TaxTMI 
TaxTMI 
2005 (9) TMI 284
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.... 22,394. The total purchases during the year was thus far Rs. 29,27,894 and sales at Rs. 31,85,694. During the accounting year ended on 31st March, 1998 the assessee shifted his nativity to Ahmedabad. A new office has been opened at Ahmedabad. The investment made in the opening of new office has not been explained. In the new set-up of business consisting of the offices of the assessee at Ahmedabad, Jaipur and Raipur, the total purchases are as given hereunder: Total purchases 67,02,38,688 Total sales 67,17,42,311 That means the purchases and sales have increased by more than 20 times. The investment in embarking upon such a quantum jump in business is naturally to be investigated as it has not been explained. The investment made in the opening of new office with equipments has also not been explained and should be investigated. The balance sheet of the assessee which shows the flow of fund show that the assessee did not introduce a single paise as additional capital. On the contrary he withdrew Rs. 4,26,568 out of the opening capital of the concern. Thus the funds available with the assessee for investment in the business was only Rs. 4,62,000 Rs. 4,26,000 = Rs. ....
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....t this rate the GP works out to Rs. 50,38,067. The resultant addition on this account would be (Rs. 50,38,067 - Rs. 24,22,805) Rs. 26,15,262. 4. The learned Departmental Representative painted out that the assessee being an enlightened taxpayer for reasons best known to him failed to produce the books of accounts in spite of the fact that the books had been released by the DDIT, Raipur almost 10 months ago when the AO requisitioned the same. He pointed out that the learned CIT(A) annulled the order of the AO by holding that the reasons recorded by the AO were not satisfactory on the basis of which an opinion could be formed that income had escaped assessment. He vehemently argued that what further requirement was to be considered insofar as the AO had to complete the assessment under s. 144/147 which in itself speaks the non-co-operation of the assessee for proceedings under s. 147. He, therefore, prayed that the order of the learned CIT(A) be set aside and that of the AO be restored. 5. The learned counsel for the assessee submitted that the reason recorded by the AO did not justify the formation of belief that income had escaped assessment. The return filed by the assessee was ....
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....requirement of law to make further disclosure in the return. As regards creditors which represented the purchases were also mentioned in balance sheet and there is no further requirement of law to make any further disclosure. The purchases and sales were duly supported by the bills and vouchers, the stock register was maintained. There is no material with the AO to treat the purchases or sales as bogus. There is no failure on the part of the assessee to disclose any information relating to the items mentioned in the reasons recorded by the AO. As such, in law there is no such requirement to disclose further details in respect of cash credits or sundry creditors which were otherwise certified by the auditor in balance sheet filed along with return. All the above facts reveal that AO simply wanted to investigate the matter and there is no information on the basis of which there could be a reason to believe that income has escaped assessment. The learned counsel further submitted that reasons recorded by the AO clearly indicates that under the guise of reopening of completed assessment, the AO intended to scrutinize the return which was otherwise time-barred by virtue of provisions o....
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....holds. the provisions relating to regular assessments to be applicable to assessment proceedings under s. 147 as well. Having failed to issue notice within the time-limit the return filed by the assessee was deemed to be accepted and the AO lost jurisdiction to make reassessment as were also considered in the case laws cited such as in the case of Vipan Khanna vs. CIT (2002) 175 CTR (P&H) 335 : (2002) 255 ITR 220 (P&H) by the Hon'ble Punjab & Haryana High Court, it was held that seeking a general information to verify the return under the guise of proceedings under s. 147 was not permissible. Such general enquiry could only be made by issue of notice under s. 142(2) within the stipulated period which in the assessee's case had already expired. The amendment made in ss. 143 and 147 of the Act w.e.f. 1st April, 1989 do not in any manner negate this proposition of law as enunciated by the Hon'ble apex Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC). He also supplemented his arguments by placing reliance on the decision of ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220 :(1976) 103 ITR 437 (SC) wherein the Ho....
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.... s. 143(1)(a). In the case of Vishnu Borewell vs. ITO & Anr. (2002) 178 CTR (Ori) 409 : (2002) 257 ITR 512 (Ori) : (2002) 125 Taxman 996 (Ori) it was observed by Orissa High Court that before the AO assumes jurisdiction to issue notice, he must have reason to believe that the income of the assessee has escaped assessment. The expression in s. 147 'reason to believe' is stronger than the words is satisfied'. The belief entertained by the AO should not be arbitrary or irrational. It must be reasonable. In other words, it must be based on reasons which are relevant and material. If there is no rational and intelligible nexus between the reasons and belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the inevitable conclusion is that the AO could not have reasons to believe that any part of the income of the assessee had escaped assessment. In the case of Anant Kumar Saharia vs. CIT (1999) 151 CTR (Gau) 556 : (1998) 232 ITR 533 (Gau) it was observed by Gauhati High Court that the power conferred under s. 147 of the IT Act, 1961, is very wide. But at the same time it cannot be stated to be a plenary power. The ....
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....se of reason to believe. To put otherwise, the information which formed the basis for the 'reason to believe' for the AO lacked specific, relevant and reliable criteria which material are liable to be rejected only on the ground that they may be reason to escape (suspect) but not reasons to believe as was not considered by the Hon'ble apex Court in the case of Phool Chand Bajrang Lal & Anr. vs. ITO & Anr. (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456 (SC). It was not the case of the AO that the return indicated possible escapement of income and he was not Sure about it to initiate proceedings under s. 147. When proceedings under s. 147 are initiated, the proceedings are open only qua items of under-assessment. The finality of assessment proceedings on either (other) issues remains undisturbed. It makes no difference whether the assessment proceedings have become final on account of framing of an assessment under s. 143(1) of the Act or on account of non-issue of notice under s. 143(2) of the Act within the stipulated period. Therefore, it was the AO's loud thinking by reasoning his suspicion to verify the very return which enquiry could only be made by him by issuing....