1998 (5) TMI 21 - HC - Income Tax

Reassessment reopening on locker search revealing cash and jewellery: s.148 notice upheld despite 'roving enquiry' challenge dismissed

The dominant issue was whether reassessment reopening under s.147/s.148 was vitiated for lack of 'reason to believe' and amounted to a roving enquiry. The ... Validity of the reopening of the assessment - reasonable belief - escaped assessment within the meaning of section 147 - requested for supply of the reasons on the basis of which the notice under section 148 of the Act was issued - HELD THAT:- The sufficiency of the material cannot be gone into by this court in exercise of the writ jurisdiction. The material cannot be held to be irrelevant or vague nor it can be said that the material has no rational connection or live link for formation of the opinion sought to be questioned by the petitioner. Further, it appears from the communication dated January 28, 1993, sent by the Assistant Commissioner of Income-tax, Investigation Circle 19(1) to the Income-tax Officer, Ward 13(5), that on May 30, 1990, a search was carried out at the locker held in the name of the petitioner and his wife in which the jewellery and the cash as stated in the letter were found. The cash was seized and was surrendered by the wife of the assessee. The jewellery was released to her. On the facts of the case before us neither can it be held that there was no material for formation of requisite belief for issue of notice under section 148 of the Act nor is it possible to hold that the Assessing Officer did not form the requisite belief about the involvement of the assessee and he was only making roving and fishing enquiries to find out whether the assessee was involved or not. At this stage, the question is not whether what is stated in the letter dated February 17, 1993, or the conclusion drawn from the appraisal report are true or not. The only question at this stage is about the relevancy of the material for formation of the requisite belief. It cannot be held that the letter and the appraisal report do not constitute the relevant material. It is a different matter that during enquiry the petitioner may be able to establish that the conclusions are not correct. In our view, there is no illegality in the issue of the impugned notice. For the aforesaid reasons, the writ petition is dismissed. Issues Involved:1. Validity of the notice u/s 148 of the Income-tax Act, 1961.2. Existence of material for forming a reasonable belief of income escaping assessment.3. Allegation of roving and fishing enquiries by the Assessing Officer.Summary:1. Validity of the notice u/s 148 of the Income-tax Act, 1961:The petitioner challenged the notice dated May 3, 1993, issued u/s 148 for the assessment year 1990-91, claiming it was without jurisdiction as the pre-conditions for exercising power did not exist. The respondents contended that there was sufficient material for the Assessing Officer to form a reasonable belief that the income had escaped assessment.2. Existence of material for forming a reasonable belief of income escaping assessment:The reasons for reopening the assessment included a letter dated February 17, 1993, from the ACIT, Investigation Circle 19(1), New Delhi, indicating that the petitioner was earning income in benami names and had received money totaling Rs. 15 crores through bank drafts from four Sikkim companies. The Assessing Officer had perused the appraisal report and relevant annexures before issuing the notice. The court found that the material, including the letter and appraisal report, constituted relevant material for forming the requisite belief.3. Allegation of roving and fishing enquiries by the Assessing Officer:The petitioner argued that the Assessing Officer was making roving and fishing enquiries, which is not permissible. However, the court held that the material relied upon was not irrelevant or vague and had a rational connection for forming the opinion. The court referenced the Supreme Court decisions in ITO v. Purushottam Das Bangur and ITO v. Selected Dalurband Coal Co. Pvt. Ltd., which supported the view that the information from the letter and appraisal report could be relied upon for forming a reasonable belief.Conclusion:The court dismissed the writ petition, holding that there was no illegality in the issue of the impugned notice and that the material available was sufficient for forming a reasonable belief of income escaping assessment. The parties were left to bear their own costs.