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Challenge of jurisdiction under section 147 of the Income Tax Act. Analysis: In this case, the appellant challenged the assumption of jurisdiction by the Assessing Officer under section 147 of the Income Tax Act for the assessment years 1991-92, 1992-93, and 1993-94. The Assessing Officer initiated re-assessment proceedings based on the belief that the appellant had not declared the true cost of construction of certain projects. The District Valuation Officer estimated the cost of construction higher than the declared amount, leading to the initiation of proceedings under section 147. The appellant contested the assumption of jurisdiction under section 147, arguing that there was no cogent material for the formation of belief that income had escaped assessment. The appellant also contended that the reference to the Valuation Officer for estimating construction costs was invalid, as per a Supreme Court decision. The appellant further argued that the additions made by the Assessing Officer were based on doubts and surmises, without concrete evidence, making them ad hoc and against the provisions of the law. The Tribunal analyzed the provisions of sections 147 and 148 of the Income Tax Act. It highlighted the requirement that the Assessing Officer must have a "reason to believe" that income has escaped assessment before initiating re-assessment proceedings. The Tribunal noted that the reasons recorded for re-assessment must be exhaustive and justify the reopening of assessment. It emphasized that the reasons must fulfill the legal requirement and cannot be merely formalities. The Tribunal found that in this case, the Assessing Officer did not satisfy the condition of having a valid reason to believe that income had escaped assessment, rendering the initiation of re-assessment proceedings illegal. The Tribunal referred to various court decisions, including a Supreme Court ruling, which held that a reference to the Valuation Officer for estimating construction costs was invalid. As the reference itself was illegal, the Tribunal concluded that the Assessing Officer lacked any material for the formation of belief that income had escaped assessment. Additionally, the Tribunal highlighted that the Assessing Officer made ad hoc additions without concrete evidence, which was against the law. The Tribunal held that the initiation of proceedings under section 147 and the additions made in the re-assessment order were invalid. Consequently, the Tribunal allowed all three appeals directed by the assessee, canceling the re-assessment orders. In summary, the Tribunal's analysis focused on the legal requirements for initiating re-assessment proceedings under section 147, emphasizing the necessity of a valid reason to believe that income had escaped assessment. The Tribunal found that in this case, the Assessing Officer failed to meet this requirement, rendering the proceedings and subsequent additions invalid.
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