TaxTMI 
TaxTMI 
2001 (4) TMI 172
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....point of jurisdiction shall be decided before hearing the merit. Hon'ble High Court had set a time-limit of three months, for completion of hearing by the Tribunal, from the date of receiving order dt. 11th Dec, 2000. Accordingly, the appeals were fixed, on out of turn basis, for 31st Jan., 2001. However, Shri S.P. Choudhury, counsel for the assessee, moved an adjournment petition dt. 22nd Jan., 2001, which inter alia, stated as follows: "That the above appeals have been fixed for hearing-on 31st Jan. 2001, but as I am leaving Calcutta today to have a holy bath at Kumbh Mela and will be returning on 31st Jan., 2001, it will not be possible for me to appeal and argue the appeals on 31st Jan., 2001. Under the above mentioned facts and circumstances, your good selves are requested to adjourn the hearing of appeals on 31st Jan., 2001, and refix the same after 31st Jan., 2001, at your convenience." Accordingly, the appeals were posted for hearing on 8th March, 2001, but, even on this date, the appeals could not be heard. Record of proceedings for that day are as follows: "8th March, 2001 The case is adjourned to 28th March, 2001, at the request of the assessee's counsel. &....
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..... Let us first summarize the material facts. The assessee is a private limited company engaged in the business of constructing residential complexes and selling flats therein. In the relevant previous years, the assessee sold the flats upon construction in its premises at 201-297, Jodhpur Park, Calcutta, 14 MT Road, Calcutta, 110, H.K. Sarani, Calcutta, and 2 NB Lane, Calcutta. Income-tax assessment for the asst. yrs. 1990-91 and 1991-92 were completed under s. 143(3) the Act, and assessment for the asst. yr. 1993-94 was processed under s. 143(1)(a). It is also not in dispute that audited accounts were duly furnished for all these years and that the assessee attended satisfactorily to all the queries made by the AO during the course of scrutiny proceedings under s. 143(3) of the Act. The assessments for all these years were reopened on 2nd May, 1995, on the basis of Departmental Valuer's report obtained after completion of original assessments. The reasons recorded for reopening the assessment for the asst. yr. 1991-92, which are materially identical to the reasons for reopening of assessments for other years also, are reproduced below: "During the F.Y. 1990-91 (asst. yr. 1991-9....
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....tances of concealed income or other income escaping assessment in large number of cases comes to the notice of the IT authorities after the assessment is completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right to appeal and revision, finality of orders made in judicial and quasi judicial proceedings. It is, therefore, essential that before such action is taken, requirement of law should be satisfied." Earlier in the same order, Their Lordships have observed that 'the reason for formation of belief must have rational connection with or bearing on formation of belief'. Rational connection was said to postulate that there must be direct nexus and live link between material coming to the notice of the AO and formation of belief that there is some escapement of income. We may also refer to the observations of Hon'ble Gauhati High Court, in the case of Bhola Nath Majumdar vs. ITO (1996) 137 CTR (Gau) 198 to the effect that a valuation report is only an opinion of valuer. It is further stated that the same can neither amount to 'information nor to 'reason to believe' that any income has escaped assessment. The condition pr....
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....en of showing that there is no understatement of consideration, on the assessee would be to cast an impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him." In our view, therefore, merely because a DVO report support higher fair market value of the floor space than the sales price disclosed by the assessee, it cannot be said there is any reason to believe that any income has escaped assessment. As observed by the Hon'ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das, there has to be direct nexus and live link between material coming to the notice of the AO and formation of belief that there is some escapement of income. To our mind, there is no such direct nexus between DVO report and ascertaining suppressed sale amount of the related flats. The reasons of reopening, therefore, cannot be said to be relevant for that purpose. 10. In the case of N.R.K. Ramkumar Raja vs. CIT (1999) 106 Taxman 81 (Mad) Hon'ble Madras High Court has, while dealing with s. 147 as it exists today, observed as follows: "The words 'AO has reason to believe' should be read with reference to the other provisions of the ....