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TMI Blog2012 (9) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... . 50/Chd/2009. 4. Both the parties were heard. 5. After hearing both the parties we find that identical issue came up for consideration of the Tribunal in assessee's own case for various Assessment Years. In ITAs No. 7 & 8/Chd/2008 the issues were adjudicated by para 4 to 11 which is as under: "4 . W e have considered the rival submissions, perused the case laws cited at bar and also the material relevant on record. In this case the original return filed had been processed and accepted under section 143(1) of the Act. It is a trite law that the intimation under section 143(1) is given without prejudice to the powers available to the Assessing Officer under section 143(2) of the Act. The Hon'ble Delhi High Court in the case of Mahanagar Telephone Nigam Ltd. vs. Chairman, CBDT 246 ITR 173 (Del) held that where action under section 143(2) was not taken within the prescribed period, so long as ingredients of section 147 are fulfilled, that would not render Assessing Officer powerless to initiate reassessment proceedings, even when only an intimation under section 143(1) had been issued. The Gujarat High Court in Bharat vs. Patel v. Union of India & Others 268 ITR 116 held that a mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under the old provisions of section 147 separate clauses (a) and (b) laid down the circumstances under which reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly, the assessing officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment or that year. Both these conditions were conditions 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 if confers jurisdiction to reopen the assessment.......... .........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 assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er should not be irrational or arbitrary. Alternatively put it must be reasonable and must be based on reasons which are material. Following the above judgment, the Delhi High Court in the case of United Electrical Co. (P) Ltd. v. CIT reported in 258 ITR 317 (Del) has held as under:- "Thus the existence of tangible material, for the formation of opinion in a pre-requisite for initiation of action under section 147 of the Act. Therefore what section 147 of the Act postulates is that the Assessing Officer must have reason to believe that income has escaped assessment. There should be facts before him that reasonably give rise to the belief but the facts on the basis of which he entertains the belief need not at this stage be rebuttably conclusive to support his tentative conclusion. In case of challenge it is open to the court to examine whether there was material before the Assessing Officer having rational connection or relevant bearing to the formation of the belief that is claimed to have been held at the time when he issued the notice. But the court cannot for the purpose of ascertaining validity of the notice examine the sufficiency of the reasons for the belief. Explaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in the instant case. In this case, after the processing of return under section 143(1) the Assessing Officer recorded reasons on 08.02.2006 to initiate proceedings under section 147/148 as under:- "The assessee filed return of income for the above noted assessment year declaring total income at Rs. Nil after claiming deduction u/s 80IA amounting to Rs.51,73,798/-. The assessee firm derives income from manufacturing of emergency lights. The NP shown is against total turnover of Rs.2,96,74,155/- and Net Profit percentage is 17.4% which is exceptionally high rate of net profit. A perusal of manufacturing account reveals that assessee has shown expenses under the head electricity at Rs.3,894/-. W ages Rs.2,25,502/- and Packing expenses Rs.1,195/- only. It appears that either manufacturing activities have not been carried out by the assessee firm or expenses. As per fixed assets plant & machinery is worth only Rs.27,101/- whereas total sales/production has been shown at Rs.2,96,74,155/- during the period under consideration. Plant & Machinery engaged in the manufacturing process is not sufficient to generate such a huge production. From the above facts it is clear that eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the Act. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Indian Oil Corporation vs. ITO reported in 159 ITR 956 wherein it was held "that the reasons to believe is not the same thing as reasons to suspect". It is a case where the Assessing Officer's belief is unsupported by any evidence and all the factors stated in the reasons recorded fall within the realm of suspicion. In fact plain reading of the reasons supports our conclusion, when he has observed that "either the income earned by the assessee from other sources has been declared from business activities or the manufacturing expenses have not been booked properly." Therefore proceedings have been initiated for the purpose of investigation and no more. It is settled law that the provisions contained in section 147 of the Act cannot be used as a tool or as a provision to enable the Assessing Officer to conduct investigation. The Hon'ble Apex Court in the case of Madhya Pradesh Indl. Corpn. v. ITO reported in 57 ITR 637 has held that, proceedings cannot be initiated for the purpose of making fishing and roving enquiries. In our opinion, the Assessing Officer was obliged in law to firstly place ..... X X X X Extracts X X X X X X X X Extracts X X X X
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