dealt with the contentions and objections raised by the appellant with respect to initiation of proceedings under section 148 and the conditions and circumstances under which the same were initiated. I find that the Assessing Officer was having a valid reason to believe that the appellant s income chargeable to tax has escaped assessment. The reason was also found recorded on 18-5-2004 prior to the issue of notice under section 148 on the same date. On asking for the reasons of reopening by the appellant, the Assessing Officer, vide letter dated 10-6-2004, had supplied the same to the appellant. Subsequently also the Assessing Officer has shown the reasons recorded in this order sheet to the Authorised Representative of the appellant on 13-1-2006. Thus the appellant s claim that the Assessing Officer was not having any reasons for reopening the assessment under section 147 is not found to be correct. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48, are the procedures laid down in terms of guidelines issued by the Hon ble apex Court in the case of GKN Driveshafts India Ltd. ( supra ) and also by the Hon ble Bombay High Court. Therefore, I do not find any infirmity and illegality both in initiation of proceedings under section 147 and issuing notice under section 148 of the IT Act, by the Assessing Officer. Accordingly, these two grounds (against reassessment proceedings) are decided against the appellant." 5. The assessee is also not satisfied with the stand so taken by the CIT(A) and is in second appeal before us. 6. We have heard the rival contentions at length, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 7. A plain reading of the reasons recorded by the Assessing Officer would indicate that the Assessing Officer was of the view that the amount of Rs. 1,02,00,000, which according to the Assessing Officer, was invested in violation of section 11(5) read with section 13(1)( d ), was to be included in assessee s total income and it has escaped assessment. This understanding of the Assessing Officer, however, is clearly contrary to the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the reasons recorded by him. He has to speak through the reasons." Their Lordships added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence....". Hon ble Supreme Court, in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561, has observed that "reasons must have a live link with formation of belief". Hon ble Bombay High Court, in the case of Prashant S. Joshi v. ITO [2010] 230 CTR (Bom) 232 has observed : "The Assessing Officer must have reasons to believe that such is the case ( i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under section 147" and that "the reasons which are recorded by the Assessing Officer are the only reasons which can be considered when formation of belief is impugned". In this light when we examine the reasons recorded for reopening the assessment, we find that there was no material before the Assessing Officer that any income, leave aside the income of Rs. 1,02,00,000, has escaped assessment. As we have pointed out earlier, even if the investment of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and even when reassessment proceedings are initiated within a period of four years, it is still necessary that there should be reasons to believe that income had escaped assessment and such reasons are subject to judicial scrutiny. No doubt that at the stage of initiating reassessment proceedings, it is not necessary to establish that there has been an escapement of income, but essentially there have to be valid reasons to believe that income has escaped assessment and these reasons, on standalone basis, must be considered appropriate for arriving at the conclusion arrived at by the officer recording the reasons. 10. In view of the above discussions and bearing in mind entirety of the case, we are of the considered view that the very initiation of reassessment proceedings, on the facts of this case and on the basis of reasons recorded by the Assessing Officer, is bad in law. We, therefore, quash the reassessment proceedings. As we have quashed the reassessment proceeding itself, we see no need to deal with ground No. 3 raised by the assessee to the effect that "on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming and the Assessing Officer ..... 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