TMI Blog2017 (12) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational or there exists no rational and intelligible nexus between the reasons and the belief. It is true that the reasons recorded or the material available on record must have nexus to the subjective opinion formed by the AO regarding the escapement of the income but then, while recording the reasons for belief formed, the AO is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the AO had cause or justification to know or suppose that income had escaped assessment [vide Rajesh Jhaveri Stock Brockers (P.) Ltd.'s case (2007 (5) TMI 197 - SUPREME COURT)]. It is also well settled the sufficiency and adequacy of the reasons which have led to formation of a belief by the AO that the income has escaped the assessment cannot be examined by the court. - d.b. spl. appl. writ no. 1101 of 2017 - - - Dated:- 18-12-2017 - Sangeet Lodha And Vinit Kumar Mathur, JJ. Niraj Kumar Jain for the Appellant. K.K. Bissa for the Respondent. JUDGMENT Sangeet Lodha, This special appeal is directed agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. ITO [2002] 125 Taxman 963/[2003] 259 ITR 19, contended that it was bounden duty of the AO to dispose of the objections filed by the appellant in response to the notice under Section 148 of the Act before proceeding with the assessment, by a speaking order. Learned counsel submitted that a bare perusal of order makes it clear that none of the objections raised have been dealt with by the AO. Learned counsel submitted that the documents forming basis for initiating re-assessment proceedings were not even supplied to the appellant and thus, no effective opportunity to file objections to the notice issued was extended by the AO to the appellant. It is submitted that by way of objections raised, the appellant had questioned assumption of jurisdiction by the AO under Section 147 read with Section 148 of the Act and therefore, the same were required to be dealt with at this stage and the decision thereon cannot be deferred till time assessment order is passed and thus, the learned Single Judge has seriously erred in observing that the objection raised being totally factual can only be adjudicated at the time of dealing with the assessment order. Learned counsel submitted that a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and the belief formed by the AO that income had escaped assessment and thus, the reassessment proceeding initiated cannot be faulted with. Learned counsel submitted that the sufficiency of the reasons for the formation of the belief cannot be challenged by the assessee. As a matter of fact, while filing the objections, the appellant has invoked the merits of the material on record, which shall be obviously decided the AO during the course of assessment proceedings and thus, the order impugned passed by the learned Single Judge dismissing the writ petition does not warrant any interference in intra court appeal jurisdiction. 5. We have considered the rival submissions and perused the material on record. 6. Indisputably, Section 147 of the Act, an AO is empowered to initiate reassessment proceedings if he has reason to believe that any income of the assessee chargeable to tax has escaped assessment. As per mandate of Section 148, before making assessment, reassessment or recomputation of income chargeable to tax under Section 147, the AO is under an obligation to issue notice to the assessee, after recording the reasons for initiating the reassessment proceedings in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. 8. In Lakhmani Mewal Das's case (supra), relied upon by the learned counsel for the appellant, the Hon'ble Supreme Court observed: Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advice the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under Section 147(a) are has reason to believe and these words are stronger than the words is satisfied . The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1-4- 1998 and 31-5-1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word intimation as substituted for assessment that two different concepts emerged. 13. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1) (a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but mostly by ministerial staff. Can it be said that any assessment is done by them? The reply is an emphatic no . The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a) , the question of change of opinion, as contended, does not arise. ** ** ** 19. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact of legal evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. (emphasis added) 12. In the backdrop of settled position of law as noticed hereinabove, adverting to the facts of the present case, it is to be noticed that the return filed by the assessee for the A.Y. 2013-14 disclosing the total income at ₹ 7,66,540/- was processed under Section 143(1) of the Act whereunder the total income or loss is computed after making the permissible adjustments and the return filed by the assessee is not subjected to scrutiny assessment. As laid down by the Supreme Court in Rajesh Jhaveri stock Brokers (P.) Ltd.'s case (supra), there being no assessment under Section 143 (1), the question of change of opinion does not arise and therefore, the contention sought to be raised on behalf of the appellant that the re-assessment proceedings are initiated by the AO on mere change of opinion is absolutely devoid of any merit. 13. As per Explanation 2(b) to Section 147, where a return ..... X X X X Extracts X X X X X X X X Extracts X X X X
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