Pradeep Dayanand Kothari, CHENNAI V. ACIT, CHENNAI

ITA 1303/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9520 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Salary income; Peak credit; Difference of opinion; Competent authority; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' ! # . $% , & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NOS. 1302 & 1303/MDS/15 / ASSESSMENT YEARS : 2007-08 & 2006-07 PRADEEP DAYANAND KOTHARI, KOTHARI BUILDINGS, 4 TH FLOOR, 114, MAHATMA GANDHI ROAD, CHENNAI 600 034. PAN AEEPK6866L ( APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-II(4), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI A.B.KOLI, JCIT ! / DATE OF HEARING : 16.03.2016 '# ! / DATE OF PRONOUNCEMENT: 27.04.2016 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) - - ITA 1302 & 1303/15 2 DATED 31.3.2015. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHO TRADED IN SHARES AND MUTUAL FUNDS FILED RETURNS FOR ASSESSMEN T YEARS 2006-07 AND 2007-08 AND THE ASSESSMENT ORDERS PASSE D BY THE JURISDICTIONAL ASSESSING OFFICERS AS PER DETAILS, T ABULATED BELOW : AY DATE OF FILING RETURN RETURNED INCOME ` ASSESSMENT ORDER U/S 143(3) RWS 147 DATED ASSESSED INCOME ` 2006-07 27.07.2006 16,98,710 31.3.2013 35,20,350/ - 2007-08 30.07.2007 29,56,474 30.03.2013 1,65,32,580 /- 2 .1 INFORMATION WAS OBTAINED FROM THE INVESTIGATION WING THAT THE ASSESSEE HAD OPERATED AN UNDECLARED ACCOUN T WITH HSBC BANK LOCATED IN SWITZERLAND UNDER CODE BUP 5090165807 AND CARRIED OUT UNACCOUNTED TRANSACTIONS AND MADE DEPOSITS IN THEM DURING THE FY 2005-06 AND FY 2006- 07 RELEVANT TO THE ASSESSMENT YEARS 2006-07 AND 200 7-08 RESPECTIVELY. 2.2 THE ASSESSMENTS WERE REOPENED AFTER RECORDING REASONS THEREOF WITH THE PRIOR APPROVAL OF THE JOIN T COMMISSIONER OF INCOME TAX/ SALARY RANGE V, CHENNAI . NOTICES U/S.148 DATED.26.09.2011 FOR BOTH THE AYS 2 006-07 - - ITA 1302 & 1303/15 3 AND 2007-08 WERE ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX/ SALARY CIRCLE-V, CHENNAI. NOTICES U/S 1 43(2) WERE ISSUED SUBSEQUENTLY/IN RESPONSE TO ASSESSEE'S AR MADE SUBMISSIONS AND FURNISHED DETAILS. AFTER DISCUSSING THE CASE WITH THE ASSESSEE'S REPRESENTATIVE, THE ASSESS MENTS WERE COMPLETED BY THE AO BROADLY STATING IN AN UNIF ORM MANNER FOR BOTH AYS IN APPEAL, AS UNDER: THE INFORMATION RECEIVED REGARDING BANK ACCOUNTS H ELD BY SRI PRADEEP DAYANAND KOTHARI IN HSBC BANK, GENEVA, SWITZERLAND ARE AS FOLLOWS : A/C. NAME WITH HSBC BANK ACCOUNT NUMBER BENEFICIARY XENIOS FOUNDATION 5091365665 PRADIP DAYANAND KOTHARI DAYANAND837 5091352245 PRADIP DAYANAND KOTHARI 2.3 THE ASSESSEE WAS REQUIRED TO EXPLAIN THE TRANSACTIONS IN THE ABOVE MENTIONED ACCOUNTS. THE ASSESSEE FILED A COPY OF THE WRITTEN SUBMISSION FIL ED BEFORE THE ASST. DIRECTOR OF INCOME TAX (INV) UNIT 111(2), CHENNAI IN RESPONSE TO SUMMONS U/S 131(IA) DT. 29,8,2011, C ALLING FOR THE FOLLOWING DETAILS: 1. A SUM OF USD 3,42,628,00 (PEAK) WAS SEEN DEPOSITED INTO THE A/C OF HSBC BANK SWITZERLAND IN BUP_SIFIC_PER_ID5090165807,PER_ID 108183, - - ITA 1302 & 1303/15 4 PER_NO 165807. CLIENT NAME XENIOS FOUNDATION CODE: 5091365665 WHERE YOU ARE THE BENEFICIARY. PLEASE FURNISH THE DETAILS REGARDING SOURCE OF INCOME AND WHETHER THE SAME WAS OFFERED TO TAX. 2. DETAILS OF T-T/S. XENIOS FOUNDATION AND M/S. DAYANAND837 (CLIENT ID 5091352245) 2.4 THE REPLY FILED BY THE ASSESSEE IN RESPONSE TO THE ABOVE SUMMONS IS REPRODUCED HEREUNDER: '1. AS REGARDS THE DETAILS CONTAINED IN ITEM NO.1 O F YOUR SUMMONS, I WOULD LIKE TO STATE THAT I AM NOT AWARE OF ANY OF THESE DETAILS EXCEPT THAT I HAVE AN ACCOUNT UNDER CLIENT IDNO.1365665 IN THE NAME OF XENIOS FOUNDATION. 2. AS REGARDS THE DETAILS CONTAINED ITEM NO.2 OF YOUR SUMMONS, I AM NOT AWARE OF ANY OF THE DETAILS CONTAINED THEREIN, 3. I AM ADVISED THAT ANY AMOUNT LYING TO MY CREDIT PRIOR TO THE ASSESSMENT YEAR 2006-07 ARE NOT LIABLE FOR TAX. THE ACCOUNT NO, 11235875 IS THERE EVEN PRIOR TO 2006. THE BALANCE IN THE SAID ACCOUNT WAS APPROXIMATELY $ 287000 EVEN PRIOR TO 2006. THESE AMOUNTS WERE DEPOSITED BY TRANSFER FROM MY FATHER'S ACCOUNT IN 2002, NO FURTHER AMOUNTS WERE DEPOSITED BY ME IN THE SAID ACCOUNT AT ANY TIME AFTER 1.4.2006. 4. EVEN THOUGH I AM NOT LIABLE TO PAY ANY TAX ON TH E BALANCE IN THE SAID ACCOUNT, IN AS MUCH AS THE PRESENT BALANCE HAS NOT EXCEED THE BALANCE IN THE SAID ACCOUNT PRIOR TO THE ASSESSMENT YEAR 2006-07 - - ITA 1302 & 1303/15 5 AND ON ACCOUNT OF THE FACT THAT THERE ARE NO FRESH DEPOSITS IN THE SAID ACCOUNT ANY TIME AFTER 1.4.2006 BY ME, IN ORDER TO BUY PEACE WITH THE INCOME TAX DEPARTMENT, AND IN A SPIRIT OF COOPERATION, I MIGHT CONSIDER OFFERING THE BALANCE AS ON DATE IN THE SAID ACCOUNT AS MY INCOME OF THE CURRENT FINANCIAL YEAR AND PAY THE APPROPRIATE TAX AS ADVANCE TAX FOR THE ASSESSMENT YEAR 2012-13 SUBJECT TO THE INCOME TAX DEPARTMENT NOT INITIATING ANY PROCEEDINGS TOWARDS CONCEALMENT OF INCOME OR OTHERWISE FOR LEVY OF PENALTY UNDER ANY OF THE PROVISIONS OF THE INCOME TAX ACT OR INITIATING PROSECUTION PROCEEDINGS AGAINST ME FOR ANY ALLEGED DEFAULT/OFFENCE UNDER THE PROVISIONS OF THE INCOME TAX ACT. THIS OFFER IS CONDITIONAL UPON THE FACT TH AT NO PROCEEDINGS, EITHER PENAL OR PROSECUTION, SHOULD BE INITIATED AGAINST ME BY THE INCOME TAX DEPARTMENT. ' THE ASSESSING OFFICER CONSIDERED THE CONTENTIONS OF THE AR, BUT REJECTED THE SAME AND MADE ADDITIONS TOWARD S DEPOSIT IN THOSE ACCOUNTS. AGAINST THIS, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(APPEALS ) CHALLENGING THE REOPENING OF THE ASSESSMENT AND HE CONFIRMED THE REOPENING OF THE ASSESSMENT. AGGRIEV ED, THE ASSESSEE IS IN APPEAL BEFORE US ONCE AGAIN, CHALLENGING THE REOPENING OF THE ASSESSMENT. - - ITA 1302 & 1303/15 6 3. THE LD. AR SUBMITTED THAT T HESE APPEALS RELATE TO ASSESSMENT YEARS 2006-2007 AND 2007-2008 AND THESE ARE REOPENED ASSESSMENTS AND THE ORIGINAL ASSESSMEN TS WERE ONLY UNDER SECTION 143(1). THE REASONS RECORDED FOR REOPENING THE ASSESSMENT AS COMMUNICATED TO THE ASSESSEE NOWH ERE STATES THAT THE AO HAS REASON TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT. THE REASONS MERELY ALLEGED THE FOLLOWING:- 'IT HAS COME TO MY NOTICE THAT THE ASSESSEE HAS OPERATED AN UNDECLARED ACCOUNT WITH HSBC BANK LOCATED III SWITZERLAND UNDER CODE BUP5090 165807 AND CARRIED OUT UNACCOUNTED TRANSACTIONS AND MADE DEPOSITS DURING THE PERIOD FROM 01104/2005 TO 31103/2006 RELEVANT TO THE ASSESSMENT 2006-07. NONE OF THE TRANSACTIONS WERE RECORDED IN THE REGUL AR BOOK OF ACCOUNTS AND THEY WERE NOT REPORTED TO THE INCOME TAX DEPARTMENT. THE ASSESSEE HAS NOT DISCLOSED THE ABOVE MENTIONED BANK ACCOUNT OR THE TRANSACTIONS MADE THROUGH THE SAID BANK ACCOUNT EITHER IN THE RETURN OF INCOME'. 3.1 THE PRIMARY REQUISITE FOR REOPENING OF THE ASSESSMENT, ON A PLAIN READING OF THE RELEVANT PROVISIONS OF THE A CT AS WELL AS, AS HELD IN SEVERAL DECISIONS, IS THE SATISFACTION OF T HE ASSESSING OFFICER THAT A SPECIFIC INCOME HAS ESCAPED ASSESSME NT AND A - - ITA 1302 & 1303/15 7 FINDING TO THAT EFFECT HAS TO BE RECORDED BEFORE TH E ISSUE OF A NOTICE U/S 148. THIS FINDING IS CONSPICUOUSLY ABSENT IN THE REASONS FOR REOPENING FURNISHED TO THE APPELLANT BY THE ASSESSING OFFICER IN THE LETTER DATED 18/02/2013 . EVEN THE LETTER DATED 28/03/2013 DISPOSING OFF THE OBJECTIONS OF THE ASSESSEE DOES NOT CONTAIN ANY DETAILS ABOUT INCOME ESCAPING ASSESSMENT. THE ASSESSEE BY HIS LETTER DATED 15/02/2013 REQUESTED FOR THE REASONS TO BE FURNISHED AND ON 23/03/2013 FILED THE OBJECTIONS FOR THE REOPENING AND IN THE SAID LE TTER HAS EXPRESSLY STATED THAT THE ASSESSEE'S PARTICIPATION IN THE REOPENING PROCEEDINGS IS WITHOUT PREJUDICE TO SECTI ON 292BB OF THE INCOME TAX ACT AND THE ASSESSEE ALSO E XPRESSLY REITERATED HIS RIGHT TO CONTEST THE VALIDITY OF THE REOPENING. HENCE THE ASSESSING OFFICER REJECTING THE OBJECTIONS ON T HE ASSUMPTION OF JURISDICTION TO REOPEN ON THE BASIS THAT THE ASS ESSEE HAS PARTICIPATED IN THE REOPENING PROCEEDING DESERVES TO BE REJECTED. 3.2 A READING OF THE ASSESSMENT ORDER WOULD SHOW TH AT THE BASIS FOR REOPENING APPEARS TO BE INFORMATION OBTAI NED FROM THE - - ITA 1302 & 1303/15 8 INVESTIGATION WING THAT THE ASSESSEE HAS OPERATED A N UNDECLARED ACCOUNT WITH HSBC BANK LOCATED IN SWITZERLAND AS THEIR CODE BUP5090165807 AND CARRIED OUT UNACCOUNTED TRANSACTION AND MADE DEPOSITS DURING TH E PERIOD FROM 01/04/2005 TO 31/03/2006. 3.3 WHAT IS STATED ABOVE HAS BEEN EXACTLY REPRODUCE D FROM THE REASONS RECORDED AS COMMUNICATED TO THE ASSESSE E BARRING THE SOURCE FOR INFORMATION. THE SOURCE FOR INFORMAT ION HAS BEEN STATED TO BE INVESTIGATION WING OF THE DEPARTMENT A ND NOTICE APPEARS TO HAVE BEEN ISSUED MECHANICALLY ON THE BAS IS OF THE SAID INFORMATION. 3.4 NO ENQUIRIES HAVE BEEN CONDUCTED BY THE ASSESSI NG OFFICER INDEPENDENTLY AND AS A MATTER OF FACT THE A SSESSMENT ORDER ITSELF MENTIONS THAT NO CONFIRMATION HAS BEEN RECEIVED FROM THE COMPETENT AUTHORITY AS PRESCRIBED IN THE INCOME TAX ACT 1961 ON A REFERENCE MADE BY THE ASSESSING O FFICER. THE ASSESSING OFFICER HIMSELF AGAIN STATES THAT THERE I S NO CONCLUSIVE INFORMATION ('ABSENCE OF CONCLUSIVE INFORMATION'). HENCE IT IS STATED THAT REOPENING ON THE BASIS OF THE INCONCLUS IVE AND - - ITA 1302 & 1303/15 9 UNVERIFIED INFORMATION IS INVALID. IT HAS ALSO BE H ELD BY THE DELHI HIGH COURT THAT A NOTICE ISSUED MECHANICA LLY MERELY ON THE INFORMATION SUPPLIED BY THE INVESTIGATION WING HAS UNJUSTIFIED IN THE CASE OF CIT VS. KAMADHENU STEEL ALLOYS LTD., 248 CTR 33. 3.5 THE ASSESSING OFFICER HAS TAKEN AS INCOME THAT ALLEGED PEAK CREDIT IN THE ALLEGED BANK ACCOUNT. COPY OF TH E SAID BANK ACCOUNT WAS NEVER SUPPLIED TO THE ASSESSEE. THE ALL EGED CREDITS IN THE SAID BANK ACCOUNT NEED NOT NECESSARILY REPRE SENT THE FRESH DEPOSITS MADE DURING THE YEAR. EVEN THE ASSES SMENT ORDER DOES NOT CONTAIN ANY NARRATION ABOUT THE CREDITS IN THE BANK ACCOUNT. 3.6 IT IS TRUE THAT THE ASSESSEE FILED A REPLY IN T HE INVESTIGATION WING IN RESPONSE TO SUMMONS U/S 131(L)(A) DATED 29/08/2011. THE ASSESSEE IN THE WRITTEN SUBMISSION FILED BEFORE THE INVESTIGATION WING HAS CATEGORICALLY STATED THAT NO AMOUNTS WERE DEPOSITED AT ANY TIME AFTER 2006. T HE ASSESSEE OFFERED TO PAY THE TAX ON THE BALANCE IN 2 011 AS INCOME FOR THE ASSESSMENT YEAR 2012-13 WAS CONDITIO NAL UPON - - ITA 1302 & 1303/15 10 THAT NO PROCEEDINGS EITHER PENAL OR PROSECUTION SHO ULD BE INITIATED. THE STATEMENT READ AS A WHOLE WOULD S HOW THAT THE ASSESSEE HAS ONLY STATED THAT HE MIGHT CONSIDER OFF ERING THE BALANCE AS ON DATE AS INCOME OF THE CURRENT FINANCI AL YEAR SUBJECT TO CERTAIN CONDITIONS AND ALSO A CATEGORICA L ASSERTION THAT NO DEPOSITS ARE MADE IN THE SAID ACCOUNT AFTER 2006 . 3.7 THE LD. AR CONTENDED THAT THE ASSESSING OFFICER THEREFORE OUGHT TO HAVE LOOKED AT THE ORIGIN OF THE VARIOUS C REDITS FOUND IN THE ALLEGED BANK ACCOUNT. IT IS COMMON KNOWLEDGE T HAT BANKS ABROAD INVEST THE AMOUNTS LYING IN THE BANK ACCOUNT IN VARIOUS UNITS, MUTUAL FUNDS, ETC. AND EVERY TIME SUCH MUTUA L FUNDS MATURED, THESE ARE CREDITED BACK TO THE BANK ACCOUN T. THE SO- CALLED CREDITS FOUND IN THE BANK ACCOUNT ARE NOTHIN G BUT SUCH MATURITY PROCEEDS AND IN ANY CASE THE ASSESSING OFF ICER HAS NOT EVEN ATTEMPTED TO FIND OUT THE SOURCE AND THE DETAI LS OF THE VARIOUS CREDITS MENTIONED BY HIM. 3.8 ACCORDING TO THE LD.AR, ANY ADDITION MADE TO TH E RETURNED INCOME ON THE BASIS OF THE FINDING THAT SUCH INCOME BELONGS TO THE ASSESSEE WOULD REQUIRE STRICT PROOF TO BE FURNI SHED BY THE - - ITA 1302 & 1303/15 11 DEPARTMENT. RULES OF EVIDENCE REQUIRE THE DEPARTME NT TO CONCLUSIVELY PROVE THAT THE INCOME BELONGS TO THE A SSESSEE OR THE CREDITS REPRESENT ASSESSEES INCOME ETC., WOULD REQUIRE STRICT PROOF. NO SUCH PROOF HAS BEEN BROUGHT BY THE ASSES SING OFFICER AND ON THE OTHER HAND EVEN BY THE ASSESSING OFFICER S ADMISSION THAT THE INFORMATION IN THE POSSESSION OF THE DEPAR TMENT IS INCONCLUSIVE THAT ANY ADDITION MADE ON THE BASIS OF SUCH INCONCLUSIVE INFORMATION WOULD NOT SATISFY THEIR RI GOURS OF RULES OF EVIDENCE NECESSARY FOR A REOPENED ASSESSMENT. 4. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSMENT WAS VALIDLY REOPENED AFTER RECORDING THE REASONS AS FOLLOWS : THE ASSESSEE HAS DECLARED TOTAL INCOME OF ` 16,98,710 WHICH CONSIST OF INCOME FROM SALARY 14,99,190 AND INCOME FROM OTHER SOURCES ` 2,99,523. THERE IS INFORMATION FROM THE CBDT THAT THE ASSESSE E HAD UNACCOUNTED DEPOSITS WITH HSBC BANK, SWITZERLAND TO THE TUNE OF USD 33,754.07 WHICH CONVERTED TO INDIAN RUPEE @ ` 50 PER DOLLAR WORKS OUT TO ` 16,87,700. I HAVE REASON TO BELIEVE THAT THIS AMOUNT OF ` 16,87,700 HAS ESCAPED ASSESSMENT. ACCORDING TO HIM, THERE ARE TWO ACCOUNTS IN SWITZER LAND BANK AND THERE ARE DEPOSITS IN THE ASSESSMENT YEARS UNDE R - - ITA 1302 & 1303/15 12 CONSIDERATION AS TABULATED BY THE AO IN HIS ASSESSM ENT ORDER ESPECIALLY IN PARA 12 FOR THE ASST. YEAR 2007-08. ACCORDING TO THE LD. DR, THESE DEPOSITS ARE NOT DISCLOSED AND HA S RIGHTLY BROUGHT TO TAX. ACCORDINGLY, REOPENING OF THE ASSE SSMENT BY THE AO IS VALID. HE PLACED RELIANCE ON THE FOLLOWING J UDGMENTS : I) KALYANJI MAVJI AND CO. V. CIT (102 ITR 287)(SC), WHEREIN IT WAS OBSERVED AS UNDER : SECTION 147 OF THE INCOME-TAX ACT, 1961 (CORRESPONDING TO SECTION 34(1)(B) OF THE INDIAN INCOME-TAX ACT, 1922] INCOME ESCAPING ASSESSMENT POSITION PRIOR TO 1-4-1989 ASSESSMENT YEAR 1956 - 57 IN ORIGINAL ASSESSEE-FIRM WAS ALLOWED DEDUCTIO N OF A SUM BEING AMOUNT OF INTEREST PAID BY IT ON DEB TS INCURRED FOR PARTNERSHIP BUSINESS LATER ON, ITO, HAVING FOUND THAT AMOUNT OF DEDUCTION CLAIMED BY ASSESSEE WAS UTILISED FOR GIVING INTEREST FREE LOAN S TO PARTNERS FOR CLEARING UP THEIR INCOME-TAX DUES, ISS UED NOTICE FOR REOPENING ASSESSMENT ORDER ON GROUND THA T DEDUCTION HAVING BEEN WRONGLY ALLOWED, TAXABLE INCOME HAD ESCAPED ASSESSMENT WHETHER SINCE ITO PROCEEDED ON BASIS OF INFORMATION WHICH CAME TO HIM AFTER ORIGINAL ASSESSMENT BY FRESH FACTS REVEALED I N ASSESSMENT FOR YEAR 1958-59, IT COULD NOT BE SAID T HAT IT WAS A CASE OF MERE CHANGE OF OPINION BY ITO ON MATERIALS WHICH WERE ALREADY ON RECORD HELD, YES WHETHER THEREFORE, THERE WAS NO INFIRMITY IN IMPUGN ED NOTICE HELD, YES II) ITO V. PURUSHOTTAM DAS BANGUR AND ANOTHER (224 ITR 362)(SC), WHEREIN IT WAS HELD AS UNDER : SECTION 147(B) OF THE INCOME-TAX ACT, 1961 - - - ITA 1302 & 1303/15 13 REASSESSMENT - INFORMATION - ASSESSMENT YEAR 1969- 70 - ASSESSEE CLAIMED THAT HE HAD INCURRED CAPITAL LOSS ON SALE OF SHARES HELD IN A COMPANY - LOSS WAS CLAIMED ON BASIS OF OFFICIAL QUOTATION AT CALCUTTA STOCK EXCHANGE AND SAME WAS ALLOWED IN ORIGINAL ASSESSMENT - SUBSEQUENTLY, ITO RECEIVED LETTER FROM DIRECTORATE OF INVESTIGATION GIVING DETAILED PARTIC ULARS COLLECTED FROM BOMBAY STOCK EXCHANGE WHICH REVEALED EARNING OF SHARE AND PRICE OF SHARE INCREA SED DURING PERIOD IN QUESTION AND QUOTATION APPEARING A T CALCUTTA STOCK EXCHANGE WAS AS A RESULT OF MANIPULATED TRANSACTION - VERY NEXT DAY OF RECEIPT OF LETTER, ITO ISSUED NOTICE UNDER SECTION 147(B) - WHETHER INFORMATION CONTAINED IN LETTER OF DIRECTOR ATE OF INVESTIGATION COULD BE SAID TO BE DEFINITE INFOR MATION AND ITO COULD ACT UPON FOR TAKING ACTION UNDER SECT ION 147(B) - HELD, YES - WHETHER ON BASIS OF FACTS AND INFORMATION CONTAINED IN LETTER OF DIRECTORATE OF INVESTIGATION, ITO COULD HAVE FORMED OPINION THAT THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND HE WAS JUSTIFIED IN HIS ACTION - HELD, YES - WHETHER MERELY BECAUSE NOT ICE WAS ISSUED ON VERY NEXT DAY OF RECEIPT OF LETTER IT DID NOT MEAN THAT ITO DID NOT APPLY HIS MIND TO THE INFORMATION - HELD, YES. III) ITO V. SELECTED DALURBAND COAL CO. (P) LTD. (2 17 ITR 597)(SC), WHEREIN IT WAS OBSERVED THAT : SECTION 147 OF THE INCOME-TAX ACT, 1961 INCOME ESCAPING ASSESSMENT ILLUSTRATION ASSESSMENT YEARS 1962-62, 1962-63 AND 1965-66 ON BASIS OF LETTER FROM MINING DEPARTMENT GIVING A REASONABLY SPECIFIC ESTIMATE OF EXCESSIVE COAL-MINING SAID TO HAVE BEEN DONE BY ASSESSEE OVER AND ABOVE FIGURE DISCLOSED BY IT IN ITS RETURNS ITO RECORDED REASO NS AND THEREAFTER ISSUED NOTICES UNDER SECTION 148 WHETHER SAID LETTER COULD CONSTITUTE RELEVANT MATER IAL AND BASIS FOR FORMATION OF REQUISITE BELIEF BY ITO UNDER - - ITA 1302 & 1303/15 14 SECTION 147 AND, THEREFORE, ISSUANCE OF NOTICE UNDE R SECTION 148 WAS VALID HELD, YES 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. 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 YE AR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF T HE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPO SE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REAS ON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL E VIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER I S TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUE R WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. FOR INITIATION OF AC TION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEV ANT TIME) FULFILMENT 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 STA GE, WHAT IS - - ITA 1302 & 1303/15 15 REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABL ISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOT ICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUS E THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE RE ALM OF SUBJECTIVE SATISFACTION OF HIM AS HELD BY THE SUPREME COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC). FURTHER, IT WAS HELD WHAT IS TO BE SEEN WHETHER TH ERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPAR TMENT CAN REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT TO BE CONSIDERED AT THIS STAGE. 6. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITU TED 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 SECT ION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMST ANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSES SMENT - - ITA 1302 & 1303/15 16 YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JU RISDICTION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED T O BE 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 AS SESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFI CER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 1 47 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORD S IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO R EOPEN THE ASSESSMENT. IT IS, HOWEVER, TO BE NOTED THAT BOTH T HE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBI T OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAI N PROVISION AND NOT THE PROVISO. - - ITA 1302 & 1303/15 17 7. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE F ULFILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UN DER SECTION 147 OF THE ACT. WHILE ISSUING THE NOTICE U/S.148 OF TH E ACT, FOR THE PURPOSE OF REOPENING OF ASSESSMENT, THE FINAL OUTCO ME OF THE PROCEEDINGS IS NOT RELEVANT AND AT THE INITIAL STAG E, WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT ESTABLISHED FACT OF ESCAPEMENT OF INCOME. IT IS FURTHER, TO BE NOTICED THAT AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHET HER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COUL D HAVE FORMED A REQUISITE BELIEF, WHETHER THE MATERIAL WOU LD CONCLUSIVELY APPROVE THE ESCAPEMENT IS NOT THE CONC ERNED, AT THE TIME OF REOPENING OF THE ASSESSMENT. THE ASSE SSING OFFICER HAS NOT REQUIRED TO ESTABLISH BY CONCLUSIVE EVIDENC E THAT THE ISSUE RAISED IN REOPENING ASSESSMENT WOULD BE CALCU LATED WITH THE ADDITION OF INCOME IN REASSESSMENT ORDER. THUS , IN OUR OPINION, ISSUE OF NOTICE U/S.148 OF THE ACT, FOR TH E PURPOSE OF REOPENING OF ASSESSMENT U/S.147 OF THE ACT IS BASED ON MATERIAL AVAILABLE BEFORE THE ASSESSING OFFICER IN RESPECT O F UNDISCLOSED BANK ACCOUNT IN FOREIGN COUNTRIES SO AS TO BELIEVE THAT THE INCOME WAS ESCAPED FROM THE ASSESSMENT, WHILE FRAMI NG THE - - ITA 1302 & 1303/15 18 ORIGINAL ASSESSMENT. HENCE, REOPENING OF ASSESSMEN T IS VALID. ACCORDINGLY, WE CONFIRM THE REOPENING OF THE ASSESS MENT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 27 TH APRIL, 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.