TMI Blog2008 (5) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for re-assessment under Section 148/147 of the Income Tax Act were initiated by the Assessing Officer on non-existing facts because ultimately, the assessee has been able to explain that the income which was believed to have escape assessment was explainable but some other additions were made under the assessment order?" 2. The necessary facts are, that some search was undertaken at some business establishment, and in that process one diary was found, which showed some entry regarding purchase of plot of land by the present assessee, in village 1-a-Chhoti, for a consideration of Rs.1,66,000/-, while in the agreement, it was shown to have been purchased for Rs.45,000/-. On this basis, a notice under Section 148 was issued to the present assessee. Then query letters were also issued. The assessee appeared, and explained, that he purchased the plot from his agricultural income, and also submitted the requisite return, showing the agricultural income. Then his statements were also recorded, wherein he deposed, that he carries on agriculture and animal husbandry. However, the Assessing Officer summoned the books of accounts of the establishment, at whose premises search was unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned Tribunal to be covered by the decision of the Tribunal in ITA No.401 to 403 decided on 13.8.2004, being Income Tax Officer Vs. M/s. Maruti Guar Gum (P) Ltd., and then it was also found, that in the order dated 13.1.2004 passed in the case of I.T.O. Vs. Bhanwar Lal Murawatiya it has been held by the learned Tribunal, that when the very base of the reopening goes, the reason for reopening also goes. Thus it was found, that action taken by the learned Assessing Officer under Section 148/147 of the Act is illegal, and notice issued under Section 148 is ab initio void and was thus, quashed. 7. Arguing the appeal, it was contended by learned counsel for the Revenue, that a look at the provisions of Section 147 shows, that once the Assessing Officer has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, he may, subject to provisions of Section 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. Thus, on the language of Section 147, if in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, to assess the other incomes, which have come to his notice subsequently, in the course of proceedings, to have escaped assessment. In the present case, since the "reason to believe" entertained by the Assessing Officer was, with respect to the assessee having purchased a plot of land from undisclosed source of income, while it has been found, that the source of income was clearly established to be agricultural income, which were lying deposited with M/s. Barar sons, wherefrom it was withdrawn by cheque, and was invested, and the Assessing Officer himself also found the investment to have been properly explained, that being the position, the jurisdiction commenced, came to an end, at that point itself, and did not confer any jurisdiction on the Assessing Officer, to further continue with the assessment proceedings, simply because, he was of the opinion, that other escaped income had come to his notice, subsequently, in the course of the proceedings. In this regard, learned counsel has relied upon a judgment of Punjab and Haryana High Court, in CIT Vs. Atlas Cycle Industries, reported in [1989]180 ITR 319, which in turn is based on the judgment of Hon'ble the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, [2006] 282 ITR (AT) 18 (Jodhpur), learned Tribunal has relied upon the judgment of the Punjab and Haryana High Court, in Atlas Cycle Industries' case, [1989] 180 ITR 319, and concluded, that the basic condition is, that the Assessing Officer has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, and it was found, that the Section puts no bar on the powers of the Assessing Officer, to put to tax, any other income, chargeable to tax, which has escaped assessment, and which subsequently comes to his notice, in the course of the proceedings, but then, the prefixing words "and also", which succeeded "any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Section 148 to 153, assess or reassess such income". This expression was found to be making clear, that existence of the income, for which the Assessing Officer formed belief, to have escaped assessment, is a precondition, for including any other income chargeable to tax, escaping assessment, and coming to the notice of the Assessing Officer subsequently, in the course of the proceedings. Thus, unless and until such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer." 17. Likewise in Jagan Nath Singhal's case [2000] 242 ITR 554 (P H), again, this very view was taken, that was also a case, where the initiation of proceedings was challenged. It was also held, that the affidavit of the daughter of the petitioner, formed a reasonable ground for the Assessing Officer, to entertain a prima-facie reason to believe, about the escapement of income, and therefore, it was held, that the proceedings cannot be said to be without jurisdiction. It was also clarified, that the Court was not going into the merits of the case of the assessee, the assessee was left free to lead evidence, in the re-assessment proceedings, to show, that the expenditure incurred in the daughter's marriage was up to a specified exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question is required to be examined, as to whether, we should follow the judgment in Atlas Cycle Industries' case, [1989] 180 ITR 319, or take a different view. 23. Reverting back to language of Section 147, this much is clear, that the sine-qua-non for conferment of jurisdiction on the Assessing Officer, to initiate proceedings under that Section is, that he should have "reason to believe" that "any income chargeable to tax has escaped assessment for any assessment year" and that, being that situation, being available, i.e. the Assessing Officer having entertained a "reason to believe", obviously on valid grounds, he acquires the jurisdiction to assess or reassess "such income", which obviously means, the income, which was chargeable to tax, and had escaped assessment for any assessment year, according to his "reason to believe", and while so assessing or reassessing, he can also, in addition, assess or reassess "any other income chargeable to tax which has escaped assessment and which may come to his notice subsequently in the course of proceedings under Section 147". 24. The precise question, thus requiring to be considered is, as to whether, the conjunctive word us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, that it is only when, in proceedings under Section 147 the Assessing Officer, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had "reason to believe" to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under Section 147. 28. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under Section 147, the Assessing Officer were to come to conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under Section 147. 29. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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