TMI Blog2012 (4) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate with Mr.R.L. Thakur, Advocate. Dev Darshan Sud, J. This is the Revenue s appeal against the order passed by the learned Tribunal affirming the order in appeal preferred by the assessee-respondent partly allowing the appeal. 2. The brief facts which we notice for the determination of this case are that the Assessing Officer proceeded to assess the income of the respondent-assessee herein disallowing deductions under Section 80-1A of the Income Tax Act, 1961 (hereinafter referred to as `Act ). The Assessing Officer holds that the respondent was engaged in business of manufacturing of knitted cloth from yarns and has thereafter discontinued his business/operations in Baddi and moved out. 3. The order was passed under Section 143(3)/147 of the Act. The Assessing Officer noticed that the assessee had filed return for the assessment year 1998- 1999 declaring nil income after claiming deduction of Rs.61,32,678/- under Section 80-1A of the Act. The return was processed under Section 143(1) of the Act. The Assessing Officer had reason to believe that the income of the respondent had escaped assessment because of the failure on the part of the assessee/respondent to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses incurred under the head wages were not sufficient to engage 10 workers throughout the year. The manufacturing expenses debited were very meager. The Commissioner holds that the case of verification and investigation falls beyond the purview of the said provisions of the Act for the reasons he adopts. He holds that the power under Section 147 is wide but not plenary and unbridled and is hedged in with several safeguards, which have to be followed. The order then proceeds that there must be material for forming the belief and circumstances must exist and cannot be assumed for the purposes of exercise of jurisdiction for reopening assessment. The crucial words used are `reasons to believe and the order does not satisfy the legal requirements to invoke jurisdiction as resorted to. He takes into consideration a number of decisions on the point; namely; Sri Krishna (P) Ltd. vs. Income Tax Officer, (1996) 221 ITR 538 (SC), Chugamal Rajpal vs. S.P. Chailiha Others, (1971)79 ITR 603 (SC), Smt.Rina Sen Vs. CIT (1998)101 Taxman 151 (Patna). 5. In a nutshell what the Commissioner held was that the powers could not be used to exercise jurisdiction simply for proceeding on a roving or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investigation, whereas the Assessing Officer has noticed that the assessee has claimed incorrect and excessive deduction under Section 801B; (b) That the Commissioner had erred in holding that the deduction in fact as claimed could be allowed to be set off against the income disclosed. (c) That the Commissioner had erred in admitting additional evidence (wages register) in violation of the provisions of Rule 46A of the Income Tax Rules. 7. The learned Tribunal proceeded to discuss the facts in detail as noted by the Commissioner while disposing of the appeal before it. Reliance was placed upon the judgment of this court in Green World Corporation vs. ITO, ITR 118(HP) to contend that higher profits were disclosed to take undue advantage of the deductions permissible under the provisions of the Income Tax Act. A number of decisions were also cited by the respondent in support of its contention. 8. We find that the Tribunal records as an undisputed fact that the assessee had filed return for the assessment year 2000-2001 which was processed under Section 143(1) of the Act and assessed under Section 143(3) of the Act and had recorded that the conditions for grant of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was restored to the file of the Commissioner for decision on merits. It was directed that the Commissioner of Income Tax(Appeals) would not decide the issue until and unless the decision for reopening the assessment under Section 147 of the Act is not reversed by any superior Court. This in nutshell is a case put forth before the Tribunal. 12. It is in these circumstances that we are called upon to test the legality of the orders passed by the Tribunal. 13. What we are concerned with in this case is the scope and ambit of the jurisdiction of the Assessing Officer under Sections 147 and 148 of the Act. This issue is no longer res-integra and has engaged the attention of Courts in a number of cases. We do not intend to multiply precedent but only refer to some of the cases. We first advert to the decision of the Supreme Court in Indian Oil Corporation vs. Income Tax Officer, Central Circle V, Calcutta and Others, (1986)3 SCC 409. The Court holds:- 25. The principles on this branch of law are well settled. 26. To confer jurisdiction under clause (a) of Section 147 of the Act beyond the period of four years but within a period of eight years from the end of the relevant yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed or otherwise, the assessing authority has to draw inferences as to certain other facts. But one of the primary facts (sic tasks) of the taxing authority is to draw inferences. It is not necessary for the assessee to draw inferences for him. See in this connection the observations in Calcutta Discount Co. Ltd.'s case (AIR 1961 SC 372) (supra). (pp.418-419, 421-422) 14. On the facts of the case, the Court held that the learned Single Judge of the High Court had noted the relevant provisions of law and held that all the facts in possession of the assessee were placed before the taxing authority prior to the finalising of the assessment and after having accepted the claim inspite of non-production of the relevant auditors certificate which was asked for at one stage, it was not open to the Revenue to turn around and say that the income of the assessee had escaped assessment or been underassessed due to the failure of the assessee to disclose those very auditors reports. Under-assessment was due to the laches on the part of the Revenue and not due to any omis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax and Others, (2001)251 ITR, 420, the expression `reason to believe was the subject matter for consideration before the Bombay High Court. The Court holds:- We may also mention that the expression reason to believe refers to the belief which prompts the Assessing Officer to apply section 147 to a particular case; that it will depend on the facts of each case; that the belief must be of an honest and reasonable person, based on reasonable grounds; that the Assessing Officer is required to act, not on mere suspicion, but on direct or circumstantial evidence; that the expression reason to believe does not mean a subjective satisfaction on the part of the Assessing Officer. (pp.425-426) 19. In Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P.Ltd., (2007)291 ITR 500 (SC), the Supreme Court considered the ambit and scope of Section 143(1)(a), (3) and Section 147. The Court holds:- 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. (pp.511-512) 20. Reliance was also placed by the Revenue on the decision of the Allahabad High Court in Shyam Bansal vs. Assistant Commissioner of Income-Tax, (2008)296 ITR 25(All) which we need not consider in detail as the principles are now well settled by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated October 31, 1989 (1990) 182 ITR (St.) 1, 29), which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe in section 147.-A number of representations were received against the omission of the words `reason to believe from section 147 and their substitution by the `opinion of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe in place of the words `for reasons to be recorded by him in writing, is of the opinion . Other provisions of the new section 147, however, remain the same. (pp.-564-565) 21. Learned counsel relies upon the decision of the Supreme Court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases) vs. Commissioner of Income-tax (In both cases), where this Court also held:- In view of the law laid down above, it is apparent that the powers of the Assessing Officer to reopen assessment are very wide. True it is that the word `reason to believe does not mean a mere change in opinion. If the Assessing Officer has at any time expressed an opinion or come to a finding on the facts before him and decided the matter in a particular way then just because a different interpretation is possible the Assessing Officer may not have the power to issue a notice under Section 148. However, in case, no opinion has been expressed then whatever be the reason as long as they prima facie satisfy the conscience of the Court, the Court would not interfere in the issuance of a notice 23. We need not consider any other precedent as the law settled by the Supreme Court is clear on the point. It is not the mere whim or opinion of the Assessing Officer which would entitle him to invoke the powers for re-opening assessment. 24. From the order of the Tribunal, what we find is that after paraphrasing the reasons set out by the Assessing Officer for reopening the assessment proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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