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TMI Blog2004 (7) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee challenged the initiation of re-assessment proceedings as well as the jurisdiction of the Assessing Officer to issue notice under section 148. He also challenged the assessment of the income under the head other sources on merit. Various objections were taken on both the aspects of the matter, which were all rejected by the CIT(A). The reasons given by him are not reproduced here for the sake of brevity. Suffice to say that the appeal was dismissed. 4. The assessee is in further appeal challenging the jurisdiction of the Assessing Officer to re-open the assessment under section 148 as well as the addition of ₹ 2,21,200 on merits. The challenge to the reassessment proceedings is threefold: (a)The Assessing Officer has not obtained the approval of the JCIT before issuing notice under section 148 and, therefore, the reassessment proceedings are null and void. (b)There was no application of mind by the Assessing Officer before recording reasons for reopening and he has simply acted on the directions of the CIT. (c)The information in the possession of the Assessing Officer (the statement of Anand Prakash) is vague and so totally irrelevant. Another contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a copy of the relevant papers which has been done. He also pointed out from the record that the Assessing Officer has also issued notice under section 143(2) on 13-11-2002 which was served on the assessee on the same day. At my instance, he has also filed the copies of the notice containing the acknowledgement. He also drew my attention to the statement of Anand Prakash and submitted that the statement fully justify the re-opening of the assessment by notice under section 148. Anand Prakash stated that he simply received the cash from the assessee and put it in the bank so as to make it appearing as if it is the agricultural income of the assessee. The statement is clear and does not suffer from vagueness. Therefore, the reasons recorded on the basis of the statement account also do not suffer from vagueness or irrelevance. It is, therefore, contended that the issue of notice under section 148 is valid and cannot be invalidated. 7. As regards the merits, the Ld. DR drew my attention to pages 15, 31 32 of the paper book to point out that the assessee all of a sudden indulged in agricultural operation and earned huge income therefore, and all of a sudden stopped the operation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. DR has not addressed any arguments on the question of the effect of not allowing the assessee an opportunity of cross-examine Anand Prakash. He, therefore, submitted that at any rate the addition should be deleted on this ground along even if the issue of notice is upheld. 10. Similar arguments were advanced in the case of Satish Gupta. 11. On a careful consideration of the matter, I am of the view that the assessee has to succeed on both the counts. As regards the validity of the notice issued under section 148, I agree with the contention of the ld. Representative for the assessee that the notice is based on the vague statement of Anand Prakash and there is no live link or nexus between the statement and the belief that the income chargeable to tax has escaped assessment. Even under the amended section 147, the Assessing Officer is required to have the reason to believe that any income chargeable to tax has escaped assessment. In the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 ftn1Satish Gupta v ITO.htm a Full Bench of the Hon ble Delhi High Court has held that even after the amendment made to section 147 w.e.f. 1-4-1989, the condition that the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, I am doing the job of Accountant (Munimi). My income is ₹ 25,000 to ₹ 30,000 per annum. Q.2. Do you know Sh. Ram Bilas? Ans. Yes, I know Ram Bilas S/o Late Sh. Jagdish Rai very well. He gave introduction at the time of opening my bank A/c. No. 3582. Today also he called me in his office. Right now Mr. Ram Bilas is sitting with us. Q.3. I am showing you your bank A/c. No. 3582 with Punjab Sind Bank, Naya Bazar Delhi 6, in which cash amount has been deposited many times. Please tell us about the source of this cash. Ans. This cash had been received from different parties, which was deposited by us in Bank and the same funds, were paid to the same parties through cheques or draft. I want to clarify that my concern has not done any purchase or sale of any crop. This bank account was operated for nearly one year. Whatever funds were routed through this bank account were basically utilized for accommodation entry. There is no genuine transaction in this firm. I do not remember that which parties have taken accommodation entries from this bank A/c. of my concern. Sd/- Anand Prakash 7-3-2002 I have read this statement and found it to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be beliefs held by the Assessing Officer, which would be a contradiction in terms. It was held that there should be material or fact before the Assessing Officer on the basis of which he could have formed the belief of the nature contemplated by section 147. Otherwise, the notice is liable to quashed. Further, it was held the word reason to believe suggests that the belief must be that of an honest and reasonable person based on reasonable grounds. He may act on direct or circumstantial evidence, but not on mere suspicion, gossip or rumour. In ITO v. Lakmani Mewal Das [1976] 103 ITR 437 it was again held by the Supreme Court that the reasons for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. There must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of the belief that there was escapement of income. The reason must be held in good faith. It cannot be merely a pretence. 14. The formation of the belief by the Assessing Officer in the present case suffers from a basic infirmity, namely, that it has no nexus or live link with the material c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , despite having asked for the cross-examination. The assessee s letter dated 21-3-2003 addressed to the Assessing Officer (pages 38 and 39 of the paper) contains a request to the Assessing Officer to give an opportunity to cross examine the person, who has given statement. The reference is to the statement of Anand Prakash. At pages 79-81 of the paper book, I find the statement of the assessee recorded under section 131 on 31-3-2003. In answer to question No. 6, in which the Assessing Officer has put it to the assessee that Anand Prakash had admitted that he used to receive cash from the parties and issue cheques subsequently, the assessee has stated that he contradicts the statement of Anand Prakash, that he has sold agricultural proceeds and a copy of the bill issued by him has already been furnished to the Assessing Officer. The assessee further requested specifically to the Assessing Officer to allow him to cross-examine Anand Prakash. Despite these two requests, Anand Prakash was not allowed to be cross-examined by the assessee, a position which is not disputed before me by the department. The entire addition is based on the statement of Anand Prakash. As rightly pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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