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TMI Blog2018 (1) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was not subjected to scrutiny assessment, the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational or there exists no rational and intelligible nexus between the reasons and the belief. It is true that the reasons recorded or the material available on record must have nexus to the subjective opinion formed by the AO regarding the escapement of the income but then, while recording the reasons for belief formed, the AO is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the AO had cause or justification to know or suppose that income had escaped assessment [see Rajesh Jhaveri Stock Brockers Pvt. Limited’s case (2007 (5) TMI 197 - SUPREME Court )]. It is also well settled the sufficiency and adequacy of the reasons which have led to formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. - Decided against assessee. - D.B. Spl. Appl. Writ No. 1102 / 2017 - - - Dated:- 18-12-2017 - MR. SANGEET LO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 259 ITR 19(SC), contended that it was bounden duty of the AO to dispose of the objections filed by the appellant in response to the notice under Section 148 of the Act before proceeding with the assessment, by a speaking order. Learned counsel submitted that a bare perusal of order makes it clear that none of the objections raised have been dealt with by the AO. Learned counsel submitted that the documents forming basis for initiating re-assessment proceedings were not even supplied to the appellant and thus, no effective opportunity to file objections to the notice issued was extended by the AO to the appellant. It is submitted that by way of objections raised, the appellant had questioned assumption of jurisdiction by the AO under Section 147 read with Section 148 of the Act and therefore, the same were required to be dealt with at this stage and the decision thereon cannot be deferred till time assessment order is passed. Learned counsel submitted that a perusal of the reasons recorded reveal that the AO has not spelled out as to how on the basis of the information/material available he has formed the opinion that the income has escaped assessment. Learned counsel submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Single Judge dismissing the writ petition does not warrant any interference in intra court appeal jurisdiction. 5. We have considered the rival submissions and perused the material on record. 6. Indisputably, Section 147 of the Act, an AO is empowered to initiate reassessment proceedings if he has reason to believe that any income of the assessee chargeable to tax has escaped assessment. As per mandate of Section 148, before making assessment, reassessment or recomputation of income chargeable to tax under Section 147, the AO is under an obligation to issue notice to the assessee, after recording the reasons for initiating the reassessment proceedings in terms of sub-section (2) of Section 148, forming basis for the belief that any income of the assessee chargeable to tax for the relevant assessment year has escaped assessment. It is well settled that the belief entertained by the AO must not be arbitrary or irrational, it must be reasonable and based on material on record. The assumption of the jurisdiction by the AO under the Act pre-supposes due application of mind on the material on record and formation of the belief by the AO that the income has escaped assessment ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advice the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed . The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any such escapement was by reason of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. (emphasis supplied) 10. Similar view is taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. Thus, the legislative intent is very clear from the use of the word intimation as substituted for assessment that two different concepts emerged. 13. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1) (a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No.2) Act of 1991 with effect from 1-10-1991, and subsequently with effect from 1-6-1994, by the Finance Act 1994, and ultimately omitted with effect from 1-6-1999, by the Explanation as introduced by the Finance (No.2) Act of 1991 an intimation sent to the assessee un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise. ... xxxxx .xxxxxx 19. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact of legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. 20. As observed by the Delhi High Court in Central Provinces Manganese Ore. Co. Ltd. vs. ITO [1991 (191) ITR 662] for initiation of action under section 147(a) (as the provision stood at the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case, it is to be noticed that the return filed by the assessee for the A.Y. 2010-11 disclosing the total income at Nil was processed under Section 143(1) of the Act whereunder the total income or loss is computed after making the permissible adjustments and the return filed by the assessee is not subjected to scrutiny assessment. As laid down by the Supreme Court in Rajesh Jhaveri Brockers Pvt. Limited s case (supra), there being no assessment under Section 143 (1), the question of change of opinion does not arise and therefore, the contention sought to be raised on behalf of the appellant that the re-assessment proceedings are initiated by the AO on mere change of opinion is absolutely devoid of any merit. 13. As per Explanation 2(b) to Section 147, where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed the excessive loss, deduction, allowance or relief in the return, the same is deemed to be case where income chargeable to tax has escaped assessment. 14. In the instant case, a perusal of the reasons recorded by the AO fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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