TMI Blog2012 (10) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... anese treaty for the Avoidance of Double Taxation, cannot constitute valid material on the basis of which the AO can form even a tentative or prima facie belief that income to the extent of Rs.11, 28,644/- had escaped assessment - The contention of the assessee that the Japanese authorities have no power to examine the books of accounts of the petitioner and, therefore, to the extent that the information supplied by the DAO-45, New Delhi says that the amount of Rs.11,28,644/- has not been declared by the petitioner, it cannot be taken note of by the AO has no force. As the columnar chart set out in the reasons recorded stated as “gross income paid amount: major unit of currency”. Even assuming that the expression “gross income” has been loosely employed, the very fact that this information was received from a governmental agency under Article 26 of the DTAA constitutes the live link or nexus between the material and the formation of the belief that income to that extent has escaped assessment - writ dismissed - against assessee. - WP(C) No.1121/2012 & CM No.2447/2012 - - - Dated:- 26-9-2012 - MR. S. RAVINDRA BHAT MR. R.V. EASWAR JJ. Petitioner Through: Mr. S.Ganesh, Sr.Advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the objections to the initiation of reassessment proceedings, the petitioner had written several letters to the Assessing Officer on 2nd August, 2011, 9th August, 2011, 23rd August, 2011 and 25th August, 2011 and copies of these letters are collectively placed as Annexure 8 of the writ petition. These letters were followed up by another letter dated 19th September, 2011 in which it was pointed out that despite repeated reminders, the Assessing Officer had not provided the complete particulars of the alleged payment said to have been received by the petitioner from Mitsui Co. Ltd. of Japan. It was pointed out that the petitioner s books of accounts did not reflect any specific amount of Rs.11,28,644/- equivalent to Japanese yen 26,65,645/- said to have been received in the previous year relevant to the assessment year 2006-07. The petitioner also furnished the copy of the statement of Standard Chartered Bank for the year ended 31st March, 2006 in support of its submission. 3. On 1st December, 2011 the Assessing Officer, who is the first respondent herein, sent a letter to the petitioner in which he stated that the information regarding the receipt of the amount of Rs.11,28,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... footing that the reasons recorded were not self-sufficient and, therefore, they were sought to be buttressed by reference to extraneous material and they were sought to be improved by different stages by reference to other material which, according to the petitioner, was opposed to the rulings of the Supreme Court in M.S. Gill s case (1978) 1 SCC 405 and Commissioner of Police, Bombay vs. Goverdhan Das Bhanji AIR 1952 SC 16. It was thus pleaded that the reassessment proceedings, being invalid, be dropped. 5. Apparently the Assessing Officer did not respond specifically to the above letter of the assessee containing the objections because he thought that he had disposed of the objections of the petitioner on 1st December, 2011 itself. This is evident from the fact that he issued a letter to the petitioner on 30th December, 2011 in relation to the computation of the arm s-length price in respect of the year ended 31st March, 2006. It may also be recalled that in the letter of 1st December, 2011, the Assessing Officer had expressed his intention to proceed with the reassessment proceedings and had also called for several details relating to the reassessment. Therefore, in its lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was stated that in the light of the information received from DAO-45, New Delhi, it cannot be said that there was no material on the basis of which the Assessing Officer could have acted under Section 147. 8. In the rejoinder the petitioner has stated that the Japanese authorities have no authority to verify the accounts of the petitioner to find out whether the amount of Rs.11,28,645/- has been accounted for in its books and, therefore, the Assessing Officer was not right in stating that the information received from the Japanese authorities related only to the amount not disclosed in the books of accounts of the petitioner. The assumption of the Assessing Officer that the material in his possession related to the amount of income that had escaped assessment was challenged on this basis. It is contended by the petitioner in the rejoinder that the material in the possession of the Assessing Officer cannot in any case constitute reason to believe so as to clothe the respondent with jurisdiction to reopen the assessment. Reference has been made to the details filed by the petitioner before the respondent which showed that it had disclosed interest income of Rs.84,13,948/- in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly initiated. It is contended that at the stage of recording reasons under Section 148(2) and issuing notice under Section 147 to reopen reassessment, the Assessing Officer is not expected to hold an enquiry, with the participation of the assessee, to firmly conclude that the amount sought to be included represented the income of the assessee; at that stage the assessing authority was expected only to arrive at a tentative or prima facie belief, on the basis of the material coming to his possession, that income chargeable to tax had escaped assessment. The material before the Assessing Officer in the present case, urges counsel, satisfied this test. It is thus contended that jurisdiction to reopen the assessment was validly assumed. 11. Having considered the facts and the rival contentions, we are unable to say that the notice issued under Section 148 is without jurisdiction. The petitioner has no doubt furnished the particulars relating to the interest received from the Japanese company in the return under the head income from other sources . The interest amounted to Rs.84, 13,948/-. The return was processed under Section 143(1) on the date on which it was filed, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 147 can be issued only where the Income- tax Officer has reason to believe that the income profits or gains chargeable to tax had been under-assessed or escaped assessment and further that such escapement or under assessment was occasioned by reason of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment of that year. (We are not concerned with Clause (b) of Section 147 here but only with Clause (a). In other words, there must be relevant material before the assessing officer upon which he must reasonably and rationally form the requisite opinion (belief). The question, therefore, is whether the letter of the Chief Mining Officer aforesaid does not constitute relevant material upon which the Income-tax Officer could have formed the requisite belief? It must be remembered that the formation of belief by the Income-tax Officer is essentially within his subjective satisfaction. 4. After hearing the learned Counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income- tax Officer could not have reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. Subject to this condition, the material or information can be acted upon by the Assessing Officer. In CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561, it was observed that the power to reopen the assessment should be based on tangible material . 13. If these tests are applied to the present case, it is difficult to appreciate the petitioner s objection that the information received from DAO-45, New Delhi, acting under Article 26 of the Indo-Japanese treaty for the Avoidance of Double Taxation, cannot constitute valid material on the basis of which the Assessing Officer can form even a tentative or prima facie belief that income to the extent of Rs.11, 28,644/- had escaped assessment. In S. Narayanappa Ors vs. Commissioner of Income Tax, Bangalore (1967) 63 ITR 219, it was observed by a three Judge Bench of the Supreme Court that the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue, but it is open to the assessee to contend that the assessing authority d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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