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TMI Blog2016 (3) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order without issuing the mandatory notice 143(2) of the Income Tax Act, 1961. 3. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in framing the assessment in violation of principles of natural justice in as much as passing the impugned order by recording incorrect facts and findings. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in bringing to tax alleged capital gain in respect of sale of agricultural land. 5. That in any case and in any view of the matter, impugned disallowance and impugned assessment order are bad in law, illegal, unjustified, contrary to facts & law and based upon incorrect facts and finding, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed." 2. The brief fact of the case is that the assessee is an individual and she filed return of income for Assessment Year 2006-07 on 30.03.2007 u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Commissioner of Income-tax (Appeals) upheld the action of the reopening of the assessment and dismissed the appeal of the assessee on that ground. On the merit also the learned Commissioner of Income-tax (Appeals) of the view that the assessee is related on the amount revenue records and no agricultural income has been shown during the period of holding of this land for 10 months. He also held that as no agricultural activities are carried on by the assessee as per sought enquiry and the sale of the land as in development industrial hub he held that the main land sold is not an agricultural land and hence the profit of sale of this land is chargeable to tax as short term capital gains. Considering the main land as capital asset. 5. Aggrieved by this the assessee is in appeal before us. 6. The assessee has raised the following arguments:- a. There is no material come to possession of the AO after filing of return of income based on which the reopening has been made. For this he took us to the return of income and along with computation of total income and reasons recorded by the AO. He stated that for reopening even in case of assessment u/s 143(1) or merely on proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only subject to fulfilment of the conditions precedent, which include the condition that the Assessing Officer must have "reason to believe" that income chargeable to tax has escaped assessment, is sound. It is true that no assessment order is passed when the return is merely processed under section 143(1) and an intimation to that effect is sent to the assessee. However, it has been recognised by the Supreme Court itself in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC), a decision that was relied upon by the Revenue, that even where proceedings under section 147 are sought to be taken with reference to an intimation framed earlier under section 143(1), the ingredients of section 147 have to be fulfilled ; the ingredient is that there should exist "reason to believe" that income chargeable to tax has escaped assessment. This judgment, contrary to what the Revenue would have us believe, does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under section 143(1) at his whims and caprice ; he must have reason to believe within the meaning of the section. It would be appropriate to reproduce the following portions fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations extracted above reiterate that the intimation can be disturbed by initiating reassessment proceedings only "so long as the ingredients of section 147 are fulfilled" and with reference to section 143(1) vis-a-vis section 147, the only ingredient is that there should be reason to believe that income chargeable to tax has escaped assessment and it does not matter that there has been no failure or omission on the part of the assessee to disclose full and true particulars at the time of the original assessment. There is nothing in the language of section 147 to unshackle the Assessing Officer from the need to show "reason to believe". The fact that the intimation issued under section 143(1) cannot be equated to an "assessment", a position which hasbeen elaborated by the Supreme Court in the judgment cited above, cannot, in our opinion, lead to the conclusion that the requirements of section 147 can be dispensed with when the finality of an intimation under section 143(1) is sought to be disturbed. We are at pains to point out this position, which seems fairly obvious to us, because of the argument frequently advanced before us on behalf of the Revenue in other cases as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows : '7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression "reason to believe" in section 147. A number of representations were received against the omission of the words "reason to believe" from section 147 and their substitution by the "opinion" of the Assessing Officer. It was pointed out that the meaning of the expression, "reason to believe" had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression "has reason to believe" in place of the words "for reasons to be recorded by him in writing, is of the opinion". Other provisions of the new section 147, however, remain the same'." 11. It would be appropriate at this juncture to take a brief survey of a few decisions of the Supreme Court which have infused meaning and content to the expression "reason to believe" appearing in section 147. 12. A Constitution Bench of the Supreme Court in A. N. LakshmanShenoy v. ITO [1958] 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the reasons themselves cannot be stated to be beliefs, which would be an obvious self-contradiction. 14. The entire law as to what would constitute "reason to believe" was summed up by H. R. Khanna J., speaking for the Supreme Court in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The following principles were laid down : " (a) The powers of the Assessing Officer to reopen an assessment, though wide, are not plenary. (b) The words of the statute are 'reason to believe' and not 'reason to suspect'. (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority ; the reason be held in good faith and cannot merely be a pretence. (e) The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in section 147 ; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore, it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-avis section 143(1) and section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it isapplied to the reopening of an assessment earlier made under section 143(3) cannot apply where only an intimation was issued earlier under section 143(1). It would in effect place an assessee in whose case the return was processed under section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of the assessee ; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prepared to concede that position. It is nobody's case that an "intimation" cannot be subjected to section 147 proceedings ; all that is contended by the assessee, and quite rightly, is that if the Revenue wants to invoke section 147 it should play by the rules of that section and cannot bog down. In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements. 18. In the present case, the reasons d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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