TaxTMI 
TaxTMI 
2002 (10) TMI 86
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....ent of assessable income, various other documents and annexures, including the statutory tax audit report and the list of loans taken during the relevant previous year. One of the loans, for Rs.7,40,000, raised by the petitioner was from a concern Visa Fincap Limited, New Delhi, According to the petitioner, the loan was taken on two different dates through account payee cheques; the sum of Rs. 33,860 was paid/credited as interest on the said amount during the relevant period; tax was deducted at source on the said amount which was paid to the credit of the Central Government; and the loan was repaid in April, 1997, by account payee cheque. It seems that since notice under section 143(2) of the Act was not received by the petitioner within 12 months from the date of filing of the return, it was taken that the return had been accepted. On May 5, 2002, the petitioner received the impugned notice under section 148 of the Act. Pursuant thereto, the petitioner filed its return declaring the same income which had been declared in the original return filed under section 139(1) of the Act. Vide letter dated June 18, 2002, the petitioner requested the Assessing Officer to supply a copy of....
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....awn against the petitioner towards the loan transaction and, therefore, no "reasons to believe" existed with the Assessing Officer to initiate proceedings under section 147/148 of the Act, the present petition was filed for quashing of notice dated April 30, 2002, We have heard Mr. M. S. Syali, learned senior counsel for the petitioner, and Mr. R. D. Jolly, learned senior standing counsel for the Revenue, who has put in appearance on advance notice. The record of the Assessing Officer has also been produced before us by Mr. Jolly and we have perused the same. The main thrust of Mr. Syali's argument is that the foundation for the belief of the Assessing Officer that the petitioner's income has escaped assessment is based on the statement of V. K. Jain, wherein he is alleged to have stated that the loan given by Visa Fincap to the petitioner is bogus, whereas the copy of the statement of V. K. Jain, supplied to the petitioner by the Assessing Officer, does not show any such confession. Learned counsel would submit that the Assessing Officer having solely relied on the said statement for his requisite belief, the entire proceedings for reopening the assessment have no legal foun....
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....r the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-built safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment. In Bawa Abhai Singh v. Dy. CIT [2002] 253 ITR 83, a Division Bench of this court, speaking through Chief Justice Arijit Pasayat (as his Lordship then was), has said that the crucial expression "reason to believe" predicates that the Assessing Officer must hold a belief ... by the existence of reasons for holding such a belief. In other words, it contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons, inducing the belief. Such a belief may not be based merely on reasons but it must be founded on information. In Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC), their Lord ships of the Supreme Court, inter alia, observed that the expression "reason to believe" is stronger than the expression "is satisfied". The belief entertained by the Assessing Officer should not be irrational or arbitrary. Alternatively put....
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....ed is such which shows lack of application of mind of the appropriate authority. The reason to believe must be tangible in law and if the information or the reason has no nexus with the belief or there is no material or tangible information for the formation of the belief, then, in such a case, action taken under section 132 would be regarded as bad in law." It is, thus, trite, that when a challenge is made to the action under section 147 of the Act what the court is required to examine is whether some material exists on record for the Assessing Officer to form the requisite belief and the reasons for the belief have a rational nexus or a relevant bearing to the formation of such belief and are not extraneous or irrelevant for the purpose of the said section. But the sufficiency of the grounds, which induced the Assessing Officer to act under the said section is not a justiciable issue. In the instant case, as noticed above, the respondents have produced before us the original file containing the satisfaction note of the Assessing Officer as also a copy of the statement of V. K. Jain. Copy of the statement supplied to the petitioner is the same as is available on the file of ....