Reopening of income tax assessment under section 147(a): procedural recording of reasons is essential before reassessment can be validly invoked.

Reopening an income-tax assessment requires satisfaction of two condition precedent elements: a belief that income has escaped assessment and recording relevant reasons at the initiation stage; failure to satisfy either deprives the assessing officer of jurisdiction and renders reassessment invalid. Procedural compliance in recording reasons is integral to invoking jurisdiction under the provision; absence of contemporaneous materials evidencing belief means subsequent reference to belief in the reassessment order cannot cure lack of jurisdiction. Although non-disclosure of income was found, the statutory prerequisite of entertaining a belief at the initiation stage was not met, therefore the reassessment was invalidated.

---

---

Issues: Whether the reopening and reassessment of the assessment year 1955-56 under section 147(a) of the Income-tax Act, 1961 (by notice under section 148) was legal and within the jurisdiction of the Income-tax Officer.

Analysis: The Court examined (i) whether there was non-disclosure by the assessee of material facts resulting in escapement of income for the assessment year 1955-56, and (ii) whether, independent of non-disclosure, the Income-tax Officer had recorded reasons at the stage of initiation (as required by section 148(2) and sanction procedure under section 151) sufficient to show that he entertained a belief that income had escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The Court held that the assessee failed to include the sum of Rs. 36,000 in her return for 1955-56 despite its accrual and hence there was non-disclosure and escapement of income. However, the Court also held that the only recorded reason at the initiation stage was the Commissioner's direction, and there was no contemporaneous recording showing that the Income-tax Officer entertained the requisite belief under section 147(a). The statutory requirement to record reasons relevant to the matters set out in section 147(a) was treated as a condition precedent to jurisdiction; absence of such relevant recorded reasons rendered the initiation of proceedings and consequent reassessment without jurisdiction.

Conclusion: The reassessment under section 147(a) for the assessment year 1955-56 is without jurisdiction and therefore invalid; the revenue's challenge fails and the decision is in favour of the assessee.

---