TMI Blog2002 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by D.K. JAIN J.- Rule D.B. Since a very short point is involved, with the consent of counsel for the parties we take up the matter for final disposal. Challenge in this writ petition under article 226 of the Constitution of India is to the notice, dated April 30, 2002, issued under section 148 of the Income-tax Act, 1961 (for short "the Act"), by the Income-tax Officer, respondent No. 3 herein, seeking to reopen the assessment of the petitioner-company for the assessment year 1996-97. The petitioner-company is engaged in the business of manufacturing of electrical goods. It filed its return of income for the assessment year 1996-97 on November 30, 1996, declaring an income of Rs. 9,26,867. The return of income was accompanied by the statement of assessable income, various other documents and annexures, including the statutory tax audit report and the list of loans taken during the relevant previous year. One of the loans, for Rs.7,40,000, raised by the petitioner was from a concern Visa Fincap Limited, New Delhi, According to the petitioner, the loan was taken on two different dates through account payee cheques; the sum of Rs. 33,860 was paid/credited as interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accord approval for issue of notice under section 148 read with section 151(2) of the Income-tax Act. (Sd.) Sugan Chand Mittal, ITO, Ward 18(1), New Delhi. Yes, I am satisfied that it is a fit case for issue of notice under section 148 of the Income-tax Act. (Sd.) N. K. Sharma Addl. Commissioner of Income-tax, Range 18, New Delhi." Since the purported belief of the Assessing Officer was based on the statement of one Mr. V. K. Jain, the Assessing Officer was requested to supply a copy thereof, which was supplied to the petitioner. Alleging that in his statement, recorded under section 131 of the Act, the said V. K. Jain had nowhere stated that the loan given to the petitioner was bogus, no adverse inference could be drawn against the petitioner towards the loan transaction and, therefore, no "reasons to believe" existed with the Assessing Officer to initiate proceedings under section 147/148 of the Act, the present petition was filed for quashing of notice dated April 30, 2002, We have heard Mr. M. S. Syali, learned senior counsel for the petitioner, and Mr. R. D. Jolly, learned senior standing counsel for the Revenue, who has put in appearance on advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may apply the provisions of sections 148 to 153 and assess or reassess the income which has escaped assessment. For the present purpose, only sections 148 and 151 are relevant. Sub-section (2) of section 148 of the Act mandates that before 'Issuing notice to the assessee under sub-section (1), for filing the return, the Assessing Officer shall record his reasons for doing so. Therefore, formation of reason to believe and recording of reasons are imperative before the Assessing Officer can reopen the completed assessment. The proviso to sub-section (1) of section 151 of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-built safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment. In Bawa Abhai Singh v. Dy. CIT [2002] 253 ITR 83, a Division Bench of this court, speaking through Chief Justice Arijit Pasayat (as his Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an authorisation under section 132 is challenged in a court, it will be open to the petitioner to contend that, on the facts or information disclosed, no reasonable person could have come to the conclusion that action under section 132 was called for. The opinion which has to be formed is subjective and, therefore, the jurisdiction of the court to interfere is very limited. A court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether action under section 132 is called for. But the court would be acting within its jurisdiction in seeing whether the act of issuance of an authorisation under section 132 is arbitrary or mala fide or whether the satisfaction which is recorded is such which shows lack of application of mind of the appropriate authority. The reason to believe must be tangible in law and if the information or the reason has no nexus with the belief or there is no material or tangible information for the formation of the belief, then, in such a case, action taken under section 132 would be regarded as bad in law." It is, thus, trite, that when a challenge is made to the action under section 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said V. K. Jain, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. As highlighted above, the Legislature has provided certain safeguards to prevent arbitrary exercise of powers by an Assessing Officer, particularly after a lapse of substantial time from completion of assessment. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval. For the foregoing reasons, we allow the petition and quash the impugned notice dated April 30, 2002. The rule is made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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