TaxTMI 
TaxTMI 
2023 (1) TMI 180
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....in various firms and derives income from various sources. For the Assessment Year 2011-12, petitioner filed the return of income by declaring his income to the tune of Rs.1,00,85,160/- and paid tax to the tune of Rs.33,45,909/-. A notice dated 30.3.2018 under Section 148 of the Income Tax Act, 1961 ('the Act' for short) was issued for re-assessing the income and called upon the petitioner to file his return of income in the prescribed form for the said assessment year. On 29.8.2018, the assessee filed the reply denying about the income having escaped assessment and contending original income of return is once again offered as income in the return of income filed in response to the notice issued under Section 148 of the Act. Petitioner sought for reasons supporting the action of re-opening of the assessment / re-assessment. By communication dated 17.9.2018, the reasons for re-opening the assessment came to be provided. Petitioner appeared before the respondent authority and also made oral as well as written submissions raising several contentions and specifically contending the assessment proceedings could not be re-opened after 6 years and that too without any justification and sou....
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....assessment in the case of the petitioner. 2. Having regard to the submissions advanced by the learned advocate for the petitioner, issue NOTICE returnable on 29.1.2019. By way of ad-interim relief, the respondent may proceed further pursuant to the impugned notice; he, however, shall not pass the final order without the permission of this Court. Direct service is permitted today." REASONS ASSIGNED FOR REOPENING ASSESSMENT 4. The reasons for re-opening the assessment was: During the search proceedings conducted in the case of Mr. Piyush G. Modi, vital documents were found and seized and relevant information derived therefrom disclosed that suada chitthi of land bearing Block Nos. 438, 439 paiki 2 dislcosed that said land was sold by Mr. Ramesh P. Bhadani to the assessee, admeasuring 22870 square yards for a consideration of Rs.32,24,89,000/- and the said sauda chitthi also disclosed that assessee held ownership right in house No. 3 of Union Point, Ghoddod Road, Surat, admeasuring 10000 square feet and the rate of Rs.1,515 per feet was decided between assessee and Mr. Ramesh P. Bhadani and thus, total price of the property came to Rs.15,15,10,000/-. As per sauda chitthi, asses....
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....nd was purchased by assessee in the name of A.R. Enterprise at an amount of Rs.5,12,83,200/- and was being sold for Rs.23,30,15,508/- and as such the purchase price of land cannot be relied upon and was of the view that price of the same amount cannot be less than that of price 2 years before. Hence, he held that assuming that land has been purchased at an amount of Rs.23,30,15,508/- and registration is made only at jantri price decided by the government which is much before actual sale transaction and was of the view that difference amount will be paid by cash by the purchaser. He was also of the view that in the sauda chitthi the actual sale price of the land will be returned since it is an informal document between purchaser and seller and between period 2010 to 2013 the land prices in Surat had increased substantially in Dumas area. Hence, the Assessing Officer was of the view that firm A.R. Enterprise of which assessee had partner, was paid Rs.18,17,32,308/- out of books and same is to be treated as unaccounted investment of assessee's firm A.R. Enterprise. As sauda chitthi dated 9.2.2011 disclosed that a purchaser has to pay 25% of the total on-money amount on 9.2.2011 and th....
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....ical to the present Special Civil Applications. 8. Later on, petition has come up for consideration before this Court in which Mr. Saurabh Soparkar, learned Senior Advocate assisted by Mr. Abhishek Mehta, has represented the petitioner and Mr. Nikunt Raval, learned advocate for Ms. Kalpana Raval, has represented the contesting authority namely respondents 2 and 3. 9. Mr. Soparkar, learned Senior Advocate has vehemently contended that first of all the very issuance of impugned notice itself is unreasonable, high handed and arbitrary act of the respondent authority. Though full disclosure in true sense, income tax return for Assessment Year 2011-12 has been filed and though there was no circumstance or justification, after a period of six years, i.e. in the year 2018, the authority initiated the stand of reopening of assessment on thoroughly unjustified ground and there is no justification at all to initiate proceedings under Section 142 of the Income Tax Act. Mr. Soparkar, learned Senior Advocate has further contended that it is evident that land being Survey Nos. 438 and 439 paiki has never been purchased by petitioner and is purchased by one Mr. Jaswantbhai Mohanbhai Patel as pa....
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....ted in any year. Learned Senior Advocate has further submitted that this was specifically pointed out before the authority, but by ipse dixit manner, the authority has without proper application of mind, initiated steps for reopening which is otherwise impermissible. Since there is a clear lack of authority in this background of fact to initiate proceedings for reopening, this Court may kindly consider the same. 9.3 Mr. Soparkar, learned Senior Advocate has further submitted that there is no material whatsoever to substantiate the stand of the department which has been created from the document/'Sauda Chitthi' recovered from the premise of one Mr. Piyush Modi. Petitioner's premise was also searched and no incriminating document was found and no additional income was declared by the petitioner and there was no material found from petitioner's premise. To substantiate the said 'Sauda Chitthi' to arrive at a reason to believe that income escaped the assessment and as such, even if formulating such information about income having escaped from assessment, there is no cogent material whatsoever available with the authority. Hence, authorities' action deserves to be quashed. 9.4 Learned....
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....id exercise is must and necessary and same having not been established, impugned notice as well as the order rejecting the objections deserves to be quashed and set aside. Learned Senior Advocate has submitted that since in view of Section 149 of the Income Tax Act, reopening cannot be commenced after expiration of six years period from end of relevant Assessment Year by raising mere inference. An attempt is made which in the background of facts obtained is thoroughly impermissible. According to learned Senior Advocate, there are several proposition of law on the issue, which clearly indicate that there is hardly any case made out to sustain the action. There is no failure on the part of petitioner and there is no justification adequate enough that there is no escapement of income due to failure on the part of petitioner to disclose. If this be missing, the very initiation of proceedings deserves to be quashed and the entire exercise appears to have been undertaken without proper application of mind and thereby affecting fundamental right of petitioner. Petitioner left with no other efficacious remedy is constrained to approach this Court. 9.7 Learned Senior Advocate has submitted....
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....ent the authority should be permitted to reopen the assessment instead of intercepting and if allowed to proceed ahead petitioner will not be remediless. It has been contended that while examining the explanation the authority has found some material about shadow transaction and adequate reasons to formulate the belief of reopening of assessment and as such, at this stage of the proceedings, the authority deserves to be allowed to adjudicate and examine and then to arrive at ultimate conclusion. It has been contended that it is not correct on the part of petitioner counsel to indicate that reopening is impermissible in law. In fact, the authority is adequately empowered to examine the issue. When such belief about income having escaped is established, and here is a case in which conjoint effect of material and the explanation, the authority has rightly rejected the stand of the petitioner and passed an order dated 26.11.2018. Hence, petitioner at this stage may not be allowed to interject the proceedings which are sought to be processed. Mr. Raval, learned advocate has referred to a decision in the case of Heval Navinbhai Patel v. Income Tax Officer reported in [2021] 126 Taxmann.c....
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....esulting in prejudice to both the parties. We say so, for the reason that in the event of assessee's contention being upheld the re-assessment sought to be commenced would come to an end, of course, subject to the further challenge by the Revenue if they chose to do so. Whereas, if the contention of the assessee is not accepted or in other words, challenge laid to re-opening fails, in such circumstances, if the writ application is kept pending for years or allowed to languish before this Court by granting stay of re-opening of assessment and thereby stalling the proceedings before the authorities, it would not only result in piling up of the cases before this Court but it would also stall the re-assessment proceedings which otherwise would have come to an end long back and parties to such proceedings would have been in a position to re-take recourse to the alternate remedy available under law viz. by questioning the order of assessment by filing an appeal before the appellate forum in the manner prescribed under the Act. 13. It also requires to be noticed that an attempt is always made by the assessee to assail the notice of reassessment on the ground of there being no tangible ma....
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....-tax vs. Rajesh Jhaveri Stock Brokers (P) Ltd., [2007] 161 Taxman 316 (SC) and it has been held: "17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence o....
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.... tax or interest was found due from the assessee concerned. Between April 1, 1998 and May 31, 1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word intimation as substituted for assessment that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from October 1, 1991, and subsequently with effect from June 1, 1994, by the Finance Act, 1994....
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....ery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise." 16. The aforesaid proposition of law has been reiterated by the Hon'ble Apex Court in the case of Deputy Commissioner of Income- Tax & Anr. vs. Zuari Estate Development & Investment Company Limited, reported in [2015] 373 ITR 661 [SC]. At the time of commencement of the re-assessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material would not be the subject matter of consideration at that stage. The Hon'ble Apex Court in the case of Raymond Woollen Mills Ltd. v. ITO (236) ITR 34 (SC) has held: "In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Depar....
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.... order to assume jurisdiction under Section 147 where assessment has been made under Section 143(3) the twin conditions to be satisfied is (a) the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; and (b) such escapement occurred by reason of failure on the part of the assessee either (i) to make a return of income under Section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or (ii) to disclose fully and truly all the material facts necessary for his assessment for that purpose. 19. In other words, the Assessing Officer has to arrive at a subjective satisfaction independently on an objective evaluation of the material by independent application of mind. The concept of 'change of opinion' has been held by the Hon'ble Apex Court in Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. [2010] 210 ITR 561 as an inbuilt test to check abuse of power by the Assessing Officer. 20. Where fresh facts are revealed as the basis for reopening of the assessment / re-assessment by issuance of notice under Section 148 per se cannot be held to be a ground to set aside the same on the ground....
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....cation for setting aside exparte decree by taking recourse to Order 9 Rule 13 of the Code of Civil Procedure apart from his remedy of review. However, if the appeal is disposed of on merit where even the grounds accessible under Section 114 or Order 9 Rule 13 are also available by taking aid of Section 105, the pending applications for review or for setting aside exparte decree would become infructuous. (See Bhanu Kumar Jain v. Archana Kumar and another reported in AIR 2005 SC 626 for detail discussion). 13. Therefore, in the case before us, the petitioner filed the present application under Article 226 of the Constitution on the allegation that he is entitled to the benefit of law laid down by the Supreme Court in case of CALCUTTA DISCOUNT COMPANY LTD. V. I.T.O., reported in 41 ITR 191. The petitioner has also challenged the consequent order of reassessment on the ground of violation of law laid down by the Supreme Court in the case of GKN Driveshafts [India] Ltd. [supra]." 22. As already noticed hereinabove, the exercise of jurisdiction is available where the applicant / petitioner would assail the action of the authorities under four contingencies viz. when the said action ....
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....o petitioner, no imaginary conclusion can be arrived at by an authority. Simply because, Sauda-chitthis were recovered from the premises of one Mr. Piyush Modi and from petitioner's premises, no incriminating documents were found, as such no additional income was declared by petitioner. Reopening appears to have been prepared on the basis of information received from assessing officer of Shri Piyush Modi and Mr. Dilip Sojitra and as such, by raising such factual controversy also, action is assailed by way of invoking extraordinary jurisdiction of this Court. 24. Now to deal with such background which is tried to be projected by petitioner, a perusal of discretion exercised by respondent authority deserves to be relooked. The authority while disposing of the objections against reopening of the assessment under Section 147 of the Income Tax Act has examined at great length the stand of the petitioner and has also examined not only the Sauda-chitthi but also certain admissions and statements made by petitioner as well as incidental material and only upon such critical analysis of the material on record, jurisdiction is exercised as has been vested in law. 25. It appears that since a....
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....ers. During course of recording of statement, even Mr. Ramesh Bhadani has also admitted certain amounts as reflecting in the order about transaction in question. Mr. Pavan Tulsiani- petitioner was crossexamined during the course of survey proceeding and he specifically admitted about the cash transaction during sale of land but did not disclose the exact cash amount paid by him to Mr. Ramesh Bhadani and as such it was very much found clearly by an authority that petitioner being a leading person did purchase both the plots bearing Block/ Survey Nos.438 and 439/2, said land transaction deal was finalized as per the terms and conditions specified in the Sauda-chitthi for both the lands and each conditions including payment schedule have also been fulfilled by the purchaser and seller of the land. MoU as well as Sauda-chitthi seized, as referred to in the order itself, were clearly matching with the registered document and main person of the firm is the petitioner himself as has been revealed. This examination if to be looked into, unexplained investment by petitioner which relates to another land at 706 Dumas is also examined at length and there also, petitioner himself has accepted ....
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....ed to Shri Ramesh R. Bhadani). During the course of investigation it was noticed that the House No.3, Union Point, Ghod Dod Road, Surat was constructed by Sumangal Corporation and Sunil J. Shah was one of the partner in this firm. The details such as purchase deed in this regard was called for from M/s. Sumangal Corporation. Only two purchase deeds for these properties admeasuring area of 221.28 sq. mtrs super built-up situated at ground floor and 221.28 sq mtrs super built-up situated at first floor were furnished by M/s. Sumangal Corporation to the Investigation Wing These properties have been purchased by MB Systems at a cost of Rs.83,66,125/- and Rs.75,03,200/- respectively. Further, on perusal of the registered document no.SRT/ 1/ATV/6651 and SRT/1/ATV/6656 dated 25.04.2012 and 27.04.2012, it has been noticed that MB Systems (Ramesh R. Bhadani) had purchased the property House No.3, Union Point, Ghod Dod Road, Surat directly from the Sumangal Corporation, whereas, Pawan Tulsiani has signed in the sauda chithi in the capacity of seller for selling the same property. As per the document of the property Sunil J. Shah was the owner of the property. So it is quite clear that Sun....
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....ire survey proceedings. He was further questioned that have you seen the sauda chithi after coming back to Surat. He stated that Yes, he has seen the sauda chithi. At last question in respect of the purchase of the land at Block No.438, 439/Paiki- 2 was asked to Pawan Tulsiani. He confirmed the purchase of the land, and he stated that both the lands ie Block No.438, 439/Paiki 2 at Dumas was purchased by him along with his partners Jaswant M. Patel, Paresh M. Mavani and Rajendra Panwala. He also cleared that document of the land at Block No.438 was registered in the name of Jaswant M. Patel and Block No.439/2, was in the name of Jaswant Patel and Paresh Mavjibhai Mavani since he is not a farmer of Gujarat and therefore he cannot buy the agricultural land in Gujarat. Both the above persons, Jaswant M.Patel and Paresh M. Mavani are farmers in Gujarat and therefore the registered sale deed of both the above land were made in their names. He also stated that the document for the land at Block No.438 was registered in the month of March 2012 in the name of Jaswant M. Patel and he doesn't know the time period of the registration of other block at 439/2. It was further stated by him th....
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....11,00,000/- on various dates to Ramesh R. Bhadani for purchase of land at Block No. 438 and 439 / 2, Dumus: 10.1.2011 Rs. 11,00,000 13.1.2011 Rs.3,00,00,000 13.1.2011 Rs.3,00,00,000 Rs.6,11,00,000 Here, it is clear that Pawan K. Tulsiani had admitted in his statement that the unaccounted cash has been paid for purchase of both the above land but with the fear of payment of taxes he did not state the correct amount of the unaccounted cash paid. He has promised that after consultation with his partners he will state the correct amount before the undersigned on 19.5.2014, but later on he did not turn up to state the correct fact During the course of recording the statement in post search proceedings Ramesh R. Bhadani has admitted that he has received an amount to the tune of Rs.8,08,76,700/- in cash in form of on money in lieu of sale of land at Block No.438 situated at Dumas. As Pawan Tulsiani and his partners had purchased the same land from Ramesh Bhadani so, during the course of survey proceedings Pawan Tulsiani was cross examined and it was asked to him that why the payment of Rs.8,08,76,700/- made to Ramesh R. Bhadani on account of purchase of land Sh....
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....lso well within the discretion vested in law and after careful analysis of the material on record and exercise of discretion prima facie suggests that same is within the prescribed parameters and it cannot be said to be perverse in any form as each and every material as well as the explanation offered by the petitioner has been dealt with and arrived at a particular conclusion. Merely because same is not favourable to petitioner, extraordinary jurisdiction cannot be involved by us for substituting the view of the authority on the basis of the very same material, particularly when entire mechanism as provided under the Act to redress the grievance of the petitioner even in the process of reopening being available. Hence, we are of the clear opinion that no case is made out by the petitioner. 30. One additional fact which we may not lose sight of is that even from reasons furnished under communication dated 17.9.2018 - Annexure-F for reopening when Deputy Commissioner of Income Tax, Surat sought sanction since 4 years had elapsed of the relevant assessment year, seeking necessary sanction to issue notice under Section 148 of the Act, which has been accorded by the Principal Commissi....
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....ea of the above property at Union Point, Ghod Dod, Surat was 10000 sq. ft. including ground first floor and the + rate of Rs.15.151/- per sq. ft was decided between Pawan K. Tulsiani and Ramesh R. Bhadani. Thus, the total price of the above property came to Rs.15,15,10,000/-. As per this sauda chithi, Pawan K. Tulsiani had sold this property of House No.3, Union Point, Ghod Dod Road, Surat to Ramesh R. Bhadani in lieu of payment against the purchase of land at Block No. 438, 439/2, Dumas. The value of this property had been decided at Rs.15,15,10,000/- and this amount had been subtracted from the total amount of Rs.32,24,89,000/- and it was decided that the balance amount of Rs.17,09,79,000/- will be paid by Pawan Tulsiyani to Ramesh R.Bhadani. The payment schedule of the balance amount was also mentioned in the sauda chithi. It was gathered during the assessment proceedings that the above both lands were purchased by R.P. Associates in which Shri pawan Tulsiyani is one of partner and House No.3, Union Point, ghod Dod Road, Surat was purchased by M.B. Systems in which Shri Ramesh R. Bhadani is one of Partner. 2.1 (a) Further, it is also reported that on perusal of Annexure-A/....
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.... also admitted that he received Rs.11,00,000/- as advance(token money), for confirmation of the deal. He also explained that the land Block No.706, situated at Dumas pertained to navi sharat. As per Gujarat Land Act, the land belonging in navi sharat cannot be sold without altering it into juni sharat If a person want to alter the land to juni sharat belonging to navi sharat then certain amount of premium as decided by Gujarat Government is to be paid. Pawan Tulsiyani stated that he did not know about the quantum of premium so the deal was cancelled. He also explained about the contents of page no10 of the Annexure A-2. It is a sauda chithi of the same land at Block No.706, Dumas made between Pawan Tulsiani as seller and Dilip C sojitra as purchaser. Pawan Tulsiyani stated that he once again decided to sell this land after gathering information of premium amount now the same land was decided to sell to Dilipbhai Sojitra at the rate of Rs.14589/-, Rs.51,00,000/- was also advanced by Dilipbhai Sojitra, and receipt of the same was duly acknowledged Pawan Tulsiyani during the course of survey proceedings. On being asked about the present ownership of the land Block No06, situated at Du....
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....rat has been perused with reference to statement given u/s.131 of the Act of Shri Pawan K. Tulsainai and transactions appearing in the seized paper provided referred above. After perusai and having verified, the finding of the DCIT, Central Circle-2, Surat is found to be in order that the assessee Shri Pawan K. Tulasiani was paid onmoney in the form of cash amounting to Rs.6,11,00,000/- in lieu of purchase of land block no 438, 439/Paiki 2 during the FY 2010-11 relevant to AY 2011-12, source of the said cash payment remains unexplained and required to be added in the total income of the assessee. Further, it is also observed as per the sauda chithi dated 09.02.2011 and statement dated 16.05.2014 given by Shri Pawan K. Tulsiani that Shri Pawan K. Tulsiani has made investment amounting to Rs.454,33,077/- (25% of Rs.18,17,32,308) for the purchase of land block mo 706 at Dumas, pertains to FY 2010-11 relevant to A.Y.2011-12, remains unexplained and required to be added in the total income of the assessee. 4. In view of above facts and finding, the detailed investigation report in the above matter received from the DCIT, Central Circle-2. Surat has been perused and analyzed From the ....
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....e (b) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 31. Since the aforesaid factual details are very much expedient to proceed ahead in contemplated action, we find it necessary that the authority must be allowed to examine at length while reopening the assessment and we cannot usurp such discretion of an authority in the aforesaid peculiar background of these facts, more particularly when at various levels, as indicated above, certain admissions of petitioners are also worth proper scrutiny and as such, fact finding authority is required to analyze them freely. At this stage, we may deem it proper to quote hereunder the relevant observations made by Hon'ble the Apex Court in case of D.N. Jeevaraj Vs. Chief Secretary, Government of Karnataka and others reported in (2016) 2 SCC 653 propounding that High Court/ Constitutional Court in exercising its extraordinary jurisdiction cannot usurp the discretion of a statutory authority unless it believes that such an authority will not be able to exercise discretion on account of some inability. I....
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....al circumstances and not as a routine. Insofar as the present case is concerned, the High Court has not given any reason why it virtually took over the decision taking function of the authorities and for this reason alone the mandamus issued by the High Court deserves to be set aside, apart from the merits of the case which we have already adverted to." 32. Thus, above material would disclose that information received from the Investigating Wing cannot be denied and they are prepared after conducting search and seizure operation, inquiry, recording of the statements and collection of evidence. The expression 'reason to believe' occurring in Section 147 would mean and include justification for such re-opening and when the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be safely inferred that he is said to have reason to believe that income had escaped assessment. Finality to the ascertainment cannot be attached at this stage. When there is relevant material on which a person of reasonable prudence would have formed the belief of such escapement, it would suffice and in the instant case, the above material is sufficient en....
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....e is acceptable." 34. From the aforesaid proposition of law also, we are of the clear opinion that this is not a case in which we may exercise extraordinary jurisdiction nor a case is made out by the petitioner for this Court to exercise such extraordinary jurisdiction. Hence, we refrain to do so. 35. Yet, another reason for us not to exercise the discretion is that under the scheme of the Act, petitioner has very much the remedy by way efficacious redressal mechanism under various provisions of the Act available and as such when petitioner is not left remediless, at this stage of proceedings, to invoke extraordinary jurisdiction would not be just and proper. At various stages, petitioner is permitted to avail alternative statutory remedies after ultimate analysis or conclusion being arrived at by an authority. At this stage, we may not assume anything and petitioner being not remediless, we are not inclined to exercise extraordinary jurisdiction. 36. In the light of the aforesaid observations, the judgment which have been relied upon by learned counsel for the petitioner are no-doubt projecting the salutary principles, but the background of this peculiar facts and the material....