ITO, Parwanoo V. M/s Shiva Export, Parwanoo

ITA 512/CHANDI/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7771 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R. SOOD, AM AND MS. SUSHMA CHOWLA, JM ITA NO. 511 & 512/CHD/2012 ASSESSMENT YEAR: 2001-02 & 20 02-03 I.T.O. WARD, PARWANOO V M/S SHIVA EXPORTS SECTOR 2, PARWANOO PAN: AAEFS 8429 H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AKHILESH GUPTA ASSESSEE BY: SHRI SUDHIR SEHGAL DATE OF HEARING: 21.06.2012 DATE OF PRONOUNCEMENT: 25.06.2012 ORDER PER T.R. SOOD, A.M IN BOTH THESE APPEALS IDENTICAL GROUNDS HAVE BEEN R AISED WHICH ARE AS UNDER: 1 THE LD. CIT(A) ERRED IN QUASHING THE ASSESSMENT MADE U/S 147 OF THE INCOME-TAX ACT AND HOLDING THE RE-ASSESSMENT PR OCEEDINGS NULL AND VOID. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT IN B OTH THESE YEARS ASSESSMENTS HAVE BEEN REOPENED ON THE BASIS THAT TH E ASSESSEE HAS SHOWN EXCESSIVE PROFITS BECAUSE OF THE AVAILABILITY OF DE DUCTION U/S 80IA OF THE ACT AND SUCH PROFITS WERE REDUCED WHEN THE DEDUCTION WAS LO WERED TO 25%. 3. ON APPEAL, THE LD. CIT(A) DECIDED THE ISSUES IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR ASSESSMENT YEARS 1998-99, 1999-2000 AND 2000-01 IN ITAS NO. 7 & 8/CHD/2008 AND ITA NO. 50/CHD/2009. 4. BOTH THE PARTIES WERE HEARD. 5. AFTER HEARING BOTH THE PARTIES WE FIND THAT IDEN TICAL ISSUE CAME UP FOR CONSIDERATION OF THE TRIBUNAL IN ASSESSEES OWN CAS E FOR VARIOUS ASSESSMENT 2 YEARS. IN ITAS NO. 7 & 8/CHD/2008 THE ISSUES WERE ADJUDICATED BY PARA 4 TO 11 WHICH IS AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE CASE LAWS CITED AT BAR AND ALSO THE MATERIAL RELEVA NT ON RECORD. IN THIS CASE THE ORIGINAL RETURN FILED HAD BEEN PRO CESSED AND ACCEPTED UNDER SECTION 143(1) OF THE ACT. IT IS A T RITE LAW THAT THE INTIMATION UNDER SECTION 143(1) IS GIVEN WITHOU T PREJUDICE TO THE POWERS AVAILABLE TO THE ASSESSING OFFICER UN DER SECTION 143(2) OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD. VS. CHAIRMAN, CBDT 2 46 ITR 173 (DEL) HELD THAT WHERE ACTION UNDER SECTION 143( 2) WAS NOT TAKEN WITHIN THE PRESCRIBED PERIOD, SO LONG AS INGR EDIENTS OF SECTION 147 ARE FULFILLED, THAT WOULD NOT RENDER AS SESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDI NGS, EVEN WHEN ONLY AN INTIMATION UNDER SECTION 143(1) HAD BE EN ISSUED. THE GUJARAT HIGH COURT IN BHARAT VS. PATEL V. UNION OF INDIA & OTHERS 268 ITR 116 HELD THAT A MERE PROCESSING OF A RETURN UNDER SECTION 143(1) CANNOT BE ELEVATED TO THE STAT US OF REGULAR ASSESSMENT AND FORMATION OF OPINION ABOUT T HE INCIDENCE OF TAX ON A PARTICULAR ITEM MENTIONED IN THE RETURN OF INCOME. THAT IF THE INGREDIENTS OF SECTION 147 WERE SATISFIED, THE ISSUANCE OF NOTICE WAS HELD VALID. IN BAWA ABHA I SINGH 283 ITR 53 (DEL), IT WAS HELD THAT THERE MUST BE SOME M ATERIAL WHICH CAN BE REGARDED AS INFORMATION ON THE BASIS O F WHICH, ASSESSING OFFICER CAN HAVE REASON TO BELIEVE THAT A CTION UNDER SECTION 147 IS CALLED FOR. IT WAS HELD AS UNDER:- INFORMATION MEANS THE COMMUNICATION OR RECEPTION O F KNOWLEDGE OR INTELLIGENCE. IT INCLUDES KNOWLEDGE OB TAINED FROM INVESTIGATION STUDY OR INSTRUCTION. TO INFORM MEANS TO IMPART KNOWLEDGE. A DETAIL AVAILABLE IN THE PAPE RS FILED BEFORE THE INCOME TAX OFFICER DOES NOT BY ITS MERE PRESENCE OR AVAILABILITY BECOME AN ITEM OF INFORMAT ION. IT IS TRANSMUTED INTO AN ITEM OF INFORMATION ONLY IF A ND WHEN IT EXISTENCE IS REALIZED AND ITS IMPLICATIONS ARE RECOGNIZED. WHETHER A PARTICULAR FACT OR MATERIAL CONSTITUTES INFORMATION IN A PARTICULAR CASE HAS TO BE DECIDED WITH REFERENCE TO THE FACTS OF THAT CASE AN D THERE CANNOT BE A DEFINITE RULE OF UNIVERSAL APPLICATION AS TO WHEN A PARTICULAR MATERIAL WILL BE TAKE TO BE AN INFORMATION. [EMPHASIS, ITALICIZED IN PRINT, SUPPLIED BY US] 5. INFACT IN THE LATEST JUDGMENT, THE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) HA S HELD THAT, NO OPINION IS EXPRESSED BY AN ASSESSING OFFICER, WH EN AN ASSESSMENT IS FRAMED UNDER SECTION 143(1) OF THE AC T AND AS SUCH, THERE IS NO CHANGE OF OPINION ON INVOCATION O F SECTION 147 OF THE ACT. IT WAS HOWEVER NOT BEEN HELD THAT I N EACH AND EVERY CASE WHERE RETURN OF INCOME IS ACCEPTED IN AN INTIMATION UNDER SECTION 143(1) OF THE ACT PROCEEDING UNDER SE CTION 147 OF THE ACT CAN BE INITIATED. ON THE CONTRARY WHAT H AS BEEN HELD IS THAT ASSESSING OFFICER HAS JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT IF THERE WAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HA D ESCAPED ASSESSMENT. THEIR LORDSHIPS HELD AS UNDER:- THE SCOPE AND EFFECT OF SECTION 147 OF THE ACT, AS SUBSTITUTED WITH EFFECT FROM APRIL 1,1989 AS ALSO S ECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PRO VISIONS 3 AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECTION 147 SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH REASSESSED. TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDIT IONS WERE REQUIRED TO BE SATISFIED: FIRSTLY, THE ASSESSI NG 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 ASSES SEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT OR THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASS ESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UND ER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS, IF THE ASSESSIN G OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCO ME HAS ESCAPED ASSESSMENT IF CONFERS JURISDICTION TO R EOPEN THE ASSESSMENT . 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 ASSESS MENT YEAR HAS ESCAPED ASSESSMENT. THE WORD REASON IN T HE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE O R JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ES CAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER S HOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER I S TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBL IC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPA YERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINC ES MANGANESE ORE CO. LTD. V. ITO (1991) 191 ITR 662, F OR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE P ROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STA GE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABLISHED FACT OF ESCAPE MENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY Q UESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF. WHETHER THE MATERIAL WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OF FICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION (SEE ITO V. SELECTED DALURBAND COAL CO. P. LTD. (1996) 217 ITR 597 (SC); RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SC). [EMPHASIS, ITALICIZED IN PRINT SUPPLIED B Y US] 6. IT HAS THEREFORE BEEN HELD THAT REASON TO BELIE VE IS A MANDATORY PRECONDITION FOR ASSUMPTION OF JURISDICTI ON UNDER SECTION 147 OF THE ACT. IT HAS BEEN FURTHER HELD TH AT SUCH REASON TO BELIEVE MUST NECESSARILY TO BE BASED ON RELEVANT MATERIAL AND THAT RELEVANT MATERIAL MUST BE SUCH TH AT A REASONABLE PERSON ON INFORMATION OF SUCH MATERIAL W OULD HAVE FORMED A REQUISITE BELIEF THAT INCOME OF THE ASSESS EE HAS ESCAPED ASSESSMENT. IN THIS CONTEXT IT WOULD BE APP ROPRIATE TO 4 REFER TO THE JUDGMENT OF APEX COURT IN THE CASE OF GANGA SARAN AND SONS P. LTD V. ITO REPORTED IN 130 ITR 1 WHEREI N THE SUPREME COURT INTER-ALIA OBSERVED THAT THE EXPRESSI ON REASON TO BELIEVE IS STRONGER THAN THE EXPRESSION IS SAT ISFIED. IT WAS HELD THAT BELIEF ENTERTAINED BY THE ASSESSING OFFIC ER SHOULD NOT BE IRRATIONAL OR ARBITRARY. ALTERNATIVELY PUT IT MU ST BE REASONABLE AND MUST BE BASED ON REASONS WHICH ARE M ATERIAL. FOLLOWING THE ABOVE JUDGMENT, THE DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL CO. (P) LTD. V. CIT REPORTED I N 258 ITR 317 (DEL) HAS HELD AS UNDER:- THUS THE EXISTENCE OF TANGIBLE MATERIAL, FOR THE FORMATION OF OPINION IN A PRE-REQUISITE FOR INITIAT ION OF ACTION UNDER SECTION 147 OF THE ACT. THEREFORE WHAT SECTION 147 OF THE ACT POSTULATES IS THAT THE ASSES SING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THERE SHOULD BE FACTS BEFORE HI M THAT REASONABLY GIVE RISE TO THE BELIEF BUT THE FAC TS ON THE BASIS OF WHICH HE ENTERTAINS THE BELIEF NEED NOT AT THIS STAGE BE REBUTTABLY CONCLUSIVE TO SUPPORT HIS TENTA TIVE CONCLUSION. IN CASE OF CHALLENGE IT IS OPEN TO THE COURT TO EXAMINE WHETHER THERE WAS MATERIAL BEFORE THE ASSES SING OFFICER HAVING RATIONAL CONNECTION OR RELEVANT BEAR ING TO THE FORMATION OF THE BELIEF THAT IS CLAIMED TO HAVE BEEN HELD AT THE TIME WHEN HE ISSUED THE NOTICE. BUT THE COURT CANNOT FOR THE PURPOSE OF ASCERTAINING VALIDITY OF THE NOTICE EXAMINE THE SUFFICIENCY OF THE REASONS FOR T HE BELIEF. EXPLAINING THE SCOPE OF THE EXPRESSION INFORMATION IN THE BACKGROUND OF SECTION 132 OF THE ACT, WHICH LOG IC IS EQUALLY APPLICABLE TO A CASE UNDER SECTION 147 OF T HE ACT IN L. R. GUPTA V. UNION OF INDIA (1992) 194 ITR 32 A DIVISION BENCH OF THIS COURT OBSERVED THUS: THE EXPRESSION INFORMATION MUST BE SOMETHING MOR E THAN A MERE RUMOUR OR A GOSSIP OR A HUNCH. THERE MU ST BE SOME MATERIAL WHICH CAN BE REGARDED AS INFORMATI ON WHICH MUST EXIST ON THE FILE ON THE BASIS OF WHICH THE AUTHORIZING OFFICER CAN HAVE REASON TO BELIEVE THAT ACTION UNDER SECTION 132 IS CALLED FOR ANY OF THE REASONS MENTIONED IN CLAUSE (A), (B) OR (C). WHEN THE ACTION OF ISSUANCE OF AN AUTHORIZATION UNDER SECTION 132 IS CHALLENGED IN A COURT IT WILL BE OPEN TO THE PETITI ONER TO CONTEND THAT ON THE FACTS OR INFORMATION DISCLOSED NO REASONABLE PERSON COULD HAVE COME TO THE CONCLUSION THAT ACTION UNDER SECTION 132 WAS CALLED FOR. THE O PINION WHICH HAS TO BE FORMED IS SUBJECTIVE AND THEREFORE THE JURISDICTION OF THE COURT TO INFER IS VERY LIMITED. A COURT WILL NOT ACT AS AN APPELLATE AUTHORITY AND EXAMINE METICULOUSLY THE INFORMATION IN ORDER TO DECIDE FOR ITSELF AS TO WHETHER ACTION UNDER SECTION 132 IS CALLED FO R. BUT THE COURT WOULD BE ACTING WITHIN ITS JURISDICTION I N SEEING WHETHER THE ACT OF ISSUANCE OF AN AUTHORIZATION UND ER SECTION 132 IS ARBITRARY OR MALAFIDE OR WHETHER THE SATISFACTION WHICH IS RECORDED IS SUCH WHICH SHOWS LACK OF APPLICATION OF MIND OF THE APPROPRIATE AUTHORITY . THE REASON TO BELIEVE MUST BE TANGIBLE IN LAW AND IF TH E INFORMATION OR THE REASON HAS NO NEXUS WITH THE BEL IEF OR THERE IS NO MATERIAL OR TANGIBLE INFORMATION FOR TH E FORMATION OF THE BELIEF THEN IN SUCH A CASE, ACTION TAKEN UNDER SECTION 132 WOULD BE REGARDED AS BAD IN LAW. IT IS THUS, TRITE, THAT WHEN A CHALLENGE IS MADE TO THE ACTION UNDER SECTION 147 OF THE ACT WHAT THE COURT IS 5 REQUIRED TO EXAMINE IS WHETHER SOME MATERIAL EXISTS ON RECORD FOR THE ASSESSING OFFICER TO FORM THE REQUIS ITE BELIEF AND THE REASONS FOR THE BELIEF HAVE A RATION AL NEXUS OR A RELEVANT BEARING TO THE INFORMATION OF S UCH BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT FOR THE PURPOSE OF THE SAID ACTION. BUT SUFFICIENCY OF THE GROUNDS, WHICH INDUCED THE ASSESSING OFFICER TO ACT UNDER THE SAID SECTION IS NOT A JUSTICIABLE ISSUE. [EMPHASIS, ITALICIZED IN PRINT, SUPPLIED BY US] 7. IN THE AFORESTATED BACKGROUND NOW WE MAY ADVERT TO THE FACTUAL POSITION IN THE INSTANT CASE. IN THIS CASE, AFTER THE PROCESSING OF RETURN UNDER SECTION 143(1) THE ASSES SING OFFICER RECORDED REASONS ON 08.02.2006 TO INITIATE PROCEEDINGS UNDER SECTION 147/148 AS UNDER:- THE ASSESSEE FILED RETURN OF INCOME FOR THE ABOVE NOTED ASSESSMENT YEAR DECLARING TOTAL INCOME AT RS. NIL A FTER CLAIMING DEDUCTION U/S 80IA AMOUNTING TO RS.51,73,7 98/-. THE ASSESSEE FIRM DERIVES INCOME FROM MANUFACTURING OF EMERGENCY LIGHTS. THE NP SHOWN IS AGAINST TOTAL TUR NOVER OF RS.2,96,74,155/- AND NET PROFIT PERCENTAGE IS 17 .4% WHICH IS EXCEPTIONALLY HIGH RATE OF NET PROFIT. A PERUSAL OF MANUFACTURING ACCOUNT REVEALS THAT ASSESSEE HAS SHOWN EXPENSES UNDER THE HEAD ELECTRIC ITY AT RS.3,894/-. WAGES RS.2,25,502/- AND PACKING EXPENSES RS.1,195/- ONLY. IT APPEARS THAT EITHER MANUFACTURING ACTIVITIES HAVE NOT BEEN CARRIED OUT BY THE ASSESSEE FIRM OR EXPENSES. AS PER FIXED ASSETS PLANT & MACHINERY IS WORTH ONLY RS.27,101/- WHEREAS TOTAL SALES/PRODUCTION HAS BEEN SHOWN AT RS.2,96,74,155/- DURING THE PERIOD UNDER CONSIDERATION. PLANT & MACHINERY ENGAGED IN THE MANUFACTURING PROCESS IS NOT SUFFICIENT TO GENERATE SUCH A HUGE PRODUCTION. FROM THE ABOVE FACTS IT IS CLEAR THAT EITHER THE IN COME EARNED BY THE ASSESSEE FROM OTHER SOURCES HAS BEEN DECLARED FROM BUSINESS ACTIVITIES OR THE MANUFACTUR ING EXPENSES HAVE NOT BEEN BOOKED PROPERLY. I HAVE REAS ONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.51,73,798/ - CLAIMED AS DEDUCTION U/S 80IA/80IB HAS ESCAPED ASSESSMENT. AS SUCH NOTICE U/S 148 NEEDS TO BE ISSU ED IN THIS CASE. 8. FROM THE PERUSAL OF THE ABOVE REASONS RECORDED I T IS EVIDENT THAT THE ASSESSING OFFICER HAS ASSUMED JURISDICTION UNDER SECTION 147 OF THE ACT SINCE IN HIS PRIMA-FACIE OPINION INC OME TO THE TUNE OF RS.51,72,798/- CLAIMED AS DEDUCTION UNDER SECTIO N 80IA/80IB OF THE ACT HAS ESCAPED ASSESSMENT ON ACCOUNT OF THE FOLLOWING FACTORS:- (A) THE NET PROFIT SHOWN OF RS.51,73.798/- AGAINST TOTAL TURNOVER OF RS.2,96,74,155/- IS 17.4% WHICH IS EXCEPTIONALLY HIGH; (B) THAT EXPENSES UNDER THE HEAD ELECTRICITY AT RS. 3894/-, WAGES AT RS.2,25,502/-, PACKING EXPENSES AT RS.1195/-DEBI TED IN THE MONTHLY ACCOUNT SHOW THAT EITHER MANUFACTURING ACTIVITIES HAVE NOT BEEN CARRIED OUT BY THE ASSESSEE FIRM OR E XPENSES 6 HAVE BEEN SUPPRESSED TO DECLARE MAXIMUM PROFIT WHIC H IS EXEMPT UNDER SECTION 80IA OF THE ACT; AND (C) THAT AS PER FIXED ASSETS, PLANT AND MACHINERY I S WORTH RS.27,101/- WHEREAS TOTAL SALES/ PRODUCTION HAS BEE N SHOWN AT RS.2,96,74,155/- DURING THE PERIOD WHICH IS INSU FFICIENT FOR SUCH A HUGE PRODUCTION. 9. IT IS THEREFORE APPARENT FROM THE REASONS RE CORDED THAT PRIMA-FACIE BELIEF OF THE ASSESSING OFFICER THAT DE DUCTION UNDER SECTION 80IA OF THE ACT WAS INCORRECTLY CLAIMED AND ALLOWED IS UNSUPPORTED BY ANY MATERIAL. THE ASSESSING OFFICER HAS LED NO EVIDENCE WHATSOEVER TO EITHER ALLEGE OR ESTABLISH T HAT THE EXPENSES INCURRED WERE INSUFFICIENT TO CARRY OUT TH E MANUFACTURING PROCESS. HE HAS ALSO LED NO MATERIAL TO ASSUME THAT NET PROFIT DECLARED BY THE ASSESSEE WAS EXCEPTIONALLY HIGH RAT E OF PROFIT. THERE IS ALSO NO MATERIAL TO ALLEGE THAT PLANT AND MACHINERY WAS INSUFFICIENT TO CARRY OUT THE MANUFACTURING PROCESS . THE ASSESSING OFFICER HAS THUS NOT RELIED UPON ANY MATERIAL OR EV IDENCE, WHICH COULD ENABLE HIM TO ASSUME THAT INCOME OF THE ASSES SEE, HAS ESCAPED ASSESSMENT EITHER BY UNDERSTATEMENT OR EXPE NSES OR OVERSTATEMENT OF PROFITS. HE HAS MERELY PROCEEDED O N SURMISES, CONJECTURES AND SUSPICION TO OBSERVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT WHICH IN LAW CANNOT CONSTITU TE A REASON TO BELIEVE FOR INVOKING SECTION 147 OF THE ACT. REL IANCE IS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF INDIAN OIL CORPORATION VS. ITO REPORTED IN 159 ITR 956 WHEREIN IT WAS HELD THAT THE REASONS TO BELIEVE IS NOT THE SA ME THING AS REASONS TO SUSPECT. IT IS A CASE WHERE THE ASSESSI NG OFFICERS BELIEF IS UNSUPPORTED BY ANY EVIDENCE AND ALL THE F ACTORS STATED IN THE REASONS RECORDED FALL WITHIN THE REALM OF SUSPI CION. INFACT PLAIN READING OF THE REASONS SUPPORTS OUR CONCLUSIO N, WHEN HE HAS OBSERVED THAT EITHER THE INCOME EARNED BY THE ASSESSEE FROM OTHER SOURCES HAS BEEN DECLARED FROM BUSINESS ACTIV ITIES OR THE MANUFACTURING EXPENSES HAVE NOT BEEN BOOKED PROPERL Y. THEREFORE PROCEEDINGS HAVE BEEN INITIATED FOR THE P URPOSE OF INVESTIGATION AND NO MORE. IT IS SETTLED LAW THAT T HE PROVISIONS CONTAINED IN SECTION 147 OF THE ACT CANNOT BE USED AS A TOOL OR AS A PROVISION TO ENABLE THE ASSESSING OFFICER TO COND UCT INVESTIGATION. THE HONBLE APEX COURT IN THE CASE O F MADHYA PRADESH INDL. CORPN. V. ITO REPORTED IN 57 ITR 637 HAS HELD THAT, PROCEEDINGS CANNOT BE INITIATED FOR THE PURPOSE OF MAKING FISHING AND ROVING ENQUIRIES. IN OUR OPINION, THE ASSESSING OFFICER WAS OBLIGED IN LAW TO FIRSTLY PLACE ON RECORD ANY MATER IAL WHICH ENABLED HIM TO HAVE REASON TO BELIEVE THAT INCOME O F THE APPELLANT HAS ESCAPED ASSESSMENT AND ONLY THEREAFTE R INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. IN OTHER WORDS, UNTIL AND UNLESS, THE AFORESAID BURDEN HAD BEEN DISCHARGE D, THE ASSESSING OFFICER COULD NOT HAVE RESORTED TO THE PR OVISIONS CONTAINED IN SECTION 147 OF THE ACT. THE ASSESSING OFFICER HAS PROCEEDED ON MERE ASSUMPTIONS AND SURMISES WHICH IN LAW CANNOT BE A MADE TO ASSUME THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THE HONBLE SUPREME COURT IN THE CASE O F LAKHMANI MEWAL DAS REPORTED IN 103 ITR 437 HAS HELD AS UNDER :- THE REASONS FOR THE FORMATION OF THE BELIEF CONTEM PLATED BY SECTION 147(A) OF THE INCOME-TAX ACT,1961, FOR THE REOPENING OF AN ASSESSMENT MUST HAVE A RATIONAL CONNECTION OR RELEVANT BEARING ON FORMATION OF BELIEF. RATIONAL C ONNECTION POSTULATES THAT THERE MUST BE DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE IN COME-TAX OFFICER AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSES SMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE T HAT THE COURT 7 CANNOT GO INTO THE SUFFICIENCY OR ADEQUACY OF THE M ATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE INCO ME-TAX OFFICER ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED OR RE-OPENING THE ASSESSMENT. AT THE SAME TIME WE H AVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL HOWSOEVER VAGUE AND INDEFINITE OR DISTANT REMOTE AND FAR-FETC HED WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. THE FACT THAT THE WORDS DEFINITE INFORMATION WHICH WERE THERE IN SECTION 34 OF THE ACT OF THE AC T 1922 AT ONE TIME BEFORE ITS AMENDMENT IN 1948 ARE NOT THERE IN SECTION 147 OF THE ACT OF 1961 WOULD NOT LEAD TO TH E CONCLUSION THAT ACTION CAN NOW BE TAKEN FOR REOPENI NG THE ASSESSMENT EVEN IF THE INFORMATION IS WHOLLY VAGUE INDEFINITE FAR-FETCHED AND REMOTE. THE REASON FOR T HE FORMATION OF THE BELIEF MUST BE HELD IN GOOD FAITH AND SHOULD NOT BE A MERE PRETENCE. [EMPHASIS, ITALICIZED IN PRINT, SUPP LIED BY US] 10. IN VIEW OF THE ABOVE IN OUR CONSIDERED OPINION THE MANDATORY PRE-CONDITION FOR TAKING ACTION UNDER SEC TION 147 OF THE ACT THAT THE ASSESSING OFFICER SHOULD HAVE REASON T O BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND S UCH REASON TO BELIEVE MUST BE BASED ON SOME VALID MATERIAL HAS NOT BEEN SATISFIED IN THE CASE OF THE APPELLANT. 11. IN LIGHT OF THE ABOVE IN OUR CONSIDERED OPINION ALL OF THE ABOVE THREE FACTORS STATED IN THE REASONS IN ABSENC E OF NAY MATERIAL EITHER INDIVIDUALLY OR CUMULATIVELY CAN BE CONSIDERED A BASIS SO AS TO ENABLE THE ASSESSING OFFICER TO FORM A REQUISITE BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSE SSMENT IN TERMS OF THE JUDGMENT OF APEX COURT IN THE CASE OF RAJESH JHAVERI (SUPRA). IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINI ON THAT INITIATION OF PROCEEDINGS WAS WITHOUT JURISDICTION. THE ENTIRE REASSESSMENT PROCEEDINGS ARE THEREFORE, FOUND TO BE NULL AND VOID AND ON THIS BASIS THE ASSESSMENT ORDER IS LIAB LE TO BE QUASHED. WE THEREFORE CANCEL THE ASSESSMENT ON THIS GROUND AND ALLOW GROUND NOS. 1 AND 2 IN FAVOUR OF THE ASSESSEE . FOLLOWING THE ABOVE ORDER, WE DECIDE THE ISSUE AGAI NST THE REVENUE. 6. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 25.06. 2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 .06.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 8