AI Drafter 
TaxTMI 
TaxTMI 
2016 (6) TMI 1045
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....AO on 26.12.07 at total income of Rs. 609,09,40,080/-. The order passed by the AO was appealed against by the assessee before the CIT (A), which reduced the assessed income to Rs. 587,04,55,500/-. After scrutiny of assessment, it was observed that the assessee has made incorrect claim of additional depreciation on Captive Power Plant (CPP) & Wind Mills. The re-assessment proceedings were initiated by the AO by issuing notice under Section 148 of the Income Tax Act, 1961 (for short "the Act"). The AO framed the assessment order under Section 143(3) read with Section 148 of the Act and disallowed the additional depreciation on CPP claimed by the assessee to the tune of Rs. 30,09,36,309/- and accordingly assessed the taxable income at Rs. 617,13,91,709/-. Aggrieved thereby, the assessee preferred an appeal before the CIT (A), Udaipur. It was contended on behalf of the assessee that the assessments completed after scrutiny assessment under Section 143(3), cannot be reopened under Section 147 merely on the basis of change of opinion. The CIT(A) arrived at the finding that the re-assessment proceeding initiated by the AO for the reasons recorded is valid. However, after due consideration....
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....of Section 148, for formation of the belief that any income of the assessee chargeable to tax for the relevant assessment year has escaped assessment. As laid down by the Hon'ble Supreme Court, the belief entertained by the Assessing Officer must not be arbitrary or irrational, it must be reasonable and based on material on record. The assumption of jurisdiction by the Assessing Officer under the provisions of the Act pre-supposes due application of mind by the Assessing Officer on the material on record and formation of the belief by the Assessing Officer that the income has escaped assessment cannot be based on whims and fancy, there must exists rational and intelligible nexus between the reasons and the belief. 6. In the matter of "Calcutta Discount Co. Ltd. vs. Income-tax Officer, Companies District I, Calcutta", (1961)41 I.T.R.191 (SC), the Hon'ble Supreme Court while dealing with the ambit and scope of the provisions of Section 34 of the Indian Income Tax, 1922, which were similar to the provisions of Section 147 of the Act of 1961 explained the purports of Section 34 ,as under:- "To confer jurisdiction under this section to issue notice in respect of assessment....
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....e-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. Again the expression "reason to believe" in section 34 does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it differently, it is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law." (Emphasis supplied) 8. In the matter of 'Income Tax Officer, I Ward Distt VI, Calcutta Vs. Lakhmani Mewal Das', (1976) 103 ITR 437, the Hon'ble Supreme Court has observed as under : "Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence amount to disclosure contemplated by law. The ....
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....e material coming to the notice of the Income -tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts." (emphasis supplied) 9. In the matter of 'M/s. S.Ganga Saran & Sons (Pvt.) Ltd., Calcutta vs. Income Tax Officer & Ors.', (1981) 3 SCC, 143, the Hon'ble Supreme Court held as under:- "6. It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under Section 147(a). First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under Section 147 (a) are "has reason to believe" and these words are stronger....
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....ections 147 and 148 is thus not an unbridled one. It is hedged in with several safeguards conceived in the interest of eliminating room for abuse of this power by the Assessing Officers. The idea was to save the assessees from harassment resulting from mechanical reopening of assessments but this protection avails only to those assessees who disclose all material facts truly and fully. Every disclosure is not and cannot be treated to be true and full disclosure. A disclosure may be a false one or a true one. It may be a full disclosure or it may not be. A partial disclosure may very often be a misleading one. What is required is a full and true disclosure of all material facts necessary for making assessment for that year. All the requirements stipulated by section 147 must be given due and equal weight. It was further observed that : "Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessee to establish that, in fact there existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited ext....