TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 375
X X X X Extracts X X X X
X X X X Extracts X X X X
....r affidavit dated 22.04.2022 on behalf of the respondent no.2 has been filed by Kumari Sukanya Kirti, Assistant Commissioner of Income Tax, Circle 5(3)(1), Noida. In paragraph 3 thereof, the respondent no.2 has stated as under :- "3. That, vide order dated 11.04.2022, the Hon'ble Court has specifically sought reply to the following questions:- (i) how the notice under Section 148 of the Act, 1961 issued by him to the petitioner was a valid notice? (ii) how the respondent no.2 could get jurisdiction to issue notice under Section 148 of the Act, 1961 when the very basis of issuing notice, ie., 'reason to believe', recorded by him was totally unfounded, non-existent and wholly baseless." 4. Perusal of the counter affidavit shows that there is not even a whisper with respect to the query of the Court (as itself mentioned by the respondent no.2 in paragraph 3(ii) of her counter affidavit). On the other hand, in the re-assessment order, it has been specifically mentioned that "on perusal of the documentary evidence submitted by the assessee in reference to the information available on record, no inference is drawn in connection with the amount of Rs.45 lakhs". It shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son 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 believe" that a case of escaped assessment exists requiring assessment proceedings to be reopened. (See: Binani Industries Ltd. v. CCT,(2007) 15 SCC 435; A.L.A. Firm v. CIT, (1991) 2 SCC 558). If a conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making the assessment and again a different or divergent view is reached, it would tantamount to "change of opinion". If an assessing Authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for re-assessment. Thus, reason to believe cannot be said to be the subjective satisfaction of the assessing Authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment. 30. In case of there being a change of opinion, there must necessarily be a nexu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecessary to observe that the belief must be held in good faith and should not be a mere pretence. 10. It may also be mentioned that at the stage of the issue of notice the consideration which has to weigh is whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment. The question as to whether that material in sufficient for making assessment or re-assessment under section 21 of the Act would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. The assessing authority would then decide the matter in the light of material already in its possession as well as fresh material procured as a result of the enquiry which may be considered necessary." (Emphasis supplied) 8. A Division Bench of this Court, while dealing with the validity of the re-assessment notice under Section 148 in Writ Tax No.874 of 2010 (M/S Parmarth Steel And Alloys Pvt. Ltd. vs. State of U.P. and Others, decided on 28.03.2022, held as under (Para 17) : "17. It is settled principles of law that proceedings under Section 21 of the Act, 1948 can be initiated if the material on whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R 1974 SC 478 : (1973) 3 SCC 581 (para-5), Hon'ble Supreme Court held as under:- "................. before an Income-tax Officer can be said to have had reason to believe that some income had escaped assessment, he should have some relevant material before him from which he could have drawn the inference that income has escaped assessment. His vague feeling that there might have been some escape of income from assessment is not sufficient................." 11. In the case of ITO vs. Lakhmani Mewal Das, (1976) 3 SCC 757 (para-11 and 12), Hon'ble Supreme Court has held as under:- "11. As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the 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. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs." 12. In the case of M/s. S. Ganga Saran and Sons (P) Ltd. Calcutta vs. ITO and others, (1981) 3 SCC 143 (Para-6), 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 than the words "is satisfied". The belief entertained by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bearing on the outcome of the relevant assessment order. 15. Section 147 of the IT Act does not allow the re-assessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to re-assess and not the power to review. 16. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The words "change of opinion" implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. 17. It is well settled and held by this court in a catena of judgments and it would be sufficient to refer Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 320 ITR 561(SC) wherein this Court has held as under: (SCC p.725, para 5-7) "5....where the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned on the existence of "tangible material" and that "reasons must have a live link with the formation of the belief". 15. In view of the above discussion, we summarize the principles, powers and limitations on exercise of powers under Section 147/148 by Income Tax Officers/ Authorities under the Income tax Act, 1961, as under:- (a) The assessing officer under Section 147 of the Act, 1961 has the power to re-assess any income which escaped assessment to tax for any assessment year subject to the provisions of Sections 148 to 153. The power to reassess under Section 147 of the Act, 1961 has been incorporated so as to empower the Assessing Authorities to reassess any income on the ground which escaped his knowledge. (b) Reassessment of income under Section 147 of the Act, 1961 cannot be made on change of opinion. The words "change of opinion" implies formulation of opinion and then a change thereof. If the Assessing Officer has earlier made assessment for the same Assessment Year expressing an opinion of a matter either expressly or by necessary implication then on the same matter, a reassessment proceedings for the alleged escapement of income from assessment to tax, cannot b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to take action under the section. Whether the grounds are adequate or not is not a matter which would be gone into by the High Court for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. What can be challenged is the existence of the belief but not the sufficiency of reasons for the belief. The belief must be held in good faith and should not be a mere pretence. (e) The question as to whether the material on the basis of which the assessing authority has formed the belief for "reason to believe" is sufficient, for making assessment or reassessment under Section 47 of the Act, 1961, would be gone into after the notice is issued to the assessee and he is heard or given an opportunity for that purpose. The assessing authority would then decide the matter in the light of material already in his possession as well as fresh material procured as a result of inquiry, if any, which may be considered necessary. 16. Perusal of the impugned notice under Section 148 of the Act, 1961 and other impugned orders clearly shows that the "reason to believe" recorded by the assessing authority, failed to pass the standard of reason exercised by t....