TMI Blog2005 (3) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... Dinakaran J.- Writ Petitions Nos. 10608, 10629 and 10630 of 2005 are filed challenging the notices even dated November 18, 2004, issued under section 148 of the Income-tax Act, 1961, (hereinafter referred to as "the Act") proposing to reassess the income of the petitioners for the assessment year 2000-01 on the ground that the respondent in each of the writ petitions has reason to believe that the petitioners income chargeable to tax for the assessment year 2000-01 has escaped assessment within the meaning of section 147 of the Act. Writ Petitions Nos. 10607, 10628 and 10631 of 2005 are filed challenging the proceedings even dated November 25, 2004, served on the petitioners passing an order of provisional attachment under section 281B of the Act pending proceedings of the reassessment notices even dated November 18, 2004, initiated under section 148 of the Act, which are challenged in Writ Petition Nos. 10608, 10629 and 10630 of 2005, referred to the above. While Writ Petitions Nos. 10608 and 10607 of 2005 are filed by one K.S. Suresh, W.P. Nos. 10629 and 10628 of 2005 are filed by one K.S. Ganesan and W.P. Nos. 10631 and 10630 of 2005 are filed by one K.S. Aghoram. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the petitioner also invited my attention to sections 147, 148 and 281B of the Act, which read as follows: "Section 147. Income escaping assessment.- If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 281B. Provisional attachment to protect revenue in certain cases.- (1) Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interest of the revenue it is necessary so to do, he may, with the previous approval of the Chief Commissioner, Commissioner, Director-General or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. Explanation.- For the purposes of this sub-section, proceedings under sub-section (5) of section 132 shall be deemed to be proceedings for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1): Provided that the Chief Commissioner, Commissioner, Director-General or Director may, for reasons to be recorded in writing, extend the aforesaid period by such further period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the receipt of the said additional objections even dated January 10, 2005, the respondent by his proceedings even dated February 10, 2005, furnished the calculation of demand for provisional attachment issued in the proceedings even dated November 25, 2004, made under section 281B of the Act, which is challenged in W.P. Nos. 10607, 10628 and 10631 of 2005. Mr. janarthana Raja, learned counsel for the petitioner, specifically invited my attention to paras. 2.2 and 3 of the proceedings even dated February 10, 2005, which read as follows: "2.2 Further, being fit case for levy of penalty under section 271(1)(c), if minimum amount of penalty is levied, it will work out to Rs. 5.8 crores. 3. You may give your submissions, if any, on or before February 18, 2005, to consider your objection(s) in reopening the case under section 147 of the Income-tax Act, 1961." It is pointed out that even though the respondent in paragraph 3 of the proceedings even dated February 10, 2005, has given opportunity to the petitioners to submit their objections on or before February 18, 2005, against the proposed reopening of the assessment under section 147 of the Act, the respondent has come to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , February 18, 2005, and the non-consideration of the objections made by the petitioners vitiates the proceedings under section 147 of the Act as arbitrary and unreasonable, as the proceedings dated March 21, 2005, are not in strict compliance with the well settled principles laid down by the apex court and several decisions of the Division Benches of other High Courts, referred to above and consequently, the entire proceedings initiated pursuant to the notices even dated November 18, 2004, issued under section 148 of the Act and consequential proceedings of provisional attachment even dated November 25, 2004 issued under section 281B of the Act are vitiated. Mrs. Pushya Sitaraman, learned counsel taking notice on behalf of the respondent, fairly concedes that the objections of the petitioners made on December 27, 2004, February 10, 2005 and February 18, 2005, were not considered by the respondent, while concluding that the assessment proceedings for the assessment year 2000-01 have been validly reopened under section 147 of the Act by proceedings dated March 21, 2005. Learned counsel for the respondent also concedes that the respondent has committed an error apparent on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspect. In other words, what is relevant is whether the material has got any rational connection or live link for the purpose of reason to believe. To put otherwise, if the information which forms the basis for the reason to believe for the Department to reopen the assessment are materials which lacks specific, relevant and reliable criteria such materials are liable to be rejected only on the ground that they may be reason to suspect, but not reason to believe, vide Phool Chand Bajrang Lal's case [1943] 203 ITR 456 (SC). The above proposition is also supported by another decision of the apex court reported in ITO v. Lakhmani Mewal Das [1976] 103 [TR 437, wherein it was held as follows: 'The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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