Shri. Jitendra Virwani, Bangalore V. Assistant Commissioner Of Income Tax, Central Circle-1(3), Bangalore

ITA 46/BANG/2021

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2106 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2021
• Assessment Year: 2002-2003
• Appeal Filed On: 17-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Principle of natural justice; Period of limitation; Retrospective amendment; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction; Capital Gains
• Section: 143(3); 142(1); 143(1); 150(1); 43; 13; 119; 22; 147; 131; 69; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJ ARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NOS. 46 & 47/BAN G /2021 ASSESSMENT Y EA R S : 2002-03 & 2003-04 SHRI JITENDRA VIRWANI, NO.341, EMBASSY WOODS, 6A, CUNNINGHAM ROAD, VASANTH NAGAR, BANGALORE 560 052. PAN: AAVPV 0738P VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1(3), BANGALORE. APPELLANT RESPONDENT APPELLANT B Y : SHRI S. RAMASU B RAMANIAN, CA RESPONDENT B Y : SHRI PRIYAD A RSHI MISHRA, ADDL.CIT (DR)(ITAT), BENGALURU. DATE OF HEARING : 16.04.2021 DATE OF PRONOUNCEMEN T : 23.06.2021 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF CIT(APPEALS) FOR AYS 2002-03 & 2003-04. THE GROUNDS ARE COMMON IN BOTH THE APPEALS AND ONLY CHANGE IN FIGURES, WHICH READ AS FOLLOWS:- AY 2002-03 1. THE CIT(A) ERRED BOTH IN LA W AND ON THE FACTS OF THE CASE IN UPHOLDING THE RE-OPENING OF THE ASSESSMENT U/S. 147 OF THE INCOME-TAX ACT, 1961 (AC T) MADE ON 24.03.2014. ITA NOS. 46 & 47/BANG/2021 PAGE 2 OF 40 2. THE CIT(A) ERRED IN UPHOLDI NG THE ADDITION OF INCOME OF RS. 731845- U/S 69 OF THE ACT AND IN LEVYING AN INTEREST OF RS. 53,222/- U/S. 234D OF THE ACT. 3. THE CIT(A) ERRED IN NOT AP PRECIATING AND CONSIDERING THE SUBMISSION OF THE APPELLANT THAT THE RE-OPENING OF THE ASSESSMENT ON 24.03.2014 WAS BEYOND THE TI ME LIMIT PRESCRIBED UNDER THE ACT AND AMENDMENT TO SECTION 147 WOULD NOT BE APPL ICABLE TO THE APPELLANTS CASE AND THEREFORE TH E RE-ASSESSMENT WAS NOT VALID. 4. THE CIT(A) HAS ERRED IN NO T APPRECIATING THE FACT THAT ASSESSING OFFICER HAD MERELY RELIED UPON TH E REASONS RECORDED BY PREDECESSOR WITHOUT INDEPE NDENTLY APPLYING MIND. 5. THE CIT(A) HAS ERRED IN NO T APPRECIATING THE GROUNDS OF THE APPELLANT THAT ASSESSMENT UNDE R SECTION 147 IS LIABLE TO BE QUASHED AS THE INGREDIENTS MENTIONED IN SECTION 147 HAVE NOT BEEN SATISFIED BEFORE ASSUMPTION OF JURISDICTION AND EVEN AT THE TIME OF CONCLUSION OF THE ASSESSMENT. 6. THE CIT(A) FAILED TO APPR ECIATE THAT THE APPELLANT HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 7. THE CIT(A) ERRED IN IGNORI NG THE STATEMENT GIVEN BY THE APPELLANT THAT HE WAS NOT OWNING OR OPERATING ANY BANK ACCOUNT WITH HSBC BANK, GENEVA. 8. THE CIT(A) FAILED TO CONSID ER THE FACT THAT THE DOCUMENT PURPORTED TO BE THE EVIDENCE OR THE INFORMATION FORMING THE BASIS OF THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, SHOWN TO THE APPELLANT WAS AN UNSIGNED DOCUME NT GIVING SOME BANK ACCOUNT NUMBER AND OTHER PERSONAL DETAILS OF THE APPELLANT. 9. THE CIT(A) FAILED TO CONSID ER THE FACT TH AT THE EVIDENCE SUBMITTED BY THE AO IS A MERE SURMISE AND CONJECTURE WHICH CANNOT FORM THE BASIS OF AN ASSESSMENT AS THE AUTHENTICITY OF THE ALLEGED EVIDENCE IS NOT ESTABLISHED. 10. THE CIT(A) FAILED TO APPRECIATE THE APPELLANTS CONTENTIONS THAT THE SOURCE OF EVIDENCE WAS NOT SPECIFIED BY THE ITA NOS. 46 & 47/BANG/2021 PAGE 3 OF 40 AO EXCEPT STATING IN THE ORDER TH AT THE INFORMATION WAS PROCURED THROUGH DIPLOMAT IC CHANNELS. 11. THE CIT(A) FAILED TO CONS IDER THE FACT THAT THE AO PRODUCED NO PHYSIC AL EVIDENCE OR DOCUMENT SO THAT HIS STATEMENT THAT THE INFORMATION WAS PROCUR ED THROUGH DIPLOMATIC CHANNELS CAN BE VERIFIED. 12. THE CIT(A) ERRED IN NOT AP PRECIATING THE FACTS THAT THE APPELLANT WAS DEPRIVED OF TH E OPPORTUNITY TO EXAMINE THE EVIDENCE WHICH THE AO CLAIMED TO BE IN POSSESSION OF. THE ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IS BAD IN LAW. 13. THE CIT(A) ERRED IN LAW AN D FACTS OF THE CASE BY NOT CONSIDERING THAT THE AO HAS A SSESSED THE SAME INCOME FOR THE SAME ASSESSMENT YEAR IN THE HANDS OF BOTH THE A PPELLANT AND HIS EX-WIFE WITHOUT APPRECIATING THAT THE AO WAS NOT AB LE TO CONVERT HIS INITIAL REASON TO BELIEVE TH AT INCOME HAD ESCAPED ASSESSMENT AT THE BEGINNING OF THE ENQUIRY IN TO A CONCLUSIVE STATEMENT AT THE END OF THE ENQUIRY, INDICATING TH AT THE REASON FORMING THE BASIS OF REOPENING HAD FAILED. 14. THE CIT(A) ERRED IN LAW IN UPHOLDING THE LEVYING OF THE INTEREST U/S .234D AS MANDAT ORY AND CONSEQUE NTIAL WITHOUT APPRECIATING THE LAW TH AT IT CANNOT BE LEVIED /INCREASED IN THE RE- ASSESSMENT U/S. 147 OF THE ACT. 15. THE APPELLANT, THEREFORE, PR AYS THAT THE RE-ASSESSMENT U/S. 147 MAY BE ANNU LLED, THAT THE ADDITION OF RS. 7,31,845/- MAY BE DELETED AND THAT THE INTE REST OF RS. 53,222/- LEVIED U/S. 234D MAY BE CANCELLED. 2. FOR THESE ASSESSMENT YEARS, THE ASSESSEES INCOME MOSTLY CONSISTS OF SALARY, PROPERTY INCOME AND INCOME FROM OTHER SOURCES. HE FILED RETURN OF INCOME FOR THESE ASSESSMENT YEARS DECLARING INCOME AS FOLLOWS:- A.Y. RS. 2002-03 52,31,130 2003-04 63,95,979 ITA NOS. 46 & 47/BANG/2021 PAGE 4 OF 40 3. THE AO GATHERED INFORMATION THAT ASSESSEES EX-WIFE, MS. VANDANA VIRWANI, HAD MAINTAINED AN ACCOUNT WITH HSBC BANK, GENEVA IN WHICH THERE WERE TRANSACTIONS OF US $ 14,149 FOR AY 2002-03 AND US $ 14,500 FOR AY 2003-04. 4. DURING ENQUIRY AT THE TIME OF ASSESSMENT, STATEMENT WAS RECORDED U/S. 131 OF THE INCOME-TAX ACT, 1961 [THE ACT] WHEREIN THE ASSESSEE HAS STATED THAT SHE WAS NOT OWNER NOR OPERATING ANY BANK ACCOUNT WITH HSBC BANK, GENEVA AND THEREFORE THE TRANSACTION DID NOT RELATE TO HIM. HOWEVER, ADDITION WAS MADE IN TH ESE ASSESSMENT YEARS TOWARDS THE TRANSACTIONS IN HSBC BANK, GENEVA. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(APPEALS), WHO HAS CONFIRMED THE ADDITION. AGAINST THIS, THE ASSESSEE IS IN APPEALS BEFORE US. 5. AT THE OUTSET, THE ASSESSEE ARGUED THAT REOPENING OF ASSESSMENT IN THESE ASSESSMENT YEARS IS BAD IN LAW. HE DREW OUR ATTENTION TO THE REASONS RECORDED FOR REOPENING OF ASSESSMENTS WHICH READS AS UNDER:- THE ASSESSEE IS A RESIDENT INDI VIDUAL ASSESSED TO TAX. THE CASE HAS BEEN NOTIFIED TO THIS CIRCLE BY THE ORDER OF CIT-IV DATED 06.12.2012. BASED ON THE INFORMATION RECEI VED BY THE DE PARTMENT, THE ASSESSEE AND HIS EX-WIFE SM T. VANDANA VIRWANI WERE BENEFICIARIES AND AUTHORISED SIGNAT ORIES OF ACCOUNTS MAINTAINED AT HSC BANK, GENEVA. THE ASSESSEE HAS OPENED AN ACCOUNT WITH M/S. HSBC BANK, GENEVA ON 04.1 0.2001 AT HSBC GENEVA BY DEPOSITING AN AMOUNT OF USD 14149, THE SAME HAS NOT BEEN ADMITTED AS INCOME IN THE RETURN OF INCOME FILED BEFORE THE TAX AUTHORITIES IN INDIA. HENCE INCO ME CHARGEABLE TO TAX HAS BEEN ESCAPED ASSESSMENT FI R THE AY 2002-03. 6. FURTHER, THE LD. AR SUBMITTED THAT VALIDITY OF NOTICE U/S. 147 OF THE ACT FOR THE INITIATION OF REASSESSMENT PROCEEDINGS IS BARRED BY LIMITATION. THE IMPUGNED ASSESSMENT YEAR IS 2002-03. NOTICE U/S. 148 OF THE ACT HAD ITA NOS. 46 & 47/BANG/2021 PAGE 5 OF 40 BEEN ISSUED ON 24.03.2014. SECTION 149 WHICH DEALS WITH TIME-LIMIT FOR ISSUING NOTICE, PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2012, READ AS UNDER: 149.(1) NO NOTICE UN DER SECTION 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR:- A) IF FOR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CA SE FALLS UNDER CLAUSE( B); (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TA X WHICH HAS ESCAPED ASSE SSMENT AMOUNTS TO OR ITS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR. EXPLANATION - IN DETERMINING INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE PUR POSE OF THIS SUB-SECTION, THE PROVISIONS OF EXPLANAT ION 2 OF SECTIO N 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSE OF THAT SECTION (2) THE PROVISIONS OF SUB-SECTIO N (1) AS TO THE ISSUE OF NOTICE SHALL BE SUBJECT TO THE PROVISIONS OF SECTION 151. (3) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 148 IS TO BE SERVED IS A PERSON TREATED AS THE AGENT OF A NON-RESIDENT UNDER SECTION 163 AND THE ASSE SSMENT, REASSESSMENT OR PRECOMPUTATION TO BE MADE IN PURSUANCE OF THE NO TICE IS TO BE MADE ON HIM AS THE AGENT OF SUCH NON-RESIDENT, THE NOTICE SHALL NOTICE SHALL NOT BE ISSUED AFTER THE EXPIRY OF A PERIOD OF TWO YEARS FROM THE END IF THE RELEVANT ASSESSMENT YEAR. 7. SECTION 149, PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2012, STATED THAT THE TIME-LIMIT FOR ISSUING NOTICE U/S. 148 IS 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO LESS THAN RS. 1 LAKH. IF THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO RS. 1 LAKH OR MORE, THEN THE TIME-LIMIT ITA NOS. 46 & 47/BANG/2021 PAGE 6 OF 40 TO ISSUE NOTICE U/S. 148 IS 6 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 8. SECTION 149 HAS BEEN AMENDED BY FINANCE ACT, 2012. THE AMENDED SECTION READS AS UNDER:- 149. (1) NO NOTICE UNDER SECTI ON 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR, (A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FA LLS UNDER CLAUSE (B) OR CLAUSE (C); (B) IF FOUR YEARS, BU T NOT MORE THAN SIX YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR; (C) IF FOUR YEARS, BUT NOT MORE THAN SIXTEEN YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESS MENT YEAR UNLESS THE INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL IN TEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT. EXPLANATION.IN DETERMINING INCO ME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE PURP OSES OF THIS SUB-SECTION, THE PROVISIONS OF EXPLANAT ION 2 OF SECTIO N 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF THAT SECTION. (2) THE PROVISIONS OF SUB-SECTIO N (1) AS TO THE ISSUE OF NOTICE SHALL BE SUBJECT TO THE PROVISIONS OF SECTION 151. (3) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 148 IS TO BE SERVED IS A PERSON TREATED AS THE AGENT OF A NON-RESIDENT UNDER SECTION 163 AND THE ASSESSMENT, R EASSESSMENT OR R ECOMPUTATION TO BE MADE IN PURSUANCE OF THE NOTICE IS TO BE MADE ON HIM AS THE AGENT OF SUCH NON-RESIDENT, THE NO TICE SHALL NOT BE ISSUED AFTER THE EXPIRY OF A PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. EXPLANATION .FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF SUB-SECTIONS (1) AND (3), AS AMENDED BY THE ITA NOS. 46 & 47/BANG/2021 PAGE 7 OF 40 FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 9. AS PER SECTION 149 AS AMENDED BY FINANCE ACT, 2012, IN CASE INCOME IN RESPECT OF AN ASSET LOCATED OUTSIDE INDIA HAS ESCAPED ASSESSMENT THEN NOTICE U/S 148 CAN BE ISSUED UPTO 16 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE AMENDMENT MADE TO SECTION 149 TOOK EFFECT FROM 01.07.2012. THE TIME-LIMIT FOR ISSUING NOTICE U/S 148 R.W.S. 149 OF THE ACT FOR AY 2002-03 EXPIRED ON 31.03.2009 UNDER THE OLD LAW. 10. THE LD. AR SUBMITTED THAT THE EXTENDED PERIOD OF LIMITATION UNDER THE NEW LAW IS APPLICABLE ONLY TO THOSE CASES WHERE THE TIME-LIMIT TO ISSUE NOTICE UNDER SECTION 148 R.W.S 149 HAS NOT EXPIRED ON THE DATE ON WHICH THE AMENDMENT MADE TO SECTION 149 BY THE FINANCE ACT, 2012 IS EFFECTIVE. THE AMENDMENT MADE TO SECTION 149 IS EFFECTIVE ONLY FROM 01.07.2012. AS STATED EARLIER, THE PERIOD OF LIMITATION TO ISSUE NOTICE U/S 148 R.W.S 149 ALREADY EXPIRED ON 31.03.2009 WHICH IS MUCH EARLIER TO THE DATE FROM WHICH THE AMENDMENT MADE TO SECTION 149 BY FINANCE ACT, 2012 IS EFFECTIVE. HENCE, THE NOTICE ISSUED U/S 148 IS BARRED BY LIMITATION. IN THIS CONNECTION, HE RELIED ON THE FOLLOWING DECISIONS OF THE HONBLE SUPREME COURT:- S.S. GADGIL V. LAL & CO. [1 964] 53 ITR 231 (SC) IN THIS CASE, A NOTICE WAS ISSUED AGAINST THE ASSESSEE AS AN AGENT OF A NON-RESIDENT ON 27TH MARCH, 1957, AND THAT NOTICE RELATED TO THE ASSESSMENT YEAR 1954-55. UNDER CL AUSE (III) OF THE PROVISO TO SECTION 34(1), AS IT STOOD PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 1956, A NOTICE OF ASSESSMENT OR REASSESSMENT COULD NOT BE ISSUED AGAINST A PERSON DEEMED TO BE AN AGENT OF A NON-RESIDENT AF TER THE EXPIRY OF ONE YEAR FROM THE END OF THE YEAR OF ASSESS MENT. THE RIGHT TO COMMENCE A PROCEEDING FOR ASSESSMENT AGAINST THE ASSESSEE AS AGENT OF A NONRESIDENT FOR THE ASSE SSMENT YEAR 19 54-55, THEREFORE, ENDED ON 31ST MARCH, 1956, UNDER THE NEW ACT BE FORE ITS AMENDMENT ITA NOS. 46 & 47/BANG/2021 PAGE 8 OF 40 IN 1956. THIS PROVISI ON WAS, HOWEVER, AMEN DED BY THE FINANCE ACT, 1956, AND UNDER THE AMENDED PROVISION THE PERIOD OF LIMITATION WAS EXTENDED TO TW O YEARS FROM THE END OF THE ASSESSMENT YEAR. THE AMENDMENT WAS MADE ON 8TH SEPTEMBER, 1958, BUT WAS GIVEN EFFECT TO FROM 1ST APRIL, 1956. SINCE THE TIME WITHIN WHICH NOTICE COULD BE ISSUED AGAINST A PERSON DEEMED TO BE AN AGENT OF A NO N-RESIDENT WAS EXTENDED TO TWO YEARS FROM THE END OF THE ASSESSM ENT YEAR, IT WAS CONTENDED ON BEHALF OF THE INCOME-TAX OFFICE R THAT THE NOTICE ISSUED BY HIM WAS WITHIN THE TERMS OF THE AMENDED PROVIS ION AND WAS, THEREFORE, A VALID NOTICE. NOW TH E NOTICE ISSUED ON 27TH MARCH, 1957, WAS CLEARLY WITHIN A PERIOD OF TWO YEARS FROM THE END OF THE ASSESSMENT YEAR 1954-55 AND IF THE AMENDED PROVISION APPLIED, THE NOTICE WOULD BE A VALID NOTICE. IT WAS, HOWEVER, HELD BY THIS COURT THAT THE NOTICE WAS NOT A VALID NOTICE INASMUCH AS THE RIGHT OF THE IN COME-TAX OFFICER TO REOPEN THE ASSESSMENT OF THE ASSESSEE UNDER THE UNAME NDED PROVISION BECAME BARRED ON 31ST MARCH, 1956, AND THE AMENDED PROVISION DID NOT OPERATE AGAINS T HIM SO AS TO AUTHORISE THE INCOME-TAX OFFICER TO COMMENCE PROCEEDINGS FOR REOPENING THE ASSESSMENT OF THE ASSESSEE IN A CASE WHERE, BEFORE THE AMENDED PROVISION CA ME INTO FORCE, TH E PROCEEDINGS HAD BECOME BARRED UNDER THE UNAMENDED PROVISION. BASED ON THE ABOVE FACTS, THE HONBLE SUPREME COURT HELD AS UNDER:- 'AS WE HAVE ALREADY POINTED OUT, THE RIGHT TO COMMENCE A PROCEEDING FOR ASSESSMENT AGAINST TH E ASSESSEE AS AN AGENT OF A NON-RESIDENT PARTY UN DER THE INCOME-TAX ACT BEFORE IT WAS AMENDED, ENDED ON MA RCH 31, 1956. IT IS TRUE THAT, UNDER THE AMENDING ACT, BY SECTION 18 OF THE FI NANCE ACT, 1956, AUTHORITY WAS CONFERRED UPON THE INCOME-TAX OFFICER TO ASSESS A PERSON AS AN AGENT OF A FOREIGN PARTY UNDER SECTION 43 WITHIN TWO YEARS FROM THE END OF THE YEAR OF ASSESSMENT. BUT THE AUTHORITY OF THE INCOME-TAX OFFI CER UNDER THE ACT BEFORE IT WAS AMENDED BY THE FINANCE ACT OF 1 956, HAVING ALRE ADY COME TO AN END, THE AMENDI NG PROVISION WILL NOT ASSIST HIM TO COMMENCE A PROCEEDING EVEN TH OUGH AT THE DATE WHEN HE ISSUED THE NOTICE IT IS WITHIN THE PERIOD PROVIDED BY THAT ITA NOS. 46 & 47/BANG/2021 PAGE 9 OF 40 AMENDING ACT. THIS WILL BE SO , NOTWITHSTANDING THE FACT THAT THERE HAS BEEN NO DETERMINABLE POINT OF TIME BETWEEN THE EXPIRY OF THE TIME PROVIDED UNDER THE OLD ACT AND THE COMMENCEMENT OF THE AMENDING AC T. THE LEGISLATURE HAS GIVEN TO SECTION 18 OF THE FINANCE ACT, 19 56, ONLY A LIMITED RETROSPECTIVE OPERATION, I.E., UP TO APRIL 1, 1956, ONLY. THAT PROVISION MUST BE READ SUBJECT TO THE RULE THAT IN THE ABSENCE OF AN EXPRESS PROVISION OR CLEAR IMPL ICATION, THE LEGISLATURE DOES NOT INTEND TO ATTRIBUTE TO TH E AMENDING PROVISION A GREATER RETROSPECTIVITY THAN IS EXPRESSLY MENTIONED, NOR TO AUTHORISE THE INCOME-TAX OFFICER TO COMME NCE PROCEEDINGS WHICH BEFORE THE NEW ACT CAME INTO FORCE HAD BY THE EXPIRY OF THE PERIOD PROVIDED BECOME BARRED.' IN THE CASE OF K.M. SHARMA VS. ITO (2002) 254 ITR 772 (SC), THE HONBLE SUPREME COURT HELD AS UNDER:- ON A PROPER CONSTRUCTION OF TH E PROVISIONS OF SECTION 150(1) AND THE EFFECT OF ITS OPERATION FROM 1-4-1989, WE ARE CLEARLY OF THE OPINION THAT THE PROVISIONS CANNOT BE GIVE N RETROSPECTIVE EFFECT PRIOR TO 1-4- 1989 FOR ASSESSMENTS WHICH HAVE ALREADY BECOME FINAL DUE TO BAR OF LIMITATION PRIO R TO 1-4-1989. TAXING PROVISION IMPOSING A LIABILITY IS GOVERNED BY NORMAL PRESUMPTION THAT IT IS NOT RETROSPECTIVE AND SETTLED PRINCIPLE OF LAW IS THAT THE LAW TO BE APPLIED IS THAT WHICH IS IN FORCE IN THE ASSESSMENT YEAR UNLESS OTHERW ISE PROVIDED EXPRESSLY OR BY NECESSARY IMPLICATION. EVEN A PROCEDURAL PROV ISION CANNOT IN THE ABSENCE OF CLEAR CONTRARY IN TENDMENT EXPRESSED THEREIN BE GIVEN GREATER RETROSPECTIVITY THAN IS EXPRESSLY MENTIONED SO AS TO ENABLE THE AUTHORITIES TO AFFECT FINALITY OF TAX ASSESSMENTS OR TO OPEN UP LIABILITIES, WHICH HAVE BECOME BA RRED BY LAPSE OF TIME. OUR CONCLUSION, THEREFORE, IS THAT SUB-SECTION (1) OF SECTION 150, AS AME NDED WITH EFFECT FRO M 1-4-1989, DOES NOT ENABLE THE AUTHORITIES TO RE OPEN ASSESSMENTS, WHICH HAVE BECOME FINAL DUE TO BA R OF LIMITATION PRIOR TO 1-4-1989 AND THIS POSITION IS APPLICABLE EQUALLY TO REASSESSMENTS PROPOSED ON THE BASIS OF ORDERS PASSED UNDER TH E ACT OR UNDER ANY OTHER LAW. ITA NOS. 46 & 47/BANG/2021 PAGE 10 OF 40 THE LARGER BENCH OF SUPREME COURT IN S.C. PRASHAR V. VASANTSEN DWARKADAS HUNGERFORD INVESTMENT TRUST LTD. (1 963) 49 ITR 1 (SC) HELD AS UNDER:- I NOW TAKE UP THE SECOND FACET OF THE SAME QUESTION. ON THIS ASPECT OF THE CASE BOTH THE LEAR NED SINGLE JUDGE (DESAI J.) AND THE APPELLATE COURT (CHAGLA C.J. AND TENDOLKAR J.) WERE AGREED. THE RELEVANT ASSESSME NT YEAR WAS 1942-19 43 AND IT ENDED ON MARCH 31, 1943. THE PERIOD OF FOUR YE ARS THEREFROM WOULD END ON MARCH 31, 1947, AND THE PERIOD OF EIGHT YEARS WOULD END ON MARCH 31, 1951. NOW THE SECOND PROVISO TO SUB-SECTION (3) CAME INTO EFFECT, AS I HAVE STATED EARLIER, ON APRI L 1, 1952. IN OTHER WORDS, THE TIME LIMIT FIXE D BY SUB-SECTION (1) HAD EXPIRED SOME TIME BEFORE THE AMENDE D SECOND PROVISO CAME INTO EFFECT. DESAI J. HAS RIGHTLY PO INTED OUT THAT IT IS A FIRMLY ESTABLISHED PRINCIPLE OF INCOME -TAX LAW THAT ONCE A FINAL ASSESSMENT IS ARRIVE D AT AND THE ASSESSMENT IS COMPLETE, IT CANNOT BE REOPENED EXCEPT IN THE CIRCUMSTANCES DETAILED IN SECTIONS 34 AND 35 OF THE ACT AN D WITHIN THE TIME LIMITED BY THOSE SECTIONS. IS THERE ANYTHI NG IN THE PROVISO IN QUESTION WHICH WOULD GIVE IT A RETROSPECTIVE EFFECT BEYOND APRIL 1, 1952 ? IN MY OPINION THERE IS NONE. THE SE COND PROVISO CAME INTO FORCE ON APRIL 1, 1952, AND BEFORE THAT DATE THE PERIOD OF EIGHT YEARS FROM MARCH 31, 1943 , HAD ALREADY EXPIRED. THE LEGISLATION WHICH PROVIDED TH AT FROM APRIL 1, 1952, THERE WOULD BE NO LIMITATION IN RESPECT OF CERTAIN CASES COULD NOT REVIVE A REMEDY WHICH WAS ALRE ADY LOST TO THE INCOME-TAX OFFICER. IT SEEMS TO ME THAT THE PROPOSITION OF LAW IS SETTLED BEYOND ANY DOUBT THAT ALTHOUGH LIMI TATION IS A PR OCEDURAL LAW AND ALTHOUGH IT IS OPEN TO THE LEGISLATURE TO EXTEND THE PERIOD OF LIMITATION, AN IMPORTANT RIGHT ACCRUES TO A PARTY WHEN THE REMEDY AGAINST HIM IS BARRED BY THE EXISTING LA W OF LIMITATION AND A VESTED RIGHT CANNOT BE AFFECTED EXCEPT BY EXPRESS TERMS USED BY THE STATUTE OR THE CLEAREST IMPLI CATION FLOWING THEREFROM.. ON BEHALF OF THE APPELLANTS, SOME DISTINCTION WAS SOUGHT TO BE DRAWN BETWEEN A RIGHT AND THE REMEDY THEREOF AND IT WAS CONTENDED THAT THE LIABILITY OF AN ASSESSEE TO PAY THE TAX OWING TO THE STATE WAS ALWAYS THER E FROM THE COMMENCEMENT OF THE ITA NOS. 46 & 47/BANG/2021 PAGE 11 OF 40 ASSESSMENT YEAR AND SECTION 34 OF THE ACT DEALT MERELY WITH THE MACHINERY OF ASSE SSMENT. IT WAS ARGUED THAT A CASE UNDER SECTION 34 WAS NOT AN ALOGOUS TO A TIME-BARRED CLAIM TO RECOVER MONEY FROM ONE INDIVIDU AL BY ANOTHER. IN MY OPINION SUCH A DISTINCTION IS ENTIRELY OUT OF PLACE SO FA R AS SECTION 34 IS CONCERNED. THE LEARNED CHIEF JU STICE HAS RIGHTL Y POINTED OUT THAT UNDER SECTION 34 THE INCOME-TAX OFFICER HAS THE RIGHT TO ISSUE A NOTICE WITHIN THE PERI OD OF LIMITATI ON FIXED BY SUB- SECTION (1); IN ANOTHER SENSE, IT MAY BE SAID THAT THE REMEDY OF THE INCOME-TAX OFFICER TO BRIN G TO TAX ESCAPED INCOME IS AVAILABLE TO HIM UNDER SECTION 34 PROVIDED HE AVAI LS HIMSELF OF THE REMEDY WITHIN THE PERIOD OF LIMITATION . NO DISTINCTION CAN BE DRAWN, SO FAR AS SECTION 34 IS CONCERNED, BETWEEN THE RIGHT OF THE INCOME-TAX OFFICER AND TH E REMEDY AVAILABLE TO HIM. IF THE REMEDY IS LOST, THE RIGHT IS ALSO LOST AND IF THE RIGHT IS LOST, MUCH MORE SO IS THE REMEDY. THEREFORE, I AM CLEARLY OF THE VIEW THAT ON AP RIL 30,1954, THE INCOME-TAX OFFICER HAD NO JURISDICTION TO ISSUE THE NOTICE WHICH HE DID ON THE FIRM PU RSHOTTAM LAXM IDAS UNDER THE SECOND PROVISO TO SUB-SECTION (3) OF SE CTION 34, BECAUSE THE TIME LIMIT FIXED BY SU B-SECTION (1) OF SEC TION 34 HAD EXPIRED LONG BEFORE THE SAID PROVISO CA ME INTO EFFECT AND THE PROVISO DOES NOT IN EXPRESS TERMS OR BY NECESSARY IMPLICATION REVIVE A REMEDY WHICH HAS BEEN LOST BEFORE APRIL 1, 1952 IN ALL THESE CASES THE PRIVY COUN CIL PROCEEDED ON THE PRINCIPLE THAT IF THE RIGHT OF ACTION HAD BECOME BARRED ACCORDING TO THE LAW OF LIMITATION IN FORCE, SU BSEQUENT ENLARGEMENT OF THE PERIOD OF TIME DOES NOT REVIVE THE REMEDY TO ENFORCE THE RIGHTS ALREADY BARRED. THE SAME PRINCI PLE, IN MY OPINION, WOULD APPLY TO THE PERIODS SPECIFIED IN SECTION 34 OF THE ACT AND IF THE PERIOD PRESCRIBED FOR TAKING ACTION HAD AL READY EXPIRED, SUBSEQUENT CHANGE IN THE LAW DOES NOT MAKE IT SO RETROSPECTIVE IN ITS EFFECT AS TO RE VIVE THE POWER OF AN INCOME-TAX OFFICER TO TAKE ACTION UNDER THE NEW LAW. IT IS ONE OF THE CANONS OF CONSTRUCTION OF STATUTE OF LIMITA TION THAT IN THE ABSENCE OF EXPRESS WORDS OR NECESSARY INTENDMENT NO CHANGE IN THE PERIOD OF LIMITATION CAN REVIVE THE RIGHT TO SUE WHICH HAS BECOME BARRED NOR CAN IT IMPAIR THE I MMUNITY FROM ANY ACTION WHICH HAD BECOME FINAL AFTE R THE LAPSE OF A SP ECIFIED PERIOD OF TIME ITA NOS. 46 & 47/BANG/2021 PAGE 12 OF 40 ANOTHER ARGUMENT RAISED ON BEHA LF OF THE APPE LLANT WAS THAT THE EIGHT-YEARS' PERIOD PRESCRIBED IN SECTION 34 IS NOT A RULE OF LIMITATION BUT MERELY A FETTER ON THE POWER OF THE INCOME-TAX OFFICER TO TAKE ACTION AND THE REMOVAL OF THE FETTER REVIVES THE POWER OF THE OFFICER. THIS REALLY IS NOT A DIFFERENT ARGUMENT BUT THE SAME ARGUMENT OF REVIVAL OF A RIGHT TO SUE WHICH HAS BEEN DISCUSSED ABOVE. CHANGE IN THE LA W AS TO THE PERI OD IN WHICH A SUIT CAN BE BROUGHT TO RECOVER A DEBT OR ACTION CAN BE TAKEN BY THE INCOME-TAX OFFICER TO COMMENCE AN ASSESSMENT OR REASSESSMENT DOES NOT IMPAIR THE RIGHTS ALREADY AC QUIRED BY THE BAR OF LIMITATION OR REVIVE THE POWER OF TH E INCOME-TAX OFFICER WHICH HAS ALREADY BECOME INCAPABLE OF BEING EXERCISED BY LAPSE OF TIME. THE TWO STAND ON THE SAME FOOTING AND HAVE THE SAME EFFECT, I.E., PROVIDE IMMUNITY AND PLACE A BAR ON ANY ATTACK ON THE RIGHTS OF THE DEFEND ANT OR THE ASSESSEE AS THE CASE MAY BE. 11. THE LD. AR SUBMITTED AS STATED EARLIER, THE EXTENSION WAS BROUGHT IN BY AMENDMENT WHICH IS WITH EFFECT FROM 01.07.2012. THERE IS NOTHING IN THE AMENDMENT TO INDICATE RETROSPECTIVITY IN CLEAR TERMS. AS STATED EARLIER, RETROSPECTIVITY CANNOT BE EASILY INFERRED OR IMPLIED. THE EXPLANATION CLARIFYING THAT THE PROVISIONS OF SUB-SECTIONS (1) AND (3), AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012 DOES NOT EXPLICITLY PROVIDE THAT SUCH EXTENSION APPLIES EVEN WHERE THE EARLIER TIME LIMIT HAD LONG BEFORE LAPSED. AT THE MOST IT MAY PROVIDE THAT SUCH EXTENSION IS AVAILABLE FOR PRIOR ASSESSMENT YEARS WHERE THE LIMITATION HAS NOT LAPSED AS YET. THEREFORE, NOTICE DATED 24.03.2014 ISSUED U/S 148 OF THE ACT IS BARRED BY LIMITATION. 12. SECTION 142(1) STATES THAT FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDER THIS ACT, THE ASSESSI NG OFFICER MAY SERVE ON ANY PERSON WHO HAS MADE A RETURN UNDER SECTION 115WD OR SECTION 139 OR IN WHOSE ITA NOS. 46 & 47/BANG/2021 PAGE 13 OF 40 CASE THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 FOR FURNISHING THE RETURN HAS EXPIRED A NOTICE REQUIRING HIM, ON A DATE TO BE THEREIN SPECIFIED,. . THE LD. AR SUBMITTED, THEREFORE, NOTICE U/S 142(1) CAN BE ISSUED ONLY FOR THE PURPOSE OF MAKING ASSESSMENT. WHEN THE TIME-LIMIT TO INITIATE ASSESSMENT PROCEEDINGS ITSELF IS BARRED BY LIMITATION, IT IS TRITE TO STATE THAT THE NOTICE U/S 142(1) ISSUED PURPORTEDLY FOR MAKING ASSESSMENT WHICH IS INVALID IN THE EYES OF LAW SHOULD ALSO BE HELD TO BE INVALID. 13. IT WAS FURTHER SUBMITTED THAT VIDE LETTER DATED 26.09.2014 THE ACIT, CIRCLE-2(1), BANGALORE HAS COMMUNICATED THE RECORDED REASONS. THE SAME HAS BEEN EXTRACTED SUPRA. SECTION 147 OF THE ACT STATES THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEV E 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. , HENCE THE BASIC REQUIREMENT FOR INITIATING PROCEEDINGS U/S. 147 IS THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT NAY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . 14. THE LD. AR SUBMITTED THAT A PERUSAL OF THE REASONS RECORDED DO NOT STATE WHAT IS THE AMOUNT OF INCOME CHARGEABLE TO TAX THAT AS ESCAPED ASSESSMENT IN MY HANDS. ACCORDING TO THE AO, BASED ON THE INFORMATION RECEIVED BY THE DEPARTMENT, THE ASSESSEE AND HIS EX-WIFE SMT. VANDANA VIRWANI WERE BENEFICIARIES AND AUTHORIZED SIGNATORIES OF ACCOUNTS MAINTAINED AT HSBC BANK, GENEVA. THE ASSESSEE OPENED AN ACCOUNT WITH HSBC BANK, GENEVA ON 04.10.2001 AT HSBC GENEVA BY DEPOSITING AN AMOUNT OF US $ 14,149/-. THE SAME HAS NOT BEEN ADMITTED AS INCOME IN THE RETURN OF INCOME FILED BEFORE THE TAX AUTHORITIES IN INDIA. HENCE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 2002-03. THE ASSESSEE DID NOT ADMIT OF THE ALLEGED BANK ACCOUNT AS BELONGING TO HIM. IT WAS SUBMITTED THAT THE ALLEGED BANK ACCOUNT DOES NOT MEET WITH THE ITA NOS. 46 & 47/BANG/2021 PAGE 14 OF 40 REQUIREMENTS OF SECTION 147 COMPLIANCE WITH WHICH IS NECESSARY FOR ASSUMING JURISDIC TION UNDER THE SAID SECTION. 15. IT WAS FURTHER SUBMITTED THAT A PERUSAL OF THE ABOVE REASONS RECORDED WOULD SHOW THAT THE AMOUNT OF INCOME THAT IS CHARGEABLE TO TAX THAT HAS ESCAPED ASSESSMENT HAS NOT BEEN QUANTIFIED. AS PER THE INFORMATION, THE BANK ACCOUNT HAS BEEN HELD JOINTLY BY ASSESSEE ALONG WITH HIS WIFE. IN SUCH A SCENARIO, IT SHOULD BE ASCERTAINED AS TO HOW MUCH OF THE TRANSACTIONS PERTAIN TO THE ASSESSEE AND HIS WIFE. MOREOVER, MERELY ENTERING INTO TRANSACTIONS WOULD NOT MEAN THAT INCOME IS EARNED. THE REASONS RECORDED DO NOT STATE WHETHER THE TRANSACTIONS ARE INCOME BEARING TRANSACTIONS OR NOT. 16. THE LD. AR SUBMITTED THAT THE EXPRESSION REASON TO BELIEVE CANNOT BE A MERE CONJECTURE OR SURMISE. THE REASON FOR FORMATION OF BELIEF FOR INITIATING ASSESSMENT U/S 147 MUST HAVE A RATIONAL CONNECTION OR RELEVANT BEARING ON THE FORMATION OF BELIEF. THE EXISTENCE OR OTHERWISE OF SUCH A BELIEF ON THE PART OF THE AO, IS THE VERY FOUNDATION FOR HIM TO ASSUME JURISDICTION U/S 147. IN THE PRESENT CASE, IT IS ESTABLISHED THAT THE AO DID NOT HAVE ANY REASON TO BELIEVE AS JUDICIALLY INTERPRETED BY VARIOUS COURTS. SO THE INITIATION OF PROCEEDINGS U/S 147 IS BAD IN LAW. 17. THE HONBLE SUPREME COURT IN SHEO NATH SINGH V. APPELLATE ASSTT. CIT [1971] 82 ITR 147 (SC) OBSERVED AS UNDER:- 'THERE CAN BE NO MANNER OF DOUBT THAT THE WORDS 'REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON RE ASONABLE GROUND S AND THAT THE INCOME-TAX OFFICER MAY ACT ON DI RECT OR CIRCUM STANCES EVIDENCE BUT NOT ON MERE SUSPICION, GOSS IP OR RUMOUR. THE INCOME-TAX OFFICER WOULD BE ACTING WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SA TISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELI EF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMINE THIS AS PECT THOUGH THE DECLARATION OR ITA NOS. 46 & 47/BANG/2021 PAGE 15 OF 40 SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT.' 18. A THREE-JUDGE BENCH OF THE SUPREME COURT IN S. NARAYANAPPA V. CIT [1967] 63 ITR 219 HELD AS UNDER:- 'AGAIN THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 34 OF THE INCOME-TAX ACT DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE INCOME -TAX OFFICER. THE BELIE F MUST BE HELD IN GOOD FAITH: IT CANNOT BE MERELY A PR ETENCE. TO PUT IT DIFFERENT, IT IS OPEN TO THE COURT TO EXAMINE TH E QUESTION WHETHER THE REASONS FOR THE BELIEF HAVE A RATIONAL CONNECTION OR A RELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT TO THE PURPOSE OF THE SECTION. TO THIS LIMITED EXTENT, THE ACTION OF THE INCOME-TAX OFFICER IN STARTING PROCEEDINGS UNDER SECTION 34 OF THE ACT IS OPEN TO CHALLENGE IN A COURT OF LAW (SEE CALCUTTA DISCOUNT CO. LTD. V. INCOME-TAX OFFICER, COMPANIES DISTRICT 1, CALCUTTA).' 19. IN GANGA SARAN & SONS (P.) LTD. V. INCOME-TAX OFFICER [1981] 130 ITR 1 (SC), THE HONBLE SUPREME COURT OBSERVED AS UNDER:- THE IMPORTANT WORDS IN SECTION 147 (A) ARE HAS REASON TO BELIEF AND THESE WORDS ARE STRONG 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 RELE VANT AND MATERIAL. THE COURT OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUA CY OR SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE INCOME-TAX OFFICER IN COMING TO THE BELIEF, BUT THE COURT CAN CERTA INLY 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). IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REAS ONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED ON FACT AND LAW COULD REASONABLY ENTERTAIN THE BELIE F, THE CONCLUSION WOULD BE INESCAPABLE THAT THE INCOME-TAX OF FICER COULD NOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCO ME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WA S BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL ITA NOS. 46 & 47/BANG/2021 PAGE 16 OF 40 MATERIAL FACTS AND THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID. 20. THE HONBLE GAUHATI HIGH COURT IN ASSAM CO. LTD. V. UNION OF INDIA [2006] 150 TAXMAN 571 [GAU.] HELD AS UNDER:- THE LITMUS TEST AS IS DECIPHERABLE FROM THE CONSISTENT JUDICIAL PRONOUNCEMENTS ON THIS FACET OF THE LIS, THEREFORE, IS THE EXISTENCE, RELEVANCE AND RATIONAL E OF THE REASON ON WHICH THE ASSESSING OFFICER PRO CEEDS TO ACT UNDER SECTION 147 AND THE BEARING IT HAS ON THE PROCESS OF FORMATION OF THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IF EITHER OF THESE TWO ESSENTIALS IS ABSENT, THE PROPOSED ACTION WO ULD BE EX FACIE UNAUTHORIZED. NOT ONLY THE REASON HAS TO BE ONE, WHICH IS RELEVANT AND RECOGNIZED IN LAW, THE SAME HAS TO HAVE A RATIONAL AND LOGICAL LINK WITH THE BELIEF THAT THERE HAS BEEN AN ESCAPEMENT OF TAXABLE INCOME. THE BELIEF HAS TO HAVE ITS ROOTS IN THE REASONS AND OBVIOUSLY HAS TO BE GENUINE AND BONA FI DE AND NOT MERELY A PRETENCE. THE SUBJECTIVE SATISFACTION METAMORPHING INTO THE BELIEF HAS TO BE GUIDED BY OBJECT IVITY BASED ON EXISTING RELEVANT REASONS ACKNOWLEDGED AND RECOGNIZED BY LAW. A TANGIBLE AND BONA FIDE LEGAL NECESSITY TO SCUTTL E TAX AVOIDANCE IS THE ESSENCE OF THE POWER AN D NO ROVING ENQUIRY ON VAGUE-HUNCHES OR INDETERMINATE AND IMPERTINENT CONSIDERATION IS ENVISAGED. 21. THE ENTIRE LAW AS TO WHAT WOULD CONSTITUTE 'REASON TO BELIEVE' WAS SUMMED UP BY THE HONBLE SUPREME COURT IN ITO V LAKHMANI MEWAL DAS [1976] 103 ITR 437. THE FOLLOWING PRINCIPLES WERE LAID DOWN:- (A) THE POWERS OF THE ASSESSING OF FICER TO REOPEN AN ASSESSMENT, THOUGH WIDE, ARE NOT PLENARY. (B) THE WORDS OF THE STATUTE AR E 'REASON TO BELIEVE' AND NOT 'REASON TO SUSPECT'. (C) THE REOPENING OF AN ASSESSMENT AFTER THE LAPSE OF MANY YEARS IS A SERIOUS MATTER. SINCE THE FI NALITY OF A JUDI CIAL OR QUASI- JUDICIAL PROCEEDINGS ARE SOUGHT TO BE DISTURBED, IT IS ESSENTIAL THAT BEFORE TAKING ACTION TO REOPEN THE ASSESSMENT, THE REQUIREMENTS OF THE LAW SHOULD BE SATISFIED. ITA NOS. 46 & 47/BANG/2021 PAGE 17 OF 40 (D) THE REASONS TO BELIEVE MUST HAVE A MA TERIAL BEARING ON THE QUESTION ON ESCAPEMENT OF INCOME. IT DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION OF THE ASSESSING AUTHORITY; THE REASON BE HELD IN GOOD FAITH AND CANNOT MERELY BE A PRETENCE. 22. THE LD. AR SUBMITTED THAT THE REASONS TO BELIEVE MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE AO AND THE FORMATION IS BELIEF REGARDING ESCAPEMENT OF INCOME. THE FACT THAT THE WORDS 'DEFINITE INFORMATION' WHICH WERE THERE IN SECTION 34 OF THE ACT OF 1922 BEFORE 1948, ARE NOT THERE IN SECTION 147 OF THE 1961 ACT WOULD NOT LEAD TO THE CONCLUSION THAT ACTION CAN NOW BE TAKEN FOR REOPENING AN ASSESSMENT EVEN IF THE INFORMATION IS WHOLLY VAGUE, INDEFINITE, FAR-FETCHED OR REMOTE. FROM PERUSAL OF THE REASONS RECORDED, HE SUBMITTED THAT THE REASONS RECORDED CANNOT LEAD ONE TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE OBSERVATIONS OF THE HONBLE SUPREME COURT IN INCOME- TAX OFFICER V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC) ON THIS PROPOSITION ARE REPRODUCED BELOW:- AS STATED EARLIER, THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULAT ES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE INCOME-TAX OFFICER AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PA RTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO THE SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE INCOME- TAX OFFICER ON THE POINT AS TO WH ETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EV ERY MATERIAL, HOWSO EVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT ITA NOS. 46 & 47/BANG/2021 PAGE 18 OF 40 THE FORMATION OF THE BELIEF RELATI NG TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. TH E FACT THAT THE WORDS 'DEFINITE INFORMATION' WHICH WERE THERE IN SECTION 34 OF THE ACT OF 1922, AT ONE TIME BEFORE ITS AMENDMENT IN 1948, ARE NOT THERE IN SECTION 147 OF THE ACT OF 1961, WOULD NO T LEAD TO THE CONCLUSION THAT ACTION CAN NOW BE TA KEN FOR REOPENING ASSE SSMENT EVEN IF THE INFORMATION IS WHOLLY VAGUE, I NDEFINITE, FAR-FETC HED AND REMOTE. THE REASON FOR THE FORMATION OF TH E BELIEF MUST BE HELD IN GOOD FAITH AND SHOULD NOT BE A MERE PRETENCE.. 23. IN COMMISSIONER OF INCOME-TAX V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 (SC), THE HONBLE SUPREME COURT HELD AS UNDER: THERE SHOULD, IN OUR OPINION, BE SOME DIRECT NE XUS BETWEEN THE CONCLUSION OF FACT ARRIVED AT BY THE AUTHORITY CONCERNED AND THE PRIMARY FACTS UPON WHICH THAT CO NCLUSION IS BASED. THE USE OF EXTRANEOUS AND IRRELEVANT MATERIAL IN ARRIVING AT THAT CONCLUSION WOULD VITIATE THE CONCLUSION OF F ACT BECAUSE IT IS DIFFICULT TO PREDICATE AS TO WHAT EXTENT THE EXTRANEOUS AND IRRELEVANT MATERIAL HAS INFLUENCED THE AUTHORITY IN ARRI VING AT THE CONCLUSION OF FACT. 24. A CONSTITUTION BENCH OF THE HONBLE SUPREME COURT IN M. CT. MUTHIAH V. CIT AIR 1956 SC 269, CONSIDERED THE EXPRESSIONS 'REASON TO BELIEVE' AND DISTINGUISHED THE SAME FROM 'REASON TO SUSPECT' COMPARING THE PROVISIONS WITH THE UN-AMENDED PROVISIONS OF SECTION 34(1) OF THE INCOME-TAX ACT, 1922 AND HELD THAT AFTER AMENDMENT, THE EXPRESSIONS 'REASON TO BELIEVE' HAD TO BE BASED AS A CONSEQUENCE OF 'DEFINITE INFORMATION' WHICH CAME INTO POSSESSION OF THE REVENUE. HOWEVER, THERE MUST BE SOME MATERIAL IN POSSESSION OF THE REVENUE ON THE BASIS OF WHICH AN OBJECTIVE OPINION CAN BE FORMED THAT THE PERSON CONCERNED HAS UNDISCLOSED AMOUNT FOR THE PURPOSE OF THE ACT. ITA NOS. 46 & 47/BANG/2021 PAGE 19 OF 40 25. IT IS SUBMITTED THAT THERE IS NO NEXUS BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE AO AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF INCOME. THE ASSESSEE DOES NOT HOLD ANY BANK ACCOUNT WITH HSBC GENEVA. HENCE, THE VERY BASIS FOR ASSUMING JURISDICTION IS NOT FACTUALLY CORRECT, NO REASONABLE BELIEF CAN BE FORMED BASED ON SUCH INCORRECT FACTS. 26. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LEARNED ASSESSING OFFICER HAS TO DETERMINE INCOME CHARGEABLE TO TAX. THIS PRESUPPOSES THAT THE MATERIAL BASED ON WHICH HE FORMS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT SHOULD ENABLE COMPUTATION OF INCOME THAT HAS ESCAPED ASSESSMENT. THE AO HAS NOT STATED AS TO HOW THE ENTRIES IN THE BANK ACCOUNT REPRESENT INCOME. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE ALLEGED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 27. IT WAS FURTHER SUBMITTED THAT THE RETURN OF INCOME HAS BEEN PROCESSED U/S 143(1) OF THE ACT. IT IS SUBMITTED THAT ONCE THE RETURN HAS BEEN PROCESSED U/S 143(1), THEN UNLESS THERE IS TANGIBLE MATERIAL WHICH HAS COME TO THE POSSESSION OF THE AO SUBSEQUENT TO ISSUE OF INTIMATION, PROCEEDINGS U/S 147 CANNOT BE INITIATED. IT HAS NOT BEEN STATED AS TO WHAT IS THE MATERIAL THAT IS AVAILABLE BASED ON WHICH THE LEARNED DCIT, CIRCLE 2(1) HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. VIDE NOTICE DATED 26.09.2014 ISSUED U/S 142(1), THE DCIT, CIRCLE 2(1) SOUGHT COPY OF ACCOUNT WITH HSBC GENEVA. IF THE DCIT, CIRCLE 2(1) DID NOT HAVE A COPY OF THE BANK ACCOUNT, IT WAS SUBMITTED THAT IT IS NOT UNDERSTOOD AS TO WHAT MATERIAL WAS IN THE POSSESSION OF THE DEPARTMENT FOR INITIATING ASSESSMENT U/S 147. HENCE, INITIATION OF ASSESSMENT U/S 147 WITHOUT TANGIBLE MATERIAL IN POSSESSION IS LIABLE TO BE QUASHED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- ITA NOS. 46 & 47/BANG/2021 PAGE 20 OF 40 IN COMMISSIONER OF INCOME-TAX-V V. ORIENT CRAFT LTD. [2013] 29 TAXMANN.COM 392 (DELHI), THE H ONBLE DELHI HIGH COURT HELD AS UNDER:- WE THINK THAT THE POINT TAKEN ON BEHALF OF THE ASSESSEE THAT EVEN AN ASSESSMENT MADE UNDER SECTION 143(1) OF THE ACT CAN BE REOPENED UNDER SECTION 147 ON LY SUBJECT TO FULFILLMENT OF THE CONDITIONS PRECEDENT, WHICH INCLUDE THE CONDI TION THAT THE ASSESSING OFFICER MUST HAVE 'R EASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT, IS SOUND. IT IS TRUE THAT NO ASSESSMENT ORDER IS PASSE D WHEN THE RETURN IS MERELY PROCESSED UNDER SECTION 143(1) AND AN INTIMATION TO THAT EFFECT IS SENT TO THE ASSESSEE. HOWEVER, IT HAS BEEN RECOGNISED BY THE SUPREME COURT ITSELF IN ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P). LTD. [2007] 291 ITR 500/ 161 TA XMAN 316, A DECISION THAT WAS RE LIED UPON BY THE REVENUE , THAT EVEN WHERE PROCEEDINGS UNDER SECTION 147 AR E SOUGHT TO BE TAKEN WITH REFERENCE TO AN INTIMATION FRAM ED EARLIER UNDER SECTION 143(1), THE INGREDIENTS OF SECTION 147 HAVE TO BE FULFILLED; THE INGREDIENT IS THAT THERE SHOULD EXIST 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HA S ESCAPED ASSESSMENT. THIS JUDGMENT, CONTRARY TO WHAT THE REVENUE WOULD HAVE US BELIEVE, DOES NOT GIVE A CARTE BLANCHE TO THE ASSESSING OFFICER TO DISTURB THE FINALITY OF THE INTIMATION UNDER SECTION 143(1) AT HIS WHIMS AND CAPR ICE; HE MUST HAVE REASON TO BELIEVE WITHIN THE MEANING OF THE SECTION. ..THERE IS NOTHING IN THE LANGUAGE OF SECTION 147 TO UNSHACKLE THE ASSESSING OFFICER FROM THE NEED TO SHOW 'REASON TO BELIEVE'. THE FACT THAT THE INTIMA TION ISSUED UNDE R SECTION 143(1) CANNOT BE EQUATED TO AN 'ASSESSM ENT', A POSITION WHICH HAS BEEN ELABORATED BY THE SUPREME COUR T IN THE JUDGME NT CITED ABOVE, CANNOT IN OUR OPINION L EAD TO THE CONCLUSION THAT THE REQUIREMENTS OF SECTION 147 CAN BE DISPENSED WITH WHEN THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED. WE ARE AT PAINS TO POINT OUT THIS POSITI ON, WHICH SEEMS FA IRLY OBVIOUS TO US, BECAUSE OF THE ARGUMENT FREQ UENTLY ADVANCED BEFORE US ON ITA NOS. 46 & 47/BANG/2021 PAGE 21 OF 40 BEHALF OF THE REVENUE IN OTHER CASES AS WELL, UNDER THE MISCONCEPTION, IF WE MAY SAY SO WITH RESPECT, THAT AN INTIMATION UNDER SECTION 143(1) CAN BE DI STURBED ON ANY GROUND WHICH APPEALS TO THE ASSESSING OF FICER. THE CONSEQUENCE OF COUNTENANCING SUCH AN ARGUMENT COULD BE GRAVE. THE EXPRESSION 'REASON TO BELIEVE' HAS COME TO ATTAIN A CERTAIN SIGNIFICATION AND CONTENT, NOURISHED OVER A LONG PERIOD OF YEARS BY JUDICIAL REFINEMENT PAINSTAKI NGLY EMBARKED UPON BY GR EAT JUDGES IN THE PAST. THE EXPRESSION HAS BEEN JUDICI ALLY INTERPRETED IN A PARTICULAR MANNER. WHEN SECTION 147 WAS RECAST WITH EFFECT FROM 1 ST APRIL, 1989, THE LEGISLATURE S OUGHT TO REPLACE THE EX PRESSION 'REASON TO BELIEVE' WITH THE EXPRESSION 'FOR REASONS TO BE RECORDED BY HIM IN WRITING'. BUT THERE WERE REPRESENTATIONS AGAINST THE PROPOSAL AND BOWING TO THEM THE ORIGINAL EXPRESSION WAS RESTORED. THIS ASPECT OF THE MATTER HAS BEEN BROUGHT OUT BY THE SUPREME COURT IN KELVINATOR OF INDIA LTD. (SUPRA) HAVING REGARD TO THE JUDICIAL INTERPRETATION PLACED UPON THE EXPRESSION 'REASON TO BELIEVE', AND THE CONTINUED USE OF THAT EXPRESSION RIGHT FROM 194 8 TILL DATE, THE LD. AR SUBMITTED THAT THE MEANING OF THE E XPRESSION HAS TO BE U NDERSTOOD IN EXACTLY THE SAME MANNER IN WHICH IT HAS BE EN UNDERSTOOD BY THE COURTS. THE ASSUMPTION OF THE REVENUE THAT SOMEHOW THE WORDS 'REASON TO BELIEVE' HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMATION U/S. 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIV ED. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; IT MAKES NO DIST INCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AN D THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFOR E IT IS NOT PERMISSIBL E TO ADOPT DIFFERENT STANDARDS WHILE INTERPRETING THE WO RDS 'REASON TO BELIEVE' VIS-A- VIS SECTION 143( 1) AND SECTION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVE NUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE U/S. 14 3(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EARLIER U/S. 143( 1). IT WOULD IN EFFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETU RN WAS PROCESSED U/S. 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL-FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED ITA NOS. 46 & 47/BANG/2021 PAGE 22 OF 40 WITHOUT DEMUR IS NOT A MATTER WH ICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE CO ULD BE CIRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINCTION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION 'REASON TO BELIEVE' IN CASES WHERE ASSESSMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AN D CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UNDER SECTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. IN OTHER WORDS, THE EXPRESSION 'REASON TO BELIEVE' CANNOT HAVE TWO DIFFERENT STANDA RDS OR SETS OF MEANING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EARLIER MADE UNDER SECTION 143(3) AND ANOTHER AP PLICABLE WHERE AN IN TIMATION WAS EARLIER ISSUED UNDER SECT ION 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT OF 'CHANGE OF OPINION' IS NOT AVAILABL E TO HIM, IT WOUL D STILL BE OPEN TO HIM TO CONTEST TH E REOPENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BE LIEVE OR THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOU S JUDICIAL PRONOUNCEMENTS. 28. THE LD. AR SUBMITTED THAT IN THE PRESENT CASE THE REASONS DISCLOSE THAT THE AO REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME AFTER HE ACCEPTED THE RETURN U/S. 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF POWER BY THE AO, BOTH STRONGLY DEPRECATED BY THE SUPREME COURT IN KELVINATOR OF INDIA LTD. (SUPRA). THE REASONS RECORDED BY THE AO IN THE PRESENT CASE CONFIRMS THE APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF ITA NOS. 46 & 47/BANG/2021 PAGE 23 OF 40 THE WORDS 'REASON TO BELIEVE' VIS-A-VIS AN INTIMATION ISSUED U/S. 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPER IN THE REASONS RECORDED, OF ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF THE AO SUBSEQUENT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY EXERCISE OF THE POWER CONFERRED UNDER SECTION 147. 29. IN PRASHANT S. JOSHI V. INCOME-TAX OFFICER, WARD 19(2)(4) [2010] 189 TAXMAN 1 (BOM.), THE HONBLE BOMBAY HIGH COURT HELD AS UNDER:- FOR ALL THESE REASONS, IT IS EV IDENT THAT THERE WAS ABSOLUTELY NO BASIS FOR THE FIRST RESP ONDENT TO FORM A BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT WITHIN THE MEANING OF THE SUBSTANTIVE PROVISIONS OF S ECTION 147. EXPL ANATION (2) TO SECTION 147 CREATES A DEEMING FI CTION OF CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT. CLAUSE (B) DEALS WITH A SITUATION 'WHERE A RETURN OF IN COME HAS BEEN FU RNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTIO N, ALLOWANCE OR RELIEF IN THE RETURN.' FOR THE PURPOSE OF CLAU SE (B) TO EXPLANATION (2), THE ASSESSING OFFICER MUST NOTICE TH AT THE ASSESSEE HAS UNDERSTATED HIS INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. THE TAKING OF SUCH NOTICE MUST BE CONSISTENT WITH THE PROVISIONS OF THE APPLICABLE LAW. TH E ACT OF TAKING NOTICE CANNOT BE AT THE ARBITRARY WHIM OR CAPRICE OF THE ASSESSING OFFICER AND MUST BE BASED ON A REASONABLE FOUNDATION. THE SUFFICIENCY OF THE EVIDENCE OR MATERI AL IS NOT OPEN TO SCRUTINY BY THE COURT BUT THE EXISTENCE OF THE BELIEF IS THE SINE QUA NON FOR A VALID EXERCISE OF POWER. IN THE PR ESENT CASE, HAVING REGARD TO THE LAW LAID DOWN BY THE SUPREME COURT IT WA S IMPOSSIBLE FOR ANY PRUDENT PERSON TO FORM A REASONA BLE BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT. THE REASONS WH ICH HAVE BEEN RECORDED COULD NEVER HAVE LED A PRUDENT PERSON TO FORM AN OPINION THAT INCOME HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. IN THESE CIRCUMSTANCES, THE PETITION SHALL HAVE TO BE ALLOWED BY SETTING ASIDE THE NOTI CE UNDER SECTION 148. 30. IN THE ABOVE CASE, NO ASSESSMENT HAD BEEN CARRIED OUT U/S 143(3) OR 144 OF THE ACT. ONLY INTIMATION U/S 143(1) HAD BEEN ISSUED. ITA NOS. 46 & 47/BANG/2021 PAGE 24 OF 40 31. THE HONBLE TRIBUNAL IN GREY WORLDWIDE (INDIA) PRIVATE LIMITED VS. ASST COMMISSIONER OF INCOME TAX 2011-TIOL-291-ITAT-MUM HELD AS UNDER:- 13. THE EXPRESSION REASON TO BELI EVE' STILL CONTINUES TO BE PART OF MAIN SECTION 147. THERE IS NO DISTINCTION AT ALL BETWEEN THE ASSESSMENT DEEMED TO BE COMPLETED UNDER SECTION 143(1) AND THE ASSESSMENT COMPLETED UNDER SECT ION 143(3) OF THE INCOME TAX ACT. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI VS. ITO 324 ITR 154(BOM) = (2010-TIOL-146-HC-MUM- IT) AFTER CONSIDERING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500 (SC) = (2007-TIOL-95-SC-IT) HA S HELD THAT EVEN WHEN AN INTIMATION IS ISSUED U/S. 143(1) OF THE ACT, THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS HAS TO SATISFY THE TEST OF EXISTENCE OF REASON TO BELIEVE TH AT INCOME CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT. THE LAW REGA RDING EXISTENCE OF REASON TO BELIEVE IS BY NOW WELL SETTLED. BELIEF OF THE ASSESSING OFFICER SHOULD NOT BE ARBITRARY OR IRRATIONAL, BUT BASED ON RELEVANT AND SPECIFIC INFORMATION OR MATERIAL. IN THIS CONTEXT, IT IS ALSO IMPORTANT TO NOTE THAT THERE SHOULD BE A DIRE CT NEXUS OR LIVE-LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ASSESSING OFFICER AND THE FORMATION OF HI S BELIEF THAT THERE HAS BEEN ESCAPEMENT OF INCOME OF THE ASSESSEE. THE IMPORTANT WORDS UNDER SECTION 147 ARE HAS REASON TO BELIEVE AND THESE WORDS ARE STRONGER THAN THE WORDS IS SATISF IED. THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORD S, IT MUST BE BASED ON REASONS, WHICH ARE RELEVANT AND MATERIAL. IN THIS CONTEXT IT MAY ALSO BE NOTED THAT THE COURTS HAVE GO T POWERS TO EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTER, IN REGARD TO WHICH, THE ASSESSING OFFICER IS RE QUIRED TO ENTERTAIN THE BELIEF, BEFORE HE ISSUES NOTICE UNDER SECT ION 147. BESIDES, THE EXPRESSION REASON TO BELIEVE DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE ASSESSING OFFI CER. THE BELIEF MUST BE HELD IN ITA NOS. 46 & 47/BANG/2021 PAGE 25 OF 40 GOOD FAITH, IT CANNOT MERELY BE PRETENCE. IN ADDITION, SUSPICION, GOSSIP OR RUMOUR WOUL D NOT FORM THE BASI S FOR SUCH BELIEF. 32. IN RAMBAGH PALACE HOTELS PVT LTD VS DCIT 2013-TIOL-45-HC-DEL- IT, THE HONBLE DELHI HIGH COURT HELD AS UNDER:- EVEN SO, IT IS NECESSARY THAT THE ASSESSING OFFICER MUST HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THERE MUST BE TANGIBLE MATERIAL BEFORE HIM ON THE BASIS OF WHICH HE COULD FORM TH E BELIEF, BONA FIDE AND IN GOOD FAITH, THAT THERE WAS ESCAPEMENT OF INCOME. THE MATERIAL MUST HAVE A LIVE LINK OR NEXUS WITH THE FORMATION OF THE BELIEF. THE BELIEF CANNOT BE A MERE PRETENCE . THESE ARE THE MOST BASIC AND INDISPENSABLE REQUIREMENTS FOR THE VALIDITY OF THE NOTICE UNDER SECTION 148 33. THE THIRD MEMBER IN M/S. TELCO DADAJEE DHACKJEE LTD. VS. THE DCIT, CIRCLE 2(3) 2012-TIOL-532-ITAT-MUM-TM HELD AS UNDER:- SECTION 147 APPLIES BOTH TO SECT ION 143(1) AS WELL AS SECTION 143(3) AND, THEREFORE, EXCEPT TO THE EXTENT THAT THE REASSESSMENT NOTICE ISSUED UNDER SECTION 148 IN A CASE WHERE THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143(1) CANNOT BE CHALLENGED ON THE GROUND OF A MERE CHANGE OF OPINION, STILL IT IS OPEN TO AN ASSESSEE TO CHALLENGE THE NOTICE ON THE GROUND THAT THERE IS NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE REASON TO BELIEVE MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF THAT INCO ME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WHEN TH E RETURN WAS PROCE SSED AND ACCEPTED UNDER SECTION 143(1). TO HOLD THAT IN EVERY CASE WHERE A RETURN WAS PROCESSED AND ACCEPTED UNDER SECTION 143(1) THE ASSESSING OFFICER WILL BE FREE TO REOPEN THE SAME UNDER SECTION 148 EVEN IN THE ABSENCE OF A LIVE LINK BETW EEN THE REASONS RE CORDED AND THE FORMATION OF BELIEF WOULD BE TO MAKE THE CONDITI ONS OF SECTION 147 AND SECTION 148 OTIOSE AS REGARDS NOTICES REOPENING ISSUED IN CASES WHERE THE RETURN WAS ORIGINALLY PROCESSED UNDER SECTION ITA NOS. 46 & 47/BANG/2021 PAGE 26 OF 40 143(1). THERE IS NO EXCLUSION IN SECTION 147 TO THE EFFECT THAT WHERE THE RETURN WAS EARLIER PROC ESSED UNDER SECTION 143(1) IT IS NOT NECESSARY FOR THE ASSESSING OF FICER TO HOLD OR ENTERTAIN A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THE REASONS RECORDED BY HIM. TH EREFORE, THE CONDITION THAT THE ASSESSING OFFICER MUST HAVE REAS ON TO BELIEVE AND THE FURTHER CONDITION THAT THOSE RE ASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF IS APPLIC ABLE EQUALLY TO CASES WHERE THE RETURN WAS PROCESSED U NDER SECTION 143(1) AS ALSO TO CASES WHERE THE RETURN WAS EXAMINED AND AN ASSESSMENT WAS MADE BY A SPEAKING ORDER UNDER SECTION 143(3). THE ONLY DISTINCTION RECOGNIZED IN SECTION 147 BETWEEN THE TWO IS WHERE IT IS PROVIDED BY THE PROVISO THAT WHERE THE EAR LIER ASSESSMENT WAS MADE UNDER SECTION 143(3), NO ACTION FOR REOPENING THE ASSESSMENT CAN BE TAKEN AFTER THE E XPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BECAUSE OF THE FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETURN OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. SU CH AN EXCEPTION HAS NOT BEEN PROVIDED FOR IN A CASE WHERE THE RE TURN HAS BEEN PROCESSED UNDER SECTION 143(1) IN WHICH CASE THE PROVISO WILL HAVE NO APPLICATION. IF IT IS CORRECT THAT AN INTIMATION UNDER SECTION 143(1) AS WELL AS AN ASSESSMENT ORDER UNDER SECTI ON 143(3) ARE BOTH AMENABLE TO SECTION 147, IT SHOULD ALSO BE CO NCEDED THAT EVEN IN A CASE WHERE THE ORIGINAL RETURN WAS MERELY PR OCESSED UNDER SECT ION 143(1) THE ASSESSING OFFICER MUST HAVE RE ASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT. HE ALSO HAS TO RECORD REASONS UNDER SECTION 148(2) FOR REOPENING THE EARLIER ASSESSMENT MADE UNDER SECTION 143(1). ALL TH AT HAS BEEN EXCL UDED IS THAT THE ASSESSEE, IN WHOSE CASE THE RETURN WAS FIRST PROCESSED UNDER SECTION 143(1), CANNOT CHALLENGE THE NOTICE OF REOPENING ON THE GROUND THAT IT IS PROMPT ED BY A MERE CHANGE OF OPINION. ONLY TO THIS LIMITED EXTENT THERE IS A DISABILITY ON THE PART OF THE ASSESSEE TO CHALLENGE THE NOTICE OF REOPENING IN A CASE WHERE HIS RETURN WAS EARLIER PROCESSED UNDER SECTION 143(1) OF THE ACT. ..THE NOTICE OF REOPENING ISSUED IN A CASE WHERE THE RETURN WAS FIRST PROCESSED UNDER SECTION 143(1) IS OPEN TO CHALLENGE ON ALL GROUNDS AVAILABL E TO THE ASSESSEE, INCLUDING THE GROUND THAT THERE WAS NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED A SSESSMENT OR THAT THE MATERIALS ITA NOS. 46 & 47/BANG/2021 PAGE 27 OF 40 BEFORE THE ASSESSING OFFICER HAD NO LIVE LINK OR NEXUS WITH THE FORMATION OF SUCH BELIEF OR THAT THE REASONS ARE BASED ON GOSSIP OR RUMOUR OR WERE A MERE PRETENCE . THIS IS MADE CLEAR BY THE OBSERVATIONS OF THE COURT AT PAGE 512 OF THE REPORT WHERE IT WAS HELD THAT SO LONG AS THE INGREDIENTS OF SEC TION 147 ARE FULFILLED THE ASSESSING OFFICER CAN REOPEN THE PROCEEDINGS EVEN WHERE INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. THUS FULFILLMENT OF THE CONDITIONS OF SE CTION 147, INCLUDING THE ONE THAT THERE SHOULD BE REASON TO BELIEVE , IS ESSENTIAL FOR THE VALIDITY OF THE NOTICE UNDER SECT ION 148. IT IS WHIL E EXPOUNDING THE WORDS REASON TO BELIEVE THAT THE SUPR EME COURT IN THE LATER JUDGMENT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HELD THAT THERE SHOULD BE TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT. THUS, IN MY HUMBLE UNDERSTANDING OF BOTH THE JUDGMENTS, WHILE RESORTING TO SECTION 147 EVEN IN A CASE WHERE ONLY AN INTIMATION HAD BEEN ISSUED UNDER S ECTION 143(1)(A) IT IS ESSENTIAL THAT THE ASSESSING OFFICER SHOULD HAVE BEFORE HIM TANGIBLE MATERIAL JUSTIFYING HIS R EASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. 34. RELIANCE IS ALSO PLACED ON FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THAT THE PROCEEDINGS INITIATED UNDER SECTION 147 ARE LIABLE TO BE QUASHED ON THE GROUND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER, EVEN THOUGH NO ASSESSMENT U/S 143(3) OR 144 HAD BEEN MADE BEFORE AND THE RETURN WAS MERELY PROCESSED U/S 143(1) OF THE ACT:- INDIVEST PTE. LTD., SING APORE V. ADDITIONAL DIRECTOR OF INCOME- TAX-3(1), MUMBAI [2012] 206 TAXMAN 351 (BOM.) INDUCTOTHERM (INDIA) PVT. LTD VS. DCIT (GUJ.) 2012-TIOL-667- HC-AHM-IT 35. IT IS SUBMITTED THAT THE REASON TO BELIEVE CONTEMPLATED IN SECTION 147 SHOULD BE THAT OF THE ASSESSING OFFICER. THE AO HAS TO APPLY HIS MIND INDEPENDENTLY TO THE MATERIAL BASED ON WHICH THE BELIEF IS SOUGHT TO BE FORMED. IF BASED UPON HIS EXAMINATION, HE HAS REASON TO BELIEVE THAT ITA NOS. 46 & 47/BANG/2021 PAGE 28 OF 40 INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT, THEN HE CAN INITIATE PROCEEDINGS U/S 147. THE AO CANNOT MERELY RELY ON THE REPORT OF SOME OTHER INCOME-TAX AUTHORITY AND ISSUE NOTICE U/S 148 THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HENCE, THE INITIATION OF PROCEEDINGS U/S 147 IS NOT VALID. 36. THE TRIBUNAL IN ASSISTANT COMMISSIONER OF INCOME-TAX, VAPI CIRCLE V. RESHAM PETROTECH LTD. [2012] 136 ITD 185 (AHD.) HELD AS UNDER: THE ITO HIMSELF SHOULD FORM THE REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND TH EN ONLY HE CAN REOPEN AN ASSESSMENT. REASSESSMENT PROCEEDI NGS INITIATED ON THE DIRECTIONS GIVEN BY THE CIT WOULD BE INVALID [CIT V. T. R. RAJKUMARI [1973] 96 ITR 78 (MAD.): TC 51R 430].THE REQUISIT E BELIEF U/S. 147 MUST BE THAT OF THE ITO CONCERNED AND NOT OF ANY OTHER OFFICER. IF THE ITO DOES NOT FORM, HI S OWN BELIEF BUT MERELY ACT AT THE BEHEST OF ANY SUPERIOR AUTHOR ITY, IT MUST BE HELD THAT THE ASSUMPTION OF JURISDICTION UNDE R SECTION 148 WA S BAD FOR NON- SATISFACTION OF THE CONDITIONS PR ECEDENT [SHEO NARAIN JASWAL & ORS. V. ITO & ORS. [1989] 176 ITR 352 (PAT .); TC 51R 432.. SEE ALSO VISHAL SWAMP AGRAWILLA V. ITO [1976] CTR (CAL.) 296: TC 51R 432A AND CHUNNILAL ONKARMAL (PVT) LTD., (1983) 349 ITR 380 (MP): TC 51R 435]'.. THE REASONS FOR RE OPENING MUST BE RECORDED BY JURISDICTIONAL AO BECAUSE HE IS KEEPING ALL RELEVA NT AND PRIMARY RECORD. THE BASIC REQUIREMENT OF SECTION 147 OF THE ACT IS THAT THE AO HAS REASON TO BELIEVE THAT ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT. SUCH BELIEF MUST BE THE BELIEF OF JURISDICTIONAL AO AND NOT ANY OTHER AO OR AUTHORITY OF THE DEPART MENT. THEREFORE, IT IS WELL SETTLED THAT THE AO'S JURISDICTION TO REOPEN AN ASSESSMENT U/S. 147 DEPENDS UPON THE ISSUANCE OF A VALID NOTICE. IF THE NOTICE ISSUED BY HIM IS INVALID FOR ANY REASON THE ENTIRE PROCEEDINGS TAKEN BY HIM WOULD BECOME VOID FOR WANT OF JURISDICTION. 37. THE TRIBUNAL IN ASSISTANT COMMISSIONER OF INCOME-TAX V. RADHESHYAM MOHANLAL MAHESHWARI [2011] 12 ITR(TRIB.) 429 (AHD.) HELD AS UNDER:- ITA NOS. 46 & 47/BANG/2021 PAGE 29 OF 40 REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT AS PER ITS PLAIN LANGUAGE PR OVIDED IN THE ACT PROVIDES PREROGATIVE TO THE ASSESSING OFFI CER TO REOPEN THE ASSESSMENT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. EVEN IF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ISSUED A DIRECTION IN THE AP PELLATE ORDER DATED DECEMBER 11, 2003 TO REOPEN THE ASSESSMENTS, IT IS THE PREROGATIVE OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT BY SATISFYING THE REQUIREMENTS OF THE LAW AS MENT IONED ABOVE AND SHALL HAVE TO RECORD IN WRITING, THE REASON S TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. HOWEVER, THE REASONS RECO RDED BY THE ASSESSING OFFICER IN ALL THE ABOVE CASES DO NOT FIND MENTION SUCH FACTS AND THE SATISFACTION OF THE ASSESSING O FFICER FOR ESCAPEMENT OF INCOME. IN THE ABSENCE OF THE FULFILMENT OF THE REQUIREMENTS OF SECTION 147 OF THE INCOME-TAX ACT FOR INITIATION OF THE REASSESSMENT PROCEEDINGS IN THE A BOVE CASES, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER INSTEAD OF COMPLYING WITH THE REQUIREMENTS OF LAW MERELY WAS SWAYED BY THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) IN THE APPELLATE ORDER DATED DECEMBER 11, 2003. CONSIDERI NG THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW THAT THESE ARE NOT THE FIT CASES FOR INITIATION OF THE REASSESSMENT PROCEEDINGS BECAUSE THE ASSESSING OFFICER FAILED TO MAKE OUT A CASE WITHIN THE FOUR CORNERS OF THE PROVISIONS OF SECTION 147 OF THE INCOME-TAX ACT. 38. THE HONBLE DELHI HIGH COURT IN COMMISSIONER OF INCOME-TAX V. SPL'S SIDDHARTHA LTD. [2012] 345 ITR 223 (DELHI) HELD AS UNDER:- 8. THUS, IF AUTHORITY IS GIVEN EXPRESSLY BY AFFIRMATIVE WORDS UPON A DEFINED CONDITI ON, THE EXPRESSION OF THAT CONDITION EXCLUDES THE DOING OF THE ACT AUTHORISED UNDER OTHER CIRCUMSTANCES THAN THOSE AS DEFI NED. IT IS ALSO ESTABLISHED PRINCIPLE OF LAW THAT IF A PARTICUL AR AUTHORITY HAS BEEN DESIGNATED TO RECORD HIS/HER SATISFACTION ON ANY PARTICULAR ISSUE, THEN IT IS THAT AUTHORITY ALONE WHO SHOULD APPLY HIS/HER INDEPEND ENT MIND TO RECORD HIS/HER SATISFACT ION AND FURTHER MANDATOR Y CONDITION IS THAT THE SATISFACTION RECORDED SHOU LD BE 'INDEPEND ENT' AND NOT 'BORROWED' OR 'DICTATED' SATISFAC TION. LAW IN THIS REGARD IS NOW ITA NOS. 46 & 47/BANG/2021 PAGE 30 OF 40 SELL-SETTLED. IN SHEO NARAIN JA ISWAL V. ITO [1989] 176 ITR 352/ 45 TAXMAN 213 (PAT .), IT WAS HELD: 'WHERE THE ASSESSING OFFICER DOES NOT HIMSELF EXERCISE HIS JURISDICTION UNDER SECTION 147 BUT MERELY ACTS AT THE BEHEST OF ANY SUPERIOR AUTHORITY, IT MUST BE HELD THAT ASSUMPTION OF JURISDICTION WA S BAD FOR NON-SATISFACTION OF THE CONDITION PRECEDENT.' 39. 9. THE APEX COURT IN THE CASE OF ANIRUDHSINHJI KARANSINHJI JADEJA V. STATE OF GUJARAT [1995] 5 SCC 302 HAS HELD THAT IF A STATUTORY AUTHORITY HAS BEEN VESTED WITH JURISDICTION, HE HAS TO EXERCISE IT ACCORDING TO ITS OWN DISCRETION. IF DISCRETION IS EXERCISED UNDER THE DIRECTION OR IN COMPLIANCE WITH SOME HIGHER AUTHORITIES INSTRUCTION, THEN IT WILL BE A CASE OF FAILURE TO EXERCISE DISCRETION ALTOGETHER. 40. THE HONBLE HIGH COURT IN MRS.VINITA JAIN V. ITO 158 TAXMAN MAGAZINE 167 HELD THAT WHERE ASSESSING OFFICER REOPENED ASSESSEES ASSESSMENT MERELY BECAUSE DDIT (INV.) BELIEVED THAT TRANSACTION OF CAPITAL GAINS SHOWN BY ASSESSEE WAS BOGUS AND NO SEPARATE REASON DISCLOSING SATISFACTION OF A SSESSING OFFICER FOR FORMATION OF BELIEF THAT INCOME OF ASSESSEE HAD ESCAPED ASSESSMENT HAD BEEN RECORDED, NOTICE ISSUED UNDER SECTION 148 WAS TO BE QUASHED AND ASSESSMENT MADE IN PURSUANCE THEREOF WAS TO BE ANNULLED. 41. THE HONBLE SUPREME COURT IN ACIT V. DHARIYA CONSTRUCTION CO. [2010] 328 ITR 515 (SC) HELD THAT THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961. IT WAS HELD THAT THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON AND WITHOUT THE SAME, THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. ITA NOS. 46 & 47/BANG/2021 PAGE 31 OF 40 42. THE HONBLE RAJASTHAN HIGH COURT IN CIT V. SHREE RAJASTHAN SYNTEX LTD. [2009] 313 ITR 231 (RAJ) HELD THAT IT HAS BEEN VERY INTELLIGIBLY PROJECTED THAT THE FACTUM OF THE ASSESSING OFFICER AT MUMBAI HAVING ALLOWED DEPRECIATION ALLOWANCE TO THE LESSEE DID CONSTITUTE A FACT WHICH CAME TO THE NOTICE OF THE ASSESSING OFFICER HERE AND THAT FURNISHED REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BUT THEN IF PROPERLY APPRECIATED ALL THAT IT COMES TO IS THAT A SET OF LEASE DEEDS HAD BEEN APPRECIATED BY THE ASSESSING OFFICER OF THE LESSEE AT MUMBAI, WHO AFTER APPRECIATING THEM ALLOWED DEPRECIATION AND THE ASSESSING OFFICER HERE CAME TO THE CONCLUSION THAT THE ASSESSEE CONTINUES TO BE THE OWNER OF THE ASSETS AND IS ENTITLED TO DEPRECIATION ALLOWANCE, WHILE THE ASSESSING OFFICER AT MUMBAI FORMED AN OPINION FROM THE SAME SET OF LEASE DEEDS THAT THE LESSEE SHOULD BE TAKEN TO BE THE OWNER AND HAS RIGHT TO DEPRECIATION. THUS, THE NET RESULT WHICH COMES TO IS THAT SIMPLY BECAUSE AFTER THE ASSESSING OFFICER HERE HAD FORMED A PARTICULAR OPINION ON A PARTICULAR SET OF DOCUMENTS SIMPLY BECAUSE THE ASSESSING OFFICER AT MUMBAI HAD FORMED A DIFFERENT OPINION ON THE SAME SET OF DOCUMENTS THE ACTION WAS SOUGHT TO BE INITIATED HERE FOR REASSESSMENT WHICH, IN OUR VIEW, HAS RIGHTLY BEEN FOUND BY THE LEARNED TRIBUNAL THAT IT WAS A BORROWED SATISFACTION UNDER THE OPINION OF THE ASSESSING OFFICER AT MUMBAI AND HAS RIGHTLY BEEN FOUND TO BE NOT SUFFICIENT TO CONFER POWER ON THE ASSESSING OFFICER TO INITIA TE REASSESSMENT PROCEEDINGS. 43. THE DEPARTMENTS SPECIAL LEAVE PETITION AGAINST THE JUDGMENT OF THE RAJASTHAN HIGH COURT REPORTED IN 313 ITR 231 (SUPRA) WHEREBY THE HIGH COURT HELD THAT INITIATION OF REASSESSMENT PROCEEDINGS BASED UPON THE OPINION OF THE ASSESSING OFFICER OF THE LESSOR AT MUMBAI WAS BORROWED SATISFACTION AND WAS NOT SUFFICIENT REASON TO BELIEVE THAT INCOME HAD ITA NOS. 46 & 47/BANG/2021 PAGE 32 OF 40 ESCAPED ASSESSMENT PROCEEDINGS UNDER SECTION 147 HAS BEEN DISMISSED. [CIT V. SHREE RAJASTHAN SYNTEX LTD. [2009] 313 ITR (STATUTES) 27] 44. THE HONBLE MUMBAI HIGH COURT IN ICICI HOME FINANCE CO LTD VS ACIT, MUMBAI 2012-TIOL-590-HC-MUM-IT HELD AS UNDER:- THE BELIEF U/S 147 TH AT INCOME HAS ESCAPED ASSESSMENT HAS TO BE THE REASONABLE BELIEF OF THE AO HIMSELF AND CANNOT BE AN OPINION AND/OR BELIEF OF SO ME OTHER AUTHORITY. THE AO CANNOT BLINDLY FOLLOW THE OPINION OF AN AUD IT AUTHORITY FOR THE PURPOSE OF ARRIVING AT A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. ON FACTS, THE RECORDED REASONS ARE IDENTICAL TO THE OBJECTIO N OF THE AUDIT AUTHORITY. THE REASON S DO NOT RELY UPON ANY TA NGIBLE MATERIAL IN THE AUDIT REPORT BUT MERELY UPON AN OPINION A ND THE EXISTING MATERIAL ALREADY ON RECORD. THIS ITSELF INDICATES THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE AO BEFORE HE ISSUED THE S. 148 NOTICE (INDIA EASTERN NEWSPAPER SOCIETY 119 ITR 996 (SC) FOLLOWED). 45. THE BANGALORE TRIBUNAL IN M/S GMR HOLDINGS PVT LTD VS DCIT, BANGALORE 2012-TIOL-114-ITAT-BANG HELD THAT ISSUE OF NOTICE U/S. 148 OF THE ACT ONLY AFTER THE AUDIT PARTY RAISED CERTAIN OBJECTIONS IS INVALID. 46. THE LD. AR SUBMITTED THAT IN THE PRESENT CASE, THE REASONS RECORDED DO NOT SHOW AS TO HOW THE AO HAS COME TO THE CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS EXCEEDED RS. 1 LAC MERELY BASED ON CERTAIN BANK ENTRIES. THE AO CONSIDERED THE BANK ENTRIES ITSELF TO REPRESENT THE INCOME CHARGEABLE TO TAX THAT HAS ESCAPED ASSESSMENT. IT IS SUBMITTED THAT THE REASONS RECORDED MUST DISCLOSE THE PROCESS OF REASONING BY WHICH THE AO HOLDS THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ITA NOS. 46 & 47/BANG/2021 PAGE 33 OF 40 ESCAPED ASSESSMENT. THE AO IN TH E PRESENT CASE HAS RECORDED HIS CONCLUSION ITSELF AS REASON. 47. IN THE CASE OF VXL INDIA LTD. V. ASST. CIT [1995] 215 ITR 295 THE GUJARAT HIGH COURT HAS HELD AS UNDER:- IN A CASE WHERE THE ASSESSING OFFICER HOLDS THE OPINION THAT BECAUSE OF EXCESSIVE LOSS OR DEPR ECIATION ALLOWANCE THE INCOME HAS ESCAPED ASSESSMENT, THE REAS ONS RECORDED BY THE ASSESSING OFFICER MUST DISCLOSE BY WHAT PR OCESS OF REASONING HE HOLDS SUCH BELIEF THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED IN THE ORIGINAL ASSE SSMENT. MERELY SAYING THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED WITHOUT DISCLOSING REAS ONS WHICH LED THE ASSESSING AUTHORITY TO HOLD SUCH BELIEF, IN OUR OPINION, DOES NOT CONFER JURISDICTION ON THE ASSESSING OFFICER TO TAKE AC TION UNDER SECTIONS 147 AND 148 OF THE ACT. 48. IN CIT VS ICICI BANK LTD 2012-TIOL-512-HC-MUM-IT, THE HONBLE MUMBAI HIGH COURT HELD AS UNDER:- AS DISCLOSED IN THE REASONS R ECORDED WHILE I SSUING NOTICE UNDER SECTION 148 OF THE ACT, IN THE PRESENT CASE, THE IMPUGNED NOTICE WAS BASED ON THE GROUND THAT TH E INCOME EARNED FROM THE NON FUND BASED ACTIVITIES OF THE RESPONDENT HAD BE EN INCLUDED IN THE FUND BASED INCOME SO AS TO CLAIM EX CESS DEDUCTION UNDER SECTION 36(1)(VIII) OF THE SAID ACT. THE REASONS ONLY PROVIDE A CONCLUSION AND GIVE NO MATERIAL PARTICULARS OF INFORMATION OBTAINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1998-99 THEREFORE THE REASONS RE CORDED DO NOT INDICATE ANY TANGIBLE MATERIAL WHICH HAS LED TO A REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. AS HELD BY THIS COURT IN THE MATTER OF HINDUSTAN LEVER LTD. V. R.B. WADKAR 268 IT R 332 = (2004- TIOL-72-HC-MUM-IT), THE REASON S FOR REOPENING AS RECORDED MUST BE CLEAR AND NOT SUFFER FROM ANY VAGUENESS SO TO KEEP THE ASSESSEE GUESSING FOR THE REASONS. IT IS THE REASONS WHICH PROVIDE THE LINK BETWEEN THE EVIDENCE AND THE CONCLUSION. IN THIS CASE THE REASONS AS RECORDED DO SUFFER FROM THE VICE OF VAGUENESS. ITA NOS. 46 & 47/BANG/2021 PAGE 34 OF 40 49. AS REGARDS, THE TRANSACTION OF USD $ 14149 BASED ON WHICH THE REASSESSMENT PROCEEDINGS ARE INITIATED, IT WAS SUBMITTED THAT THE SAME HAS ALREADY BEEN ASSESSED IN AY 2003-04 REASSESSMENT PROCEEDINGS AND THE SAME CANNOT BE CONSIDERED IN THE RELEVANT AY OF 2002-03. 50. ON THE BASIS OF THE ABOVE SUBMISSIONS, THE LD. AR SUBMITTED THAT THAT THE REASSESSMENT PROCEEDINGS MAY BE QUASHED. 51. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT REOPENING OF ASSESSMENT IS WITHIN THE TIME LIMIT. FURTHER, HE SUBMITTED THAT UNACCOUNTED MONEY WAS DEPOSITED INTO HSBC BANK, GENEVA AND THESE FACTS CAME TO THE KNOWLEDGE OF AO. AFTER RECORDING DUE REASONS, THE AO REOPENED THE ASSESSMENT TO BRING THE ESCAPED INCOME TO TAX AND THE ASSESSEE BEING THE BENEFICIAL OWNER OF HSBC BANK, THERE IS VERY GOOD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IN THE HANDS OF ASSESSEE. 52. IT IS CONTENDED THAT BASED ON THE MATERIAL ON RECORD, THE AO HAS REASONS TO BELIEVE THAT INCOME HAS E SCAPED ASSESSMENT. ACCORDING TO THE LD. DR, THERE IS SPECIFIC INFORMATION WHICH HAS COME TO THE KNOWLEDGE OF AO ABOUT THE ASSESSEES ACCOUNT WI TH HSBC BANK AND HAVING HUGE BALANCE. ON THIS BASIS, THE AO IS JUSTIFIED IN REOPENING ASSESSMENT SINCE THE BANK ACCOUNT AMOUNTS ARE NOT DISCLOSED TO REVENUE AUTHORITIES AND THE AMOUNTS SO PLACED THEREIN HAVE NOT BEEN CONSIDERED IN THE RETURN OF INCOME FILED BY THE ASSESSEE. HE RELIED ON THE ORDERS OF LOWER AUTHORITIES AND PLEADED TO UPHOLD THE REOPENING OF ASSESSMENT. HE RELIED ON THE JUDGMENT OF MUMBAI BENCH IN THE CASE OF RENU T THARANI V. DCIT, ITA NO.2333/MUM/2018 DATED 16.7.2020 FOR AY 2006-07. 53. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THESE CASES, THE AO HAS REOPENED THE ASSESSMENT BY RECORDING REASONS WHICH ARE EXTRACTED IN THE EARLIER PART OF THIS ORDER. SIMILAR IS THE REASON ITA NOS. 46 & 47/BANG/2021 PAGE 35 OF 40 FOR BOTH THE ASSESSMENT YEARS. NOTICE DATED 24.03.2014 FOR AY 2002-03 WAS SERVED ON 25.3.2014 AND NOTICE DATED 10.5.2013 FOR AY 2003-04 WAS SERVED ON 13.5.2013. 54. AS PER REASONS RECORDED, THE ASSESSEE HAS INVESTED ALONG WITH HIS EX-WIFE IN HSBC BANK, GENEVA AND THE TRANSACTION WITH HSBC BANK WERE NOT DISCLOSED TO THE DEPARTMENT. HOWEVER, IT HAS NOT BEEN STATED THAT THE SAID INVESTMENT IN HSBC WAS OUT OF INCOME WHICH ES CAPED ASSESSMENT. THE AO ALSO HAS NOT MENTIONED IN THE AFORESAID REASONS THAT HE WAS SATISFIED THAT THE ABOVE INCOME ESCA PED ASSESSMENT. HE SIMPLY RELIED ON THE INFORMATION RECEIVED IN HIS POSSESSION TO COME TO THE CONCLUSION THAT THIS HSBC BANK ACCOUNT BELONGED TO THE ASSESSEE. 55. FROM THE PROVISIONS OF SECTION 147, IT IS CLEAR THAT THE AO MUST HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HOWEVER, IT CA NNOT BE SAID THAT IF THERE IS ANY INVESTMENT OR BANK ACCOUNT IT IS SUFFICIENT TO BELIEVE THAT INCOME TO THAT EXTENT ESCAPED ASSESSMENT BECAUSE THERE MAY BE SO MANY SOURCES FOR MAKING SUCH INVESTMENT AND IT IS NOT NECESSARY THAT ONLY ON THE BASIS OF INVESTMENT IT CAN BE PRESUMED THAT INCOME TO THAT EXTENT ESCAPED ASSESSMENT. THERE SHOULD BE CONCRETE FINDING BEFORE COMING TO THE CONCLUSION THAT ANY INCOME ESCAPED ASSESSMENT AND MERELY ON THE BASIS OF INFORMATION PROVIDED BY ANY OTHER WING OF THE DEPARTMENT, THE AO CANNOT BELIEVE THAT THERE WAS INCOME WHICH HAS ESCAPED ASSESSMENT. 56. IN THE PRESENT CASE, THE AO SIMPLY RELIED UPON THE INFORMATION RECEIVED BY HIM AND STATED THAT THE INVESTMENT IN ASSESSEES JOINT ACCOUNT WITH HIS EX-WIFE, MS. VANDANA VIRWANI WITH HSBC BANK WHICH HAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME FILED BY THE ASSESSEE IS THE INCOME WHICH ESCAPED ASSESSMENT IN THE HANDS OF A SSESSEE. IT CLEARLY SHOWS THAT AO SIMPLY ACTED UPON THE INFORMATION AND DID NOT APPLY HIS OWN MIND TO THE ITA NOS. 46 & 47/BANG/2021 PAGE 36 OF 40 INFORMATION TO ARRIVE AT A BELIEF INDEPENDENTLY THAT ON THE BASIS OF MATERIAL BEFORE HIM TO COME TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. FURTHER, IT IS TO BE NOTED THAT IT IS A JOINT ACCOUNT OF ASSESSEE WITH HIS EX-WIFE, MS. VANDANA VIRWANI WITH HSBC BANK, GENEVA AND THE ASSESSEE SOLELY CANNOT BE CONSIDERED AS OWNER OF THE ACCOUNT SO AS TO BRING THE ENTIRE TRANSACTION IN THAT ACCOUNT IN THE HANDS OF THE ASSESSEE. 57. FURTHER THE TRANSACTION WITH HSBC BANK LED TO THE CONCLUSION OF THE AO THAT THIS INVESTMENT WAS UNEXPLAINED AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL WITH RESPECT TO THIS CONCLUSION THAT THIS DEPOSIT WAS UNEXPLAINED. IT WAS ONLY A DOUBT, BUT NOT A REASON TO BELIEVE MEANING THEREBY THAT, EVEN IF THERE WAS SOME MATERIAL IN RESPECT OF SOURCE OF DEPOSIT, IT WAS NOT SUFFICIENT FOR ARRIVING AT THE CONCLUSION THAT THE DEPOSIT REPRESENTED UNEXPLAINED INCOME OF THE ASSESSEE. IN OTHER WORDS, THE AO HAS JUST SUSPICION IN HIS MIND AND IT IS TRITE LAW THAT AN ASSESSMENT CANNOT BE REOPENED MERELY ON THE BASIS OF SUSPICION AND INITIATION OF REASSESSMENT PROCEEDINGS U/S. 148 OF THE ACT ON THE BASIS OF THIS ASPECT WAS INVALID IN THE EYE OF LAW. 58. FURTHER, THE AO FRAMED ASSESSMENT ON PROTECTIVE BASIS IN AY 2002- 03 WHICH CLEARLY SHOWS THAT HE WAS NO T SURE AS TO WHETHER ASSESSEE WAS HAVING INCOME WHICH ESCAPED ASSESSMENT. IN SIMILAR CIRCUMSTANCES, THE BANGALORE BENCH IN THE CASE OF DCIT VS. BULLION INVESTMENTS & FINANCIAL SERVICES (P) LTD. [2010] 123 ITD 568 HELD AS UNDER:- THE FACT OF UNDISCLOSED INVESTMENT IN THE SHARE CAPITAL OF THE ASSESSEE-COMPANY WAS FOUND DURING THE COURSE OF SEARCH AND MATERIAL WAS COLLECTED DURING THE COURSE OF SEARCH THAT SUCH INVESTMENT BELONGED TO 'G'. IF SUCH INCOME WAS TO BE ASSESSED IN THE HANDS. OF A PERSON OTHER THAN 'G'; TH EN THE REVENUE SHOULD HAVE TAKEN RECOURSE UNDER SECTI ON 158BD. IF THE REVENUE WAS NOT SURE AS TO WHOSE HANDS THE ASSE SSMENT WAS TO BE MADE, THEN THE REVENUE COULD HAVE INITIATED PROCEEDINGS AGAINST BOTH THE ITA NOS. 46 & 47/BANG/2021 PAGE 37 OF 40 ASSESSEES. IN THE INSTANT CASE, TH E ASSESSMENT IN THE CASE OF 'G' WAS COMPLETED ON 31-7-1997. NOTI CE UNDER SECTIO N 148 HAD BEEN ISSUED TO THE ASSESSEE-COMPANY ON 27-7-1998. ONCE THE REVENUE HAD TAKEN ITS STAND THAT SUCH IN VESTMENT IN THE SHARE CAPITAL BELONGED TO 'G' AND THE ASSESS MENT ORDER WAS PASSED, THEN IT COULD NOT BE SAID THAT THE ASSESSI NG OFFICER WAS HAVING REASON TO BELIEVE THAT INCOME HAD ESCAPED IN THE HANDS OF THE ASSESSEE. REASSESSMENT CANNOT BE MADE ON MERE SUSPICION. THE ASSESSING OFFICER HAS TO FORM A BELIEF TH AT INCOME HAS ESCAPED ASSESSMENT IN THE HANDS OF THE ASSESSEE. ONCE IT HAD BEEN HE LD THAT SUCH INVESTMENT BELONGED TO 'G', THEN THERE WAS NO FURTHER MATERIAL TO COME TO THE CONCLUSION THAT SUCH ESCAPED INCOME BELONGED TO THE ASSESSEE. [PARA 2.5]. IN THE INSTANT CASE, THE REVENUE HE LD THAT SUCH UNDISCLOSED INCOME BELONGED TO 'G' AND THE ASSESSMEN T WAS MADE IN THE HANDS OF 'G' ON SUBSTANTIVE BASIS. THE CASE OF THE ASSESSEE WAS NOT REOPENED DURING THE PENDENCY OF PROCEEDI NGS IN THE CASE OF 'G'. HAD THE REVENUE MADE PROTECTIVE ASSESSMENT IN THE CASE OF 'G', THEN IT COULD HAVE TAKEN ACTION AGAINS T THE ASSESSEE. THUS, THE BASIC REQUIREMENT FOR REOPENING THE A SSESSMENT THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, WAS NOT SATISFIED IN THIS CASE. HENCE, THE COMMISSIONER (APPEALS) WAS JUST IFIED IN HOLDING THAT THE ASSESSMENT COULD NOT BE REOPENED FOR MAKING PROTECTIVE ADDITION. [PARA 2.6] IN VIEW OF THE ABOVE DI SCUSSION, IT WAS TO BE HELD THAT THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN CANCELLING THE ASSESSMENT IN THE HANDS OF THE A SSESSEE. [PARA 2.8] IN THE RESULT, THE APPEAL FILED BY THE REVE NUE WAS TO BE DISMISSED. 59. IN THE PRESENT CASE ALSO, FIRST OF ALL, THE AO IS NOT SURE WHETHER INCOME HAS TO BE ASSESSED IN THE HA NDS OF ASSESSEE OR HIS EX-WIFE, MS. VANDANA VIRWANI. NEXT, HE WAS NOT SU RE IN WHICH ASSESSMENT YEAR IT HAS TO BE TAXED, WHETHER AY 2002-03 OR 2003-04. IN ADDITION, HE IS NOT SURE WHO IS THE EXACT OWNER OF THIS BANK ACCOUNT. ITA NOS. 46 & 47/BANG/2021 PAGE 38 OF 40 60. FURTHER, THE HSBC BANK ACCOUNT IS A JOINT ACCOUNT WITH ASSESSEES EX-WIFE. IT DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE IS THE SOLE OWNER AND BENEFICIAL OF THE SAID BANK ACCOUNT IN ORDER TO BRING THIS DEPOSIT AS TAXABLE IN THE HANDS OF ASSESSEE AS THE OWNER OF THE ACCOUNT. THE ONUS OF PROVING LIES WITH THE DEPARTMENT. THIS LEGAL PROPOSITION HAS BEEN LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. K. CHINNATHAMBAN (2007) 162 TAXMAN 459 (SC) WHEREIN IT WAS HELD THAT WHERE A DEPOSIT STANDS IN THE NAME OF A THIRD PERSON AND WHERE THAT PERSON IS RELATED TO THE ASSESSEE, THEN IN SUCH A CASE THE PROPER COURSE WOULD BE TO CALL UPON THE PERSON IN WHOSE BOOKS THE DEPOSIT APPEARS OR THE PERSON IN WHOSE NAME THE DEPOSIT STANDS TO EXPLAIN SUCH DEPOSIT. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF DURGA KAMAL RICE MI LLS V. CIT (2003) 130 TAXMAN 533 (CAL) WHERE IT WAS HELD THAT THERE IS NOTHING TO SHOW THAT THE LEARNED TRIBUNAL HAS EVER COME TO ANY CONCLUSION THAT THE ASSESSEE OWNED THIS AMOUNT. EVEN THEN, IN THIS CASE ONCE IT HAD ADDED TO THE INCOME OF THE ASSESSEE AND THEN AGAIN THE SAME AMOUNT HAS BEEN ACCEPTED AS INCOME OF THE PARTNERS IN THEIR REVISED RETURN, THE INCOME-TAX AUTHORITY IS PRECLUDED FROM CONTENDING THAT THE ASSESSEE IS THE OWNER OF THE AMOUNT OR THE INCOME. 2. FURTHER THE HONBLE SUPREME COURT IN THE CASE OF R.B. JODHA MAL KUTHIALA V. CIT, 1971 SCC 369, HAD EXPLAINED THE TERM OWNER WHICH IS AS FOLLOWS:- THE QUESTION IS WHO IS THE 'OWNER' REFERRED TO IN THIS SECTION? IS IT THE PERSON IN, WHOM THE PROPERTY VESTS OR IS IT HE WHO IS ENTITLED TO SOME BENEFICIAL INTEREST IN THE PROPERTY IT MUST BE REMEMBERED THAT S. 9 BRINGS TO TAX THE INCOME FROM PROPERTY AND NOT THE INTEREST OF A PERSON IN THE PROPERTY. A PROPERTY CANNOT HE OWNED BY TWO PERSONS, EACH ONE HAVING INDEPENDENT AND EXCLUSIVE RIGHT OVER IT. HENCE FOR THE PURPOSE OF S. 9, THE OWNER MUST HE THAT PERSON WHO CAN EXERCISE THE RIGHTS OF THE OWNER, NOT ON BEHALF OF THE OWNER BUT ITA NOS. 46 & 47/BANG/2021 PAGE 39 OF 40 IN HIS OWN RIGHT. 17. ... IT IS NOT N ECESSARY FOR OUR PRESENT PURPOSE TO EXAMINE WHAT THE WORD 'OWNER' MEANS IN DIFFERENT CONTEXTS. THE MEANING THAT WE GIVE TO THE WORD ' OWNER' IN S. 9 MUST NOT BE SUCH AS TO MAKE THAT PROVISION CAPABLE OF BEING MADE AN INSTRUMENT OF OPPRESSION, MUST BE IN CONSONANCE WITH THE PRINCIPLES UNDERLYING THE ACT. 61. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BY FOLLOWING THE PRECEDENTS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE AO REOPENED THE ASSESSMENT MERELY ON SUSPICION AND SURMISE, WITHOUT THERE BEING ANY POSITIVE MATERIAL IN HIS POSSESSION TO PROVE THAT THE ASSESSEE IS THE OWNER OF THE BANK ACCOUNT OR HAVING BENEFICIAL INTEREST IN THIS BANK ACCOUNT. THEREFORE, WE ARE OF THE OPINION THAT THE REOPENING OF ASSESSMENTS ARE BAD IN LAW, WHICH CANNOT BE SUSTAINED. ACCORDINGLY, WE QUASH THE REASSESSMENTS. 62. THE ASSESSEE ALSO ARGUED ON THE LIMITATION OF ISSUE OF NOTICE U/S. 148 OF THE ACT AS WELL AS ON MERITS OF THE CASE. AS WE HAVE QUASHED THE ASSESSMENTS ITSELF, WE ARE NOT GOING INTO THE SAME AND THE OTHER GROUNDS RAISED BY THE ASSESSEE IN THESE APPEALS. 63. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JUNE, 2021. SD/- SD/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBE R ACCOUNTANT MEMBER BANGALORE, DATED, THE 23 RD JUNE, 2021. / DESAI S MURTHY / ITA NOS. 46 & 47/BANG/2021 PAGE 40 OF 40 COPY TO: 1. APPELLANT 2. RESPONDE NT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.