TMI Blog1999 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... tatus of a registered firm. On March 27, 1991, the assessment was completed in the status of an association of persons (AOP). On April 22, 1991, the Assessing Officer, i.e., respondent No. 1, passed an order under section 154 of the Act stating that there had been a mistake in mentioning the status of the assessee in the assessment order and that in place of association of persons (AOP), URF (unregistered firm), be read throughout the assessment order. The assessee appealed and the Commissioner of Income-tax (Appeals) who allowed the appeal on the ground that an assessment on an association of persons could not be made without issuing a notice to the associations of persons. He, therefore, set aside the assessment directing that the assessment be made again, in accordance with law. Thereafter cross appeals were filed before the Tribunal by the Department as well as by the assessee against the order passed by the Commissioner of Income-tax (Appeals). The Tribunal dismissed the Revenue's appeal and allowed the appeal by the assessee and quashed the assessment on the ground that in the circumstances of the case, no assessment could be made on the association of persons. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reopened only if the Assessing Officer has reason to believe that the income has escaped assessment. Under section 147 of the Income-tax Act if the Assessing Officer "has reason to believe" that any income chargeable to tax has escaped assessment for any assessment year, he may.... assess or reassess such income... Thus, the law requires that the Assessing Officer should have the reason/reasons to believe and sub-section (2) of section 148 provides that before issuing a notice for an intended assessment/reassessment under section 147, the Assessing Officer shall record his reasons for doing so. Thus, the Assessing Officer has to record the reasons for issuing a notice under section 147 and he has to have his own reasons to believe that any income chargeable to tax has escaped assessment. There is no dispute on this proposition of law and it was so held by the Supreme Court in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, in which a question had arisen whether proceedings under section 147 could be initiated on the basis of a report by an internal audit party. At page 1004 of the judgment, the Supreme Court observed that in every case, the Income-tax Officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solely under the orders of the Commissioner, it was necessary for him to amend the petition by incorporating therein the requisite averments and preferably annex to the writ petition a copy of the reasons recorded by the Assessing Officer. Had he done so, the respondents would have had an effective opportunity to controvert the allegation and annex to the counter affidavit the alleged direction of the Commissioner, the reasons recorded by the Assessing Officer for having a reason to believe and for proposing to issue notice under section 148 and the necessary correspondence between the Assessing Officer and the Commissioner for obtaining the latter's approval for the issue of a notice that was statutorily required to be obtained. In our view, therefore, the petitioner is not legally entitled to raise such a condition. Even if the petitioner is allowed to rely on the aforesaid averments in the counter affidavit, no sound basis is laid for the argument that the Assessing Officer did not himself have the reason to believe that income has escaped assessment. "Direct" according to the Webster's New Collegiate Dictionary, Indian edition, means "to show or point out the way for" and "d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under section 147(a) could be issued. This proposition of law was also not challenged on behalf of the Revenue. However, what is evident is that due to the time taken in the earlier round of proceedings, the limitation for making an assessment on the basis of the return of income, filed in pursuance of the notice dated October 5, 1990, had expired and, therefore, it cannot be said that either the said notice or the return of income had revived and could be treated to be pending. Such a situation has been taken care of by clause (b) of Explanation 2 to section 147. Explanation 2 states that for the purposes of section 147, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :--- "(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;" Thus, in view of this Explanation and the fact that because of the events, narrated above, no assessment was made on the assessee-partnership firm, it becomes a case where income cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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