TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1758
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....Income Tax Act. It raises similar questions of law and are therefore taken up together for hearing and disposal. 2. In W.P(C) No. 7101/2017; W.P(C) No. 7102/2017; W.P(C) No. 7103/2017 and W.P.(C) No. 7104/2017, the petitioners put into challenge the recording of reasons for issuance of notice under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the notice under Section 148 of the Act, the Notice under Sub-Section 2 of Section 143 dated 23.05.2017 as well as the notices under Sub-Section 1 of Section 142 dated 23.05.2017 and 31.10.2017. 3. In W.P(C) No. 7482/2017, the petitioner is a private limited company. The company has submitted its return of income for the assessment years 2010-11 on 14.10.2010 showing total income at Rs. NIL. Subsequently, respondent No. 1 re-opened the case of the writ petitioner under Section 148 of the Income Tax Act, 1961 by issuing of notice dated 31.03.2017 under Section 148 of the Act. In response to the Notice under Section 148 of the Act, the petitioner submitted its return of income on 09.08.2017 and thereafter vide its letter dated 10.08.2017 applied to the respondent No. 1 to provide its ground on which the notic....
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....a notice under Section 148(1) was issued by the respondent No. 1 to the petitioner No. 1 to assess/re-assess its income for the assessment year 2010-11 on the ground that she had reasons to believe that income had escaped assessment within the meaning of Section 147. The petitioner No. 1 thereafter as per procedure prescribed submitted a return on 27.04.2017 which was identical in respect of the earlier returns dated 04.03.2011 and 08.09.2014. Thereafter, the petitioner applied for a certified copy of the reasons recorded. The reasons were thereafter supplied to the petitioner which however did not indicate the date it was recorded on. 7. It is contended on behalf of the petitioners that the respondent No. 1 made a statement that information was available to the assessing officer that the petitioner No. 1 had raised share capital of Rs. 1,51,00,000.00. It was further mentioned in the reasons that this information was received from the DIT(Investigation), Kolkata that most of the allottee companies were paper companies without any genuine business. In the reasons, it was mentioned that most of the companies were owned by an individual named Shri Narendar Kumar Jain. During the surv....
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.... belief arrived at by the assessing officer is absent. "Narendra Kumar Jain" referred to in the reasons recorded in whose case survey was conducted on 11.04.2014 is a stranger. No case has been made out that he provided any accommodation entry to the petitioner. In the reasons recorded also there is no such statement attributed to Narendra Kumar Jain where he has stated that he provided any accommodation entry to the petitioner company. His statement was not recorded in connection with the petitioner company's case. Any information received from the Investigation wing/valuation officer or from any other source, per se cannot be said to be a "tangible material" for reopening of a case in the absence of any enquiry conducted by the assessing officer to verify its correctness, relevance or otherwise its link to the alleged escapement of income. In the Instant case the reasons do not disclose that after receipt of information any such enquiry was conducted by the assessing officer. The assessing officer merely accepted the vague information in a mechanical manner without application of his mind. 10. The learned counsel for the petitioner submits that there is no material/evidence to s....
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....ssessing officer (Annexure "16"), the assessing officer in her order dated 24-10-2017 (Annexure "17") has introduced certain new facts, which were not there in the reasons recorded by the assessing officer. It is submitted that it is a settled law that in the event of challenge to the jurisdiction to issue notice under Section 148 of the Act on the basis of reasons recorded by an assessing officer, the reasons are required to be read as these are recorded and no addition/substitution/deletion are permissible to such reasons. Therefore, introduction of new facts by the assessing officer was not permissible as per settled law. Further, while rejecting the objections of the petitioner vide her order dated 24.10.2017, the assessing officer has referred to the provisions of Explanation 2(ca) to Section 147 and has stated that in the instant case, information has been received from the Directorate of Investigation that the petitioner company has raised share capital with the allotment on 31.03.2010 to the tune of Rs. 1,51,00,000/- with the face value of Rs. 10/- and premium of Rs. 90/-. 13. Referring to Explanation 2(ca) inserted by the Finance Act, 2016 w.e.f. 01.06.2016, it is submitt....
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....unsel for the petitioner refers to the judgment rendered by the following Judgments: 1. Guwahati Metropolitan Development Authority Vs. C.I.T, reported in (2017) 390 ITR 137 (Gauhati); 2. Hindustan Lever Ltd. Vs. R.B. Wadkar, A.C.I.T, reported in (2004) 268 ITR 332(Bombay); 3. Assam Co. Ltd. Vs. Union of India, reported in (2005) 275 ITR 609 (Gauhati); 4. I.T.O. Vs. Madnani Engineering Works Ltd. reported in (1979) 118 ITR 1 (SC) and 5. Northern Exim Pvt. Ltd. Vs. D.C.I.T., reported in (2013) 357 ITR 586 (Delhi) 15. The second limb of argument made by the learned counsel for the petitioner is that the term "reason to believe" suggests that the belief must be that of an honest and reasonable person, based on reasonable grounds and though the Assessing Officer may act on direct or substantial evidence, but he cannot act on mere suspicion, gossip or rumor. It is submitted that the grounds or reasons, which led to the formation of belief as contemplated by Section 147 of the Act of 1961 must have a material bearing on the question of escapement of income of the assessee from assessment. It is submitted that the expression "reason to believe" does not mean a purely subjective....
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.... to what was the material fact that was not disclosed by the assessee and the action should be founded on such reasons. In support of his contentions, the learned counsel for the petitioner has relied upon the Judgments rendered in ACIT Vs. CEAT Ltd, reported in (2022) 449 ITR 171 (SC); CIT Vs. Sonitpur Solvex Ltd., reported in (2013) 352 ITR 305 (Gauhati); Cedric De Soouza Faria Vs. DCIT, reported in (2018) 400 ITR 30 (Bombay); Usha Exports Vs. ACIT, reported in (2020) 312 CTR 237 (Bombay); Fenner India Ltd. Vs. DCIT, reported in (2000) 241 ITR 672 (Madras); Haryana Acrylic Manufacturing Vs. CIT, reported in (2009) 308 ITR 38 (Delhi) and SABH Infrastructure Ltd. Vs. ACIT, reported in (2017) 398 ITR 198 (Delhi). 18. The fifth limb of argument raised by the learned counsel for the petitioner is that the duty cast on the assessee is only to make full and true disclosure of all primary facts. It is not for him to tell the Assessing Officer what inferences, whether of facts or law should be drawn by the Assessing Officer. To refer the meaning "true and full disclosure", the learned counsel for the petitioner has placed reliance on the Judgments of the Apex Court rendered in Calcutta D....
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....s. Union of India (Supra). 21. The further proposition raised by the learned counsel for the petitioner is that the power to re-open a case under Section 147 of the Act, there must "tangible material" to come to the conclusion that there was escapement of income from the assessment. In support of the contention, the learned counsel for the petitioner refers to the Judgment of Kelvinator of India Ltd (Supra) and Guwahati Metropolitan Development Authority (Supra). 22. It is further submitted that the writ petition is maintainable against a Notice issued under Section 148 of the Income Tax Act. Notwithstanding the plea of alternative remedy, a writ petition is maintainable to question a notice issued under Section 148 to re-open the assessment in the absence of tangible and cogent materials leading to atleast a prima facie view that income of the assessee had escaped assessment. It is submitted that the Judgment of the Apex Court rendered in Calcutta Discount Co. Ltd (Supra) which had laid down the proposition is still holding its field and has not been diluted since. In support of his contention, the learned counsel for the petitioner also refers to the Judgments rendered in Smt. ....
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....ent to a search and seizure operation conducted in the case, assessee company had filed return under section 153(A) vide acknowledgement No. 345082611040914 dated 04.09.2014 declaring total income at Rs. 1,64,62.050/- and tax payable thereon was shown as Rs. 65,76,379/- and accordingly assessment under section 143(3) read with section 153(A) was completed on 31.03,2015 determining total income at Rs. 2,61,17,250/- 25. Mr. Keyal further submits that the notice under section 148 issued to the writ petitioner on 31.3.2017 for the assessment year 2010-11 based on reason to believe that income chargeable to the tax has escaped assessment within the meaning of section 147 of the Income Tax Act 1961. 26. It is further submitted by the learned Standing Counsel that the return of income filed on 24.07.2017 in response to the notice under section 148 of Income Tax Act was identical in all respect with the aforesaid revised return filed on 04.09.2014 since the return filed by the assessee company in response to the section 148 proves that the writ petitioner participate in the proceedings. In response to the request of the writ petitioner the reason recorded under section 148 of Income Tax ....
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....exceeds Rs. 1 lakh and the assessment year falls within the time limit of 6 years. Therefore notice under section 148 was validly issued after taking prior approval of the jurisdictional commissioner of income tax. An independent enquiry is not required for formation of a reason to believe, enquiry is to follow during the course of assessment proceedings, reason to believe was formed on the objective satisfaction of assessing officer based on specific information received from DDIT(Inv), unit-2(2), working under DIT(Inv), Guwahati, which forms prescribed authority under section 133C of the Act. 30. Mr. Keyal further submits that the writ petitioner has already filed return in response under section 148 of the act and participate in the assessment under section 147 in the act. The writ petition is not maintainable on the ground that the writ petitioner has alternative remedy by way of filing appeal against assessment order. It is submitted that the notification relied by the writ petitioner is not applicable in the instant case as the same is issued subsequently. The learned counsel for the respondents relies upon the following authorities in support of his contentions: 1. Girish....
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....e term "proceeding" shall have the meaning assigned to it in clause (b) of the Explanation to section 133A. Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless 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 re....
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....) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions ons of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 148 Issue of notice where income has escaped assessment. 148. (1) Before making the assessment, reassessment or re-computation....
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....doing so. 149. Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. Explanation. In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a ....
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....oncerned assessing officer. 34. From the Assessment order, it is seen that the said assessment order was passed on verification and examination of the seized materials and the order was passed with the prior approval of the Addl. Commissioner of Income Tax, Range-IV. Thereafter notice dated 31.03.2017 under Section 148 of the Income Tax Act, 1961 for the assessment year 2010-11 was issued by the respondent No. 1 putting the petitioner to notice that there are reasons to believe that the income chargeable to tax have escaped assessment within the meaning of Section 147. Pursuant to this notice, the petitioner as per the provisions of the statute filed its returns showing NIL taxes. Subsequent thereto by communication dated 23.05.2017, return of income was submitted by the petitioner on 27.04.2017 for the assessment year 2010-11, whereafter certain further information was called for requiring the petitioner to attend office either in person or by authorized representative on 14.06.2017 and to produce all accounts and documents. The petitioner assessee by communication dated 07.09.2017, upon receipt of the notice under Section 148, requested the Assessing Officer to furnish the groun....
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....vant to the assessment year 2010-11 and the same had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 and that it was a fit case for issuance of notice under Section 148 of the Income Tax Act, 1961. The reasons also revealed that since the case is beyond four years, approval for issuance of notice under Section 148 is sought for from the Pr. CIT, Guwahati-2, Guwahati through proper channel. 36. Upon receipt of the grounds for issuance of notice under Section 147, the petitioner assessee filed a detailed objection. Thereafter, by order dated 24.10.2017, the Assessing Officer rejected the objections raised and concluded that the proceedings under Section 147 may validly initiated. 37. The findings in the impugned order dated 24.10.2017 rejecting the objections raised by the petitioner are extracted below: "Findings with reasoning and conclusion: The submission of the assessee is considered thoroughly. The purpose and object of the law behind initiation of proceedings u/s 147 is to protect the interest of venue by bringing to tax the escaped income and "reason to believe" requires relevant materials to assume that income has escaped assessment. Th....
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....tence of reasons to make the ITO believe that there had been under-assessment of the assessee's income for a particular year. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. ITO v. Selected Dalurband Coal Co. (P.) Ltd.[1996]217 ITR597 (SC); Raymond Woollen Mills Ltd. v. IT0[1999]236 ITR 34 (SC). On careful perusal of the judgements of the above two cases, it is clear that the then AO was totally justified in invoking the proceedings u/s 147 in the instant case. His 'reason to believe' was based on concrete facts and he recorded the same in a clear and unambiguous manner. He took due cognisance of the spirit of the statute as stressed upon in the Apex Court order in Central Provinces Manganese ore co Ltd v ITO [1991]191itr 662. His formation of the belief was also very much within the realm of subjective satisfaction as emphasised in ITO v. Dalurband Coal Co. (P....
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..../C-4/GHY/2017-18/1794 dated 30.10.2017 (Annexure-19) had sought for several documents. For the purposes of deciding this issue, this communication is relevant and therefore the contents of the communication is extracted below: "GOVERNMENT OF INDIA MINISTRY OF FINANCE: DEPARTMENT OF REVENUE OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4, GUWAHATI Aayakar Bhawan, 502, Fifth Floor, G.S. Road, Guwahati F.No. AAFCM4378R/DCIT/C-4/GHY/2017-18/1794 Dated 30.10.2017 To M/S Mukund Infrastructure Pvt. Ltd. Royal Arcade, B. Barroah Road, Guwahati: 781 007 Sir/Madam, Sub:-Assessment proceeding for the A.Y. 2010-11-requisition of information/documents-regarding Please refer to the above. In connection with the above assessment proceeding, you are requested to furnish/produce the following details/documents. 1. Bank statement of all Bank Accounts for the relevant period along with bank reconciliation statement if any. 2. Whether additional depreciation was claimed on new Plant & Machinery acquired and put to use? Also, submit bills/vouchers in support of your claim. 3. Furnish details in respect of the following companies from whom you have rai....
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.... Rs. 10/- and premium of Rs. 90/- and most of the allottee companies with regard to the capital raised for that particular assessment year are paper companies which exists only on paper with no genuine business of their own and most of these allottee companies belonged to one Shri Narendra Kr. Jain who is well known accommodation entry operator of Kolkata and which fact was sworn on oath by the said Shri Narendra Kr. Jain. Shri Narendra Kr. Jain provides bogus accommodation entries, bogus unsecured loans etc. in lieu cash commissions. 43. In the opinion of the Court, this information sought for by the Revenue from the assessee appears to be crucial information which will reflect whether the grounds of belief on which the proceedings under Section 147 has been initiated are found to be germane and whether it provides a vital connection thereto. However, since there are no averments made in the writ petitions, it is not known as to whether these information were furnished before the authorities. Since the proceedings came to be initiated by the Revenue by issuance of the communication dated 30.10.2017, the writ petitioner approached this Court and filed the present proceedings. This....
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....r Section 139 for the relevant assessment year or having filed failed to disclose fully and truly all material facts necessary for such assessment that the Income Tax Officer had reasons to believe that income chargeable to tax had escaped assessment for the relevant assessment year pursuant to information in his possession and therefore, the concerned Income Tax Officer may seek to re-open the assessment. 46. However, pursuant to the amendment brought in with effect from 01.04.1989, the only requirement for re-opening the assessments by an Assessing Officer, for reasons to be recorded by him in writing, is that the Assessing Officer is of the opinion that any income chargeable to tax had escaped assessment for any assessment year and that he should assess or reassess such income chargeable to tax which had escaped assessment and which came to his notice subsequently. It is evident that pursuant to the amendment brought in to the statute after 01.04.1989, the scope to re-open an assessment is wider than it was before prior to the amendment. It is thus seen that if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessmen....
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....ening of an assessment is that Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year. In the present proceedings, the information available with the Assessing Officer is the data made available from the Director of Investigation, Kolkata to the effect that the share capital raised to the tune of Rs. 1,51,00,000/- has been found to be allotted to some bogus companies which exists only on paper with no real business etc. and these bogus companies are nothing but accommodation entries in lieu of cash commissions which are furnished by one Shri Narendra Kr. Jain who is found to an accommodation provider and therefore, this information having come to the possession of the Assessing Officer, the proceedings were sought to be initiated under Section 147 by issuance of a Notice under Section 148. The data made available to the Assessing Officer by the DIT, Kolkata appears to be the "reasons to believe" for the assessing officer to initiate proceedings under Section 147. Pursuant to approval from higher authorities as required as per the statute, notice under Section 148 was issued. Although the petitioner submitted its rep....
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....e bogus companies as per the Date furnished by the DIT, Kolkata are found to be only inexistence in paper and the investigation has been carried on the basis of the statements recorded on oath by One Shri Narendra Kr. Jain who stated on oath that he is an accommodation provider who provides for bogus accommodation in lieu of cash commission. This information is recorded in the grounds which were also for initiating the proceedings under Section 147 furnished to the petitioner. 53. It is seen that pursuant to receipt of the grounds, the petitioner filed its reply before the Assessing Officer questioning the proceedings sought to be initiated. But what is seen from perusal of the grounds furnished by the assessing officer and the reply submitted by the petitioner is that in the grounds furnished by the assessing officer to the assessee writ petitioner, the grounds for re-opening of the assessments under Section 147 had clearly stated that as per the information received the petitioner assessee company has raised its capital to the tune of Rs. 1,51,00,000/- by allotment of shares with allotment of face value of Rs. 10/- and premium of Rs.90/-. As per the information received, most of....
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.... same having been accepted by the assessing officer unless there are strong grounds to suspect that income has escaped relating to the relevant assessment year, there is no scope for the respondent to proceed for initiation of the proceedings under Section 147. It is urged before this Court that the returns having been duly filed once showing it to be NIL returns and also pursuant to the search and seizure proceedings carried on, a similar NIL return having been filed and which was duly accepted by the assessing officer, there is no occasion subsequently to re-open the assessments on the basis of the said materials which were already before the assessing officer and the same having been filed. 56. The question urged before this Court in the present proceedings on the facts pleaded is that in the reasons to believe recorded by the assessing officer leading to escapement of income to the tune of Rs. 1,51,00,000/- and pursuant to which the assessing officer is proposing to re-open the assessment is based on the information subsequently made available to the assessing officer by the Director of Investigation, Kolkata and whether such information is discernable from the returns filed b....
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.... or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the officer in such circumstances is in one sense extraneous to the record. It will be information in his possession within the meaning of Section 19 of the State Act. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment or wrong assessment. 32. The expression "information" means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to reopening of assessment, if for any reason, the whole or any part of the turn....
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....loss or the depreciation allowance or any other allowance or deduction for such assessment year. Referring to the Calcutta Discount Co. Ltd. Vs. ITO, reported in 1960 SCC OnLine SC 10, it was held that there is a duty cast on the assessee for disclosing all primary facts relevant to the question. As to what can be the valid ground for reopening of the assessment, the Apex Court held that the "reasons to believe" must be based on objective materials and on a reasonable view. Referring to the Apex Court in ITO v. Lakhmani Mewal Das reported in (1976) 3 SCC 757 it was held that once there exist reasonable grounds for the Income Tax Officer to form the belief that was material for escapement of income, it will be sufficient to clothe him with a jurisdiction to issue the notice. However, whether these grounds are adequate or not is not a subject matter of the court to investigate. The sufficiency of the grounds which induce the income Tax officer to act is therefore not a justiciable ground. Again referring to the Judgment of Phool Chand Bajrang Lal Vs. ITO, reported in (1993) 4 SCC 77, it was held that after consideration of the earlier precedents on this subject, the Apex Court conc....
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....the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of Section 148-A have not been complied with." ]. Section 148, which contains the conditions for reopening assessments, including the limitation period within which notices can be issued, by its proviso, enacts that: "Provided that no notice under this section shall be issued unless there is information with the assessing officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the assessing officer has obtained prior approval of the specified authority to issue such notice." 19. Long ago, in its decision reported as Calcutta Discount Co. Ltd. v. ITO [Calcutta Discount Co. Ltd. v. ITO, 1960 SCC OnLine SC 10 : (1961) 2 SCR 241 : AIR 1961 SC 372] this Court had underscored the obligation of every assessee to make a true and full disclosure and said that : (AIR p. 376, para 9) "9. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the q....
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....ant information, and that the sufficiency of such reasons is not subject to judicial review the only caveat being that the court can examine the record, if such material existed, it was held that the facts disclosed in the return, if found later to be unfounded or false, can always be the basis of a reopening of assessment : (SCC p. 96, para 26) "26. ... appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would be travesty of justice to allow the assessee that latitude." 22. A three-Judge Bench, of this Court in CIT v. Kelvinator of India Ltd. [CIT v. Kelvinator of India Ltd., (2010) 2 SCC 723 : (2010) 1 SCR 768] after considering the previous decisions, restated the correct position as follows : (SCC p. 725, paras 5-7) "5. ... where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic i....
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....he said letter cannot be construed to be not relevant material or the basis on which the Income Tax Officer could not have reasonably formed the requisite belief. It was held that whether the facts stated in the letter are true or not is not the concerned at that stage. It may well be that the assessee may be able to establish the said facts stated in the said letter to be incorrect but that conclusion can only come after making a necessary enquiry. At the stage of issuance of notice, the question is whether there was relevant material and whether a reasonable person would have form the requisite belief. The relevant paragraphs of the said Judgment is extracted below: "3. It is well settled by various decisions of this Court that the notice under Section 148 read with Section 147 can be issued only where the Income Tax Officer has reason to believe that the income, profits or gains chargeable to tax had been underassessed or escaped assessment and further that such escapement or underassessment was occasioned by reason of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment of that year. [We are not concerned with clause (b) of S....
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....ct which are required to be satisfied. The first one is that the Income Tax Officer must have reason to believe that the income chargeable to tax has been under-assessed and such under assessment has occurred by reason of omission or failure on the part of the assessee to disclose fully and truly all materials necessary for the assessment. It may be mentioned herein that the interpretation of Section 147 was prior to the amendment brought in 1989. It was held that the final outcome of the proceedings is not relevant. What is relevant is the existence of reasons for the Income Tax Officer to believe that there has been under-assessment for the assessee's income for a particular year. 62. In the present proceedings, the returns which were stated to have been filed before the assessing officer and copies of which are enclosed to the petition does not reflect the breakup of the share capital distributed and/or the allottees of the share holders. This is generally not available in the balance-sheet or the other accompanying financial statements furnished unless these are specifically called for. The income tax being a self-assessment tax, ordinarily whatever returns are filed by the as....
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....the very provision of Section 147 more particularly after the amendment with effect from 01.04.1989 whereby the scope of re-opening on assessment by the Assessing Officer stood widened giving powers to the assessing officer to re-open assessment if the assessing officer has reason to believe that income for any assessment year has escaped assessment. The only requirement is that of recording of such reasons as well as taking the statutory precautions for sanction by higher authority and furnishing a copy of the reasons recorded by the Assessing Officer to the assessee. All these steps have been duly undertaken by the Revenue. 65. As have been discussed in the forgoing paragraphs, the reply filed by the assessee also does not disclose any material prima facie come to a conclusion that the reason to believe enabling the assessing officer to proceed for re-opening of the assessment under Section 147 is found to be prima facie uncalled for or unwarranted. In that view of the matter the contentions raised by the petitioner stands rejected. In view of the discussions and conclusions arrived at by this Court in the foregoing paragraphs, the Judgments referred to by the learned counsel fo....