TMI Blog2001 (3) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... the same have been furnished the present writ petition has been filed questioning the legality of the action taken. The factual position in a nutshell is as follows: On March 25, 1997, the assessee filed its return of income for 1995-96. Long term capital loss of Rs.36,28,313 in respect of properties situated at Delhi and Mumbai were claimed. The total income declared was Rs.3,89,040. Certain reports of the registered valuer indicating valuation of property were filed along with the return of income. Certain documents were filed and finally, an order of assessment under section 143(3) was passed on April 1, 1981, accepting the values of the properties as disclosed in the return. Before completion of the assessment, reference was made by the Assessing Officer to the District Valuation Officer to value the properties situated at Mulund in Mumbai. On March 16, 1998, the District Valuation Officer called upon the petitioner to produce certain documents and details. On May 17, 1998, the petitioner wrote to Valuation Officer that as assessment has already been completed, reference was irrelevant. Nevertheless, the report was submitted on February 19, 1999. On March 30, 1999, notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case at hand was one where the reference was made during pendency of the assessment. According to him, the fact that the assessment has been completed will not stand in the way of the Income-tax Officer considering the report and arriving at an independent conclusion about underassessment or escapement of income. Though in some of the decisions, it has been held that the Valuation Officer's report which has come into the possession of the Income-tax Officer after completion of assessment cannot form the basis to reopen the assessment, we find ourselves unable to agree with such a view. At this juncture, it is necessary to take note of section 147 of the Act. The provisions as they stood prior to April 1 1989, and on or after April 1, 1989, are as follows: ------------------------------------------------------------------------------------- Before 1-4-1989 After 1-4-1989 ------------------------------------------------------------------------------------- Section 147. Income escaping assessment.-If- Section 147. Income escaping assess (a) the Assessing Officer has reason to ment. -If the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions are conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to have the assessment reopened under section 147(a). The two conditions are cumulative conditions. Thus, if either of these two conditions is not fulfilled the action of the Assessing Officer would be without jurisdiction. The crucial expression is "reason to believe". The expression predicates that the Assessing Officer must hold a belief ... by the existence of reasons for holding such a belief. In other words, it contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. Such a belief may not be based merely on reasons but it must be founded on information. As was observed in Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC), the expression "reason to believe" is stronger than the expression "is satisfied". The belief entertained by the Assessing Officer should not be irrational and arbitrary. To put it differently, it must be reasonable and must be based on reasons which are material. In S. Narayanappa v. CIT [1967] 63 ITR 219, it was noted by the apex court that the expression "reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of certain conditions mandatory in character before reassessment proceedings should be initiated in the pre-amended section. The conditions precedent for initiation of action under section 147(a) or 147(b) of the pre-amended situation, is high lighted above. The amended provisions are contextually different and the cumulative conditions spelt out in clause (a) or (b) of section 147 prior to its amendment, are not present in the amended provision. The only condition for action is that the Assessing Officer should have reason to believe that income has escaped assessment, which belief can be reached in any manner and is not qualified by a pre-condition of faith and true disclosure of material fact by an assessee as contemplated in the pre-amended section 147(a) of the Act and the Assessing Officer can under the amended provisions legitimately reopen the assessment in respect of an income which has escaped assessment. Viewed in that angle the power to reopen assessment is much wider under the amended provision and can be exercised even after the assessee has disclosed fully and truly all the material facts. To similar view were the conclusions of this court in Rakesh Aggarwal v. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusion that the assessee has understated the capital gains. The conclusion made by the Assessing Officer is also a part of the record. It cannot be said that the report of the Valuation Officer containing his conclusions about the valuation cannot constitute information or have to be totally excluded from consideration, even if it is held that the report is of no consequence after the assessment has been completed. Even if accepted that the report received results in the proceedings which have become inoperative after passing of the order of assessment yet it is not totally useless or worthless. It is trite law that even materials recovered in an illegal search are capable of being used for several purposes. It has been held that they have evidentiary value. That being the position, we do not find any substance in the plea that the Assessing Officer could not have taken into account the valuation report. What is really necessary to be adjudicated in a case of this nature is about existence of relevant material which forms the foundation of a belief and constitutes reasons for entertaining a belief about escapement of an income. We may take note of a decision of the apex court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." The logic indicated by this court in the background of section 132 is equally applicable to a case under section 147. At the cost of repetition we may say that the information must be something mor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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