TMI Blog2005 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... le court deems fit and proper. (c) award the cost of the petition to the petitioner. The brief facts of the case giving rise to the present petition are that the petitioner is a company carrying on the business of construction of building in the city of Agra. The company was incorporated on January 31,1994. For the assessment year 1995-96, the petitioner filed its return regarding the construction of the building showing loss of Rs. 2,77,400. The assessment was completed under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The respondent issued a notice under section 148 of the Act on December 24, 1998, to reopen the case for the assessment year 1995-96. On the request of the petitioner, on July 26,1999, the reasons for issue of the notice and reopening of the case have been supplied which is annexure 9 to the writ petition, read as follows: "During the course of assessment proceedings for the assessment year 1996-97 the books of account of the assessee were rejected under section 145(2) for the detailed reasons given in the order passed under section 143(3) dated December 18, 1998, it was found that: 1. That the assessee is not maintaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of Rs. 46,77,190.35 paise", therefore, the assessing authority on the basis of the previous year estimated the income which was made at 10 per cent, of the gross receipts estimated the net profit at Rs. 4,67,719 as against the disclosed loss of Rs. 2,77,400 which shows that there was an escaped income. He submitted that the material mentioned in the reasons recorded is sufficient to reopen the case and this court in writ jurisdiction cannot examine the sufficiency of the material. In support of his contention, he relied upon the decisions in the cases of Raymond Woollen Mills Ltd. v. ITO reported in [1999] 236 ITR 34 (SC); Kundan Lal Ratan Lal Jain v. Assessing Officer reported in [2000] 245 ITR 434 (All) and Ess Ess Kay Engineering Co. P. Ltd. v. CIT reported in [2001] 247 ITR 818 (SC). We have given our anxious consideration to the submissions of learned counsel for the parties and perused the reasons recorded for reopening of the case under section 147 of the Act, which have been referred to hereinabove. It is a settled principle of law that in writ jurisdiction the court cannot examine the sufficiency of the material on the basis of which notice under section 148 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." Under section 147 of the Act, the case can be reopened if there is reason to believe that there is an escaped income for the assessment year. Therefore what has to be examined is whether there was any material for the year under consideration of escaped income. A perusal of the reason recorded shows that the material referred to is relating to the assessment year 1996-97 in which on the basis of the defects found in the books of account, the assessing authority estimated the income by way of best judgment assessment. If on the basis of the defect found in the books of account for the assessment year 1996-97, the income has been estimated by way of best judgment assessment by taking 10 per cent, profit of the gross receipts, it does not mean that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. In ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC); [1976] UPTC 809 (SC), the hon'ble Supreme Court held that the reasons for the formation of the belief contemplated by reopening of an assessment must have a rational connection 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 Income-tax Officer and the formation of his belief. The hon'ble Supreme Court further observed that though it is true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment yet at the same time we have to bear in mind that it is not any and every material, however, vague and indefinite or distinct, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. In Commissioner of Sales tax v. Bhagwan Industries (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment due to defect found in the books of account. There is no material that some income has been earned in the assessment year 1995-96. Thus, the information is based only on guess, presumption and on extraneous and irrelevant consideration. Therefore, in view of the principle of law referred to hereinabove, in the absence of specific material of escaped income for the year under consideration, no belief could be formed about the escaped income merely on the basis of the assessment for the year 1996-97. Now let us deal with the decisions cited by learned standing counsel. In the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34, the apex court held that in a writ jurisdiction, the court can only consider whether there was a prima facie case for reassessment and sufficiency of the material cannot be considered. In the case of Kundan Lal Ratan Lal Jain v. Assessing Officer [2000] 245 ITR 434 (All), in which notice under section 148 of the Act was issued on the basis of information relating to the enquiries in which it was found that the land holders whose names were found entered had denied having leased out any land to the assessee and the court had not found the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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