2007 (8) TMI 323

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....996, in I. T. A. No. 967 of (Asr.)/1995 relating to the assessment year 1989-90 raising the following question of law : "Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal is right in law in quashing the assessment order for the assessment year 1989-90 by holding that the notice under section 148 is invalid?" 2. The facts are that the assessee filed her original return declaring nil income and the Assessing Officer on receiving the information from survey wing of the Income-tax Department that Neta Metal Works prepared a demand draft for a sum of Rs. 83,040 payable at Chandigarh in favour of M/s. Coal India Ltd., which was not accounted in the assessee's books of account, issued a not....

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....material before him. He cannot act on the basis of his whim and fancy, and the existence of material must be real. Further, there must be nexus between the material and escapement of income. The Assessing Officer must record reasons showing due application of mind before taking recourse to reassessment proceedings. Still further the Assessing Officer can assume jurisdiction for reassessment proceedings provided he has reasons to believe but the same cannot be taken recourse to on the basis of reasons to suspect. 5. In ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, the hon'ble Supreme Court, while interpreting the provisions of section 147 of the Act, held as under (page 448) : " . . . the reasons for the formation of the belief must ha....

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.... for the Assessing Officer before issuing notice to record his own satisfaction on the basis of material and should not have acted merely upon the information received from the survey circle. It was further noticed that the Deputy Commissioner of Income-tax (Appeals) had recorded that there was not sufficient evidence for making addition of Rs. 83,040 in the hands of the assessee and the matter was remanded to him to further investigate for connecting the amount of the draft with the escaped income of the assessee still it was held that the initiation of reassessment was valid. The Tribunal concluded that contradictory findings had been recorded by the Deputy Commissioner of Income-tax (Appeals) and held the reopening to be invalid. 7. I....