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TMI Blog2013 (1) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to substantial amounts as duty drawback, DEPB, premium on DEPB and on sale of quota etc. These were all declared in the profit and loss account and the computation of income. 3. On 15th August, 2005, a notice under Section 148 of the Act was issued reopening the assessment on the ground that income chargeable to tax had escaped assessment. According to the reasons recorded under Section 148(2) for reopening the assessment, the assessee was wrong in treating the proceeds of sale of quota as part of the export turnover for claiming deduction under Section 80HHC. It was also the opinion of the Assessing Officer that the sale proceeds of the quota cannot be considered as export turnover but represented business income covered under Section 28(iv) and had to be reduced to the extent of 90% from the business income as provided by Explanation (baa) to section 80HHC. Not doing so resulted in excessive allowance of the deduction under Section 80HHC and consequently in escapement of income chargeable to tax. 4. In response to the notice under Section 148 the assessee filed a return on 22nd August, 2005 declaring total income at the same figure as in the original return of income; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appellate Tribunal. The assessee challenged the jurisdiction of the Assessing Officer to reopen the assessment under Section 147 as also certain issues on merits which were decided against it by the CIT(Appeals). The Revenue‟s appeal related to the decision of the CIT(Appeals) in respect of the premium on sale of quota and the DEPB income, both for the purposes of Section 80HHC. The Tribunal took up the appeal of the assessee and examined the reasons recorded for reopening the assessment and held that the only issue on which the assessment was reopened was the deduction under Section 80HHC with reference to premium on sale of export quota which issue had been decided by the Tribunal in the assessee‟s case for the assessment years 2000-01 and 2001-02 by order dated 7th September, 2005, which orders were followed by the Tribunal for the assessment years 1999-2000 and 2003-04 vide order dated 21st November, 2008 and that there was no fresh material which came to the notice of the Assessing Officer after the original return was processed under Section 143(1) and having regard to the orders of the Tribunal(supra) and the instruction of the CBDT dated 23rd February, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd.(2007) 291 ITR 500, a decision that was relied upon by the revenue, that even where proceedings under Section 147 are sought to be taken with reference to an intimation framed earlier under Section 143(1), the ingredients of Section 147 have to be fulfilled; the ingredient is that there should exist "reason to believe" that income chargeable to tax has escaped assessment. This judgment, contrary to what the Revenue would have us believe, does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under Section 143(1) at his whims and caprice; he must have reason to believe within the meaning of the Section. It would be appropriate to reproduce the following portions from the judgment:- "The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to disclose full and true particulars at the time of the original assessment. There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show "reason to believe". The fact that the intimation issued under Section 143(1) cannot be equated to an "assessment", a position which has been elaborated by the Supreme Court in the judgment cited above, cannot in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an intimation under Section 143(1) is sought to be disturbed. We are at pains to point out this position, which seems fairly obvious to us, because of the argument frequently advanced before us on behalf of the Revenue in other cases as well, under the misconception, if we may say so with respect, that an intimation under Section 143(1) can be disturbed on any ground which appeals to the Assessing Officer. The consequence of countenancing such an argument could be grave. The expression "reason to believe" has come to attain a certain signification and content, nourished over a long period of years by judicial refinement painstakingly embarked upon by great judges in the pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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." 9. It would be appropriate at this juncture to take a brief survey of a few decisions of the Supreme Court which have infused meaning and content to the expression "reason to believe" appearing in Section 147. 10. A constitution bench of the Supreme Court in A.N. Lakshman Shenoy v. ITO (1958) 34 ITR 275, speaking through S.K. Das, J held that an assessment cannot be reopened on the basis of a mere guess, gossip or rumour. This was in the context of the pre-1948 law relating to reassessment under which the Assessing Officer was empowered to reopen the assessment on the basis of "definite information". Though this judgment is based on the phraseology of Section 34 of the 1922 Act as it existed before 1948 which did not contain the expression "reason to believe", that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are "reason to believe" and not "reason to suspect". (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence. (e) The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation is belief regarding escapement of income. (f) The fact that the words "definite information" which were there in section 34 of the Act of 1922 before 1948, are not there in section 147 of the 1961 Act would not lead to the conclusion that action can now be taken for reopening an assessment even if the information is wholly vagu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression "reason to believe" in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(1) may well lead to such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements. 14. In the present case the reasons disclose that the Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT vs. Kelvinator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehensi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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