Notice under s.148 held invalid where AO lacked genuine belief income escaped due to alleged error under s.80HHC

HC held the notice issued under s.148 invalid: the AO never genuinely held the belief that income escaped assessment on account of erroneous computation under s.80HHC, and the reasons recorded were a pretence. The court found the reassessment proceeded from mere change of opinion and routine Board instructions to initiate remedial action on audit objections, not from independent satisfaction by the AO with jurisdiction to issue the notice. Such procedural façade cannot validate reassessment; the petition was allowed.

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Issues Involved:
1. Legality of notice issued u/s 148 for the assessment year 1993-94.
2. Validity of reopening assessment based on audit objections.
3. Requirement of Assessing Officer's independent belief for reopening assessment.

Summary:

1. Legality of Notice Issued u/s 148:
The petitioner challenged the notice issued u/s 148 on February 18, 1997, for the assessment year 1993-94, arguing that it was based on a mere change of opinion and reappreciation of existing evidence. The court noted that the reasons for the notice, disclosed to the assessee by letter dated April 16, 1997, stated that the deduction u/s 80HHC was wrongly claimed due to the exclusion of Rs. 142.62 crores from the export turnover of the marine division.

2. Validity of Reopening Assessment Based on Audit Objections:
The petitioner contended that the reopening was based on remarks from the Accountant General (Audit Wing), which cannot be regarded as valid information for reopening an assessment. The court examined the correspondence and found that the Assessing Officer did not independently believe that income had escaped assessment but acted on instructions from superior officers and audit objections.

3. Requirement of Assessing Officer's Independent Belief:
The court emphasized that the Assessing Officer must independently determine the effect of the law and form a belief that income has escaped assessment. The court referred to the Supreme Court's decision in Indian and Eastern Newspaper Society v. CIT, which stated that the audit party's opinion cannot substitute the Assessing Officer's belief. The court found that the Assessing Officer consistently maintained that the original assessment was correct and only suggested remedial actions if his view was not accepted by superiors. This indicated that the belief was not genuinely held by the Assessing Officer but was a mere pretence to validate the exercise of power.

Conclusion:
The court concluded that the notice issued u/s 148 was invalid as it was based on a belief that was not genuinely held by the Assessing Officer. The petition was allowed, and the impugned notice dated February 18, 1997, was quashed. Rule was made absolute with no order as to costs.

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