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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 ..... hares Rs. 3,10,500/- (2) On account of dividend income Rs. 9,140/- (3) On account of profit on shares Rs. 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 order made by the Assessing Officer. The Tribunal held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-96. 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 Rs. 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 reasons recorded by the Assessing Officer mentions about the undisclosed inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 stronger than the words "is satisfied". The belief entertained by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 year. It is not any and every material, howsoever vague and indefinite or distant, remote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be a reason to believe that income had escaped assessment. There has to be some tangible m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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