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TMI Blog2014 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... essment has been provided u/s 147 of the Act - With effect from 1st April, 1989, Section 147 underwent an amendment to the effect that if the AO had "reasons to believe" that any income chargeable to tax had escaped assessment, the AO could assess or reassess such income - "Reasons to believe" has been a subject matter of interpretation by various Courts in various decisions – relying upon Indra Prastha Chemicals Pvt. Ltd. and others Vs. Commissioner of Income Tax and another [2004 (8) TMI 86 - ALLAHABAD High Court] - The reason to believe does not mean purely subjective satisfaction on the part of the AO. It means that the belief must be held in good faith - the formation of the opinion and belief is a condition precedent without which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of unexplained investment in shares ₹ 3,10,500/- (2) On account of dividend income ₹ 9,140/- (3) On account of profit on shares ₹ 9,810/- The assessee, being aggrieved, filed an appeal under Section 148 of the Act. The appellate authority dismissed the appeal questioning the validity of the issuance of notice under Section 148 of the Act. The appellate authority dismissed the appeal holding that the proceedings under Section 147 of the Act were validly initiated by the Assessing Officer and that the notice under Section 148 was properly served on the assessee. The assessee, being aggrieved, preferred a Second Appeal before the Tribunal, who by its order allowed the appeal and quashed the re-assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate whether the assessee has filed return for the assessment year 1995-96. The ACIT has intimated that there is no control register and it is very difficult to ascertain as to whether the return of income has been filed or not. The assessee has not disclosed the investments as reported by the DDIT (Inv.) Unit II (i) Kanpur. We have therefore, reason to believe that the assessee has not truly and fully disclosed the particulars of income and investments in properties, cars and in bank deposits. It is estimated that the assessee has escaped assessments exceeding ₹ 1.0 lac for which provisions of section 147 of the Act are clearly attracted for which notice u/s 148 is required to be issued. From the aforesaid, it is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings for the assessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The question whether the Assessing Officer had reasons to believe is not a question of limitation only but is a question of jurisdiction, a vital thing, which can always be investigated by the Court in an application under Article 226 of the Constitution as held in Daulatram Rawatmal v. ITO (1960) 38 JTR 301 (Cal), Jamna Lal Kabra v. ITO (1968) 69 ITR 461 (All), Calcutta Discount Co. Ltd. v. ITO (1961) 41 ITR 191 (SC), CM. Rajgharia v. ITO (1975) 98 ITR 486 (Pat) and Madhya Pradesh Industries Ltd. v. ITO (1965) 57 ITR 637 (SC). The words has reason to believe are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction to initiate proceedings under Section 147. The fulfilment of this condition is not a mere formality but it is mandatory. The failure to fulfil that condition would vitiate the entire proceedings as held by the apex Court in the case of Johri Lal (HUF) v. CIT, (1973) 88 ITR 439 (SC) and Sheo Nath Singh v. AAC of I.T., (1971) 82 ITR 147 (SC). The reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of his belief that there has been escapement of income of the assessee from assessment in the particular yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in good faith. Further, the formation of the opinion and belief is a condition precedent without which the Assessing Officer will not have jurisdiction to initiate proceedings for reassessment. The reasons for the formation of the belief must have a rational connection, which is germane to the issue and must have a direct nexus. Normally, there must be some fresh material, which would give rise to the formation of the belief that income had escaped assessment and, therefore, the fresh material, which comes to the notice of the Assessing Officer has to have a direct nexus or a live link with the formation of the belief that there has been an escapement of income. The foundational requirement for reopening the assessment is, that there must ..... X X X X Extracts X X X X X X X X Extracts X X X X
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