TaxTMI 
TaxTMI 
2015 (6) TMI 1175
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.... (in short 'the Act'). Subsequently, information was received from ACIT, CC-V, Ludhiana to the effect that his assessee one Shri Jagdish Duggal resident of Sarabha Nagar, Ludhiana had disclosed to have made a gift of Rs. 5 lakhs during the year under consideration in favour of the assessee. In view of the nature of this entry and quantum of gift involved, it appeared to be an entry of accommodation nature. In that view of the matter, the Assessing Officer formed an opinion that assessee's income to the extent of Rs. 5 lakhs representing the value of so called gift has escaped assessment in terms of provisions of section 147 of the Act and notice u/s 148 was issued to the assessee after recording following reasons:- "In this case the assessee has received gift of Rs. 5,00,000/- from Shri Jagdish Duggal, 38-G, Sarabha Nagar, Ludhiana from the Bank Account No. 16503 of Shri Jagdish Duggal maintained with the Canara Bank, Bharat Nagar Chowk, Ludhiana. This information has been received from Assistant Commissioner of Income Tax, Central Circle-V, Ludhiana vide his letter No. ACIT/CC.V/Ldh/24 dated 7.4.2004 addressed to the Addl. Commissioner of Income Tax, Range VII, L....
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....proper. It was also submitted by the assessee before the CIT(A) that Assessing Officer has reopened the case just to investigate further in this matter as he has stated that there is requirement of thorough investigation. The assessee contended that reasons recorded itself were invalid as there was no reasonable belief on the part of the Assessing Officer. It was also stated by the assessee before the CIT(A) that proceedings u/s 148 of the Act cannot be initiated just to make fishing or roving enquiries or to make any further investigation in a case without the Assessing Officer having any firm foundation of belief with regard to the escapement of income. 6. The Ld. CIT(A) did not find any merit in the submissions made on behalf of the assessee and rejected the same for the reasons stated in paras 4.3 of the impugned order. The Ld. CIT(A) observed that the information received by the Assessing Officer constituted reason to believe, prima-facie that income chargeable to tax had escaped assessment in the hands of the assessee. He further observed that the Assessing Officer has initiated the proceedings on the basis of specific information and, therefore, it cannot be said that act....
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....sess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only ....
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....of the above decision of the Hon'ble Supreme Court, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. In the case of ACIT v Rajesh Jhaveri the Hon'ble Supreme Court has observed that word "reason" in the phrase "reason to believe" would mean cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. The Hon'ble Supreme Court further observed that expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. The Hon'ble Supreme Court further observed that whether material would conclusively prove escapement of income is not the concern at this stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of th....
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.... law." 11. In the above case, Investigation Wing provided the information along with cheque number and bank details that the assessee has taken cheque from entry provider and the Hon'ble Delhi High Court held that there is reason to believe prima-facie that income chargeable to tax had escaped assessment in the hands of the assessee. The Hon'ble High Court further held that material before the Assessing Officer was relevant and afforded a live link or nexus to the formation of the prima facie belief that income chargeable to tax had escaped assessment in the assessee's hands 12. In view of the above, I do not see any infirmity in the order of CIT(A) and hold that reopening of the assessment was valid and accordingly I uphold the order of CIT(A) and dismiss ground Nos. 1 & 2 of the appeal. 13. Ground Nos. 3 and 4 of the appeal reads as under:- 3. That without prejudice to the above said grounds of appeal, it is submitted that the Ld. CIT(A) has erred in confirming the addition of Rs. 5 lacs on account of gift received form Shri Jgdish Duggal as income from undisclosed sources. 4. That the Ld. CIT(A) has erred in not admitting the additional evidenc....
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....i Jagdish Duggal for the period 1.4.2001 to 31.3.2002. 17. The Ld. CIT(A) did not admit the additional evidence mainly on the ground that assessee did not avail the opportunity to submit the requisite information before the Assessing Officer and that the assessee's case does not fall in any of the exceptions listed in Rule 46A. He further observed that the assessee's case was fixed by the Assessing Officer on 17.9.2008, 23.9.2008, 29.9.2008 and 3.10.2008. Notice in this regard was duly served on the assessee. However, no one attended. According to CIT(A), four opportunities were given to present the complete case before the Assessing Officer but the Assessing Officer did not refused to any evidence which sought to have been admitted. The CIT(A) also observed that the assessee failed to establish that there was a sufficient cause which prevented her to produce the additional evidence before the Assessing Officer. He accordingly refused to admit the additional evidence adduced by the assessee before him. 18. The observations made by the CIT(A) are factually incorrect. At page 4 of the assessment order , the Assessing Officer has observed as under:-- "In response to thi....
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....ds on which the CIT(A) can allow additional evidence. Sub Rule (2) provides that the CIT(A) while admitting such evidence must record its reasoning in writing. Sub Rule (4) of Rule 46A reads as under:- "(4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]" 20. As per Sub Rule (4) of Rule 46A, the CIT(A) himself has the power to direct for production of any document or witness to enable him to dispose of the appeal or for any other substantial cause. In the instant case the additional evidence mentioned herein above was produced not on the direction of CIT(A) but by the assessee herself. The assessee explained that she produced this evidence because of her non-appearance before the Assessing Officer and....