TaxTMI 
TaxTMI 
2008 (8) TMI 14
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....7,500/-in March, 1996 and in its return had claimed exemption under the provisions of Section 2 (14) of the Income-tax Act, 1961 (hereinafter referred to as 'the said Act'). The assessee's claim was that the agricultural land sold by it was not a capital asset. Consequently, no capital gains accrued at the hands of the assessee and he was not required to pay any tax thereon. 3. Although, it appears that an intimation under Section 143(1)(a) had been sent, the appellant's case throughout has been that it did not receive any such intimation. In any event, nothing turns upon this. The main issue involved in this appeal is with regard to invocation of the provisions of Section 147 of the said Act. The Assessing Officer had issued....
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.... much deeper scrutiny", no belief could be said to have been formed entitling the issuance of a notice under Section 148 in order to initiate re-assessment proceedings. He also observed that in the present case the purpose behind the issuance of the notice under Section 148 appeared to be to reopen the assessment when, in the original return filed by the assessee, all the material facts had already been mentioned and no new facts or any other material had been brought to the file from the date on which the earlier return had been processed to the date the reasons were recorded. Consequently, he held that the jurisdiction assumed by the Assessing Officer under Section 147 and the issuance of notice under Section 148 were illegal. Therefore, ....
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....and Others: 79 ITR 603 (SC), dismissed the appeal of the revenue and affirmed the order passed by the Commissioner of Income-tax (Appeals) saying that the initiation of the proceedings under Section 147 and issuance of notice under Section 148 were without jurisdiction and were illegal. The assessment framed by the Assessing Officer on 31.03.2002 was also annulled. 6. Having considered the arguments advanced by the counsel for the parties and after examining the matter in detail, we are of the view that the tribunal as well as the Commissioner of Income-tax (Appeals) came to the correct conclusion. A reading of the reasons recorded does not disclose that the Assessing Officer, in fact, had reasons to believe that any in....
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.... necessary." The Supreme Court did not find that these were sufficient reasons for reopening the assessment. With regard to the sentence "hence, proper investigation regarding these loans is necessary", the Supreme Court observed that this conclusion that there is a case for investigation as to the truth of the alleged transactions is not the same thing as saying that there are reasons to issue a notice under Section 148. The Supreme Court further observed as under:- " he must give reasons for issuing a notice under Section 148. In other words, he must have some prima facie grounds before him for taking action under Section 148. Further, his report mentions: "Hence, proper investigation regarding these loans is necessary." In other....
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....session, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the ITO had any material before him which could satisfy the requirements of either cl.(a) or cl. (b) of s. 147. Therefore, he could not have issued a notice under s. 148." 7. We feel that the observations of the Supreme Court in the aforesaid decision clearly apply to the case at hand. Merely because the Assessing Officer felt that the issue required 'much deeper scrutiny', is not ground enough for invoking Section 147. It is not belief per se that is a pre-condition for invoking Section 147 of the said Act but a belief founded on reasons. The expression used in Section 147 is - 'If the Assessing O....
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....s whether failure to take steps under Section 143 (3) of the said Act would render the Assessing Officer powerless to initiate re-assessment proceedings in cases where intimations under Section 143 (1) had been issued. The Supreme Court held that so long as the ingredients of Section 147 are fulfilled, the Assessing Officer would be within his rights to initiate "re-assessment" proceedings irrespective of whether steps for a regular assessment under Section 143 (3) had been taken or not. While so deciding, the Supreme Court considered the expression "reason to believe" as appearing in Section 147 in the following manner:-"Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason....