COMMISSIONER OF INCOME TAX V. MS SAHIL KNIT FAB.

ITA/45/2007

AI Insights

The case involves the Commissioner of Income Tax, Shimla, as the appellant, and M/s. Sahil Knit Fab as the respondent. The core issue was the validity of the reopening of an income tax assessment for the year 1998-1999 under Sections 147 and 148 of the Income Tax Act, 1961. The Assessing Officer had initially disallowed deductions claimed by the respondent and later reopened the assessment, suspecting underreporting of income based on a high gross profit ratio. The Commissioner of Income Tax (Appeals) and the Tribunal both found that the reopening was unjustified, leading to the Revenue's appeal to the High Court. The High Court, referencing several Supreme Court decisions, concluded that the Assessing Officer's belief was not based on concrete evidence but rather on a change of opinion, thus upholding the Tribunal's decision.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 739573 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 14-03-2012
• Assessment Year: misc
• Other Referred Cases: Sri Krishna (P) Ltd. vs. Income Tax Officer, Chugamal Rajpal vs. S.P. Chailiha & Others, Smt.Rina Sen Vs. CIT, Ganga Saran & Sons (P) Ltd. vs. ITO, Indian Oil Corporation vs. Income Tax Officer, Central Circle V, Calcutta and Others, IPCA Laboratories Ltd. vs. Gajanand Meena, Deputy Commissioner of Income Tax and Others, Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P.Ltd., Shyam Bansal vs. Assistant Commissioner of Income-Tax, Kelvinator of India Ltd. vs. Commissioner of Income-Tax, Eicher Ltd. vs. Commissioner of Income-Tax, Ankita Deposits and Advances Pvt.Ltd. vs. Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VISHAL MOHAN; R L THAKUR
• Assessee Lawyers: VANDANA KUTHIALA
• Keywords: Deductions; Gross Profit; Income Tax; Investigation; Jurisdiction; Reassessment; Verification
• Section: 147; 148; 143(3); 271(1)(c); 80-1A; 260-A

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA ITA No.45 of 2007. Date of decision: 14.03.2012 Commissioner of Income Tax, Shimla … …Appellant Versus M/s.Sahil Knit Fab, 72A, HPSIDC, Indl.Area, Baddi, Distt. Solan. … …Respondent Appeal u/s 260-A of the Income Tax Act, 1961. Coram The Hon’ble Mr.Justice R.B. Misra,J. The Hon’ble Mr.Justice Dev Darshan Sud,J. Whether approved for reporting ?1 Yes. For the Appellant: Ms.Vandana Kuthiala, Advocate. For the Respondent: Mr.Vishal Mohan, Advocate with Mr.R.L. Thakur, Advocate. Dev Darshan Sud,J. This is the Revenue’s appeal against the order passed by the learned Tribunal affirming the order in appeal preferred by the assessee-respondent partly allowing the appeal. 2. The brief facts which we notice for the determination of this case are that the Assessing Officer proceeded to assess the income of the respondent-assessee herein disallowing deductions under Section 80-1A of the Income Tax Act, 1961 (hereinafter referred to as `Act’). The Assessing Officer holds 1 Whether the reporters of Local Papers may be allowed to see the judgement? Yes. 2 that the respondent was engaged in business of manufacturing of knitted cloth from yarns and has thereafter discontinued his business/operations in Baddi and moved out. 3. The order was passed under Section 143(3)/147 of the Act. The Assessing Officer noticed that the assessee had filed return for the assessment year 1998- 1999 declaring nil income after claiming deduction of Rs.61,32,678/- under Section 80-1A of the Act. The return was processed under Section 143(1) of the Act. The Assessing Officer had reason to believe that the income of the respondent had escaped assessment because of the failure on the part of the assessee/respondent to disclose all material facts truly and fully which required further investigation. Consequently, the case was taken for re-assessment under Section 147 and notice under Section 148 of the Act was issued to the assessee. The Assistant Commissioner then noticed that neither the wages and attendance registers of the workers nor any details about their numbers and remuneration drawn have been produced and in this event, proceeded to disallow the exemption claimed this, coupled with the fact that the assessee has declared gross profit of Rs.67,11,564/- on net sales of Rs.1,73,23,023/- making the gross profit ratio at 38.74%, he holds that this is an astonishingly high rate which is not comparable to any other similar case in the line of business of the assessee. Copy of the 3 assessment order is filed as Annexure A-1. The entire amount of deduction claimed was taken as income of the assessee and proceedings under Section 271(1)(c) of the Act for concealment of income were directed to be initiated. 4. The respondent preferred an appeal before the Commissioner of Income Tax, who allowed the appeal partly. One of the grounds urged for adjudication was that the Assessing Officer had no jurisdiction under Sections 147/148 of the Act to reopen assessment after a period of six years. A number of decisions were relied upon by the assessee. The Commissioner notes that the return was processed under Section 143(1) of the Act on 15.10.1999. The Union of India had introduced this provision after reposing confidence in the tax-payers who were expected to make a fair disclosure of facts. It also exempted their personal appearance. It was urged that the grounds for invocation of jurisdiction for reopening and re- assessing under Sections 147/148 of the Act were ultra vires the Act. The reasons which have been reproduced by the Commissioner in his order, as furnished by the Assessing Officer, are that there is a high rate of gross profit disclosed by the assessee which may mean that the assessee is suppressing manufacturing and administrative expenses or not debiting genuine expenses in his accounts. The purchase rates of raw material and sale rates of finished goods were required 4 to be verified, the fact that whether the assessee has fulfilled the conditions of eligibility for exemption under Section 80-1A was also required to be verified/ascertained. One fact urged was that the expenses incurred under the head wages were not sufficient to engage 10 workers throughout the year. The manufacturing expenses debited were very meager. The Commissioner holds that the case of verification and investigation falls beyond the purview of the said provisions of the Act for the reasons he adopts. He holds that the power under Section 147 is wide but not plenary and unbridled and is hedged in with several safeguards, which have to be followed. The order then proceeds that there must be material for forming the belief and circumstances must exist and cannot be assumed for the purposes of exercise of jurisdiction for reopening assessment. The crucial words used are `reasons to believe’ and the order does not satisfy the legal requirements to invoke jurisdiction as resorted to. He takes into consideration a number of decisions on the point; namely; Sri Krishna (P) Ltd. vs. Income Tax Officer, (1996) 221 ITR 538 (SC), Chugamal Rajpal vs. S.P. Chailiha & Others, (1971)79 ITR 603 (SC), Smt.Rina Sen Vs. CIT (1998)101 Taxman 151 (Patna). 5. In a nutshell what the Commissioner held was that the powers could not be used to exercise jurisdiction simply for proceeding on a roving or fishing inquiry. Adverting to the decision of the 5 Supreme Court in Ganga Saran & Sons (P) Ltd. vs. ITO 112: (1981) 130 ITR 1(SC), where it was held that expression `reason to believe’ must be stronger than the words `satisfied’ which in the present case were missing. The Commissioner then holds that the reasons recorded by the Assessing Officer are inferential and belief according to the inferences drawn by him is not on the basis of any evidence or information on record. He then proceeds that comparison of book results of M/s.Shivam Knit Fab for the assessment year 2003-2004 with the book results of the appellant-assessee for the year 1998-1999, based on this the Assessing Officer restricted the claim of the appellant to 14% of the net profit and worked out the eligible profit under Section 801A at Rs.24,25,223/-. There was no evidence on record to show as to how this could be applied to the assessee. The Assessing Officer has also ignored the fact that in the assessment year 2001-02, the gross profit of 31.24% has been accepted and the comparison of gross profit of M/s.Shivam Knit Fab, Baddi, for the assessment year 2003-04, could not be used to assess the gross profit of the respondent for the year 1998-99 which is after the gap of five years as also without consideration of changed business environment. This was illogical and an unrealistic comparison. The Commissioner then further holds that the Assessing Officer has mentioned that the books of accounts were produced and were subjected to scrutiny by way of test 6 check method. The Assessing Officer has failed to indicate anything on record, any discrepancy either in the method or in the manner of accounting or in the maintenance of the accounts books which were duly supported by bills and vouchers. He then proceeds to calculate the expenses on the basis of minimum wages payable etc. and determining as a fact that the correct fact situation has not been determined by the Assessing Officer. The assessment order was set aside. 6. The Revenue appealed to the learned Tribunal. Three grounds were urged in support of the appeal as detailed in its order, as under:- (a) The first being briefly summarized, that the Commissioner of Income Tax (Appeals) was not justified in quashing the initiation of proceedings under Section 147 of the Act by holding that notice under Section 148 was issued for verification and investigation, whereas the Assessing Officer has noticed that the assessee has claimed incorrect and excessive deduction under Section 801B; (b) That the Commissioner had erred in holding that the deduction in fact as claimed could be allowed to be set off against the income disclosed. (c) That the Commissioner had erred in admitting additional evidence 7 (wages register) in violation of the provisions of Rule 46A of the Income Tax Rules. 7. The learned Tribunal proceeded to discuss the facts in detail as noted by the Commissioner while disposing of the appeal before it. Reliance was placed upon the judgment of this court in Green World Corporation vs. ITO, ITR 118(HP) to contend that higher profits were disclosed to take undue advantage of the deductions permissible under the provisions of the Income Tax Act. A number of decisions were also cited by the respondent in support of its contention. 8. We find that the Tribunal records as an undisputed fact that the assessee had filed return for the assessment year 2000-2001 which was processed under Section 143(1) of the Act and assessed under Section 143(3) of the Act and had recorded that the conditions for grant of deduction under Section 80-1B were satisfied. It then paraphrases the reasons for reopening the assessment which are:- (i) “That the assessee had disclosed abnormal GP at 38.7% and net rate of profit at 35.4%. According to the AO, such a high rate of profit appears to have been worked out by either suppressing the manufacturing and administrative expenses or not debiting even genuine expenses. 8 (ii) That whether the assessee fulfils the conditions eligible for deduction u/s 801A or not are to be investigated & (iii) That the expenses on wages amounting to Rs.2.58,040 are too low for engaging 10 or more workers in the business of manufacturing of articles and things.” 9. The learned Tribunal then proceeds that whether the net rate of profit of 35.4% is reasonable or unreasonable would depend upon the facts and circumstances of each case. We cannot fault with this reasoning of the learned Tribunal as this is a question of fact to be arrived at on the material on record. The learned Tribunal then holds that the Assessing Officer has not referred to any comparable case in the “reasons recorded” to justify reopening of assessment on the ground that the profit rate declared by assessee was unacceptable. Learned Tribunal also holds that the Assessing Officer had already made the assessment in the case of the assessee for the assessment years 2000- 2001, 2001-2002 under Section 143(3) where profit rate disclosed in both the assessment years was between 30% and 34%. It was the assessee’s own case which was comparable and not that of any other firm/business activity for which he had no material on the record and in these circumstances, there was no justification in invoking the provisions of Sections 147/148 of the Act. 9 10. On the second ground urged, the learned Tribunal holds that fulfillment of the conditions under Section 80-1A were to be investigated by the Assessing Officer and reopening of the assessment was not permissible. If the return of income was required to be verified, the Assessing Officer was entitled to issue notice under Section 143(2) and then to proceed under Section 143(3) on the basis of the material gathered by him. The books of accounts were examined and in this view of the matter the jurisdiction for reassessment could not be invoked. 11. On the last point urged that under Rule 46A no opportunity was given to the Assessing Officer, the case was restored to the file of the Commissioner for decision on merits. It was directed that the Commissioner of Income Tax(Appeals) would not decide the issue until and unless the decision for reopening the assessment under Section 147 of the Act is not reversed by any superior Court. This in nutshell is a case put forth before the Tribunal. 12. It is in these circumstances that we are called upon to test the legality of the orders passed by the Tribunal. 13. What we are concerned with in this case is the scope and ambit of the jurisdiction of the Assessing Officer under Sections 147 and 148 of the Act. This issue is no longer res-integra and has engaged the attention of Courts in a number of cases. 10 We do not intend to multiply precedent but only refer to some of the cases. We first advert to the decision of the Supreme Court in Indian Oil Corporation vs. Income Tax Officer, Central Circle V, Calcutta and Others, (1986)3 SCC 409. The Court holds:- “25. The principles on this branch of law are well settled. 26. To confer jurisdiction under clause (a) of Section 147 of the Act beyond the period of four years but within a period of eight years from the end of the relevant year under Section 148 of the assessment year, two conditions were required to be fulfilled : first is that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to tax had been under-assessed or escaped assessment; the second was that he must have reason to believe that such escapement or under -assessment was occasioned by reason so far as relevant for the present purpose to disclose fully and truly all material facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied. See in this connection the observations of this Court in Calcutta Discount Co. Ltd. v. I T O, AIR 1961 SC 372. The obligation, therefore, of the assessee primarily was to disclose fully and truly all material and relevant facts; that the obligation was only of disclosing the basic facts but not obligation to disclose what inference had to be drawn from such 11 facts. It was further observed by Hidayatullah, J. as the learned Judge then was, that the mere production of evidence before the Income-tax Officer was not enough and there might be an omission or failure to make a full and true disclosure, if some material for the assessment lay embedded in that evidence which the assessee could uncover but did not. If there was such a fact, it was the duty of the assessee according to the said learned Judge to disclose it. There was difference of opinion amongst the learned Judges in that case on certain aspect but for the purpose of this appeal it is not necessary to refer to the same. 33. As is well settled now by the several authorities of this Court and of several High Courts, that there must be materials to come to the conclusion that there was 'omission or failure to disclose fully and truly all material facts necessary for the assessment of the year. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, an obligation is to disclose facts; secondly those which are material; thirdly the disclosure must be full and fourthly true. What facts are material and necessary for assessment will differ from case to case. In every assessment proceedings, for computing or determining the proper tax due from the assessee, it is necessary to know all the facts which help the assessing authority in coming 12 to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed or otherwise, the assessing authority has to draw inferences as to certain other facts. But one of the primary facts (sic tasks) of the taxing authority is to draw inferences. It is not necessary for the assessee to draw inferences for him. See in this connection the observations in Calcutta Discount Co. Ltd.'s case (AIR 1961 SC 372) (supra). (pp.418-419, 421-422) 14. On the facts of the case, the Court held that the learned Single Judge of the High Court had noted the relevant provisions of law and held that all the facts in possession of the assessee were placed before the taxing authority prior to the finalising of the assessment and after having accepted the claim inspite of non-production of the relevant auditors’ certificate which was asked for at one stage, it was not open to the Revenue to turn around and say that the income of the assessee had escaped assessment or been under- assessed due to the failure of the assessee to disclose those very auditors’ reports. Under-assessment was due to the laches on the part of the Revenue and not due to any omission on the part of the assessee and notice issued under Section 148 was quashed. This was 13 challenged before a Division Bench of the Calcutta High Court which held that: “23. … … … … … the assessee had failed to disclose: (1) the basis of allocation of expenses; (2) correspondence between the London principal and the assessee- company on the relevant subject; (3) existence of auditor’s certificate fixing percentage that would be reasonable for allocation in respect of the subsidiary companies including the assessee. These were some of the important materials which the assessee failed to disclose.” (p-418) 15. The Supreme Court quashed the order of the Division Bench upholding the order of the learned Single Judge. 16. Considering the facts in this case the Supreme Court, upholding the decision of the learned Single Judge of the High Court of Calcutta, held:- 21. The learned single Judge of the High Court noted the relevant provisions of law and was of the opinion that all the facts in the possession of the assessee were placed before the taxing authority prior to the making of the assessment. It was held that it was for the taxing authority either to accept the claim or to reject the claim either wholly or in part. After having accepted the claim in spite of the non-production of the 14 relevant auditor's certificate which was asked for at one stage, it was held that the revenue could not later turn round and say that the income of the assessee had escaped assessment or been under assessed due to the failure of the assessee to disclose those very auditors' reports. The learned Judge felt that the underassessment, if any, was due to the laches of the revenue and not due to any act or omission on the part of the assessee and notices under Section 148 had to be quashed. (p-416) 17. The Supreme Court, then proceeded further holding that the information in possession of the Income Tax Officer, as noted by the learned Single Judge, might have been good ground for action under clause (b) of sub-section (1) of Section 147 of the Act, but it could not be treated as good ground for reopening under clause (a) of sub-section (1) of Section 147 on the ground that there was failure or omission on the part of the assessee to disclose fully and truly all relevant and material facts. 18. In IPCA Laboratories Ltd.vs.Gajanand Meena, Deputy Commissioner of Income Tax and Others, (2001)251 ITR, 420, the expression `reason to believe’ was the subject matter for consideration before the Bombay High Court. The Court holds:- “… … … …We may also mention that the expression “reason to believe” refers to 15 the belief which prompts the Assessing Officer to apply section 147 to a particular case; that it will depend on the facts of each case; that the belief must be of an honest and reasonable person, based on reasonable grounds; that the Assessing Officer is required to act, not on mere suspicion, but on direct or circumstantial evidence; that the expression “reason to believe” does not mean a subjective satisfaction on the part of the Assessing Officer. … …” (pp.425-426) 19. In Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P.Ltd., (2007)291 ITR 500 (SC), the Supreme Court considered the ambit and scope of Section 143(1)(a), (3) and Section 147. The Court holds:- “16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word “reason” in the phrase “reason to believe” would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public 16 exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is \u0001reason to believe\u0001, but not the established fact of escapement of income. 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 (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 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 17 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 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 of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. “ (pp.511-512) 18 20. Reliance was also placed by the Revenue on the decision of the Allahabad High Court in Shyam Bansal vs. Assistant Commissioner of Income-Tax, (2008)296 ITR 25(All) which we need not consider in detail as the principles are now well settled by the Supreme Court in the cases (supra) which have been reaffirmed in Commissioner of Income-Tax vs. (1) Kelvinator of India Ltd. (2) Eicher Ltd., (2010)320 ITR 561(SC) holding:- “6. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from Ist April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-Ist April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words “reason to believe” failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; 19 he has the power to reassess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer. Hence, after Ist April, 1989, the Assessing Officer has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words “reason to believe” but also inserted the word “opinion” in section 147 of the Act. However, on receipt of representations from the companies against omission of the words “reason to believe”, Parliament reintroduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated October 31, 1989 (1990) 182 ITR (St.) 1, 29), which reads as follows: “7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe’ in section 147.-A number of representations were received against the omission of the words `reason to believe’ from section 147 and their substitution by the 20 `opinion’ of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe’ had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe’ in place of the words `for reasons to be recorded by him in writing, is of the opinion’. Other provisions of the new section 147, however, remain the same.” (pp.-564-565) 21. Learned counsel relies upon the decision of the Supreme Court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers Private Limited, (2008)14 SCC 208. There, again, the provisions of Sections 147, 148 to 152 were considered by the Supreme Court by holding:- “21. The scope and effect of section 147 as substituted with effect from 1.4.1989, 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 21 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 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 of only the first condition suffices. In other words if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 22. So long as the ingredients of section 147 are fulfilled, the assessing officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 23. Inevitable conclusion is that the High Court has wrongly applied Adani case which has no application to the case on the facts in view of the conceptual 22 difference between Section 143(1) and Section 143(3) of the Act.” (pp.217-218) 22. Lastly, Shri Vinay Kuthiala relies upon the decision of this Court in Income Tax Appeals Nos.33 of 2008 and 34 of 2008, titled: Ankita Deposits and Advances Pvt.Ltd. (In both cases) vs. Commissioner of Income-tax (In both cases), where this Court also held:- “In view of the law laid down above, it is apparent that the powers of the Assessing Officer to reopen assessment are very wide. True it is that the word `reason to believe’ does not mean a mere change in opinion. If the Assessing Officer has at any time expressed an opinion or come to a finding on the facts before him and decided the matter in a particular way then just because a different interpretation is possible the Assessing Officer may not have the power to issue a notice under Section 148. However, in case, no opinion has been expressed then whatever be the reason as long as they prima facie satisfy the conscience of the Court, the Court would not interfere in the issuance of a notice……” 23. We need not consider any other precedent as the law settled by the Supreme Court is clear on the point. It is not the mere whim or opinion of the Assessing Officer which would entitle him to invoke the powers for re-opening assessment. 23 24. From the order of the Tribunal, what we find is that after paraphrasing the reasons set out by the Assessing Officer for reopening the assessment proceedings, the learned Tribunal holds that: (a) whether the net rate of profit of 35.4% is reasonable or unreasonable depends upon the facts and circumstances of each case. The Assessing Officer does not indicate as to how this ground for reopening exists. The Tribunal then holds that the Assessing Officer had already proceeded to accept the returns of the respondent herein for the assessment years 2000-2001, 2001-2002 under Section 143(3) where the profit rate disclosed was between 30% and 40%. The assessee’s own case was comparable as an indicator/factor which should have been taken into consideration and not that of any other assessee for a different period which could not be the foundation or the reason to reopen assessment. We may not go that far but we hold that when this high rate of profit is accepted in subsequent assessment years, mere high profit without anything more could not be the ground for reopening assessment. Comparison with another firm for a different assessment year subsequent to the assessment year, in which the case of the respondent was sought to be reassessed, cannot form the ground for ordering reassessment. The second ground urged that the eligibility of the assessee for deduction under Section 80-1A could be claimed only after fulfilling mandatory conditions required, the 24 learned Tribunal holds that reopening of assessment is permissible to bring to tax escaped income and not to make investigation or verification. The Tribunal upholds the decision of the Commissioner Income Tax(Appeals) that if the return filed by the assessee is required to be verified by the Assessing Officer which what is required is notice under Section 143(2) and to proceed with assessment under Section 143(3) on the basis of material gathered by him. 25. Adverting to the factual situation, where the Assessing Officer holds that expenditure on wages of Rs.2,58,040/- was not sufficient to defray the wages of ten or more workers, the observation of the Assessing Officer was wrong. The Tribunal finds as a fact that the minimum wages required to be paid to the workers in the previous year which was subject matter of assessment proceedings was Rs.1641/- per month for ten workers, which would make it at an aggregate Rs.16,410/- per month was correct. The Assessing Officer had recorded that assessee had started production in October, 1997 and in this event, wages were required to be paid only for six months and on the basis of the material before the learned Tribunal, it is worked out to Rs.98,460/- and not Rs.2,58,040/- as held by the Assessing Officer. The learned Tribunal then proceeded to hold that the reason to believe would not mean suspicion as laid down by the Supreme Court in ITO vs. Lakhmani Mewa Das 103 ITR 437 (SC) and Indian 25 Oil Corpn. vs. ITO, 159 ITR 956(SC). In this view of the settled position we cannot accept that the Assessing Officer was right in reopening assessment. We hold that as held in Kelvinator’s and Eicher’s case, reason to believe cannot be interpreted to mean mere just opinion. We, therefore, concur with the reasoning of the learned Tribunal. 26. On the last submission that there has been violation of Rule 46A of the Income Tax Act, we do not find any fault with the reasoning of the learned Tribunal. We, accordingly, answer the question against the Revenue and in favour of the assessee. The order of the Commissioner as affirmed by the Tribunal is upheld. (R.B. Misra) Judge. March 14, 2012. (Dev Darshan Sud) (aks) Judge. . "