TMI Blog2019 (8) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... summing up of inquiry of the Investigation Wing, the information received from the Investigation Wing etc. As examined the belief of the AO to a limited extent to look into whether there was sufficient material available on record for the AO to form a reasonable belief and whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one where it could be argued that the Assessing Officer, on absolutely vague or unspecific information, initiated the proceedings of reassessment without taking the pains to form his own belief in respect of such materials. No case is made out by the writ applicant for interference. - R/SPECIAL CIVIL APPLICATION NO. 19392 of 2018 With R/SPECIAL CIVIL APPLICATION NO. 19393 of 2018 - - - Dated:- 20-8-2019 - MR J. B. PARDIWALA AND MR A. C. RAO, JJ. For The Petitioner (s) : MR DARSHAN B GANDHI (9771) AND MR SP MAJMUDAR (3456) For The Respondent (s) : MRS MAUNA M BHATT (174) COMMON ORAL JUDGMENT ( PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the unsecured loan transactions. The query reads thus: 6. Furnish complete details (confirmations, creditworthiness proof) of new unsecured loans/deposits taken and squared up accounts during the year along with details regarding interest payment, if any, made to them and also copies of balance sheet, return of income filed and copy of bank statement for the year under consideration in support of your claim. Provide confirmation of all such loans including old loans etc. 4.4 It is the case of the writ applicant that the specific query raised by the Assessing Officer with regard to the unsecured loan transactions was answered with supporting documentary evidence. It also appears that in the course of the proceedings of the original assessment under Section 143(3) of the Act, the notices dated 19th March, 2014 were issued under Section 133(6) of the Act,1961 to those parties who claimed to have given the unsecured loan to the writ applicant. 4.5 A notice under Section 148 of the Act, 1961 dated 29th March, 2018 came to be issued to the writ applicant. 4.6 The reasons assigned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.02.2013 25,00,000 16.06.2010 4. Shri Sati Fivest Pvt. Ltd. 3, Amartolla Street, 1st Floor, Kolkatta- 700001 25,00,000 10/06/10 19.03.2013 25,00,000 25.01.2011 5. Ishan Tie Up Pvt. Ltd. 369/14, Dakshindari Road Narmada Appt, 4th Floor, Flat No.9, Kolkatta- 700048. 30,00,000 17.01.2011 13.03.2013 10,00,000 25.01.2011 3. During the investigation, it was also found that all the above com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. All transactions are through property banking channel and we have already filed our bank statement as well as bank statements of the lenders/depositors. Moreover, the depositor has directly filed their copy of IT Return. It proves that we have established the identity, capacity and genuineness of transactions took place between the assessee and the depositors. The basis for re-opening as stated in your recorded reasons is para-3 and 4 we would like to submit that we cannot be expected to prove the source of source and there are number of judgments of various Court that the assessee is not expected to prove the source of source and hence no addition can be made u/s.68 of the I.T. Act. With reference to your notice dated 13.11.2018 we submit as under. A. The assessee is a construction contractor. B. We have already filed audit report and acknowledgment of ITR vide our letter dated 13.09.2013. C. We enclose herewith all bank statements. D. As already replied. E. Working of Capital Gain and Copy of Computation of Income is enclosed herewith. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: At the time of assessment u/s. 143(3), then ITO has already touched upon the Cash Credit and Unsecured Loan which you have considered for re-opening. It is merely a change of opinion and that cannot be the base for re-opening of the completed assessment. We strongly oppose the proceedings u/s. 148 of the LT Act. In support of our belief we would like to draw your kind attention to the following notices and our reply during the assessment u/s. 143(3) of the I.T. Act. We have already proved the identity, capacity and genuineness of transactions in respect of unsecured loan by filing confirmations with PA Number, Address of Five Companies. All transactions are through property banking channel and we have already filed our bank statement as well as bank statements of the lenders/depositors. Moreover, the depositor has directly filed their copy of IT Return. It proves that we have established the identity, capacity and genuineness of transactions took place between the assessee and the depositors. The basis for re-opening as stated in your recorded reasons is para-3 and 4 we would like to submit that we cannot be expected to prove the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 against the proceedings for re-opening and issuance of notice u/s. 148 of the Act is, hereby, rejected. 4.9 Being dissatisfied with the re-opening of the assessment, the writ applicant has come up with the present writ application. 5. Submissions on behalf of the writ applicant :- 5.1 Mr. Darshan Gandhi, the learned counsel appearing for the writ applicant invited our attention to the reasons recorded for reopening the assessment. He submitted that the Assessing Officer seeks to reopen the assessment on the ground that the information received from the DDIT (Inv), Jamnagar reveals that the petitioner has taken unsecured loan aggregating to ₹ 2,28,00,000/- during the year under consideration from five shell companies, details whereof are set out in the reasons. He submitted that according to the Assessing Officer, during the investigation it was found that the said companies have no credentials to carry out transactions of huge amounts as per their income profile and, therefore, the Assessing Officer seeks to reopen the assessment on the ground that the above income has escaped assessment. 5.2 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... newables Pvt. Ltd. vs. Asst. Commissioner of Income Tax , Writ Petition No.3618 of 2018, decided on 7th March, 2019. This decision of the Bombay High Court is sought to be relied upon to fortify the submission that the information supplied to the A.O. by the Investigation Wing, by itself, would not be sufficient to reopen the assessment. In other words, the investigation into the loan transactions would fall within the realm of fishing or roving inquiry which is wholly impermissible in law in the context of the reopening of the assessment. 5.9 Mr. Gandhi also placed reliance on the decision of the Supreme Court in the case of Income-tax Officer vs. Lakhmani Mewal Das , reported in ( 1976) 103 ITR 437 (SC) to make good his submission that the grounds or reasons which lead to the confirmation 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 assessee from assessment because of his failure or omission to disclose fully and truly all the materials facts. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld amount to doing violence to the plain language of Sections 147(a) and 148 of the Act respectively. 6.2 Mr. Bhatt submitted that the Court should look to the purpose and intent of the provisions. Mr. Bhatt would submit that one of the purposes of Section 147 is to ensure that an assessee does not get away by willfully making a false or untrue statement at the time of the original assessment. Mr. Bhatt submitted that the information provided by the Deputy Director of Income-Tax (Investigation), Jamnagar to the Assessing Officer speaks for itself. It is on the basis of such information that the Assessing Officer has formed a reasonable belief that the transactions were all sham and bogus. According to Mr. Bhatt, on the basis of such tangible material if the Assessing Officer proposes to reopen the assessment, it cannot be termed as a roving or a fishing inquiry. According to Mr. Bhatt, the Assessing Officer could not be said to have merely and mechanically acted on the report of the Investigation Wing. The reasons recorded by the Assessing Officer speak for itself. Mr. Bhatt, in support of his submissions, has placed reliance on the following decisions: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly question that falls for our consideration is whether the reopening of the assessment is permissible in law having regard to the facts on record. 9. Section 147 of the Income-tax Act, 1961 provides that 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 . The proviso deals with the reopening of an assessment upon the expiry of a period of four years from the end of the relevant assessment year. Explanation 3 to section 147 was inserted by the Finance (No. 2) Act of 2009, with effect from 1-4-1989. Explanation 3 provides as follows : Explanation 3. -- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular issue with reference to which income has escaped assessment, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment, when such issue comes to his notice subsequently in the course of the proceedings. The reasons for the insertion of Explanation 3 are to be found in the Memorandum explaining the provisions of the Finance (No. 2) Bill of 2009. The Memorandum treats the amendment to be clarificatory and contains the following Explanation: Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent. With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he had already recorded reasons is it necessary that he should record reasons for assessing or reassessing any of the items which are totally unconnected with the proceedings already initiated. Suppose under two heads, income has escaped assessment and those two heads are inter-linked and connected, the proceedings initiated or notice already issued under sub-section (2) of section 148 would be sufficient if the escaped income on the second head comes to the knowledge of the officer in the course of the proceedings. But if both the items are unconnected and totally alien then the assessing authority has to follow sub-section (2) of section 148 6 ITA No.2032/Kol/2018 Dipti Mehta AY- 2010-11 with regard to the escaped income which comes to his knowledge during the course of the proceedings. 16. Hence, the Punjab and Haryana High Court and the Kerala High Court took the view that once the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment and proceeds to issue a notice under section 148, it is not open to him to assess or, as the case may be, reassess the income under an independent or unconnected issue, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income chargeable to tax had escaped assessment. This aspect has been elaborated by this Court in the case of Inductotherm (India) P. Ltd vs. M. Gopalan, Deputy Commissioner of Income Tax reported in 356 ITR 481 making the following observations: 13. Despite such difference in the scheme between a return which is accepted under section 143(1) of the Act as compared to a return of which scrutiny assessment under section 143(3) of the Act is framed, the basic requirement of section 147 of the Act that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment is not done away with. Section 147 of the Act permits the Assessing Officer to assess, re-assess the income or re-compute the loss or depreciation if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. This power to reopen assessment is available in either case, namely, while a return has been either accepted under section 143(1) of the Act or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both of cases is that the Assessing Officer should have reason to bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se become final is subject to reopening on certain grounds. Ordinarily, a judicial or quasi-judicial order is subject to appeal, revision or even review if statute so permits but not liable to be re-opened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interest of the revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to entire original assessment, of course at the hands of the revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated by a two-Judge Bench of the apex Court in Lakhmani Mewal Das (supra), wherein the Court held that the grounds or reasons which lead to the formation of belief must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly, all material facts. 25. Later on in Phool Chand (supra), it stood clarified that decision to quash the action in Lakhmani Mewal Das (supra), was based on its given fact situation, where information received by the Assessing Officer was wholly vague, indefinite, farfetched, remote and without any basis for holding a reasonable belief, warranting action, under Section 147 of the Act. It further observed that: 19 .Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the same facts and material which was available with the I.-T.O at the time of original assessment proceedings. The two situations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts necessary for his assessment of that year. However, under the substituted section 147, only the first condition required satisfaction of reason to believe, that the income had escaped assessment. It further observed that:- 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 by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. 20. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as primary facts are concerned, it is the assessee's duty to disclose all of them - including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. ( Emphasis supplied) 29. The Apex Court in S. Ganga Saran and sons (Pvt.) Ltd., Calcutta v. Income Tax Officer, (1981) 3 SCC 143 has observed as under: 6 (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 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court in Lakhmani Mewal Das (supra) , had observed as under: 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 assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income- tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The 963 sufficiency of grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of 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 pret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome was on account of non filing of the return by the assessee or failure on his part of disclose fully and truly all material facts necessary for assessment would not be conclusive. Nor absence of any such statement would be fatal, if on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs.. Information Received from the Investigation Wing: Accommodation entries: 34. In the case of PCIT v. Manzil Dineshkumar Shah[2018] 95 Taxmann.com 46 (Guj) HC), this Court held that; even the assessment which is completed u/s 143(1) cannot be reopened without proper reason to believe . If the reasons state that the information received from the VAT Dept that the assessee entered into bogus purchases needed deep verification , it means the AO is reopening for doing a fishing or roving inquiry without proper reason to believe, which is not permissible. The Court also observed that, before closing, we can only lament at the possible revenue loss. The law and the principles noted above are far too well settled to have escaped the notice of the Assessing Officer despi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment can validly be exercised. The consideration which ought to weigh with the Revenue and are considered valid are the existence of the tangible material or information in the light of the judgment in CIT vs. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC). Having regard to the reasons assigned for reopening the assessment, we are unable to accept the vociferous submissions of Mr. Gandhi. It constitutes reference to tangible material outside the record, i.e., the information based upon the investigation of the office of the Deputy Director of Income Tax (Investigation), Jamnagar with respect to the bogus and sham loan transactions. 40. The contention that the Assessing Officer had merely and mechanically acted on the report of the Investigation Wing also cannot be accepted. We have reproduced the reasons recorded by the Assessing Officer and noted the gist of his reasons for resorting the reopening of the assessment. We have recorded that the Assessing Officer had perused the materials placed for its consideration and thereupon, upon examination of such materials, formed a belief that the income chargeable to tax had escaped assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer relied on the facts as found by the Customs Authorities that the assessee had under-voiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under :- So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under invoiced the goods it exported. It is not doubt correct that the said finding may not be binding upon the income tax authorities but it can be a valid reason to believe that the chargeable income has been under assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied. 11. In case of Income Tax Officer vs. Purushottam Das Bangur (Supra) after completion of assessment in case of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of re-opening of assessment, the Supreme Court held and observed as under :- After hearing the learned counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income Tax Officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted in the colliery of the respondent on January 9, 1967, by the officers of the Mining Department in the presence of the representatives of the assessee and according to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods it exported. It is not doubt correct that the said finding may not be binding upon the income tax authorities but it can be a valid reason to believe that the chargeable income has been under assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied. 43. In the case of Income Tax Officer vs Purushottam Das Bangur , (1997) 224 ITR 0362 after completion of the assessment in the case of the assessee, the Assessing Officer received a letter from the Directorate of Investigation giving detailed particulars collected from the Bombay Stock Exchange which revealed earning of share and price of share increased during the period in question and the quotation appearing at the Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t say that the letter aforesaid does not constitute relevant material or that on that basis, the Income Tax Officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted in the colliery of the respondent on January 9,1967, by the officers of the Mining Department in the presence of the representatives of the assessee and according to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situations, it is not a case of mere change of opinion or drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but is is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look the conclusion arrived at by the Income tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by him and further whether that material had any rational connection or a live link with the formation of the requisite belief. In the instant case also, these observations and findings would have a direct bearing. The Assessing Officer, at the time of making original assessment though made an enquiry, could not have found by further inquiry or investigation whether such transactions were genuine or not. However, on the basis of subsequent informations, he arrived at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. ( ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. ( iii) The validity of the reopening of the assessment shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. ( x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. ( xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. ( xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression tangible ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch facts would be expected to be elicited by the Assessing Officer during the course of the assessment. The disclosure required only reference to those material facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries. ( xix) The word information in Section 147 means instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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