Banwari Lal Jain, Kanpur V. Income Tax Officer-1(1), Kanpur

ITA 121/LKW/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4052 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Depreciation; Transfer pricing; Search and seizure; International transaction; Tangible material; Fair market value; Difference of opinion; Valuation report; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 50C; 147; 148; 139

Judgement Text

IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC , LUCKNOW BEFORE SHRI P. K. BANSAL, ACCOUNTANT MEMBER ITA NO. 12 1 / LKW /201 6 BANWARI LAL JAIN 61/203, CANAL ROAD, KANPUR PAN: - AAOPJ 3052 D ASSESSMENT YEAR S : 20 07 - 08 VS. INCOME TAX OFFICER - 1(1) KANPUR (APPELLANT) (RESPONDENT) O R D E R 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WEL L AS THE MATERIAL AND THE RELEVANT PROVISION S OF THE I NCOME T AX A CT. I HAVE ALSO GONE THROUGH THE CASE LAW S AS HAS BEEN RELIED ON BEFORE ME FROM BOTH SIDES . I NOTED IN THIS CASE THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S 147 BY RECORDING THE FOLLOWING REASONS: - PER P. K. BANSAL , A .M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - I KANPUR , DATED 22.12.2015 FOR A SSESSMENT Y EAR 20 07 - 08 . 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATE TO THE VALIDITY OF THE INITIATION OF THE PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961. APPELLANT BY SHRI ASHISH JAISWAL, ADV. RESPONDENT BY SHRI AMIT NIGAM, D.R DATE OF HEARING 09.08.2016 DATE OF PRONOUNCEMENT 11.08.2016 IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 2 ASSESSMENT IN THIS CASE COMPLETED ON 31.12.2009 U/S 143(3) ON TOTAL INCOME OF RS. 1,54,910/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE SOLD DURING THE PREVIOUS YEAR PLOT NO. 10 BLOCK K, GOVIND NAGAR, KANPUR MEASURING 800 SQ.YDS. TO THE FOLLOWING TWO PARTIES, 400 SQ.YDS. EACH FOR A SALE CONSIDERATION OF RS. 13,50,000/ - EACH TOTALING TO RS. 27,00,0 00/ - AS AGAINST RS. 53,51,040/ - AS PER VALUE TAKEN BY THE STAMP AUTHORITIES: - 1. SHRI KRISHNA MANI DEO SINGH 125/53, K BLOCK, GOVIND NAGAR, KANPUR. 2. SHRI SANJAY KUMAR GUPTA, I - 12, MOTI VIHAR, KAKADEO, KANPUR . FROM THE PERUSAL OF THE COMPUTATION OF CAPITAL GAINS IT IS SEEN THAT THE ASSESSEE HAS TAKEN THE AMOUNT OF SALE CONSIDERATION AT RS. 27,00,000/ - AS AGAINST THE VALUATION TAKEN BY THE STAMP AUTHORITIES AT RS. 53,51,040/ - . ON THE REQUEST OF THE ASSESSEE THE PROPERTY WAS REFERRED TO THE VALUATIO N CELL AND THE DEPTT. VALUATION OFFICER HAS VALUED THE PROPERTY AT RS. 31,03,604/ - AGAINST THE AMOUNT OF RS. 27,00,000/ - SHOWN BY THE ASSESSEE. SINCE THE VALUE DETERMINED BY THE VALUATION CELL HAS TO BE ADOPTED IN VIEW OF PROVISIONS OF SECTION 50C OF THE I .T. ACT, 1961 THEREFORE, THERE IS A DIFFERENCE OF RS. 4,03,604/ - IN THE INCOME DISCLOSED BY THE ASSESSEE. THUS THE ASSESSEE HAS DECLARED THE INCOME FROM CAPITAL GAINS SHORT BY RS. 4,03,604/ - . THEREFORE, I HAVE REASON TO BELIEVE THAT THE INCOME OF RS. 4,03, 604/ - CHARGEABLE TO TAX FOR THE A.Y. 2007 - 08 HAS ESCAPED ASSESSMENT. IN THIS REGARD NECESSARY APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX RANGE 1, KANPUR HAVE OBTAINED. ISSUE NOTICE U/S 148 OF THE I.T. ACT, 1961. 4. BEFORE DECIDING THE ISSUE INVOLVED, IT IS EXPEDIENT TO DISCUSS THE RELEVANT PROVISION OF SECTION 147. THE RELEVANT PROVISION OF SECTION 147 ARE REPRODUCED AS UNDER: - 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 PROCEEDIN GS UNDER THIS SECTION OR RECOMPUTED THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 3 (HEREIN AFTER IN THIS SECTION AND IN SECTION 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YE AR ) : 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 RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 14 8 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THE ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUBJECT MA TTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. EXPLANATION 1. PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DI SCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISIO. EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT, NAMELY: - (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AM OUNT WHICH IS NOT CHARGEABLE TO INCOME TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMEN T HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REPORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E; IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 4 (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT - (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (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 THIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE R EASONS RECORDED UNDER SUB - SECTION (2) OF SECTION 148. EXPLANATION 4. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISION OF THIS SECTION, AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON O R BEFORE THE 1 ST 6 . THE QUESTION WHETHER THE A.O. HAD REASON TO BELIEVE IS A QUESTION OF JURISDICTION. THE EXPRESSION REASON TO BELIEVE AS CONTAINED IN SEC. 147 OF THE ACT DOES NOT MEAN PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE A.O. BUT IT DAY OF APRIL, 2012. 5. FROM READING OF THIS SECTION, IT IS APPARENT THAT THIS SECTION EMPOWERS THE A.O. TO ASSESS OR RE - ASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THIS SECTION AUTHORIZES THE A.O. NOT ONLY TO RE - ASSESS BUT ALSO TO ASSESS THE ASSESSEE IN RESPECT OF AN INCOME WHICH ESCAPED ASSESSMENT. FOR INITIATING THE PROCEEDINGS UNDER THIS SECTION, NO DOUBT THERE MUST BE REASON TO BELIEVE. REASON TO B ELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE A.O. HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, IT CAN BE SAID THAT ASSESSING OFFICER HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 5 MEANS THAT THE BELIEF MUST BE HELD I N GOOD FAITH AND IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASON TO BELIEVE HAS A RATIONAL CONNECTION OR BEARING TO THE FORMATION OF THE BELIEF OR IS BASED ON IRRELEVANT OR EXTRANEOUS CONSIDERATION. THE WORDS ARE NOT REASON TO SUSPECT. THERE MUST BE MATERIAL RELEVANT TO THE INCOME ESCAPED BY THE ASSESSEE ON THE BASIS OF WHICH THE A.O. MUST FORM PRIMA FACIE BELIEF. THE A.O. HAS NOT TO PROVE AT THE TIME OF RECORDING OF THEREASONS THAT THE INCOME HAS ACTUALLY ESCAPED ASSESSMENT BUT THERE MUST BE MAT ERIAL RELEVANT TO THE ASSESSEE ON THE BASIS OF WHICH ONE MAY FORM PRIMA FACIE OPINION THAT THE ASSESSEE HAS ESCAPED INCOME FROM ASSESSMENT. IN RAJESH JHAVERI STOCK BROKERS (P) LTD. CASE, 291 ITR 500 THE HONBLE SUPREME COURT HELD THAT THE EXPRESSION REASO N TO BELIEVE MEANS CAUSE OR JUSTIFICATION AND THAT IF THE ASSESSING OFFICER HAD A CAUSE OR JUSTIFICATION TO KNOW THAT INCOME HAD ESCAPED ASSESSMENT IF COULD BE SAID THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION REASON TO BELIEVE CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER HAD FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED , IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. THE SUPREM E COURT HELD THAT AT THE SAGE OF ISSUANCE OF NOTICE, THE ONLY QUESTION TO BE CONSIDERED WAS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. WHETHER THE MATERIAL WOULD CONCLUSIVELY PROVE ESCAPEMENT OF INCOME WAS NOT THE CONCERN FOR THE COURT TO LOOK AT THAT STAGE. THIS IS BECAUSE THE FORMATION OF BELIEF WAS WITHIN THE REALM OF SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. 7 . I HAVE CAREFULLY GONE THROUGH THE REASONS RECORDED AS WELL AS THE ORDER OF THE CIT(A), I NOTED THAT IN THIS CASE THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) AGAINST THE RE - ASSESSMENT BUT THE LD. CIT(A) DID NOT FIND ANY IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 6 IN FIRMITY WITH THE ISSUE OF THE NOTICE U/S 148 AND HELD IT TO BE VALID. THE ASSESSEE CHALLENGED THE ORD ER OF THE LD. CIT(A) ON THE GROUND THAT THE LD. CIT(A) WAS WRONG IN NOT HOLDING THE INITIATION OF THE PROCEEDING U/S 147 TO BE INVALID. 8. THE REVENUE CHALLENGED THE ORDER OF CIT( A) ON THE GROUND THAT CIT(A) WAS WRONG IN ANNULLING THE ASSESSMENT MADE U/S 147/143(3) JUST ON TECHNICAL REASONS WITHOUT GOING INTO THE MERITS OF THE CASE RELYING ON THE ORDER OF THE HON'BLE MADRAS HIGH COURT AS REPORTED IN THE CASE OF AREVA T AND D INDIA LTD. VS. ASST. CIT, 294 ITR 233 ( SUPRA ). THE TRIBUNAL ALTHOUGH SET ASIDE THE ISSUE TO THE FILE OF CIT(A) TO RE - DECIDE THE SAME AFTER TAKING INTO CONSIDERATION THE DECISION OF HON'BLE MADRAS HIGH COURT IN AREVA T AND D INDIA LTD. VS. ASST. CIT REPORTED IN 294 ITR 233 ( SUPRA ). WHILE SETTING ASIDE THE ORDER TO THE FILE OF CIT(A), THE TRIBUNAL STATED THAT THE ASSESSEES ARE AT LIBERTY TO SUBSTANTIATE THEIR CLAIMS, BOTH LEGALLY AS WELL AS ON MERITS. THIS IS A FACT THAT IN THIS CASE THE CIT(A) VIDE ITS ORDER D T. 7.3.2007 HAS NOT DECIDED THE OTHER GROUNDS TAKEN BY THE ASSESSEE AND ANNULLED THE ASSESSMENT ONLY ON THE ISSUE RELATING TO THE NOTICE ISSUED U/S 143(2). SINCE THE REVENUE HAS CHALLENGED THE ORDER OF CIT(A) ON THIS VERY ISSUE, THE TRIBUNAL HAS SET ASIDE , THE SAID ISSUE AS THE JURISDICTION OF THE TRIBUNAL U/S 254(1) IS LIMITED TO THE GROUNDS OF APPEAL BEFORE IT. CIT(A) WHILE DECIDING THE FIRST ROUND OF APPEAL HAS CLEARLY OBSERVED IN PARA 12 THAT SINCE ASSESSMENT ORDER U/S 147/143(3) ITSELF HAS BEEN HELD TO BE INVALID, THE OTHER ISSUES RAISED BY THE APPELLANT IS NOT BEING CONSIDERED AS IT WILL BE ONLY OF ACADEMIC INTEREST. THE NATURAL CONSEQUENCE, IN OUR OPINION, OF THE ORDER OF THE TRIBUNAL ON THE GROUNDS TAKEN BY THE ASSESSEE BEFORE THE FIRST APPELLAT E AUTHORITY BUT NOT DECIDED BY IT, GETS SURVIVED FOR ADJUDICATION. ONCE THE ISSUE ON WHICH THE CIT(A) HAS ANNULLED THE ASSESSMENT GOT RESTORED TO THE CIT(A) BY THE HIGHER APPELLATE AUTHORITY, IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 7 CIT(A) IS BOUND, IN CASE THE CIT(A) DECIDES THAT ISSUE AGAINST THE ASSESSEE, TO DECIDE ALL OTHER GROUNDS TAKEN BY THE ASSESSEE. CIT(A) CANNOT BE ESTOPPED NOT TO DECIDE OTHER GROUNDS MERELY ON THE BASIS THAT THE ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTION BEFORE THE TRIBUNAL AGAINST THE ORDER OF CIT(A) DT. 7. 3.2007. WE, THEREFORE, DISMISS THE PLEA OF THE LD. DR THAT CIT(A) DOES NOT HAVE ANY JURISDICTION TO DECIDE THE APPEAL OF THE ASSESSEE ON THE OTHER GROUNDS WHICH WERE NOT ADJUDICATED BEFORE THE TRIBUNAL. 9. WE FURTHER NOTED THAT BEFORE THE CIT(A), THE AS SESSEE HAS TAKEN THREE LEGAL ISSUES; ONE ISSUE RELATES TO THE VALIDITY OF THE INITIATION OF THE PROCEEDINGS, SECOND ISSUE RELATES TO THE INITIATION OF RE - ASSESSMENT PROCEEDINGS BARRED BY LIMITATION AND THE THIRD ISSUE RELATES TO THE SERVICE OF THE NOTICE U /S 143(2). IN THE SECOND ROUND OF APPEAL, CIT(A), WHEN THE PROCEEDINGS GOT REINSTATED BEFORE HIM, HAD DECIDED THE ISSUE IN RESPECT OF ISSUANCE AND SERVICE OF NOTICE U/S 143(2) AGAINST THE ASSESSEE. AGAINST THAT ISSUE, THE ASSESSEE HAS NOT FILED ANY APPEA L OR CROSS OBJECTION BEFORE US. THEREFORE, THAT ISSUE GOT CONCLUDED BY THE ORDER OF CIT(A) AND WE CANNOT ADJUDICATE THAT ISSUE. EVEN DURING THE COURSE OF THE ARGUMENT ALSO, THE LD. AR DID NOT RAISE ANY SUCH ISSUE EVEN THOUGH THE ISSUE INVOLVED, IN OUR OP INION, IS A LEGAL ISSUE. WE NOTED THAT IN RESPECT OF VALIDITY OF THE PROCEEDINGS, THE ASSESSEE RAISED TWO ISSUES BEFORE CIT(A); ONE RELATING TO ISSUE THAT THE PROCEEDINGS INITIATED U/S 143(3) ARE BARRED BY LIMITATION AS NOTICE U/S 148 WAS ISSUED AFTER EXP IRY OF 4 YEARS AND OTHER ISSUE IS THAT THERE ARE NO REASONS TO BELIEVE AND THE MATERIAL AVAILABLE WAS ALREADY BEFORE THE AO. THE CIT(A), WE NOTED, HAS NOT GIVEN ANY FINDING IN RESPECT OF THE ISSUE TAKEN BY THE ASSESSEE THAT INITIATION OF THE PROCEEDINGS ARE BARRED BY LIMITATION IN VIEW OF PROVISO TO SEC. 147 BUT THE CIT(A) DECIDED IN FAVOUR OF THE ASSESSEE ON THE ISSUE THAT THE SAME INFORMATION WAS AVAILABLE WITH THE AO EVEN DURING THE ORIGINAL ASSESSMENT BY OBSERVING AS UNDER : IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 8 4.4 THE FACTS OF THE PRE SENT CASE CLEARLY SHOW THAT AN ASSESSING OFFICER WHO HAS A PROPER UNDERSTANDING OF INCOME TAX ACT CANNOT HOLD A BELIEF THAT THE LOAN OR CAPITAL CREDITED IN THE BOOKS OF ACCOUNT DURING THE YEAR UNDER APPEAL IS NOT GENUINE ON THE BASIS OF INFORMATION ABOUT S OME UNSPECIFIED LOAN OR CAPITAL OF PRECEDING YEARS. IN FACT THE SAME INFORMATION WAS AVAILABLE WITH THE ASSESSING OFFICER EVEN DURING THE ORIGINAL ASSESSMENT YEAR AND AT THAT TIME THIS INFORMATION WAS NOT CONSIDERED TO BE SUFFICIENT TO HOLD THAT THE LOAN O R CAPITAL CREDITED DURING THE YEAR COULD BE NON GENUINE. THE ABOVE MENTIONED DECISION OF HBLE SUPREME COURT IS APPLICABLE IN THE PRESENT CASE AND THEREFORE I HOLD THAT THE NOTICE ISSUED BY ASSESSING OFFICER U/S 148 WAS INVALID AND THEREFORE THE REASSESSME NT ORDER OF THE ASSESSING OFFICER IS ANNULLED. 10. THE ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTION BEFORE US. NOW, THE ONLY ISSUE WITH WHICH IS VESTED WITH US FOR ADJUDICATION IS WHETHER THE AO HAS REASON TO BELIEVE ON THE BASIS OF THE INFOR MATION AVAILABLE WITH HIM. WHETHER THE REASONS TO BELIEVE RECORDED BY THE ASSESSING OFFICER ARE BONAFIDE OR NOT, INITIATED ON THE BASIS OF THE STATEMENT OF ONE OF THE PARTNER OF THE ASSESEE AT THE TIME OF SEARCH AND SEIZURE. 11 . IN THE ABSENCE OF BONA FI DE REASONS, IT IS A SETTLED LAW THAT, THE PROCEEDINGS U/S 147 CANNOT BE INITIATED. IT IS NOT THE CASE OF THE ASSESSEE THAT THERE IS NO REASON TO BELIEVE OR REASON TO BELIEVE ARE NOT BONAFIDE. THE SUFFICIENCY OF REASONS CANNOT BE ENTERTAINED BY THIS TRIBU NAL. I HAVE ONLY TO SEE WHETHER THERE IS MATERIAL TO FORM THE REASON TO BELIEVE. WHETHER THE STATEMENT RECORDED DURING THE COURSE OF THE SEARCH CAN BE THE BASIS FOR REASONS TO BELIEVE SPECIALLY WHEN THIS FACT IS NOT AT ALL AVAILABLE IN THE ORIGINAL ASSESSMENT FRAMED U/S 143(3) AND THERE IS NO EVIDENCE OF MATERIAL THAT THIS FACT HAS BEEN CON SIDERED BY THE ASSESSING OFFICER DURING THE COURSE OF FRAMING ORIGINAL ASSESSMENT U/S 143(3). IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 9 12 . I NOTED THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPANY 328 ITR 515 IN WHICH THE HONBLE SUPREME COURT DISMISSED THE CIVIL APPEAL OF THE REVENUE BY OBSERVING THAT THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSE OF REOPENING THE ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE INFORMATION IF ANY COLLECTED AND FORM HIS BELIEF . T HE FACTS OF THE CASE OF THE ASSESSEE IN MY VIEW IS DIFFERENT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTIO N COMPANY (SUPRA). IN THE CASE OF THE ASSESSEE, I NOTED THAT THE ASSESSING OFFICER HAS NOT REOPENED THE ASSESSMENT MERELY ON THE BASIS OF THE DVO REPORT BUT REOPEN ED THE ASSESSMENT ON THE BASIS OF THE PROVISION OF SECTIONI 50C OF THE I.T. ACT . A S PER THE PROVISION OF SECTION 50C , THE ASSESSING OFFICER IS BOUND TO TAKE THE STAMP VALUATION AS THE FULL VALUE OF THE CONSIDERATION U/S 48 FOR COMPUTATION OF THE CAPITAL GAIN . U NDER THIS PROVISION , IN CASE THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY EXCEED S THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF THE TRANSFER , THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSETS TO THE DVO AND THE VALUE SO WORKED OUT WILL BE BIND ING ON THE ASSESSING OFFICER DUE TO APPLICABILITY OF THE PROVISION OF SECTION 16A OF THE WEALTH TAX ACT. IN THE CASE OF THE ASSESSEE, I NOTED THAT IN VIEW OF PROVISION OF SECTION IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 10 50C WHEN THE ASSESSEE HAS OBJECTED DURING THE COURSE OF THE ORIGINAL ASSESSME NT PROCEEDING , THE STAMP VALUATION TO BE TAKEN AS FULL VALUE OF THE CONSIDERATION. THE ASSESSING OFFICER AS PER THE PROVISION OF SECTION 50C(2) REFERRED VALUATION OF THE CAPITAL ASSETS TO THE DVO. THE DVO DID NOT COMPLETE THE VALUATION DURING THE COURSE OF THE ASSESSMENT PROCEEDING BUT SENT THE VALUATION REPORT ONCE THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED. DUE TO THE APPLICABILITY OF THE SECTION 16A OF THE WEALTH TAX ACT THE VALUATION MADE BY THE DVO IS BIN DING ON THE ASSESSING OFFICER. THE ASSESSING OFFICER THEREFORE, HAS TO TAKE IN ACCORDANCE WITH THE PROVISION OF SECTION 50C THE FULL VALUE OF THE CONSIDERATION TO BE THE VALUE AS HAS BEEN WORKED OUT BY THE DVO. THE ASSESSING OFFICER THUS REOPEN ED THE ASSES SMENT IN THIS CASE. THE ASSESSING OFFICER HAS DULY MENTIONED THIS FACT IN THE REASONS TO BELIEVE. WHILE I NOTED IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPANY, THE ASSESSING OFFICER HAS NOT APPLIED HIS MIN D TO THE INFORMATION. IT IS A CASE, THERE IS APPLICATION OF MIND BY THE ASSESSING OFFICER THEREFORE, I AM OF VIEW THAT THE DECISION OF ACIT VS. DHARIYA CONSTRUCTION COMPANY WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THE PROVISON OF SECTION 147 HAS ONLY REQUIRE S W.E.F. 01.04.1989 THAT THE ASS ESSING OFFICER SHOULD HAVE THE REASONS TO BELIEVE. I NOTED THAT THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500 NOWHERE TOOK THE VIEW THAT SOME FRESH TANGIBLE MATERIAL SHOULD COME SUBSEQUENTLY IN THE IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 11 POS SESSION OF THE ASSESSING OFFICER WHILE TAKING ACTION U/S 147. THE HONBLE SUPREME COURT WHILE COMPARING THE OLD PROVISIONS OF SECTION 147 AND THE PROVISIONS AS HAS BEEN SUBSTITUTED W.E.F. 01.04.1989 HAS CLEARLY LAID DOWN UNDER PARA 17 OF ITS DECISION THAT UNDER THE SUBSTITUTED SEC. 147 FOR REASONS TO BELIEVE EXISTENCE OF ONLY THE FIRST CONDITION IS SUFFICIENT. IF THE ASSESSING OFFICER, FOR WHATEVER REASONS, HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO RE - OPEN THE AS SESSMENT. IT IS FURTHER STATED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF PROVISO TO SECTION 147. THE CIT(A), I NOTED, HAS NOT ALLOWED THE RELIEF TO THE ASSESSEE ON THE APPLICABILITY OF PROVISO TO SECTION 147 AND THAT IS NOT THE ISSUE BEFORE ME . NO DOUBT THE INGREDIENTS OF SECTION 147 ARE TO BE FULFILLED. I NOTED THAT THE HONBLE SUPREME COURT IN THE CASE OF RAYMOND WOLLEN MILLS LTD. VS. ITO, 236 ITR 34 WHEN A SIMILAR QUESTION HAD COME BEFORE THE HONBLE SUPREME COURT D ID NOT DECIDE THE ISSUE WHETHER ANY NEW FACT CAME TO THE KNOWLEDGE OF THE ITO AFTER COMPLETING THE ASSESSMENT PROCEEDINGS. 13. WE NOTED THAT INITIALLY THE PROVISIONS FOR INCOME ESCAPING ASSESSMENT WERE BROUGHT INTO THE STATUTE BY WAY OF SEC. 34 INCORPORATE D UNDER THE INCOME TAX ACT, 1922. THIS SECTION READS AS UNDER : 34. INCOME ESCAPING ASSESSMENT (1) IF - (A) THE INCOME - TAX OFFICER HAS REASON TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN OF HIS INCOME UN DER SECTION 22 FOR ANY YEAR OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME - TAX HAVE ESCAPED ASSESSMENT FOR THAT YEAR, OR HAVE IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 12 BEEN UNDER - ASSESSED OR ASSESSED AT TO O LOW A RATE, OR HAVE BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT, OR EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE A SSESSEE, THE INCOME - TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME - TAX HAVE ESCAPED ASSESSMENT FOR ANY YEAR, OR HAVE BEEN UNDER - ASSESSED, OR ASSESSED AT TOO LOW A RATE, O R HAVE BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT, OR THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED, HE MAY IN CASES FALLING UNDER CLAUSE (A) AT ANY TIME 2 [* * *) AND IN CASES FALLING UNDER CLAUSE (B) AT ANY TIME WITHIN FOU R YEARS OF THE END OF THAT YEAR, SERVE ON THE ASSESSEE, OR, IF THE ASSESSEE IS A COMPANY, ON THE PRINCIPAL OFFICER THEREOF, A NOTICE CONTAINING ALL OR ANY OF THE REQUIREMENTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB - SECTION (2) OF SECTION 22 AND MAY PRO CEED TO ASSESS OR REASSESS SUCH INCOME, PROFITS OR GAINS OR RECOMPUTE THE LOSS OR DEPRECIATION ALLOWANCE; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOTICE WERE A NOTICE ISSUED UNDER THAT SUB - SECTION: 14. WE NOTED THAT SEC. 34 AUTHORISES THE AO TO TAKE ACTION FOR RE - ASSESSMENT UNDER TWO SITUATIONS; THE FIRST SITUATION IS GIVEN IN SEC. 34(1)(A) AND SECOND IS GIVEN IN SEC. 34(1)(B). SEC. 34(1)(A) EMPOWERS THE AO TO ASSESS OR RE - ASSESS THE ESCAPED INCOME, WHE RE THE AO HAS REASON TO BELIEVE, DUE TO THE OMISSION OR FAILURE OF THE ASSESSEE TO MAKE A RETURN OF HIS INCOME U/S 22 OR TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. U/S 34(1)(A) REASON TO BELIEVE IS QUALIFIED BY THE WORDS OMISSION OR FAILURE. SUB - CLAUSE (B) APPLIES TO A CASE WHERE THERE MAY BE NO OMISSION OR FAILURE BUT THE AO, IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION, HAS REASON TO BELIEVE ABOUT THE ESCAPED INCOME. U/S 34(1)(B) THUS THE REASON TO BELIEVE FOR ESCAPEMENT OF THE INCOME MUST HAVE ARISEN IN CONSEQUENCE OF THE INFORMATION COMING IN THE POSSESSION OF THE AO. THE HON'BLE SUPREME COURT HAS ANALYSED THE WORD INFORMATION AS USED IN SEC. 34(1)(B) IN THE CASE OF KALYANJI MAVJI AND CO. VS CIT, 102 I TR 287 (SC) AND HAS CATEGORICALLY HELD IN THE FOLLOWING MANNER : IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 13 THE WORD INFORMATION IN SECTION 34(1)(B) IS OF THE WIDEST AMPLITUDE AND COMPREHENDS A VARIETY OF FACTORS. NEVERTHELESS, THE POWER UNDER SECTION 34(1)(B), HOWEVER WIDE IT MAY BE, IS NOT PLENARY BECAUSE THE DISCRETION OF THE INCOME - TAX OFFICER IS CONTROLLED BY THE WORDS REASON TO BELIEVE. INFORMATION MAY COME FROM EXTERNAL SOURCES OR EVEN FROM THE MATERIALS ALREADY ON RECORD 15. FROM THE AFORESAID JUDGMENT , WE NOTED THAT THE HON'BLE COURT HAS INTERPRETED THAT THE WORD SUBSEQUENT INFORMATION REQUIRES FRESH FACTS AND MATE RIAL OR IF THERE ARE EXISTING FACTS, THEN, THERE MUST BE ENQUIRY INTO THE MATERIALS AVAILABLE. THUS, WE NOTED THAT REQUIREMENT OF FRESH MATERIAL OR FACTS HAS BEEN INTERPRETED BY THE COURT BECAUSE SEC. 34(1)(B) STATES THAT THE AO HAS IN CONSEQUENCE OF INFO RMATION IN HIS POSSESSION REASON TO BELIEVE. REASON TO BELIEVE SHOULD HAVE ARISEN IN CONSEQUENCE OF THE INFORMATION AND AS THE INFORMATION CANNOT BE BASED WITHOUT MATERIAL OR FACTS, THEREFORE, IT HAS BEEN INTERPRETED BY THE COURT THAT THERE MUST BE FR ESH FACTS OR TANGIBLE MATERIAL WITH THE AO. WE NOTED THAT IN SEC. 147, AS WAS IN EXISTENCE PRIOR TO 1.4.1989, UNDER SUB - CLAUSE (B) SIMILAR LANGUAGE HAS BEEN USED AS HAD BEEN USED IN SEC. OR MAY BE DERIVED FROM THE DISCOVERY OF NEW AND IMPORTANT MATT ER OR FRESH FACTS. SECTION 34(1)(B) WOULD APPLY TO THE FOLLOWING CATEGORIES OF CASES : (1) WHERE THE INFORMATION IS AS TO THE TRUE AND CORRECT STATE OF THE LAW DERIVED FROM RELEVANT JUDICIAL DECISIONS; (2) WHERE IN THE ORIGINAL ASSESSMENT THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO OVERSIGHT, INADVERTENCE OR A MISTAKE COMMITTED BY THE INCOME - TAX OFFICER; (3) WHERE THE INFORMATION IS DERIVED FROM AN EXTERNAL SOURCE OF ANY KIND: SUCH EXTERNAL SOURCE WOULD INCLUDE DISCOVERY OF NEW AND IMPORT ANT MATTERS OR KNOWLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME OF ORIGINAL ASSESSMENT; AND (4) WHERE THE INFORMATION MAY BE OBTAINED EVEN FROM THE RECORD OF THE ORIGINAL ASSESSMENT FROM AN INVESTIGATION OF THE MATERIALS ON THE RECORD OR THE F ACTS DISCLOSED THEREBY OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW. WHERE, HOWEVER, THE INCOME - TAX OFFICER GETS NO SUBSEQUENT INFORMATION, BUT MERELY PROCEEDS TO REOPEN THE ASSESSMENT WITHOUT ANY FRESH FACTS OR MATERIALS OR WITHOUT ANY ENQUIRY IN TO THE MATERIALS WHICH FORM PART OF THE ORIGINAL ASSESSMENT, SECTION 34(1)(B) WOULD HAVE NO APPLICATION. IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 14 34(1)(B). FOR READY REFERENCE THE SAID SECTION 147 AS WAS IN EXISTE NCE PRIOR TO 1.4.1989 IS REPRODUCED AS UNDER : - 147. IF (A) THE INCOME - TAX OFFICER HAS REASON TO BELIEVE THAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE INCOME - TAX OFFICER OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE, THE INCOME - TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SEC TIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). 1 6 . IN THIS SECTION ALSO, FOR THE PURPOSE OF REASON TO BELIEVE IT IS NECESSARY THAT THE REASON TO BELIEVE MUST HAVE ARISEN IN CONSEQUENCE OF THE INFORMATION IN THE POSSESSION OF THE AO. THE INFORMATION MUST PRECEDE THE REASONS TO BELIEVE IF WE READ THE PROVISIONS OF SEC. 147(B). WE NOTED THAT THE HON'BLE SUPREME COURT HAD OCCASION TO INTERPRET THE WORD INFORMATION AS USED IN SEC. 147(B) IN THE CASE OF CIT VS. A. RAMAN & CO., 67 ITR 011(SC) AS REPRODUCED BELOW : - THE EXPRESSION INFORMATION IN THE CONTEXT IN WHICH IT O CCURS [IN SECTION 147(B) OF THE INCOME - TAX ACT, 1961] MUST MEAN INSTRUCTION OR KNOWLEDGE DERIVED FROM AN EXTERNAL SOURCE CONCERNING FACTS OR PARTICULARS, OR AS TO LAW RELATING TO A MATTER BEARING ON THE ASSESSMENT. TO COMMENCE THE PROCEEDINGS FOR REASSESS MENT IT IS NOT NECESSARY THAT ON THE MATERIALS WHICH CAME TO THE NOTICE OF THE INCOME - TAX OFFICER, THE PREVIOUS ORDER OF ASSESSMENT WAS VITIATED BY SOME ERROR OF FACT OR LAW. THE HIGH COURT EXERCISING JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION HAS POWER TO SET ASIDE A NOTICE ISSUED UNDER SECTION 147(B) OF THE INCOME - TAX ACT, 1961, IF THE CONDITION PRECEDENT TO THE EXERCISE OF THE JURISDICTION DOES NOT EXIST. THE COURT MAY, IN EXERCISE OF ITS POWERS, ASCERTAIN WHETHER THE INCOME - TAX OFFICER HAD IN HIS POSSESSION ANY INFORMATION: THE COURT MAY ALSO DETERMINE WHETHER FROM THE INFORMATION THE INCOME - TAX OFFICER MAY HAVE REASON TO BELIEVE THE INCOME CHARGEABLE TO TAX HAS ESCAPED IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 15 ASSESSMENT. BUT THE JURISDICTION OF THE COURT EXTENDS NO FURTHER. WHETHER ON THE INFORMATION IN HIS POSSESSION, HE SHOULD COMMENCE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT, MUST BE DECIDED BY THE INCOME - TAX OFFICER AND NOT BY THE HIGH COURT. THE INCOME - TAX OFFICER ALONE IS ENTRUSTED WITH THE POWER TO ADMINISTER THE ACT: IF H E HAS INFORMATION FROM WHICH IT MAY BE SAID, PRIMA FACIE, THAT HE HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IT IS NOT OPEN TO THE HIGH COURT EXERCISING POWERS UNDER ARTICLE 226 OF THE CONSTITUTION TO SET ASIDE OR VACATE TH E NOTICE FOR REASSESSMENT ON A REAPPRAISAL OF THE EVIDENCE. IN A PETITION UNDER ARTICLE 226 OF THE CONSTITUTION, THE TAXPAYER MAY CHALLENGE THE VALIDITY OF A NOTICE UNDER SECTION 147 OF THE INCOME - TAX ACT, 1961, ON THE GROUND THAT EITHER OF THE CONDITIONS PRECEDENT DOES NOT EXIST, BUT AN INVESTIGATION WHETHER THE INFERENCES RAISED BY THE INCOME - TAX OFFICER ARE CORRECT OR PROPER CANNOT BE MADE. JURISDICTION OF THE INCOME - TAX OFFICER TO REASSESS INCOME ARISES IF HE HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THAT INFORMATION MUST, IT IS TRUE, HAVE COME INTO THE POSSESSION OF THE INCOME - TAX OFFICE AFTER THE PREVIOUS ASSESSMENT, BUT EVEN IF THE INFORMATION BE SUCH THAT IT COULD HAVE BEEN OBTAINED DURING THE PREVIOUS ASSESSMENT FROM AN INVESTIGATION OF THE MATERIAL ON RECORD, OR THE FACTS DISCLOSED THEREBY, OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW, BUT WAS NOT IN FACT OBTAINED, THE JURISDICTION OF THE INCOME - TAX OFFICER IS NOT AFFECTED. 17. FROM THE PROVISIONS OF SEC. 34(1)( B) AND 147(B) WHICH WERE UNDER THE INCOME TAX ACT PRIOR TO 1.4.1989 IT IS APPARENT THAT FOR ARRIVING AT REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IT WAS NECESSARY THAT THE AO MUST HAVE INFORMATION IN HIS POSSESSION PRIOR TO A RRIVING AT REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT. THIS INFORMATION HAS BEEN INTERPRETED BY THE COURTS FROM TIME TO TIME IN THE FORM OF TANGIBLE FRESH MATERIAL OR FACTS BUT WHEN WE LOOKED INTO THE PROVISIONS OF SEC. 147 WHICH HAS BEEN SUBSTITUTE D W.E.F. 1.4.1989, WE NOTED THAT THERE ARE DRASTIC CHANGES IN THIS SECTION. NOW, THE ONLY CONDITION WHICH REQUIRES TO BE FULFILLED IS THAT THE AO MUST HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS SECTION DOES NO T TALK THAT REASON TO BELIEVE MUST BE BASED OR MUST HAVE BEEN IN CONSEQUENCE OF FRESH INFORMATION COMING INTO THE POSSESSION OF THE AO. THEREFORE, IN OUR OPINION, FOR TAKING ACTION U/S IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 16 147 THE REASON TO BELIEVE CAN BE BASED ON THE BASIS OF THE MATERI AL AVAILABLE WITH THE AO EVEN AVAILABLE AT THE TIME OF MAKING THE ASSESSMENT PROVIDED THE PRIMA FACIE MATERIAL BELONG TO THE ASSESSEE AND APPARENTLY RELATES TO THE ASSESSMENT YEAR CONCERNED. THE COURTS HAVE FROM TIME TO TIME INTERPRETED THE WORD REASON T O BELIEVE TO MEAN THAT THE AO MUST HAVE CAUSE OR JUSTIFICATION. AT THE STAGE OF INITIATION OF THE PROCEEDINGS IT IS NOT REQUIRED THAT THE AO MUST ESTABLISH THE ESCAPEMENT OF THE INCOME. THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. THE SCOPE AND EFFECT OF SEC.147 AS SUBSTITUTED W.E.F. 1.4.1989 IS SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS STOOD PRIOR TO SUCH SUBSTITUTION. THE COURT HAS INTERPRETED FROM TIME TO TIME THAT THERE MUST BE BONA FIDE REASON TO BELIEVE. WHERE THE AO HAS APPLIED HIS MIND TO THE MATERIAL AVAILABLE WITH HIM, HE CANNOT BE PERMITTED TO REVIEW THE ASSESSMENT IN THE GARB OF REASON TO BELIEVE. IN THIS CASE WE NOTED THAT THERE IS NO EVIDENCE OR MATERI AL BEING BROUGHT ON RECORD BY THE LD. A.R WHICH MAY PROVE THAT THE ASSESSING OFFICER HAS DULY CONSIDERED THE STATEMENT OF SUSHIL KUMAR AGARWAL WHILE FRAMING THE ORIGINAL ASSESSMENT, ON THE BASIS OF WHICH REASONS TO BELIEVE HAVE BEEN RECORDED. THUS, WITH T HE AMENDMENT BROUGHT TO SEC. 147 OF THE ACT ON AND FROM 1.4.1989 AND THE ELUCIDATION ON THE SCOPE OF THE AUTHORITY AND JURISDICTION OF THE OFFICER U/S 147 OF THE ACT, WE ARE OF THE FIRM VIEW THAT THE PROCEEDINGS INITIATED BY THE AO U/S 147 ARE VALID AND TH E AO COULD HAVE TAKEN THE ACTION U/S 147 ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. THERE IS NO NEED OF ANY FRESH TANGIBLE MATERIAL FOR COMING TO THE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT IN VIEW OF EXPLANATION 2 CLAUSE (C) OF SEC. 147. 18. IN THE CASE OF PRAFUL CHUNILAL PATEL 236 ITR 832 AS RELIED BY LD. A.R, WE NOTED THAT THEIR LORDSHIPS OF THE HONBLE JURISDICTIONAL HIGH COURT HAVE HELD AS UNDER : IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 17 'THE POWER TO MAKE ASSESSMENT OR REASSESSMENT WITHIN FOUR YEARS OF THE END O F THE RELEVANT ASSESSMENT YEAR WOULD BE ATTRACTED EVEN IN CASES WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UPON WHICH A CORRECT ASSESSMENT MIGHT HAVE BEEN BASED IN THE FIRST INSTANCE, AND WHETHER IT IS AN ERROR OF FACT OR LAW THAT HAS BEEN DISCOVERED OR FOUND OUT JUSTIFYING THE BELIEF REQUIRED TO INITIATE THE PROCEEDINGS. THE WORDS ESCAPED ASSESSMENT, WHERE THE RETURN IS FILED, COVER THE CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CAUSED BY EITHER AN ERRONEOUS CONSTRUCTION OF TH E TRANSACTION OR DUE TO ITS NON - CONSIDERATION, OR CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TRANSFER OR TRANSACTION EVEN WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UPON WHICH A CORRECT ASSESSMENT COULD HAVE BEEN BASED. IN CASES WH ERE THE AO HAD OVERLOOKED SOMETHING AT THE FIRST ASSESSMENT, THERE CAN BE NO QUESTION OF ANY CHANGE OF OPINION, WHEN THE INCOME WHICH WAS CHARGEABLE TO TAX IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE LAW, BUT WAS NOT, DUE TO AN ERROR COMMITTED AT THE FIRST ASSESSMENT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE A REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE WORDS REASON TO BELIEVE CANNOT MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. UNLESS THE GROUND OR THE MATERIAL ON WHICH HIS BELIEF IS BASED, IS FOUND TO BE SO IRRATIONAL AS NOT TO BE WOR THY OF BEING CALLED A REASON BY ANY HONEST MAN, HIS CONCLUSION THAT IT CONSTITUTES A SUFFICIENT REASON, CANNOT BE OVERRIDDEN.' 19. WE ALSO NOTED THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF GRUH FINANCE LTD. VS. JT. CIT, HAVE HELD AS UNDER : 'THAT INSOFAR AS THE EXPRESSIONS REASONS TO BELIEVE AND CHANGE OF OPINION ARE CONCERNED, THOUGH MATERIAL WAS AVAILABLE ON RECORD AT THE TIME OF FIRST ASSESSMENT, WHEN NO CONSCIOUS CONSIDERATION OF THE MATERIAL WAS MADE AND A MISTAKE HAD BEEN COMMITTED IT WOU LD NOT CREATE AN EMBARGO OR A BAN ON THE COMPETENT OFFICER TO EXERCISE POWERS UNDER THE AMENDED S. 147. UPON INFORMATION THE DEPARTMENT NOTICED THAT DEPRECIATION WAS CLAIMED AND ALLOWED IN RESPECT OF MACHINERY WHICH WAS NOT AT ALL IN EXISTENCE AND THAT ASP ECT WAS NOT CONSCIOUSLY CONSIDERED AT THE TIME OF FIRST ASSESSMENT. THE NOTICES OF REASSESSMENT WERE VALID.' 20. SECTION 147 PERMITS THE REOPENING OF AN ASSESSMENT AND THE ISSUANCE OF NOTICES, ETC., IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR... THE SCOPE OF THE PHRASE REASONS TO BELIEVE - INTRODUCED IN 1989 - HAS BEEN CONSIDERED BY THE SUPREME COURT IN VARIOUS DECISIONS. IN PHOOL CHAND IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 18 BJARANG LAL V. ITO [1993] 203 ITR 456 (SC), THE COURT HELD AS FOLLOWS (PAGE 477) : SINCE THE BELIEF IS THAT OF THE INCOME - TAX OFFICER, THE SUFFICIENCY OF REASONS FOR FORMING THE BELIEF, IS NOT FOR THE COURT OF JUDGE BUT IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT THERE IN FACT EXISTED NO BELIEF OR THAT THE BELIEF WAS NOT AT ALL A BONA FIDE ONE OR WAS BASED ON VAGUE, IRRELEVANT AND NON - SPECIFIC INFORMATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK INTO THE CONCLUSION ARRIVED BY THE INCOME - TAX OFFICER AND EXAMINE WHETHER THERE WAS ANY MATERIAL AVAILABLE ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE INCOME - TAX OFFICER AND FURTHER WHETHER THAT MATERIAL HAD ANY RATIONAL CONNECTION OR A LIVE LINK FOR THE FORMATION OF THE REQUISITE BELIEF. 21. THUS, WHILE THE COURT W ILL NOT JUDGE THE ADEQUACY OF THE REASONS PROVIDED BY THE ASSESSING OFFICER, THE COURT MUST ASSESS WHETHER THE BELIEF IS BASED ON RELEVANT AND SPECIFIC INFORMATION THAT COULD LEAD TO SUCH A BELIEF. THIS WELL - ACCEPTED PRINCIPLE HAS FOUND ACCEPTANCE IN ITO V . LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC); CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662 (SC), SRI KRISHNA PVT. LTD. V. ITO [1996] 221 ITR 538 (SC); [1996] 9 SCC 534. 22. WE HAVE PERUSED THE REASONS RECORDED BY THE AO. IN OUR OPI NION THE REASONS RECORDED CANNOT BE REGARDED TO BE ARBITRARY, IRRATIONAL. THE REASONS REFER TO THE MATERIAL I.E. THE DVO REPORT DETERMINING THE FAIR MARKET VALUE PREPARED AS PER THE PROVISIONS OF SECTION 50C . IT CLEARLY STATES THAT DURING THE ON THE REQU EST OF THE ASSESSEE THE PROPERTY WAS REFERRED TO THE VALUATION CELL AND THE DVO HAS VALUED THE PROPERTY AT RS.3103604 AGAINST THE AMOUNT OF RS.2700000/ - SHOWN BY THE ASSESSEE. SINCE THE VALUE DETERMINED BY THE VALUATION CELL HAS TO BE ADOPTED IN VIEW OF PR OVISIONS OF SECTION 50C OF THE I.T. ACT, 1961, THEREFORE, THERE IS A DIFFERENCE OF RS.403604/ - IN THE INCOME DISCLOSED BY THE ASSESSEE. A PERSON OF ORDINARY PRUDENCE WOULD HAVE BELIEVED THAT INCOME HAS ESCAPED ASSESSMENT. AT THE TIME OF RECORDING OF THE R EASONS, ONLY PRIMA FACIE SATISFACTION OF THE AO IS NECESSARY. THE COURT ALSO CANNOT IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 19 INVESTIGATE THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH WEIGHED WITH THE AO IN COMING TO THE BELIEF. IN MY OPINION, THE REASONS RECORDED ARE RELEVANT AND HAS A BEARI NG ON THE INCOME OF THE ASSESSEE. THE AO IS NOT REQUIRED TO HAVE A PURELY SUBJECTIVE SATISFACTION. THE BELIEF MUST BE HELD IN GOOD FAITH. IT CANNOT MERELY BE PRETENCE AS HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF NARAYANAPPA (S.) V. CIT, 63 ITR 219 (SC). I DO AGREE WITH THE FINDING OF THE CIT(A). IN OUR OPINION, AT THE TIME OF INITIATION OF THE PROCEEDINGS THE AO HAS TO LOOK INTO WHETHER THERE IS MATERIAL RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION FOR THE ESCAPEMENT OF INCOME. T HE SAID VALUATION REPORT AS CONTENDED BY THE LD. D.R AND AS STATED BY US ABOVE CLEARLY PROVE THAT INFORMATION IN THIS REPORT ALSO RELATE TO IMPUGNED ASSESSMENT YEAR. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. VS. ACIT, 15 1 TAXMAN 41 (DEL.) HAS EXPLICITLY TAKEN THE VIEW THAT IN CASES WHERE THE ORDER PASSED BY THE STATUTORY AUTHORITY IS SILENT AS TO THE REASONS FOR THE CONCLUSION IT HAS DRAWN, IT CAN WELL BE SAID THAT THE AUTHORITY HAS NOT APPLIED ITS MIND TO THE ISSUE BEFOR E IT NOR FORMED ANY OPINION. THE PRINCIPLE THAT MERE CHANGE OF OPINION CANNOT BE THE BASIS FOR RE - OPENING OF COMPLETED ASSESSMENT WOULD BE APPLICABLE ONLY TO SITUATION WHERE THE AO HAS APPLIED HIS MIND AND TAKEN A CONSCIOUS DECISION ON A PARTICULAR MATTER IN ISSUE. IT WILL HAVE NO APPLICATION WHERE THE ORDER OF ASSESSMENT DOES NOT ADDRESS ITSELF TO THE ASPECT WHICH IS THE BASIS FOR RE - OPENING OF THE ASSESSMENT. IN MY OPINION, THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION IN RAYMOND WOOLEN MILL S LTD VS. ITO, 236 ITR 34 IN WHICH THE HON'BLE SUPREME COURT HAS CLEARLY LAID DOWN THAT IN DETERMINING WHETHER COMMENCING OF RE - ASSESSMENT PROCEEDINGS WAS VALID, IT IS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DE PARTMENT COULD RE - OPEN THE CASE. SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT NEED TO BE CONSIDERED AT THIS STAGE. IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 20 23. I NOTED DELHI HIGH COURT IN THE CASE OF AGR INVESTMENT LTD. VS. ADDL. CIT, 333 ITR 146 DEALT WITH THE SIMILAR ISSUE FOR WHICH THE LD. AR WAS DULY MADE AWARE OF DURING THE COURSE OF HEARING. IN THIS CASE, I NOTED THAT THE DELHI HIGH COURT HAS TAKEN THE VIEW THAT THE REASONS RECORDED BY THE ASSESSING OFFICER AMPLY DEMONSTRATE THAT THE INCOME HAS ESCAPED ASSESSMENT AND THEY HELD THAT THERE WAS APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER. DELHI HIGH COURT DID NOT QUASH THE NOTICE ISSUED U/S. 148. W HILE HOLDING SO, THE DELHI HIGH COURT HAS DISCUSSED VARIOUS DECISIONS ON THIS ISSUE AS UNDER : THE QUESTIONS THAT EMERGE FOR CONSIDERATION ARE WHETHER THERE HAS BEEN APPLICATION OF MIND OR CHANGE OF OPINION, WHETHER THE OBJECTIONS HAVE BEEN PROPERLY DEALT WITH AND WHETHER THERE IS A MERE SUSPICION OR REASON TO BELIEVE. REGARD BEING HAD TO THE AFORES AID ISSUES, WE THINK IT APPROPRIATE TO REFER TO CERTAIN CITATIONS IN THE FIELD. IN RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC), WHILE DEALING WITH THE VALIDITY OF COMMENCEMENT OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT, THE APE X COURT HAS HELD THAT THERE IS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CON - SIDERED AT THAT STAGE. THE HIGH COURT OF GUJARAT IN PRAFUL CHUNIL AL PATEL V. M. J. MAKWANA, ASST. CIT [1999] 236L1R 832 HAS OPINED THAT IN TERMS OF THE PROVISION CON - TAINED IN SECTION 147, THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE WORD 'REA - SON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE A REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSME NT. THE WORDS 'REASON TO BELIEVE' CANNOT MEAN THAT THE ASSESSING OFFICER SHOULD HAVE, FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. THEY ONLY MEAN THAT HE FORMS A BELIEF FROM THE EXAMINATION HE MAKES AND IF HE LIKES FROM ANY INFORMATION THAT HE RECEIVES . IF HE DISCOVERS OR FINDS OR SATISFIES HIMSELF THAT THE TAXABLE INCOME HAS ESCAPED ASSESSMENT, IT WOULD AMOUNT TO SAYING THAT HE HAD REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE JUSTIFICATION FOR HIS BELIEF IS NOT TO BE JUDGED FROM THE S TANDARDS OF PROOF REQUIRED FOR COMING TO A FINAL DECISION. A BELIEF, THOUGH JUSTIFIED FOR THE PURPOSE OF INITIATION OF THE PROCEEDINGS UNDER SECTION 147, MAY ULTIMATELY STAND ALTERED AFTER THE HEAR - ING AND WHILE REACHING THE FINAL CONCLUSION ON THE BASIS O F THE INTERVENING ENQUIRY. AT THE STAGE WHERE HE FINDS A CAUSE OR JUSTIFICATION TO BELIEVE THAT SUCH INCOME HAS ESCAPED ASSESSMENT, THE ASSESSING OFFICER IS NOT REQUIRED TO BASE HIS BELIEF ON ANY FINAL ADJUDICATION OF THE MATTER. IN GANGA SARAN AND SONS P. LTD. V. ITO [1981] 130 L1R 1 (SC), IT HAS BEEN HELD THUS (PAGE 11) : IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 21 'IT IS WELL SETTLED AS A RESULT OF SEVERAL DECISIONS OF THIS COURT THAT TWO DISTINCT CONDITIONS MUST BE SATISFIED BEFORE THE INCOME - TAX OFFICER CAN ASSUME JURISDICTION TO ISSUE NOTICE UNDER SECTION 147(A). FIRST, HE MUST HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND, SECONDLY, HE MUST HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT IS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IF EITHER OF THESE CONDITIONS IS NOT FUL FILLED, THE NOTICE ISSUED BY THE INCOME - TAX OFFICER WOULD BE WITHOUT JURISDICTION. THE IMPORTANT WORDS UNDER SECTION 147(A) ARE 'HAS REAS ON TO BELIEVE' AND THESE WORDS ARE STRONGER THAN THE WORDS 'IS SATISFIED'. THE BELIEF ENTERTAINED BY THE INCOME - TAX OFFICER MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATE RIAL. THE COURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE INCOME - TAX OFFICER IN COMING TO THE BELIEF, BUT THE COURT CAN CERTAINLY - EXAMINE WHETHER THE REASONS ARE RELEVANT AND 'HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERTAIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UNDER SECTION 147(A). IT THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTE D ON FACTS AND LAW COULD REASONABLY ENTERTAIN THE BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT THE INCOME - TAX OFFICER COULD NOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WAS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID.' IN BIRLA VXL LTD. VS. ASST. CIT (1996) 217 ITR 1, A DIVISION BENCH OF THE GUJARAT HIGH COURT HAS OPINED THUS (PAGE 3) : 'EXPLANATION 2 TO SECTION 147 OF THE ACT, AS APPENDED TO THE NEWLY SUBSTITUTED SECTION 147 MAKES CERTAIN PROVISIONS, WHERE, IN CERTAIN CIRCUMSTANCES, THE INCOME IS DEEMED TO HAVE ESCAPED ASSESSMENT GIVING JUR ISDICTION TO THE ASSESSING OFFICER TO ACT UNDER THE SAID PROVISION. ANOTHER REQUIREMENT WHICH IS NECESSARY FOR ASSUMING JURISDICTION IS THAT THE ASSESSING OFFICER SHALL RECORD HIS REASONS FOR ISSUING NOTICE. THIS REQUIREMENT NECESSARILY POSTULATES THAT BEF ORE THE ASSESSING OFFICER IS SATISFIED TO ACT UNDER THE AFORESAID PROVISIONS, HE MUST PUT IN WRITING AS TO WHY IN HIS OPINION OR WHY HE HOLDS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. 'WHY' FOR HOLDING SUCH BELIEF MUST BE REFLECTED FROM THE RECORD OF REA SONS MADE BY THE ASSESSING OFFICER. IN A CASE WHERE THE ASSESSING OFFICER HOLDS THE OPINION THAT BECAUSE OF EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE INCOME HAS ESCAPED ASSESSMENT, THE REASONS RECORDED BY THE ASSESSING OFFICER MUST DISCLOSE THAT BY WHAT PRO CESS OF REASONING HE HOLDS SUCH A BELIEF THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED IN THE ORIGINAL ASSESSMENT. MERELY SAYING THAT EXCESSIVE LOSS OR DEPRE CIATION ALLOWANCE HAS BEEN COMPUTED WITHOUT DISCLOSING REASONS WHICH LED THE ASS ESSING AUTHORITY TO HOLD SUCH BELIEF, IN OUR OPINION, DOES NOT CONFER JURISDICTION ON THE ASSESSING OFFICER TO TAKE ACTION UNDER SECTIONS 147 AND 148 OF THE ACT. WE ARE ALSO OF THE OPINION THAT, HOWSOEVER WIDE THE IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 22 SCOPE FOR TAKING ACTION UNDER SECTION 148 OF THE ACT BE, IT DOES NOT CONFER JURISDICTION ON A CHANGE OF OPINION ON THE INTERPRETATION OF A PARTICULAR PROVISION FROM THAT EARLIER ADOPTED BY THE ASSESSING AUTHORITY. FOR COMING TO THE CONCLUSION WHETHER THERE HAS BEEN EXCESSIVE LOSS OR DEPRECIATION A LLOWANCE OR THERE HAS BEEN UNDER ASSESSMENT AT A LOWER RATE OR FOR APPLYING THE OTHER PROVISIONS OF EXPLANATION 2, THERE MUST BE MATERIAL THAT HAS NEXUS TO HOLD OPINION CONTRARY TO WHAT HAS BEEN EXPRESSED EARLIER. THE SCOPE OF SECTION 147 OF THE ACT IS NOT FOR REVIEWING ITS EARLIER ORDER SUO MOTU IRRESPECTIVE OF THERE BEING ANY MATERIAL TO COME TO A DIFFERENT CONCLU SION APART FROM JUST HAVING SECOND THOUGHTS ABOUT THE INFERENCES DRAWN EARLIER. (EMPHASIS ADDED) IN SHEO NARAIN ]AISWAL V. ITO [1989J 176 I1R 352 (PATNA), IT WAS HELD THAT REASSESSMENT PROCEEDINGS CAN BE INITIATED UNDER SECTION 147(A) OF THE ACT IF THE INCOME - TAX OFFICER HAS REASON TO BELIEVE THAT THERE HAS BEEN ESCAPEMENT OF INCOME AND THAT THE SAID INCOME ESCAPED ASSESSMENT BY REASON OF THE O MISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT PERIOD OR YEAR. BOTH CONDITIONS ARE CONDITIONS PRECEDENT FOR THE ASSUMPTION OF JURIS DICTION UNDER SECTION 148 OF THE ACT. IN PHOOL CHAND BAJRANG LAL V. ITO [1993J 203 I1R 456, THE APEX COURT HAS HELD THUS (PAGE 477) : FROM A COMBINED REVIEW OF THE JUDGMENTS OF THIS COURT, IT FOLLOWS THAT AN INCOME - TAX OFFICER ACQUIRES JURISDICTION TO REOPEN AN ASSESS MENT UNDER SECTION 147 (A) READ WITH SECTION 148 OF THE INCOME - TAX ACT, 1961, ONLY IF ON THE BASIS OF SPECIFIC, RELIABLE AND RELEVANT INFOR MATION COMING TO HIS POSSESSION SUBSEQUENTLY, HE HAS REASONS, WHICH HE MUST RECORD, TO BELIEVE THAT, BY REASON OF OMISSION OR FAILURE ON TH E PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT DURING THE CONCLUDED ASSESS MENT PROCEEDINGS, ANY PART OF HIS INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME - TAX HAS ESCAPED ASSESSMENT. HE MAY STA RT REASSESSMENT PROCEEDINGS EITHER BECAUSE SOME FRESH FACTS HAD COME TO LIGHT WHICH WERE NOT PREVIOUSLY DISCLOSED OR SOME INFORMATION WITH REGARD TO THE FACTS PREVIOUSLY DISCLOSED COMES INTO HIS POSSESSION WHICH TENDS TO EXPOSE THE UNTRUTHFULNESS OF THOSE FACTS. IN SUCH SITUATIONS, IT IS NOT A CASE OF MERE CHANGE OF OPINION OR THE DRAWING OF A DIFFERENT INFERENCE FROM THE SAME FACTS AS WERE EARLIER AVAILABLE BUT ACTING ON FRESH INFOR MATION. SINCE THE BELIEF IS THAT OF THE INCOME - TAX OFFICER, THE SUFFI CIEN CY OF REASONS FOR FORMING THE BELIEF IS NOT FOR THE COURT TO JUDGE BUT IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT THERE IN FACT EXISTED NO BELIEF I OR THAT THE BELIEF WAS NOT AT ALL A BONA FIDE ONE OR WAS BASED ON VAGUE, IRRELEVANT AND NON - SPECIFIC INFORM ATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK INTO THE CONCLUSION ARRIVED AT BY THE INCOME - TAX OFFICER AND EXAMINED WHETHER THERE WAS ANY MATERIAL AVAILABLE ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE INCOME - TAX OFFICER AND FU RTHER WHETHER THAT MATERIAL HAD ANY RATIONAL CONNECTION. OR A LIVE LINK FOR THE FORMATION OF THE REQUISITE BELIEF ... ( EMPHASISE SUPPLIED)) IN ANANT KUMAR SAHARIA V. CIT [1998] 232 ITR 533 (GAUHATI), IT WAS HELD AS FOLLOWS (PAGE :539) : 'THE BELIEF IS THAT OF THE ASSESSING OFFICER AND THE RELIABILITY OR CREDIBILITY IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 23 OR FOR THAT MATTER THE WEIGHT THAT WAS ATTACHED TO THE MATERIALS NATURALLY, DEPENDS ON THE JUDGMENT OF THE ASSESSING OFFICER. THIS COURT IN EXERCISE OF POWER UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA CANNOT GO INTO THE SUFFICIENCY OR ADEQUACY OF THE MATERIALS. AFTER ALL THE ASSESSING OFFICER ALONE IS ENTRUSTED TO ADMINISTER THE IMPUGNED ACT AND IF THERE IS PRIMA FACIE MATERIAL AT THE DISPOSAL OF THE ASSESSING OFFICER THAT THE INCOME CHARGEABLE TO INCOME - TAX ESCAPED ASSESSMENT THIS COURT IN EXERCISE OF POWER UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA SHOULD REFRAIN FROM EXERCISING THE POWER. IN THE INSTANT ALSO, THE CASE OF THE PETITIONER WAS FAIRLY CONSIDERED AND THEREA FTER THE ABOVE DECISION IS TAKEN.' (UNDERLINING IS OURS) IN BOMBAYPHARMA PRODUCTS V. ITO (1999] 237 ITR 614 (MP), IT WAS HELD AS FOLLOWS (PAGE 616) : 'IT IS ALSO ESTABLISHED THAT THE NOTICE ISSUED UNDER SECTION 148 OF .,''. THE ACT SHOULD FOLLOW T HE REASONS RECORDED BY THE INCOME - TAX OFFICER, FOR REOPENING OF THE ASSESSMENT AND SUCH REASONS MUST HAVE A MATERIAL BEARING ON THE QUESTION OF ESCAPEMENT OF INCOME BY THE ASSESSEE FROM ASSESSMENT BECAUSE OF HIS FAILURE OR OMISSION TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS. WHETHER SUCH REASONS ARE SUFFICIENT OR NOT, IS NOT A MATTER TO BE DECIDED BY THE COURT. BUT THE EXISTENCE OF THE BELIEF IS SUBJECT TO SCRUTINY IF THE ASSESSEE SHOWS CIRCUMSTANCES THAT THERE WAS NO MATERIAL BEFORE THE INCOME - TAX OFF ICER TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT.' (EMPHASIS ADDED) IN H. A. NANJI AND CO. V. ITO [1979] 120 ITR 593 (CAL), IT HAS BEEN HELD THAT AT THE TIME OF ISSUE OF NOTICE OF THE REASSESSMENT, IT IS NOT INCUMBENT ON THE INCOME - TAX OFFICER TO COME TO A FINDING THAT INCOME HAS ESCAPED ASSESSMENT BY REASON OF THE OMISSION OR FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS N ECESSARY FOR ASSESSMENT. IT HAS BEEN FUR THER HELD THAT THE BELIEF WHICH THE INCOME - TAX OFFICER ENTERTAINS AT THAT STAGE IS A TENTATIVE BELIEF ON THE BASIS OF THE MATERIALS BEFORE HIM WHICH HAVE TO BE EXAMINED AND SCRUTINISED ON SUCH EVIDENCE AS MAY BE AVA ILABLE IN THE PROCEEDINGS FOR REASSESSMENT. THE DIVISION BENCH HELD THAT THERE MUST BE SOME GROUNDS FOR THE REASONABLE BELIEF THAT THERE HAS BEEN A NON - DISCLOSURE OR OMISSION TO FILE A TRUE OR CORRECT RETURN BY THE ASSESSEE RESULT - ING IN ESCAPEMENT OF ASSE SSMENT OR IN UNDERASSESSMENT. SUCH BELIEF MUST BE IN GOOD FAITH, AND SHOULD NOT BE A MERE PRETENCE OR CHANGE OF OPINION ON INFERENTIAL FACTS OR FACTS EXTRANEOUS OR IRRELEVANT TO THE ISSUE AND THE MATERIAL ON WHICH THE BELIEF IS BASED MUST HAVE A RATIONAL C ONNECTION OR LIVE LINK OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. IN N. D. BHATT, LAC OF I. T. V. I. B. M. WORLD TRADE CORPORATION [1995] 216 ITR 811 (BORN), IT HAS BEEN HELD THUS (PAGE 823) : 'IT IS ALSO WELL - SETTLED THAT THE REASONS FOR REOPENING ARE REQUIRED TO BE RECORDED BY THE ASSESSING AUTHORITY BEFORE ISSUING ANY NOTICE UNDER SECTION 148 BY VIRTUE OF THE PROVISIONS OF SECTION 148(2) AT THE RELEVANT TIME. ONLY THE REASON SO RECORDED CAN BE LOOKED AT FOR SUS TAINING OR SET TING ASIDE A NOTICE ISSUED UNDER SECTION 148.' IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 24 IN HINDUSTAN LEVER LTD. V. R. B. WADKAR, ASST. CIT (NO.1) [2004] 268 ITR 332 (BORN), A DIVISION BENCH HAS OPINED THUS (PAGE 338) : ' ... THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBI GUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS MIND. REASONS ARE THE MANI FESTATION OF MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE SELF - EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROVIDE THE LINK BETWEEN CONCLUSION AND EVI DENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE ASSESSING OFFICER, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS, NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGU ARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT.' (UNDERLINING IS OURS) IN ASST. CIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500 (SC), IT HAS BEEN RULED OUT(PAGE 511) : 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR, RE - ASSESS 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 EXPRES SION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTA INED - THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE 'ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCE S 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 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT O F 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 S TAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION. (EMPHASIS SUPPLIED ) IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 25 IN THIS CONTEXT, WE MAY REFER WITH PROFIT TO A DIVISION BENCH DECISION OF THIS COURT IN SFIL STOCK BROKING LTD. [2010] 325 ITR 285, WHEREIN THE BENCH WAS DEALING WITH THE VALIDITY OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE BENCH REPRODUCED THE INITIAL ISSUANCE OF NOTICE AND THEREAFTER REFERRED TO THE REASONS FOR ISSUE OF NOTICE UNDER SECTION 148 WHICH WAS PROVIDED TO THE ASSESSEE. THEREAFTER, THE BENCH REFERRED TO THE DECISIONS IN CIT V. ATUL JAIN [2008] 299 ITR 383 (DELHI), ASST. CIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500 (SC), JAY BHARAT MARUTI LTD. VS. CIT [2010] 324 ITR 289; 223 CTR 269 (DEL) AND CIT V. BATRA BHATTA CO. [2010] 321 ITR 526; 174 TAXMAN 444(DELHI) AND EVENTUALLY HELD THUS (PAGE 290): IN THE PRESENT CASE, WE FIND THAT THE FIRST SENTENCE OF THE SO - CALLED REASONS RECORDED BY THE ASSESSING OFFICER IS MERE INFORMATION RECEI VED FROM THE DEPUTY DIRECTOR OF INCOME - TAX (INVESTIGATION). THE SECOND SENTENCE IS A DIRECTION GIVEN BY THE VERY SAME DEPUTY DIRECTOR OF INCOME - TAX (INVESTIGATION) TO ISSUE A NOTICE UNDER SECTION 148 AND THE THIRD SENTENCE AGAIN COMPRISES OF A DIRECTION BY THE ADDITIONAL COMMISSIONER OF INCOME - TAX TO INITIATE PROCEEDINGS UNDER SECTION 148 IN RESPECT OF CASES PERTAINING TO THE RELEVANT WARD. THESE THREE SENTENCES ARE FOLLOWED BY THE FOLLOWING SENTENCE, WHICH IS THE CONCLUDING PORTION OF THE SO - CALLED REASONS : THUS, I HAVE SUFFICIENT INFORMATION IN MY POSSESSION TO ISSUE NOTICE UNDER SECTION 148 IN THE CASE OF M/S. SFIL STOCK BROKING LTD. ON THE BASIS OF REASONS RECORDED AS ABOVE. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFICER REFERRED TO THE INFORM ATION AND THE TWO DIRECTIONS AS REASONS ON THE BASIS OF WHICH HE WAS PROCEEDING TO ISSUE NOTICE UNDER SECTION 148. WE ARE AFRAID THAT THESE CANNOT BE THE REASONS FOR PROCEEDING UNDER SECTION 147/148 OF THE SAID ACT. THE FIRST PART IS ONLY AN INFORMATION AND THE SECOND AND THE THIRD PART OF THE BEGINNING PARAGRAPH OF THE SO - CALLED REASONS ARE MERE DIRECTIONS. FROM THE SO - CALLED REASONS, IT IS NOT AT ALL DISCERNIBLE AS TO WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTL Y ARRIVED AT A BELIEF THAT, ON THE BASIS OF THE MATERIAL WHICH HE HAD BEFORE HIM, INCOME HAD ESCAPED ASSESSMENT. CONSEQUENTLY, WE FIND THAT THE TRIBUNAL HAS ARRIVED AT THE CORRECTION ON FACTS. THE LAW IS WELL SETTLED. THERE IS NO SUBSTANTIAL QUESTION OF LA W WHICH ARISES FOR OUR CONSIDERATION.(EMPHASIS IS OURS) AT THIS JUNCTURE, IT IS PROFITABLE TO REFER TO THE AUTHORITY IN GKN DRIVE SHAFTS (INDIA) LTD. V. ITO [2003} 259 ITR 19 (SC) ; [2003] 179 ITR 11 (SC )WHEREIN THEIR LORDSHIPS OF THE APEX COURT HAVE HEL D THUS (PAGE 20) ; 'WE SEE NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER UNDER CHALLENGE. HOWEVER WE CLARIFY THAT WHEN A NOTICE UNDER SECTION 14 OF THE INCOME - TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE A RETURN AND IF H E SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND I DISP OSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 26 PROCEEDINGS, THE ASSESSING OFFICER HAS TO DISPOSE OF THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSMENT IN RESPECT OF THE ABOVE SAID FIVE ASSESSMENT YEARS. IN SARTHAK SECURITIES CO. P. LTD. VS. ITO (WRIT PETITION NO.6087 OF 2010 DECIDED ON OCTOBER 18, 2010)(2010) 329 ITR 110 (DELHI), A DIVISION BENCH OF THIS COURT, AFTER REPRODUCING SECTION 147 OF THE ACT AND RELYING ON CERTAIN DECISIONS IN THE FIELD, EXPRESSED THE VI EW AS FOLLOWS (PAGE 122): THE OBTAINING FACTUAL MATRIX HAS TO BE TESTED ON THE ANVIL OF THE AFORESAID PRONOUNCEMENT OF LAW. IN THE CASE AT HAND, AS IS EVINCIBLE, THE ASSESSING OFFICER WAS AWARE OF THE EXISTENCE OF FOUR COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION. BOTH THE ORDERS CLEARLY EXPOSIT THAT THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION BY THE INVESTIGATION WING AND THERE IS NO MENTION THAT THESE COMPANIES ARE FICTITIOUS COMPANIES. NEITHER THE REASONS IN THE NOTICE NOR TH E COMMUNICATION PROVIDING REASONS REMOTELY INDI CATE INDEPENDENT APPLICATION OF MIND. TRUE IT IS AT THAT STAGE, IT IS NOT NECESSARY TO HAVE ESTABLISHED FACT OF ESCAPEMENT OF INCOME BUT WHAT IS NECESSARY IS THAT THERE IS RELEVANT MATERIAL ON WHICH A REASON ABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. TO ELABORATE THE CONCLUSIVE PROOF IS NOT GERMANE AT THIS STAGE BUT THE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUNDATION OR PLATFORM OF PRUDENCE WHICH A REASONABLE IS REQUIRED TO APPLY. AS IS MANIFES T FROM THE PERUSAL OF THE SUPPLY OF REASONS AND THE ORDER OF REJECTION OF OBJECTION, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY. THEIR EXISTENCE IS NOT DISPUTED. WHAT IS MENTIONED IS THAT THESE COMPANIES WERE USED AS CONDUITS. IN THAT VIE W OF THE MATTER, THE PRINCIPLE LAID DOWN IN CIT V. LOVELY EXPORTS (P) LTD. (2009) 319 ITR (ST) 5 (SC) GETS SQUARELY ATTRACTED. THE SAME HAS NOT BEEN REFERRED TO WHILE PASSING THE ORDER OF REJECTION. THE ASSESSEE IN HIS OBJECTIONS HAD CLEARLY STATED THAT TH E COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE - COMPANY THROUGH BANKING CHANNEL. THE IDENTITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTANCES, IT WOULD NOT BE APPROPRIATE TO REQUIRE THE ASSESSEE TO GO THROUGH THE ENTIRE GA MUT OF PROCEEDINGS. IT IS TOTALLY UNWARRANTED. THE PRESENT FACTUAL CANVAS HAS TO BE SCRUTINIZED ON THE TOUCHSTONE OF THE AFORESAID ENUNCIATION OF LAW. IT IS WORTH NOTING THAT THE LEARNED COUNSEL FOR THE PETITIONER HAS SUBMITTED WITH IMMENSE VEHEMENCE THA T THE PETITIONER HAD ENTERED INTO CORRESPONDENCE TO HAVE THE DOCUMENTS BUT THE ASSESSING OFFICER TREATED THEM AS OBJECTIONS AND MADE A COMMUNICATION. HOWEVER, OFFICER TREATED THEM AS OBJECTIONS AND MADE A COMMUNICATION. HOWEVER, ON A SCRUTINY OF THE ORDER, IT IS PERCEIVABLE THAT THE AUTHORITY HAS PASSED THE ORDER DEALING WITH THE OBJECTIONS IN A VERY CAREFUL AND STUDIED MANNER. HE HAS TAKEN NOTE OF THE FACT THAT THE TRANSACTIONS INVOLVING RS. 27LAKHS MEN - TIONED IN THE TABLE IN ANNEXURE P - 2 CONSTITUTE FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOME. THE ASSESSING OFFICER HAS REFERRED TO THE SUBSEQUENT INFORMATION AND ADVERTED TO THE CONCEPT OF TRUE AND FULL DISCL OSURE OF FACTS. IT IS ALSO NOTICEABLE THAT THERE WAS SPECIFIC INFOR MATION RECEIVED FROM THE OFFICE OF THE DIRECTOR OF INCOME - TAX (INV - V) AS REGARDS THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE - COMPANY WITH A NUMBER OF CONCERNS WHICH HAD MADE ACCOMMODATIO N ENTRIES AND THEY WERE NOT IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 27 GENUINE TRANSACTIONS. AS WE PERCEIVE, IT IS NEITHER A CHANGE OF OPINION NOR DOES IT CONVEY A PARTICULAR INTERPRETATION OF A SPECIFIC PROVISION WHICH WAS DONE IN A PARTICULAR MANNER IN THE ORIGINAL ASSESSMENT AND SOUGHT TO BE DON E IN A DIFFERENT MANNER IN THE PROCEEDING UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEVE HAS BEEN APPROPRIATELY UNDERSTOOD BY THE ASSESSING OFFICER AND THERE IS MATERIAL ON THE BASIS OF WHICH THE NOTICE WAS ISSUED. AS HAS BEEN HELD IN PHOOL CHAND BAJR ANG LAL [1993] 203 ITR 456 (SC), BOMBAY PHARMA PRODUCTS [1999] 237 ITR 614 (MP) AND ANANT KUMAR SAHARIA [1998] 232 ITR 533 (GAUHATI), THE COURT, IN EXERCISE OF JURIS DICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PERTAINING TO SUFFI CIENCY OF REASO NS FOR FORMATION OF THE BELIEF, CANNOT INTERFERE. THE SAME IS NOT TO BE JUDGED AT THAT STAGE. IN SFIL STOCK BROKING LTD. [2010] 325 ITR 285 (DELHI), THE BENCH HAS INTERFERED AS IT WAS NOT DISCERNIBLE WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPEN DENTLY ARRIVED AT A BELIEF ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM THAT THE INCOME HAD ESCAPED ASSESSMENT. IN OUR CONSIDERED OPINION, THE DECISION RENDERED THEREIN IS NOT APPLICABLE TO THE FACTUAL MATRIX IN THE CASE AT HAND. IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. [2010] 329 ITR LLE (DELHI), THE DIVISION BENCH HAD NOTED THAT CERTAIN COMPANIES WERE USED A~ CONDUITS BUT THE ASSESSEE HAD, AT THE STAGE OF ORIGINAL ASSESSMENT, FUR NISHED THE NAMES OF THE COMPANIES WIT H WHICH IT HAD ENTERED INTO TRANS ACTIONS AND THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION AND FURTHER THE REASON RECORDED DOES NOT INDICATE APPLICATION OF MIND. THAT APART, THE EXISTENCE OF THE COMPANIES WAS NOT DISPUTED AND THE COMPANIES HAD BAN K ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE - COMPANY THROUGH THE BANKING CHANNEL. REGARD BEING HAD TO THE AFORESAID FACT SITUATION, THE COURT HAD INTERFERED. THUS, THE SAID DECISION IS ALSO DISTINGUISHABLE ON THE FACTUAL SCORE. 24. IN THE CASE OF ITO VS. PURUSHOTTAM DAS BANGUR AND ANOTHER, 224 ITR 362 (SC) AS RELIED HEAVILY BY LD. DR , I NOTED THAT THE APEX COURT HELD AS UNDER: - HELD, REVERSING THE DECISION OF THE HIGH COURT, THAT THE LETTER OF THE DEPUTY DIRECTOR REFERRED TO THE STATEMENT CONTAI NING FINANCIAL INFORMATION REGARDING THE COMPANY IN QUESTION WHICH WAS ANNEXED TO THE LETTER. THE STATEMENT CONTAINED INFORMATION DERIVED FROM THE BOMBAY STOCK EXCHANGE DIRECTORY INDICATING THAT DURING THE PERIOD 1965 70, THE COMPANY HAD PROSPERED, THAT THE BOOK VALUE PER EQUITY SHARE HAD RISEN FROM RS.318.55 FOR THE YEAR ENDING DECEMBER 31, 1965, TO RS.401 FOR THE YEAR ENDING DECEMBER, 31, 1970, THE EARNING PER SHARE HAD RISEN FROM RS.8.37 PER TO RS.44/ - PER SHARE AND THAT THE DIVIDEND PERCENTAGE HAD ALS O RISEN FROM 2 PER CENT TO 10 PER CENT FOR THE SAME PERIOD. ON THE BASIS OF THE INFORMATION CONTAINED IN THE LETTER OF THE DEPUTY DIRECTOR AND THE DOCUMENTS ANNEXED TO IT, THE INCOME - TAX OFFICER COULD HAVE HAD REASON TO BELIEVE THAT THE FAIR MARKET VALUE O F THE SHARES WAS FAR MORE THAN THE SALE PRICE AND THAT THE MARKET QUOTATIONS FROM THE CALCUTTA STOCK ASSOCIATION SHOWN BY THE RESPONDENT AT THE TIME OF ORIGINAL ASSESSMENT WERE MANIPULATED ONES AND THAT AS A RESULT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSE SSMENT. IT COULD IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 28 NOT BE SAID THAT THE INFORMATION THAT WAS CONTAINED IN THE LETTER WAS NOT DEFINITE INFORMATION, AND COULD NOT BE ACTED UPON BY THE INCOME - TAX OFFICER FOR TAKING ACTION UNDER SECTION 147(B) OF THE ACT. MERELY BECAUSE THE NOTICE WAS SENT ON THE NEXT DAY AFTER RECEIPT OF THE LETTER, THIS DID NOT MEAN THAT THE INCOME - TAX OFFICER DID NOT APPLY HIS MIND TO THE INFORMATION CONTAINED IN THE SAID LETTER. ON THE BASIS OF THE FACTS AND INFORMATION CONTAINED IN THE SAID LETTER, THE INCOME - TAX OFFICER, WITHOUT ANY FURTHER INVESTIGATION, COULD HAVE FORMED THE OPINION THAT THERE WAS REASON TO BELIEVE THAT INCOME OF THE RESPONDENT CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE NOTICE UNDER SECTION 147(B) WAS VALID. 25. I NOTED THAT THE APEX COURT IN THE C ASE OF ITO VS. PURUSHOTTAM DAS BANGUR AND ANOTHER, 224 ITR 362 (SC) HAS SETTLED THE LAW ON THIS ISSUE THAT AT THE TIME OF INITIATION OF THE PROCEEDINGS U/S. 147, THE ASSESSING OFFICER SHOULD HAVE THE MATERIAL RELEVANT TO THE ASSESSEE. THE INFORMATION RECE IVED FROM THE INVESTIGATION WING IS ALSO MATERIAL IF IT CONTAINS THE INFORMATION REGARDING THE ASSESSEE. THE ASSESSING OFFICER AT THE TIME OF RECORDING OF THE REASONS/FORMATION OF BELIEF IS NOT SUPPOSED TO COUNTER THE EVIDENCE OR MATERIAL COLLECTED BY HIM WITH THE ASSESSEE. EVEN THE SOURCE OF THE MATERIAL CANNOT BE ASKED BY THE ASSESSEE. IF THE MATERIAL OR THE INFORMATION BELONGS TO THE ASSESSEE, IN OUR OPINION, THE ASSESSING OFFICER HAS A BONA FIDE BELIEF TO RECORD THE REASONS. THE COURT CANNOT LOOK INTO T HE SUFFICIENCY OF THE MATERIAL HELD BY THE ASSESSING OFFICER FOR THE FORMATION OF THE BELIEF. ONCE THE PROCEEDINGS ARE INITIATED, THE ONUS IS ON THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS ESCAPED THE INCOME AND FOR THAT HE HAS TO GIVE THE HEARING TO THE ASSESSEE AND GIVE ALL THE MATERIAL AND EVIDENCE COLLECTED BY HIM SO THAT THE ASSESSEE MAY CONTRADICT THE SAME. IF THE ASSESSING OFFICER DOES NOT HAVE THE MATERIAL, THE REASONS CANNOT BE REGARDED TO BE BONA FIDE AND THE INITIATION OF THE PROCEEDINGS CAN BE QUASHED. IF THE INITIATION IS VALID AND SUBSEQUENTLY, THE ASSESSEE PROVES THAT THERE IS NO ESCAPEMENT OF INCOME, THE ASSESSMENT SO FRAMED COULD BE QUASHED/CANCELLED. WE NOTED THAT IN THE DECISIONS RELIED ON BY THE LEARNED AR, THE DECISION OF THE HO NBLE SUPREME COURT REPORTED IN 224 ITR 362 (SC) WHICH HAS SETTLED THE POSITION OF LAW HAS NOT BEEN DISCUSSED. IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 29 THE LAW PRONOUNCED BY THE SUPREME COURT IS THE LAW OF LAND AND IS BINDING ON ALL THE COURTS WHAT TO TALK OF THIS BENCH OF THE TRIBUNAL. THE DECIS ION OF APEX COURT IN THE CASE OF JOHRI LAL (HUF) VS. CIT (SUPRA), SHEO NATH SINGH VS. AAC (SUPRA) AND GANGA SARAN & SONS (P) LTD. VS. ITO (SUPRA) ALSO, IN MY OPINION, WILL NOT ASSIST THE ASSESSEE AS IN THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER WHILE RECORDING THE REASONS HAS THE RELEVANT MATERIAL TO FORM THE BELIEF FROM WHICH A PERSON OF ORDINARY PRUDENCE COULD FORM AS HELD BY US IN EARLIER PARAGRAPH. 26 . I HAVE ALSO GONE THROUGH THE DECISION IN ITA NO. 4496/DEL/2011 IN THE CASE OF SH. SAIDAN KAPO OR ON WHICH THE LD. A.R HAS HEAVILY RELI ED , THIS DECISION IN MY OPINION WILL NOT ASSISTG THE ASSESSEE BECAUSE ON THAT DECISION THERE IS A FINDING THAT THE REOPENING WAS DONE BY THE ASSESSING OFFICER PURELY ON THE BASIS OF THE VALUATION REPORT RECEIVED FROM THE OFFICE OF THE DVO. THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND, IT IS NOT A CAS E WHERE THE REOPENING WAS DONE DUE THE APPLICABILITY OF THE PROVISION OF SECTION 50C OF THE I.T. ACT. I ALSO NOTED THAT THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SUNDER CARPET INDUSTRIES VS. ITO AND ANOTHER 324 ITR 417 (ALLD) HAS TAKEN THE VIEW THAT THE REASSESSMENT PROCEEDINGS ON THE BASIS OF THE REPORT OF THE DEPARTMENTAL VALUER IN PURSUANCE OF SECTION 142A IS VALID. IN THIS CASE THE HONBLE HIGH COURT HAS HELD AS UNDER: - HELD, DISMISSING THE WRIT PETITION, THAT THE REFERENCE MADE TO THE DEPARTMENTA L VALUATION CELL FOR THE PURPOSES OF DETERMINATION OF THE INVESTMENT IN THE CONSTRUCTION OF BUILDING COULD NOT BE SAID TO BE WITHOUT THE AUTHORITY OF LAW. HE VALUATION REPORT DISCLOSED THE HIGHER INVESTMENTS IN THE CONSTRUCTIONS WHICH HAD NOT BEEN DISCLOSE D IN THE BOOKS OF ACCOUNT. THUS, THERE WAS ESCAPED ASSESSMENT. THE DEPARTMENTAL VALUERS REPORT IN I.T.A. NO. 121 / LKW / 16 ASSESSMENT YEAR: 20 07 - 08 30 CONSTITUTED MATERIAL FOR ENTERTAINING A BELIEF OF ESCAPED INCOME IN THE YEARS UNDER CONSIDERATION. THE REASSESSMENT PROCEEDINGS WERE VALID. 27. IN VIEW OF THE AFORESAID DECISION I HOLD THAT IN THIS CASE THE INITIATION OF THE PROCEEDING U/S 147 IS VALID AND THERE IS NO ILLEGALITY INVOLVED. I THEREFORE, CONFIRM THE ORDER OF THE LD. CIT(A). THERE ARE BEING NO OTHER ISSUE OR GROUND TAKEN BY THE ASSESSEE. I DISMISS THE APPEAL FILED BY THE ASSESSEE. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. + (ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2016 ) SD/ - ( P. K. BANSAL ) ACCOUNTANT MEMBER DATED: 11.08.2016 *S HARAD COPY OF THE ORDER FORWARDED TO 1. : THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR