TaxTMI 
TaxTMI 
2016 (9) TMI 1528
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....by petitioner remained pending, Assessing Authority made further inquires, on 12.8.2015. Assessing Authority rejected the objections filed by petitioner and passed order dated 21.8.2015. 3. Learned counsel for petitioner submits that all the transactions for relevant assessment years were disclosed by petitioner to Assessing Officers thereafter regular assessment was made. The Assessing Officer issued a notice under Section 148 of Act, 1961. In reply to the said notice the petitioner requested that the return of income filed on 9.9.2011 and 10.9.2012 be considered as mode of returns of income filed in compliance to the notices dated 31.3.2015. 4. The respondents have filed counter affidavit sworn by Sri Prem Prakash, Income Tax Inspector, DCIT-VI, Kanpur and it has been contended that the petition deserves to be dismissed and there was a reason to believe that the income has escaped assessment as re-assessment proceedings were initiated on the basis of material discovered in search and seizure proceedings in case of Rajendra Jain Group, Sanjay Chaudhary Group and Dharmichand Jain Group of Companies wherein it has been found that Assessee i.e. M/s Kays Jewels Private Limited h....
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....ss any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of Section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.--For the pu....
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....er person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case-- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in ....
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....only when he has "reason to believe" that income, profits or gains chargeable to income tax have been under assessed. It therefore, held that existence of material to form opinion of escaped assessment is a jurisdictional issue. 9. In the context of Act 1961, Section 147 came up for constitution in Ganga Saran & Sons P. Ltd Vs Income Tax Officer & others, (1981) 130 ITR 1 (SC) and Court said; "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 than the words "is satisfied". The belief entertained by ....
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....ve a live link with the formation of belief. 11. In Phool Chand Bajrang Lal And Anr. vs Income-Tax Officer, (1993) 4 SCC 77, referring to Section 147 and 148, Court said as under:- "From the plain phraseology of the above Sections of the Act, it appears that two conditions precedent which are required to be satisfied before an Income Tax Officer can acquire jurisdiction to proceed under Clause (a) of Section 147 read with Sections 148 and 149 of the Act, beyond the period of four years but within a period of eight years, from the end of the relevant year, are: (a) that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or escaped assessment and (b) that the ITO must have reason to believe that such escapement or under-assessment was occasioned by reason, of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both these conditions must co-exist in order to confer jurisdiction on the Income Tax Officer. The Income Tax Officer is obliged, before initiating proceedings under Section 148 of the Act to record the reasons f....
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....ith an inbuilt idea of fairness to taxpayers. Final outcome of the proceeding is not relevant. Only for the purpose of initiation stage, what is required is "reason to believe', but not the established fact of escapement of income. 14. All these authorities have been considered and reiterated recently in State of Uttar Pradesh and others Vs M/s Aryaverth Chawal Udyog & Others, 2016 (91) VST 1 (SC), Court after referring its earlier authorities, said that consistently it has been held that, such material on which Assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by Assessing Authority in pursuance of such belief. In case of absence of such material, Court in clear terms has held that the action taken by Assessing Authority on such "reason to believe" as arbitrary and bad in law. The standard of reason exercised by Assessing Authority is laid down as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. The necessary sequitur is that a mere change of opinion while perusing the same material, cannot be a "reason to....