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TMI Blog2005 (6) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... as under. "During the year under consideration, the trust has shown receipt of donation of Rs. 30,16,598 in the corpus fund, whereas the amount has been received without specific directions, therefore, this amount cannot be treated for corpus. Further, the registration under s. 12A(a) was granted w.e.f. 14th Aug., 1997, therefore, donation of Rs. 12,11,100 received before 14th Aug., 1997, is liable to tax, which has not been shown as taxable." In compliance to notice under s. 148, the assessee-trust filed its reply on 14th June, 2001, stating that the return filed on 31st Dec, 1999, may be treated as return in response to the notice under s. 148. Assessment was completed on the total income of Rs. 33,09,100. In the first appeal, the assessee challenged the validity of notice under s. 148, but without any success. 4. Before us, the learned counsel for the assessee strenuously argued that the lower authorities had erred in initiating the proceedings by issuance of notice under s. 148 and upholding the same respectively. It was stated that the trust received Rs. 30,16,598 as donations towards corpus and applied a sum of Rs. 24,65,543 for its purposes within the meaning of s. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 143(3)/147 for the immediately two preceding years, namely, asst. yrs. 1996-97 and 1997-98. It shows that the AO made presumption of the receipts shown by the assessee towards corpus donations, as without any specific direction and then to authenticate his presumption, initiated the reassessment proceedings. 6. At this juncture, we would like to highlight the difference between the regular assessment under s. 143(3) and the reassessment under s. 147. It is important to bear in mind that both the sections operate in different fields and do not have any overlapping jurisdiction. Whereas s. 143(3) empowers the AO to make assessment, when return is filed under s. 139 or in response to notice under s. 143(1), if he considers it necessary or expedient to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, he shall serve on the assessee a notice requiring him to appear, on a date to be specified therein, in his office or to be produced or cause to be produced any evidence or material on which he may rely in support of the contents of his return. After considering such evidence, as led by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 and not wee versa, that is, such reasons to believe should exist prior to the issuance of notice regarding escapement of income. It is impermissible to make fishing enquiries to determine the income that has escaped assessment in the course of proceedings pursuant to notice under s. 148. 8. It is trite law that the "reasons to believe" cannot be substituted with the "reasons to suspect" Notice can be issued only on the ground of "reasons to believe". The belief contemplated in this section is the belief of a prudent man and such belief must be bona fide and not mala fide. Similarly, a doubt or suspicion in the mind of the AO cannot empower him to initiate proceedings under s. 147. In the case of Bir Arjna Enterprises (P) Ltd. vs. ITO (1994) 116 CTR (J K) 628 : (1994) 204 ITR 258 (J K), it was held that the powers under s 147 are though wide but not plenary and existence of reason based upon some material prima facie showing escapement of assessment is a condition precedent for exercise of jurisdiction under s. 147 It is further relevant that the reasons in the possession of the AO should have direct nexus with the formation of belief that the income chargeable to tax has esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d disturbing the finality to the proceedings, without complying with the necessary conditions as laid down in the relevant sections. 10. Adverting to the facts of the present case, we find that there was no material, direct or indirect, available with the AO, which could show that the receipt of donation amounting to Rs. 30,16,598 was without any specific direction of corpus fund. The assessee had shown the receipts as having been received in the corpus fund coupled with the report of the auditor in this regard. The AO had not enquired into the nature of the contributions before issuance of notice under s. 148. Such an inference was not even possible from the assessments for the earlier years, as he had not given such finding while completing the assessment for the immediately two preceding years. In view of these facts, we feel no hesitation in holding that the first part of the reasons recorded by the AO was not relevant in issuing notice under s. 148. 11. Now, we turn to the second part of the reasons assigned by the AO that as the trust was granted registration w.e.f. 14th Aug., 1997, the donations received prior to the date of registration amounting to Rs. 12,11,100 were l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trust or institution from contributions, would be available to the assessee from 1st April, 1997. Therefore, the donations received by the trust after 1st April, 1997, and before 14th Aug., 1997, (the date from which registration was granted by the CIT), would also be exempt from taxation in terms of ss. 11 and 12. Hence, the second reason recorded by the AO for issuing notice under s. 148 that the donations during the interregnum were liable to tax, also does not have legal legs to stand on. 12. It shows that both the reasons assigned by the AO before invoking the provisions of s. 147 were in total defiance of the legal provisions in this regard and hence fail to withstand the judicial scrutiny. As the very foundation for making the present assessment is found to be unsustainable in terms of issuance of an invalid notice under s. 148, naturally, all the proceedings flowing therefrom are liable to be quashed. We order accordingly. This legal ground raised by the assessee is accepted and the assessment order is set aside. 13. In view of our finding on the first legal ground, we do not think it expedient to deal with the other grounds on merits. For this proposition, we draw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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