DCIT, CC - XVI, Kolkata, Kolkata V. M/s. Kumar Traders, Kolkata

ITA 574/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83144 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 22-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY MUKHERJEE JDIT
• Assessee Lawyers: MANISH TIWARI
• Keywords: Reopening of assessment; Depreciation; Transfer pricing; Search and seizure; International transaction; Question of law; Tangible material; Difference of opinion; Accommodation entries; Assessment record; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, KOLKATA BENCHES, KOLKATA BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, HONBLE JUDICIAL MEMBER ITA NO. 574/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOME TAX, CC - XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S KUMAR TRADERS, 51, EZRA STREET, KOLKATA-700001. PAN : AADFK3654P. (RESPONDENT) ITA NO. 575/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S MAYUR VYAPAR PVT. LTD, 51, EZRA STREET, KOLKATA-700001. PAN : AADCM6878Q. (RESPONDENT) ITA NO. 576/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S SUNIL FAN INDUSTRIES, 51, EZRA STREET, KOLKATA-700001. PAN : AAMFS3372F. (RESPONDENT) ITA NO. 577/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S R.R. SONSTRADING COMPANY LTD, 51, EZRA STREET, KOLKATA-700001. PAN : AABCR5103M. (RESPONDENT) ITA NO. 578/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, VS. M/S S.A. ENGINEERING WORKS, 51, EZRA STREET, KOLKATA-700001. PAN : AAPFS8648R. (APPELLANT) (RESPONDENT) ITA NO. 579/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S RAMESWAR LAL SAJJAN KUMAR, 51, EZRA STREET, KOLKATA-700001. PAN : AAABR0098M. (RESPONDENT) ITA NO. 580/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S LEOPARD FINANCIERS PVT. LTD, 51, EZRA STREET, KOLKATA-700001. PAN : AAACL9259R. (RESPONDENT) ITA NO. 581/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S POLAR INDUSTRIES LTD, 113, PARK STREET, KOLKATA-700016. PAN : AABCP7240D. (RESPONDENT) ITA NO. 582/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S POLAR FAN INDUSTRIES LTD, 113, PARK STREET, KOLKATA-700016. PAN : AABCP7240D. (RESPONDENT) ITA NO. 583/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S POLAR MARMO AGGLOMERATES, 113, PARK STREET, KOLKATA-700016. PAN : AACCP9151A. (RESPONDENT) ITA NO. 584/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S POLAR INTERNATIONAL LTD, 113, PARK STREET, KOLKATA-700016. PAN : AABCP8016D. (RESPONDENT) ITA NO. 585/KOL/2010 : (ASST. YEAR :1999-2000) DY.COMMISSIONER OF INCOMETAX CC-XVI, KOLKATA, 18 RABINDRA SARANI, KOLKATA-1, (APPELLANT) VS. M/S HI-GAIN CONSULTANCY SERVICES PVT LTD, 51, EZRA STREET, KOLKATA-700001. PAN : AAACH7735G. (RESPONDENT) APPELLANTS BY : SHRI SANJAY MUKHERJEE,JDIT, SR.DR. RESPONDENTS BY : SHRI MANISH TIWARI, FCA. DATE OF HEARING :3 1/07/2014 DATE OF PRONOUNCEM ENT : 12/09/2014 O R D E R PER P.K. BANSAL SINCE ALL THESE APPEALS RELATE TO DIFFERENT ASSESS EES BUT INVOLVE THE COMMON ISSUE, THEREFORE ALL THESE APPEALS ARE DISPO SED OFF BY THIS COMMON ORDER. ALL THESE TWELVE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE RESPECTIVE ORDER OF CIT(A), KOLKATA DTD. 23.12.2009 IN ITA NOS.574 TO 577, DATED 24.12.2009 IN ITA NO. 578, ITA NOS. 579 AND 5 81, DATED 23.12.2009 IN ITA NOS.580,582,583 AND 585, AND DATED 22.12.2009 I N ITA NO.584 FOR THE ASSESSMENT YEARS 1999-2000 BY TAKING THE FOLLOWING COMMON GROUNDS OF APPEAL:- (1) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 WAS INVALID AND THEREFORE ALSO ERRE D IN ANNULLING REASSESSMENT ORDER U/S 147 / 147(3) DATED 29.12.200 6. (2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE INFORMATION BA SED ON WHICH THE A.O HAD REOPENED THE ASSESSMENT WAS WHOLLY VAGUE, I NDEFINITE, FAR- FETCHED AND REMOTE. (3) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ANNULLING THE ASSESSMENT WHEN T HE MATTER WAS SET- ASIDE TO THE FILE OF CIT(A) BY THE HONBLE ITAT TO RE-DECIDE THE ISSUE REGARDING NON ISSUE OF NOTICE U/S 143(2) OF THE ACT , AFTER TAKING INTO CONSIDERATION MADRAS HIGH COURT DECISION AS REPORTE D IN 294 ITR 233 IN THE CASE OF AREVA T AND D INDIA LTD VS ACIT. 2. SINCE ALL THESE 12 APPEALS FILED BY THE REVENUE INVOLVE COMMON FACTS EXCEPT FOR THE CHANGE IN THE FIGURES, THEREFORE, BO TH THE LD. DR AND LD. AR AGREED THAT ALL THESE APPEALS BE DISPOSED OFF ON TH E BASIS OF THE FACTS INVOLVED IN THE CASE OF RAMESHWARLAL SAJJAN KUMAR IN ITA NO. 57 9/KOL/2010 AND WHATEVER VIEW THIS TRIBUNAL TAKES IN THE CASE OF RAMESHWARLA L SAJJAN KUMAR, THE SAME MAY BE FOLLOWED IN OTHER CASES ALSO. 3. THE BRIEF FACTS OF THIS CASE ARE THAT THE ORIGIN AL ASSESSMENT WAS MADE U/S 143(3) DETERMINING TOTAL LOSS AT RS.29,44,890/- VID E ORDER DT. 15.2.2002. SUBSEQUENTLY, A SEARCH AND SEIZURE OPERATION WAS CA RRIED OUT ON POLAR GROUP ON 9.1.1999 AND IN THE COURSE OF THE SEARCH, TWO LAPTO P COMPUTERS WERE FOUND AND SEIZED FROM THE POSSESSION OF SHRI SUNIL KUMAR AGAR WAL. FROM THE PRINT OUT TAKEN FROM THE LAPTOP COMPUTERS UNDER IDENTIFICATIO N NO. LP-1 TO LP-10 AND ON THE BASIS OF THE CONFESSION MADE BY SHRI SUNIL KUMA R AGARWAL THAT HE HAD TAKEN CASH LOAN FROM MARKET WHICH WERE NOT DISCLOSE D IN THE REGULAR BOOKS OF ACCOUNTS, A NOTICE U/S 148 WAS ISSUED ON 17.3.2006 AFTER RECORDING THE FOLLOWING REASONS : 17.03.2006 A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AGAINS T THE POLAR GROUP ON 09.01.1999 AND IN COURSE OF SEARCH AND SEIZURE OPER ATION TWO LAPTOP COMPUTERS WERE FOUND AND SEIZED FROM THE POSSESSION OF SRI SU NIL KUMAR AGARWAL. SRI SUNIL KUMAR AGARWAL IS THE KEY PERSON OF THE WHOLE POLAR GROUP. SUBSEQUENTLY, THE LAPTOP COMPUTERS WERE RETRIEVED AND THE PRINT OUTS WERE TAKEN UNDER THE IDENTIFICATION MARK LP-1 TO LP-10. ON PERUSAL OF T HE BOOKS OF ACCOUNTS LP-1 TO LP- 10, IT REVEALED THAT THESE ARE NOTHING BUT UNDISCLO SED ENTRIES OF BUSINESS TRANSACTIONS AND LOAN TRANSACTIONS OF THE WHOLE POL AR GROUP AND ALL THE TRANSACTION WERE IN CASH. LP-1, LP-2, LP-9 & LP-10 RELATED TO THE LOAN TRANSACTIONS OF THE ASSESSEE COMPANY. IN THIS STATEMENT U/S. 132(4) DA TED 26.03.99 HAD GIVEN BEFORE THE DDIT(INV.) UNIT-3(III), KOLKATA, SRI SUNIL KUMAR AG ARWAL CONFESSED THAT HE HAD TAKEN CASH LOAN FROM THE MARKET WHICH WERE NOT DISC LOSED IN THE REGULAR BOOKS OF ACCOUNTS AND INTRODUCED THESE MONEY INTO THE VARIOU S BUSINESS CONCERNS OF THE POLAR GROUP AS LOAN AND SHARE CAPITAL/CAPITAL. FRO M THE CONFESSION IT IS CLEAR THAT THE CAPITAL INTRODUCED BY THE PARTNER IN THE PARTNE RSHIP BUSINESS DURING THE YEAR OF THIS GROUP INCLUDING THE ASSESSEE FIRM IS DEFINITEL Y UNACCOUNTED. IN THE INSTANT CASE THE ASSESSEE FIRM CONSISTED OF TWO PARTNERS NAMELY, SHRI SUNIL KUMAR AGARWAL AND SHRI ANIL KUMAR AGARWAL. DURING THE YEAR SHRI SUNI L KUMAR AGARWAL INTRODUCED FRESH CAPITAL OF RS.24,90,000/- AND SHRI ANIL KUMAR AGARWAL INTRODUCED CAPITAL OF RS. 56,50,000/- IN THIS PARTNERSHIP BUSINESS. IN T HE BACKGROUND OF CONFESSION OF SHRI SUNIL KUMAR AGARWAL, THERE IS EVERY POSSIBILITY THA T THIS FRESH CAPITAL IS NOTHING BUT THE UNDISCLOSED INCOME OF THE ASSESSEE FIRM. SO, I HAVE REASONS TO BELIEVE THAT INCOME HAD ESCAP ED ASSESSMENT. SO AS PER MY OPINION IT IS A FIT CASE TO INITIATE PROCEEDING UND ER SECTION 148. SO, ISSUE NOTICE NOTICE U/S. 148 IMMEDIATELY. SD/- (R.P. NAG) A.C.I.T, CC.XVI, KOLKATA 3.1 SUBSEQUENTLY, RE-ASSESSMENT U/S 147/143(3) WAS COMPLETED ON 29.12.2006 DETERMINING THE TAXABLE INCOME AT RS.2,8 5,65,940/-. THE ADDITIONS MADE INCLUDE THE CASH LOAN OF RS.2,64,53,891/- AND THE INTEREST THEREON AMOUNTING TO RS.50,56,938/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO VIDE ORDER DT. 7.3.2007 ANNULLED THE ASSESSMENT BY OBSERVING AS UNDER : 11. CONSIDERING THE FACT AND THAT THE SERVICE OF N OTICE U/S. 143(2) IS MANDATORY, IT MAKES NO DIFFERENCE, WHETHER A REVISED RETURN WAS F ILED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S. 148 OR REQUEST WAS MADE TO TREAT THE EARLIER RETURN FILED U/S. 139 AS RETURN FILED IN RESPONSE TO THE NOTICE U/S. 148 OF THE ACT. FURTHER, IT IS ALSO OF NO SIGNIFICANCE THAT THE ASSESSING OFFICER CONTINUED T HE ASSESSMENT PROCEEDING BY ISSUING NOTICE U/S. 142(1) AND DUE COMPLIANCE OF TH E SAME WAS MADE BY THE ASSESSEE. RECENTLY, THIS ISSUE WAS CONSIDERED AND EXAMINED IN DETAILS BY HON'BLE ITAT, AHMEDABAD AND IT WAS HELD THAT NOTICE U/S. 142(1) C ANNOT BE DEEMED AS NOTICE U/S. 143(2) OF THE ACT. ACCORDINGLY, IT WAS HELD THAT N ON-ISSUE OF NOTICE U/S. 143(2) WILL INVALIDATE AN ASSESSMENT U/S. 147 READ WITH SEC. 14 3(3) OF THE ACT (ITO VS SMT. SUKHIN MODI & ORS. 295 ITR (AT) 169 AHMEDABAD (20 07). THE POSITION OF LAW IS WELL SETTLED THAT IF THE REQUIREMENT OF A STATUTE W HICH PRESCRIBES THE MANNER IN WHICH SOMETHING I TO BE DONE ARE EXPRESSED IN NEGATIVE LA NGUAGE, THAT IS TO SAY, IF THE STATUTE ENACTS THAT IT SHALL BE DONE IN SUCH A MANN ER AND IN NO OTHER MANNER, SUCH REQUIREMENTS ARE, IN ALL CASES ABSOLUTE AND NEGLECT TO ATTEND TO SUCH REQUIREMENT WILL INVALIDATE THE WHOLE PROCEEDING. CONSIDERING ABOVE IT IS HELD THAT SINCE THE RE- ASSESSMENT ORDER U/S. 147/143(3) OF THE ACT HAS BEE N FRAMED WITHOUT ISSUING STATUTORY NOTICE U/S.143(2), THE ASSESSMENT IS BAD IN LAW AND ACCORDINGLY ANNULLED. 12. SINCE THE ASSESSMENT ORDER U/S. 147/143(3) ITSE LF HAS BEEN HELD TO BE INVALID, THE OTHER ISSUES RAISED BY THE APPELLANT IS NOT BEI NG CONSIDERED AS IT WILL BE ONLY OF ACADEMIC INTEREST. 3.2 CIT(A) DID NOT DECIDE OTHER GROUNDS TAKEN BY T HE ASSESSEE FOR THE VALIDITY OF INITIATION OF THE PROCEEDING U/S 147. AGAINST THE SAID ORDER, THE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL BY TAKIN G THE FOLLOWING COMMON GROUNDS IN EACH OF THE CASES. (1) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ANNULLING THE ASSESSMENT MADE U/S. 147/143 (3) FOR TECHNICAL REASON WITHOUT GOING INTO THE MERITS OF THE CASE. (2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW IN NOT RESTORING THE MATTER BACK TO TH E ASSESSING OFFICER FOLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF AREVA T AND D INDIA LTD. VS. ASST. CIT REPORTED IN (2007) 294 ITR 233 (MAD). (3) THAT THE DEPARTMENT CRAVES LEAVE TO ADD OR MODI FY ANY OF THE GROUND(S) OF APPEAL AT THE TIME OF HEARING OF THE CASE. 3.3. THE TRIBUNAL, VIDE ITS ORDER DT. 16.10.2008 S ET ASIDE THE ISSUE TO THE FILE OF THE CIT(A) BY HOLDING AS UNDER : 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CONS IDERATION OF THE MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT THE CASE L AW RELIED ON BY THE REVENUE IN THE CASE OF AREVA T AND D INDIA LTD. AS REPORTED IN 294 ITR 233, WAS NEITHER CONSIDERED BY THE LD. CIT(APPEALS) NOR THE ITAT IN ITS ORDER A S REPORTED IN 295 ITIR(AT) 169 ON THE BASIS OF WHICH THE LD. CIT(APPEALS) HAS ANNU LLED THE ORDERS PASSED BY THE A.O. IN THE SAID CASE LAW, THE HON'BLE MADRAS HIGH COURT HAS OBSERVED AS UNDER :- THAT IT WAS ADMITTED THAT THE NOTICE UNDER SECTION 148 WAS VALID. THE FACTS SHOWED THAT (I) THE ORIGINAL RETURN AS WELL AS THE SUBSEQUENT RETURN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT , WERE THE SAME AND THERE WAS NO DIFFERENCE IN THE CONTENTS OF BOTH THE RETUR NS; (II) THE ASSESSEE HIMSELF PARTICIPATED IN ALL THE PROCEEDINGS OBJECTING TO TH E REASSESSMENT; (III) THE OBJECTIONS OF THE ASSESSEE WERE NOT CONSIDERED BY T HE ASSESSING OFFICER; (IV) THERE WAS A VALID REOPENING OF THE ASSESSMENT, BUT THERE WERE PROCEDURAL IRREGULARITIES COMMITTED BY THE ASSESSING OFFICER I N COMPLETING THE REASSESSMENT. [MATTER REMANDED WITH A DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE MATTER AFRESH, PARTICULARLY THE OBJECT IONS BY THE ASSESSEE FOR THE REOPENING AND ISSUE OF NOTICE UNDER SECTION 143(2)] KEEPING IN VIEW THE FACT THAT THE CASE LAW WAS NOT CONSIDERED BY THE LD. CIT(APPEALS), WE CONSIDER IT FIT TO SET ASIDE THE I SSUE TO THE FILE OF THE LD. CIT(APPEALS) TO REDECIDE THE SAME AFTER TAKING INTO CONSIDERATION THE MADRAS HIGH COURT DECISION AS REPORTED IN 294 ITR 233 (SUPRA). THE ASSESSEES ARE AT LIBERTY TO SUBSTANTIATE THEIR CLAIMS BOTH LEGALLY AS WELL AS O N MERITS. WE ORDER ACCORDINGLY. 6. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE ALLOWED FOR STATISTICAL PURPOSES. 3.4 AS PER THE SAID ORDER OF THE TRIBUNAL, CIT(A) DISPOSED OFF THE APPEAL OF THE ASSESSEE DE NOVO VIDE HIS ORDER DT. 24.12.2009 IN THE CASE OF THE ASSESSEE AND VIDE ORDERS DT. 22.12.2009 AND 23.12.2 009 IN THE CASE OF OTHER ASSESSEES TAKING A SIMILAR VIEW IGNORING THE FACT T HAT THE TRIBUNAL HAD SET ASIDE THE ISSUE BEFORE IT TO CIT(A) FOR RE-DECIDING IT AF TER TAKING INTO CONSIDERATION HON'BLE MADRAS HIGH COURT DECISION AS REPORTED IN 2 94 ITR 233 ON THE ISSUE NON-SERVICE OF NOTICE U/S 143(2) WHETHER THE ASS ESSMENT HAS TO BE SET ASIDE OR QUASHED. CIT(A), ON THE BASIS OF THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF AREVA T AND D INDIA LTD., 294 ITR 23 3 ( SUPRA ) AS WELL AS SEC. 292BB INSERTED BY THE FINANCE ACT, 2008 TOOK THE VI EW THAT THOUGH THE NOTICE U/S 143(2) WAS NOT ISSUED, BUT SINCE THE ASSESSEE H AD NEVER RAISED THIS POINT IN THE COURSE OF THE ASSESSMENT PROCEEDING, IN VIEW OF THE PROVISIONS OF SEC. 292BB IT IS DEEMED THAT NOTICE U/S 143(2) WAS DULY SERVED AND DISMISSED THE GROUND ABOUT THE VALIDITY OF THE ORDER IN THE ABSEN CE OF ISSUE/SERVICE OF NOTICE U/S 143(2) BY OBSERVING AS UNDER : 2. HBLE ITAT-KOLKATA-C-BENCH HAS DIRECTED TO REDE CIDE THE ABOVE GROUND AFTER TAKING INTO CONSIDERATION THE MADRAS HIGH COURT DEC ISION IN THE CASE OF AREVA T AND D INDIA LTD, AS REPORTED IN 294 ITR 233, AS REPORTE D IN 294 ITR 233 (SUPRA). 3. HBLE MADRAS HIGH COURT HAD SET ASIDE THE ORDER OF ITAT AS WELL AS ALL THE LOWER AUTHORITIES WITH A DIRECTION TO ASSESSING OFF ICER TO CONSIDER THE MATTER AFRESH SO THAT THE IRREGULARITIES IN RESPECT OF NON ISSUE OF NOTICE U/S 143(2) OF THE I.T.ACT COULD BE REMOVED. ASSESSING OFFICER COULD ISSUE 143 (2) NOTICE AS THE REASSESSMENT ORDER WAS SET ASIDE AND HE HAD TO FRAME THE ORDER A FRESH AND HBLE HIGH COURT HAD AUTHORIZED HIM TO DO SO. IN THE PRESENT CASE, HBLE ITAT-KOLKATA-C-BENCH HAS SET ASIDE THE ISSUE TO THE FILE OF CIT(A). IT IS NOT WI THIN THE POWERS OF CIT(A) TO ISSUE NOTICE U/S 143(2) OF THE I.T.ACT OR TO DIRECT THE A SSESSING OFFICER TO ISSUE SUCH NOTICE IN RESPECT OF AN ASSESSMENT ORDER WHICH ALREADY STA NDS COMPLETED. IT IS NOT WITHIN THE POWERS OF CIT(A) TO SET ASIDE AN ASSESSMENT ORD ER AND DIRECT THE ASSESSING OFFICER TO REMOVE AN IRREGULARITY IN THE NATURE OF NON ISSUE OF NOTICE U/S 143(2) OF THE I.T. ACT IN RESPECT OF A COMPLETED ASSESSMENT O RDER. THEREFORE IT IS NOT POSSIBLE FOR THE UNDERSIGNED TO EITHER REMOVE OR ASK THE ASS ESSING OFFICER TO REMOVE THE IRREGULARITY OF NON ISSUE OF NOTICE U/S 143(2) OF T HE I.T. ACT IN RESPECT OF AN ASSESSMENT ORDER WHICH IS ALREADY COMPLETED. 4. MY PREDECESSOR HAD PASSED THE ORDER ON 28.02.200 8 AND TILL THAT DATE FINANCE ACT 2008 WAS NOT IMPLEMENTED. A NEW SECTION 292BB W AS ADDED IN THE INCOME TAX ACT VIDE FINANCE ACT 2008. THE SECTION IS NARRATED AS UNDER: 292BB. NOTICE DEEMED TO BE VALID IN CERTAIN CIRCUM STANCES. WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING OR COOPERAT ED IN ANY INQUIRY RELATING TO AN ASSESSMENT OR REASSESSMENT, IT SHALL BE DEEME D THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS REQUIRED TO BE SERV ED UPON HIM, HAS BEEN DULY SERVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROV ISIONS OF THIS ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTI ON IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT THAT THE NOTICE WAS- (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE COMPLETION OF SUCH ASSESSMENT OR REASSESSMENT. THE ABOVE SECTION IS AVAILABLE IN THE PRESENT SECON D ROUND OF APPELLATE PROCEEDING AND IS REQUIRED TO BE APPLIED TO VERIFY THE OBJECTI ON OF APPELLANT. DURING THE APPELLATE PROCEEDINGS IN FIRST ROUND, A REMAND REPO RT WAS CALLED BY MY PREDECESSOR FROM THE ASSESSING OFFICER WHERE ASSESSING OFFICER HAS STATED IN HIS REPORT DATED 04.02.2008 AS UNDER: IN THIS CONNECTION, I WOULD LIKE TO INFORM YOU THA T NOTICE U/S. 143(2) WAS NOT ISSUED BY THE THEN ACIT, CENTRAL CIRCLE-XVI, KOLKATA IN RE SPECT OF THE REASSESSMENT PROCEEDINGS U/S. 147/143(3) FOR THE ASST. YEAR 1999 -2000. IT SEEMS, SINCE THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME IN RESPO NSE TO NOTICE U/S. 148 DATED 23-03- 2006, THE THEN ASSESSING OFFICER CONTINUED THE PROC EEDING BY ISSUING NOTICE U/S. 142(1) ON 06-112006. MOREOVER, IN COURSE OF ASSESSM ENTS PROCEEDINGS THIS POINT WAS NEVER RAISED. CONSIDERING THESE, THE GROUND OF APPEAL AS MENTIONED IN YOUR LETTER, BY THE ASSESSEE MAY BE DISMISSED AND THE MA TTER MAY BE DECIDED ON MERIT THE FACTS OF THE CASE THEREFORE SHOW THAT THOUGH TH E NOTICE U/S 143(2) WAS NOT ISSUED BY THE ASSESSING OFFICER, APPELLANT HAD NEVER RAISE D THIS POINT IN COURSE OF ASSESSMENTS PROCEEDINGS. THEREFORE AS PER THE PROVI SIONS OF SECTION 292BB OF I.T.ACT IT IS DEEMED THAT NOTICE U/S 143(2) WAS DUL Y SERVED UPON THE APPELLANT AND APPELLANT IS NOT ALLOWED TO TAKE ANY OBJECTION IN T HIS REGARD IN THE APPELLATE PROCEEDING. 5. GROUND NO 2 OF THE APPEAL OF THE ASSESSEE IS THE REFORE DISMISSED. 3.5 THE CIT(A), ON THE BASIS OF THE GROUND NO. 1 T AKEN BY THE ASSESSEE ABOUT THE VALIDITY OF THE INITIATION OF THE PROCEED ING U/S 147, TOOK THE VIEW THAT THE AO HAS FORMED REASON TO REOPEN THE ASSESSMENT O N THE INFORMATION WHICH IS WHOLLY VAGUE, INDEFINITE, FAR-FETCHED AND REMOTE AN D ULTIMATELY HELD THAT THE NOTICE ISSUED BY THE AO U/S 148 WAS INVALID AND ANN ULLED THE ASSESSMENT BY OBSERVING AS UNDER : 4.1 I HAVE GONE THROUGH THE SUBMISSION OF APPELLAN T AND THE REASONS RECORDED FOR REOPENING THE ASSESSMENT BY THE ASSESSING OFFICER. THE MAIN INFORMATION WHICH WAS THERE IN THE POSSESSION OF ASSESSING OFFICER TO REO PEN THE CASE WAS THE STATEMENT OF SRI SUNIL KUMAR AGARWAL DATED 26.03.99. THE FACTS S HOW THAT THE ASSESSING OFFICER HAD THIS INFORMATION AT THE TIME OF MAKING ORIGINAL ASSESSMENT. THIS INFORMATION WAS NOT UTILIZED TO MAKE ANY ADDITION TO TOTAL INCOME F OR THE ASSESSMENT YEAR UNDER APPEAL IN THE ORIGINAL ASSESSMENT MADE U/S 143(3) O N 15.02.2002. HOWEVER ASSESSING OFFICER INFERRED FROM THE SAME INFORMATIO N, WHICH WAS AVAILABLE WITH HIM EVEN AT THE TIME OF MAKING THE ORIGINAL ASSESSMENT, THAT THE PREFERENCE SHARES OF RS 54,00,000/- ISSUED DURING THE ASSESSMENT YEAR UNDER APPEAL WERE BOGUS IN LIGHT OF THE CONFESSION MADE BY SRI SUNIL KUMAR AGRAWAL VIDE HIS STATEMENT DATED 26.03.1999. 4.2 I HAD CALLED FOR THE STATEMENT OF SRI SUNIL KUM AR AGRAWAL DATED 26.03.1999 FROM THE ASSESSING OFFICER DURING THE APPELLATE PRO CEEDINGS AND EXAMINED THE SAME. APPELLANT IS ALREADY AWARE OF THIS STATEMENT AS APP ARENT FROM HIS SUBMISSION. THIS IS A 10 PAGE STATEMENT WITH ANNEXURE RUNNING INTO 46 P AGES. IN THIS STATEMENT SRI SUNIL KUMAR AGRAWAL ADMITTED THAT THE POLAR GROUP COMPANI ES HAD INFLATED THE BILLS TO SUPPRESS THE INCOME AND THE EXCESS AMOUNT PAID ON S UCH BILLS WAS RECEIVED BACK IN CASH AND THE TOTAL AMOUNT OF SUCH SUPPRESSED INCOME SINCE 1988-89 UPTO 1998-99 WAS ABOUT RS.16-17 CRORE. SRI SUNIL KUMAR AGRAWAL F URTHER STATED THAT CASH LOANS OF ABOUT RS 20 CRORE WERE RECEIVED FROM GREY MARKET TILL 31.3.1998 AND THE ABOVE MENTIONED INCOME FROM INFLATION OF BILLS WAS ALMOST ENTIRELY USED IN PAYING THE INTEREST, BROKERAGE ETC. ON SUCH LOANS. HOWEVER, A FTER NOT CLAIMING SOME INTEREST, BROKERAGE AND SUNDRY EXPENDITURE SRI SUNIL KUMAR AG ARWAL ADMITTED UNDISCLOSED INCOME OF RS 3.45 CRORE IN THIS STATEMENT. SRI SUNI L KUMAR AGARWAL STATED THAT THE CASH LOAN ARRANGED BY HIM FROM GREY MARKET WAS DEPO SITED IN THE BANK ACCOUNTS OF SOME PERSONS AND FROM THERE CHEQUES WERE ISSUED TO THE GROUP CONCERNS AS LOANS OR SHARE CAPITAL. SRI SUNIL KUMAR AGARWAL FURTHER STAT ED THAT SUCH LOANS HAVE BEEN SHOWN IN THE BOOKS OF ACCOUNTS MAINTAINED BY RESPEC TIVE GROUP CONCERNS AND THE AGGREGATE AMOUNT OF LOAN AS REFLECTED IN BOOKS OF A CCOUNTS OF THE GROUP CONCERNS IS ALWAYS EITHER EQUAL OR HIGHER THAN THE AMOUNT OF SU CH CASH LOANS BECAUSE OF THE GENUINE LOANS ALSO BEING TAKEN BY SUCH ENTITIES. AM OUNT OF SUCH LOANS TAKEN FROM GREY MARKET WAS AVAILABLE IN THE SEIZED RECORDS TIL L 31.3.1998 WHICH SHOWED ABOUT RS 3.71 CRORE OF SUCH LOANS ADVANCED TO VARIOUS GRO UP CONCERNS TILL 31.3.1998 AND ABOUT RS 7.37 CRORE OF SUCH LOAN EMPLOYED IN SHARE CAPITAL OF GROUP CONCERNS TILL 31.3.1998. SRI SUNIL KUMAR AGARWAL SUBMITTED IN ANN EXURE-D OF HIS STATEMENT THAT OUT OF ABOUT RS 29.71 CRORE LOANS REFLECTED IN THE BOOKS OF VARIOUS GROUP CONCERNS THE LOANS OF RS 3.71 CRORE WERE ACTUALLY CASH LOANS RAISED FROM THE GREY MARKET. THERE IS NO INFORMATION ABOUT THE NAME LENDERS WITH SPECIFIC AMOUNT EXCEPT THE AGGREGATE OF SUCH LOANS DURING A YEAR IN RESPECT OF EACH CONCERN OF POLAR GROUP. THERE IS NO DESCRIPTION OF ANY SUCH CASH LOAN TAKEN DURING THE PERIOD 1.4.1998 TO 31.3.1999 IN THE STATEMENT OF SRI SUNIL KUMAR AGRAW AL AND EVEN ASSESSING OFFICER DID NOT HAVE ANY SUCH INFORMATION AS IS EVIDENT FRO M THE INFORMATION FROM SEIZED PRINTOUTS OF LAPTOP IN THE ASSESSMENT ORDER WHERE C ERTAIN AMOUNTS OF LOANS WITHOUT THE DESCRIPTION OF LOAN LENDERS HAVE BEEN SHOWN TO BE PERTAINING TO THE FINANCIAL YEAR 1996-97 AND FINANCIAL YEAR 1997-98 AND NOT THE FINANCIAL YEAR 1998-99. THEREFORE TO SPECULATE THAT ANY LOAN OR CAPITAL TAK EN IN THE BOOKS OF ACCOUNT DURING THE FINANCIAL YEAR 1998-99 WILL ALSO BE A CASH LOAN IS ONLY A SPECULATION IN ABSENCE OF ANY EVIDENCE EITHER FROM THE STATEMENT OF SRI SU NIL KUMAR AGARWAL OR AS EVIDENT FROM THE ASSESSMENT ORDER AND ALSO ON ACCOUNT OF TH E FACT THAT MANY OF THE LOANS AND CAPITAL TAKEN BY THE GROUP CONCERNS WERE GENUINE AS PER THE STATEMENT OF SRI SUNIL KUMAR AGARWAL. ON THE BASIS OF ABOVE MENTIONED STAT EMENT OF SRI SUNIL KURNAR AGARWAL AND THE EVIDENCE OF SEIZED PRINTOUTS OF LAP TOP IN POSSESSION OF ASSESSING OFFICER, THE ASSESSING OFFICER COULD HAVE AT BEST C ONSIDERED THE REOPENING OF THE ASSESSMENTS OF ASSESSMENT YEARS 1997-98 AND/ OR ASS ESSMENT YEAR 1998-99 BUT IN ABSENCE OF ANY SIMILAR EVIDENCE FOR ASSESSMENT YEAR 1999-00 THE DRAWING OF SIMILARITY OF ANY LOAN OR CAPITAL TAKEN DURING THE FINANCIAL YEAR RELEVANT FOR ASSESSMENT YEAR 1999- 00 IS ONLY A SUSPICION AND NO T ANY BELIEF. 4.3 APPELLANT HAS RELIED ON THE DECISION OF HBLE S UPREME COURT IN CASE OF ITO VS LAKHMANI MEWAL DAS. 103 ITR 437. IN THIS DECISION, HBLE SUPREME COURT HAS HELD AS UNDER: ..THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RA TIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN T HE MATERIAL COMING TO THE NOTICE OF THE INCOME-TAX OFFICER AND THE FORMATION OF HIS BEL IEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSES SMENT IN THE PARTICULAR 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 AD EQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE INCOME-T AX OFFICER ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING AS SESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY M ATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FAR-FETCHED, WHIC H 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 WE RE 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 NOT LEAD TO THE CONCLUSION THAT ACTION CAN NOW BE TAKEN FOR REOPENING ASSESSMENT EVEN IF THE INFORMATION IS WHO LLY VAGUE, INDEFINITE, FARFETCHED AND REMOTE. THE REASON FOR THE FORMATION OF THE BEL IEF MUST BE HELD IN GOOD FAITH AND SHOULD NOT BE A MERE PRETENCE. EVEN THE FACTS OF THIS EASE ARE SIMILAR TO THE PRES ENT CASE. IN THE ABOVE CASE BEFORE HBLE SUPREME COURT, THE NON AVAILABILITY OF SPECIF IC INFORMATION WITH ASSESSING OFFICER THAT SOME OF THE CREDITORS WERE NAME LENDER S WAS CONSIDERED AS INCORRECT REASON BY HBLE SUPREME COURT TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT. IN THE SAME CASE, THERE WAS A CREDITOR IN RESPECT OF W HOM SPECIFIC INFORMATION WAS AVAILABLE THAT THE PERSON WAS A NAME LENDER, STILL HBLE SUPREME COURT HELD THAT THE ABSENCE OF INFORMATION THAT THIS PERSON WAS A NAME LENDER IN RESPECT OF THE ASSESSEE ALSO AND THE ABSENCE OF THE INFORMATION THAT SUCH P ERSON HAD LENT THE NAME DURING THE PERIOD WHEN THE LOAN WAS CREDITED IN BOOKS OF A PPELLANT, CANNOT AMOUNT TO A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T. IN THE PRESENT CASE THERE IS NO INFORMATION ABOUT EVEN THE AGGREGATE OF NON GENU INE LOANS FOR THE PERIOD 1.4.1998 TO 3 1.3.1999 WHICH IS RELEVANT FOR THE YE AR UNDER APPEAL. THE INFORMATION ABOUT THE LOANS TAKEN FROM GREY MARKET THROUGH NAME LENDERS IN THE STATEMENT OF SRI SUNIL KUMAR AGARWAL IS ONLY IN RESPECT OF AGGREGATE AMOUNT OF SUCH LOAN FOR THE EARLIER ASSESSMENT YEARS WITHOUT ANY SPECIFIC NAME OF ANY NAME LENDER. THERE IS NO INFORMATION AS WHICH CREDITOR OF LOAN OR CAPITAL EV EN IN EARLIER ASSESSMENT YEARS IS GENUINE OR NON GENUINE. THEREFORE IT IS QUITE APPAR ENT THAT THE ASSESSING OFFICER HAS FORMED A REASON TO REOPEN THE ASSESSMENT ON THE INF ORMATION WHICH IS WHOLLY VAGUE, INDEFINITE, FAR-FETCHED AND REMOTE. 4.4 THE FACTS OF THE PRESENT CASE CLEARLY SHOW THAT AN ASSESSING OFFICER WHO HAS A PROPER UNDERSTANDING OF INCOME TAX ACT CANNOT HOLD A BELIEF THAT THE LOAN OR CAPITAL CREDITED IN THE BOOKS OF ACCOUNT DURING THE YEAR UN DER APPEAL IS NOT GENUINE ON THE BASIS OF INFORMATION ABOUT SOME UNSPECIFIED LOAN OR CAPITAL OF PRECEDING YEARS. IN FACT THE SAME INFORMATION WAS AVAILABLE WITH THE AS SESSING OFFICER EVEN DURING THE ORIGINAL ASSESSMENT YEAR AND AT THAT TIME THIS INFO RMATION WAS NOT CONSIDERED TO BE SUFFICIENT TO HOLD THAT THE LOAN OR CAPITAL CREDITE D DURING THE YEAR COULD BE NON GENUINE. THE ABOVE MENTIONED DECISION OF HBLE SUPR EME COURT IS APPLICABLE IN THE PRESENT CASE AND THEREFORE I HOLD THAT THE NOTICE I SSUED BY ASSESSING OFFICER U/S 148 WAS INVALID AND THEREFORE THE REASSESSMENT ORDER OF THE ASSESSING OFFICER IS ANNULLED.) AGAINST THE SAID ORDER, THE REVENUE HAS COME IN APP EAL BY TAKING THE AFORESAID GROUNDS OF APPEAL. 4. THE LD. DR BEFORE US RELIED ON THE SUBMISSION MA DE BY THE REVENUE DT. 7.5.2012 AND REITERATED THE ARGUMENTS OUT OF THE SA ME. THE SUBMISSION MADE BY THE LD. DR ARE REPRODUCED AS UNDER : A- FACTS AND BACKGROUND OF THE CASE . ALL THE 12 MENTIONED CASES ARE LISTED AS BELOW: SL. NO. ITA NO. ASSTT. YRS. NAME OF THE ASSESEE 01. 574/KOL/ 2010 KUMAR TRADERS 02. 575/KOL/ 2010 MAYUR VYAPAR (P) LTD. 03. 576/KOL/ 2010 SUNIL FAN INDUSTRIES. 04. 577/KOL/ 2010 R. R. SONS TRADING CO. LTD. 05. 578/KOL/ 2010 S.A. ENGINEERING WORKS. 06. 579/KOL/ 2010 RAMESWARLAL SAJJAN KUMAR 07. 580/KOL/ 2010 LEOPARD FINANCIERS (P) LTD. 08. 581/KOL/ 2010 POLAR INDUSTRIES. 09. 582/KOL/ 2010 POLAR FAN INDUSTRIES. 10. 583/KOL/ 2010 POLAR MARMO AGLOMERATES LTD 11. 584/KOL/ 2010 POLAR INTERNATIONAL LTD. 12. 585/KOL/ 2010 HIGAIN CONSULTANCY SERVICES (P) LTD. IN ALL THESE CASES PERTAINING TO THE POLAR GROUP, I NITIALLY A RETURN OF INCOME/ REVISED INCOME WAS FILED IN TIME AND ALL THESE CASE S WERE TAKEN UP OF SCRUTINY U/S. 143(3). SCRUTINY ASSESSMENT WERE COMPLETED IN THE M ONTHS OF FEBRUARY/MARCH. 2002. ALL THESE 12 CASES WERE RE-OPENED U/S. 147 IN THE M ONTH OF MARCH 2006. BEFORE RE-OPENING, PERMISSION OF THE ADMINISTRATIVE COMMISSIONER, U/S. 151(1) WAS TAKEN. REASONS IN RE-OPENING WERE DULY RECORDED. A SAMPLE COPY OF COMMON REASON IS PLACED AT FLAG-A. AS PER THE REASONS RECORDED, I T IS APPARENT THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AGAINST THE POLAR G ROUP, ON 09.1.1999 IN COURSE OF WHICH TWO LAPTOP COMPUTERS WERE SEIZED FROM THE POS SESSION OF SHRI SUNIL AGARWAL, ONE OF THE MAIN PERSON OF THE POLAR GROUP PRINT OUT OF THE DATA AVAILABLE IN THESE TWO LAPTOP WAS GENERATED AND NAMED AS LP-1 TO LP-10 . THESE HAD UNDISCLOSED ENTRIES OF BUSINESS TRANSACTION AND LOAN TRANSACTIO N OF THE ENTIRE POLAR GROUP OF COS. IN THE STATEMENT RECORDED U/S. 132(4), SHRI SU NIL AGARWAL CONFIRMED THAT HE HAD TAKEN CASH LOAN FROM THE MARKET WHICH WERE NOT DISCLOSED IN THE REGULAR BOOK OF ACCOUNT AND HE INTRODUCE THIS MONEY INTO THE VARIOU S CONCERNS OF THE POLAR GROUP OF COS AS LOAN OR SHARE CAPITAL. ANOTHER KEY PERSON, S HRI ANIL AGARWAL, ALSO CONFESSED THIS MAL PRACTICE IN HIS STATEMENT RECORDED U/S. 13 2(4). ONE SHRI B .P. AGARWAL, A TRUSTED EMPLOYEE OF THE POLAR GROUP OF COS HAS ALSO CONFIRMED THIS IN HIS STATEMENT U/S. 132(4). IT THEREFORE APPEARS THAT IN THE COURS E OF THE SEARCH SEVERAL VITAL INFORMATION REGARDING UNACCOUNTED LOAN TRANSACTION OF THE POLAR GROUP OF COS WAS DISCOVERED AND THESE ARE LISTED AS BELOW: 1. TWO LAPTOPS SEIZED FROM THE POSSESSION OF SHRI S UNIL AGARWAL. 2. STATEMENT OF SHRI SUNIL AGARWAL U/S. 132(4) 3. EVIDENCE OF UNACCOUNTED LOAN TRANSACTIONS AS DET AILED IN LP- 1 TO LP- 10 4. STATEMENT OF SHRI ANIL AGARWAL RECORDED U/S. 132 (4) 5. STATEMENT OF SHRI BP. AGARWAL RECORDED U/S. 132( 4). (B) ASSESSMENT U/S. 143(3) DURING THE FEB./ MARCH-2 002 . AT FLAG-B IS PLACED COPY OF THE ASSESSMENT ORDER PA SSED U/S. 143(3) IN THE CASE OF SHRI RAMESWAR LAL SAJAN KUMAR FOR A.Y. 1999-2000. I T WILL BE SEEN FROM THE ASSESSMENT ORDER THAT IT IS TOTALLY DEVOID OF ANY K IND OF COMMENTS, DISCUSSIONS AND CONCLUSION. SUCH ASSESSMENT ORDERS, WITHOUT ANY DIS CUSSION AND CONSIDERATION HAVE BEEN PASSED IN ALL THE OTHER 11 CASES OF POLAR GROU P OF COS. WHAT IS NOT TO BE LOST SIGHT OF IS THE FACT THAT DURING THIS VERY SAME ASS ESSMENT YEAR SEARCH AND SEIZURE OPERATION HAD TAKEN PLACE IN COURSE OF WHICH INCRIM INATING DOCUMENTS HAD BEEN FOUND. THE ONUS WAS SQUARELY ON THE ASSESSING OFFIC ER TO HAVE THOROUGHLY EXAMINED THE MATERIALS AVAILABLE WITH HIM ON ACCOUNT OF SEAR CH, BUT HE HAS THOROUGHLY FAILED TO DO SO IN THE ASSESSMENT ORDER. NOWHERE, IN THE A SSESSMENT ORDER ANY ISSUE PERTAINING TO SEARCH HAS BEEN EXAMINED, IN FACT THE RE IS NO EVIDENCE IN THE ASSESSMENT ORDER TO EVEN INDICATE A SEARCH HAS TAKE N PLACE. I HAVE ALSO EXAMINED THE ASSESSMENT RECORD IN THE CASES ALLOTTED TO ME ( ITA NOS. 579, 581, 583 AND 584). I FIND THAT THE ONLY DOCUMENT THAT HAVE BEEN CALLED B Y THE LD. AO IS THROUGH NOTICE U/S. 142(1) DTD. 07.01.2002 WHEREIN ONLY ROUTINE DE TAILS HAVE BEEN CALLED FOR AS LISTED BELOW: 1. BOOKS OF ACCOUNT 2. STATEMENT OF ACCOUNT 3. BANK ACCOUNT WITHOUT NO. OF BRANCHES 4. DETAILS OF SHARE CAPITAL, LOAN CONFIRMATION ((I T FILES NO.) 5. DETAILS OF SUNDRY DEBTORS AND SUNDRY CREDITORS W ITH LISTED AND COMPLE ADDRESS AND SECURITY DEPOSIT. 6. DETAILS OF TRADE MARKETS. 7. DETAILS OF SALES & PURCHASE, INVESTMENT, SALARY AND BONUS. 8. DETAILS OF RENT PAID AND RECEIVED. 9. DETAILS OF STOCK ROYALTY AND DIVIDEND. AT FLAG C I AM PLACING A COPY OF NOTICE U/S. 142( L) ASKING FOR THE ABOVE DETAILS. NO OTHER DETAILS WERE CALLED FOR DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. IT IS APPARENT THAT NO QUESTION PERTAINING TO SEARC H, LAPTOP FOUND AT THE PREMISES OF SHRI SUNIL AGARWA1, PRINT OUT OF LP-1 T O LP-10 OR VARIOUS STATEMENTS RECORDED U/S. 132(4) WERE EVER ASKED DURING COURSE OF ASSESSMENT PROCEEDINGS. THIS BEING A SEARCH CASE, ALL THESE DETAILS SHOULD HAVE BEEN EXAMINED AND DUE TO OPPORTUNITY GIVEN TO THE ASSESSEE FOR HIS COMME NTS THERETO AND CONCLUSIONS DRAWN ACCORDINGLY. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT ORDERS H AVE BEEN PASSED IN THE CASE OF POLAR GROUP OF COS. WITHOUT ADEQUATE INQUIR IES OR DISCUSSION. IN FACT NO FINDINGS HAS BEEN ARRIVED AT BY THE LD. AO. THE RE- OPENING U/S. 147 WHICH TOOK PLACE IN MARCH-2006, HAS TO BE UNDERSTOOD AGAINST T HIS BACKGROUND OF AN INADEQUATE INQUIRY BY THE ASSESSING OFFICER. AT BES T WHAT WAS EXAMINED WAS THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE POLAR GR OUP OF COS. UNDISCLOSED PORTION OF INCOME GENERATED BY POLAR GROUP OF COS. WHICH BECAME EVIDENT FROM THE SEARCH WAS NEVER TAKEN UP NOR COMMENTED UPON BY THE LD. AO. THEREFORE, INITIATION OF PROCEEDINGS U/S. 147 WAS BOTH REASONABLE AND LOG ICAL IN VIEW OF VARIOUS MATERIAL EVIDENCES WHICH HAD BEEN GENERATED THROUGH ACTION U /S. 132(1). (C) RE-ASSESSMENT PROCEEDINGS HAVE BEEN CHALLENGED BY THE ASSESSEE . RE-ASSESSMENT HAS BEEN CHALLENGED BY THE ASSESSEE A T BOTH PRE-ASSESSMENT STAGE AND POST ASSESSMENT STAGE. AT THE PRE-ASSESSM ENT STAGE REASONS FOR RE-OPENING WERE GIVEN TO THE ASSEESEE AND HIS OBJECTIONS WERE DISPOSED OFF BY A SPECIFIC ORDER WHICH WAS CONVEYED TO THE ASSESSEE BY THE AO THROUG H HIS LETTER NO. 710 DTD. 02.11.2006 (THIS LETTER IS PLACED AT FLAG-D). DURING THE POST ASSESSMENT PERIOD, BEFORE THE CIT(A ) CENTRAL-II, KOLKATA, THE ASSESEE CHALLENGED THE RE-ASSESSMENT ON TWO GRO UNDS: FIRSTLY, IT WAS STATED THAT THE NOTICE FOR RE-ASSES SMENT WAS ISSUED BEYOND THE FOUR YEAR PERIOD, THAT THERE WAS ALSO NO REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND THAT THE CASES WERE RE-OPENED ON A M ERE CHANGE OF OPINION. SECONDLY, THE ASSESSEE ALSO CHALLENGED THAT AS NO N OTICE U/S. 143(2) WAS ISSUED THE ENTIRE RE-ASSESSMENT PROCEEDINGS STANDS NULLIFIED. THE CIT(A) IN HIS ORDER DTD. 07.03.2007 HAS NOT ADJUDICATED ON THE FIRST I SSUE. ON THE SECOND ISSUE THE CIT(A) HAS GONE BY THE RATIO OF THE DECISION OF ITA T AHMADABAD AS REPORTED IN 295 ITR (AT) 169 IN THE CASE OF ITO VS- SMT. SUKHINI M ODI AND OTHERS. THE HONBLE ABMADABAD TRIBUNAL IN THIS CASE HAD HELD THAT RE-AS SESSMENT U/S. 147/143(3) CANNOT BE FRAMED WITHOUT ISSUING STATUTORY NOTICES U/S. 14 3(2) OF THE IT ACT. ON THE BASIS OF THIS JUDGMENT, THE CIT(A) (C) II, HELD THAT RE-ASS ESSMENT ORDER U/S. 147/143(3) WAS INVALID. THE MATTER WENT TO HONBLE ITAT KOLKAT A AT THE BEHEST OF THE DEPARTMENT. IT WAS POINTED OUT BY THE DEPARTMENT BE FORE THE HONBLE C BENCH ITAT KOLKATA THAT THE CIT(A) HAD ERRED IN NOT CONSI DERING THE CASE OF AREVA T&D INDIA LTD. VS- ACIT[2007], REPORTED IN 294 ITR 23 3, WHEREIN, THE HONBLE HIGH COURT MADRAS HAD GIVEN THEIR ESTEEMED FINDING THAT FAILURE TO ISSUE NOTICE U/S. 143(2) DID NOT RENDER THE RE-ASSESSMENT AS NULL OR VOID BUT ONLY IRREGULAR. THE HONBLE MADRAS HIGH COURT AS A REMEDIAL MEASURE REM ITTED THE MATTER BACK TO THE AO TO TAKE REMEDIAL MEASURES TO CORRECT THE IRREGUL ARITIES. ACCORDINGLY, THE C BENCH ITAT KOLKATA PRONOUNCED ITS JUDGMENT ON 16.10 .2008, GIVING THE FOLLOWING CLEAR CUT DIRECTIONS TO THE CIT(A): KEEPING IN VIEW THE FACT THAT THE CASE LAW WAS NOT CONSIDERED BY THE LD. CIT(A), WE CONSIDER IT FIT TO SET ASIDE THE ISSUE T O THE FILE OF THE LD. CIT(A) TO REDECIDE THE SAME AFTER TAKING INTO THE CONSIDERATI ON THE MADRAS HIGH COURT DECISION AS REPORTED IN 294 ITR 233 (SUPRA,). THE A SSESSEES ARE AT LIBERTY TO SUBSTANTIATE THEIR CLAIM BOTH LEGALLY AS WELL AS ON MERITS. WE ORDER ACCORDINGLY. THE LD. CIT(A) IN HIS ORDER DTD. 24.12.2009 HAS DEC IDED THE ISSUE OF NOTICE U/S. 143(2) ON PAGE 8 AND 9 OF HIS ORDER. THE LD. C IT(A) HAS STATED THAT IN VIEW OF THE PROVISIONS OF SEC. 292BB OF THE IT ACT, NOTICE U/S. 143(2) WILL BE DEEMED TO HAVE BEEN SERVED AS THIS ISSUE WAS NEVER RAISED BY THE A SSESSEE IN COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, IT BECOMES APPARENT THAT THE LD.CIT(A),CENTRAL-II., HAS NOT ADHERED TO THE SPECIFIC DIRECTIONS GIVEN BY THE LD. HONBLE ITAT C BENCH KOLKATA IN ITS ORDER DTD. 16.10.2008. THE HONBLE ITAT HAD CLEARLY DIRECTED THAT THE ISSUE OF NON SERVICE OF NOTICE U/S. 143(2) SHOULD BE DECIDED AFTER TAKING INTO THE CONSIDERATION, THE MADRAS HIGH COURT DECISION AS RE PORTED IN 294 ITR 233. THIS SPECIFIC DIRECTIONS OF THE LD.ITAT C BENCH HAVE B EEN IGNORED BY THE CIT(A) ON THE PRETEXT THAT IT IS NOT WITHIN HIS POWERS TO ISSUE N OTICE U/S. 143(2) OF THE IT ACT OR TO DIRECT THE ASSESSING OFFICER TO ISSUE SUCH NOTICE I N RESPECT OF AND ASSESSMENT ORDER WHICH ALREADY STANDS COMPLETED. HE ALSO STATED THAT IT IS NOT WITHIN HIS POWERS TO SET- ASIDE THE ASSESSMENT IN ORDER TO REMOVE IRREGU LARITIES. THESE ARE, HOWEVER, IRRELEVANT, ISSUES BECAUSE WHAT THE LD. CIT(A) HAD TO DECIDE WAS ONLY THE APPLICABILITY OF THE JUDGMENT O F MADRAS HIGH COURT IN THE PRESENT CASE. INITIAL INJUSTICE WAS DONE TO THE INT EREST OF THE DEPARTMENT WHEN CIT(A) IN HIS EARLIER ORDER DTD. 07.03.2007 ARRIVED AT A CONCLUSION BASED ON THE JUDGMENT OF A LOWER AUTHORITY (AHMADABAD TRIBUNAL) WITHOUT TAKING INTO COGNISANCE THE JUDGMENT OF A SUPERIOR AUTHORITY (MA DRAS HIGH COURT). FURTHER, WHEN THE MATTER WAS SET-ASIDE BY THE HONBLE TRIBUN AL TO THE CIT(A) ONCE AGAIN INJUSTICE WAS DONE TO THE INTEREST OF THE DEPARTMEN T BY THE LD. CIT(A) IN HIS ORDER DTD. 24.02.2009 BY NOT DELIBERATING UPON THE JUDGME NT OF THE MADRAS HIGH COURT AND ITS APPLICABILITY TO THE INSTANT CASE EVEN THOU GH THERE WAS SPECIFIC DIRECTION FROM THE HONBLE ITAT C BENCH KOLKATA. IN MY OPINION, THE CIT(A) CENTRAL-II, WAS BOUND BY THE LAW TO ADJUDICATE ON THIS ISSUE. IT IS AN ESTABLISHED PRINCIPAL OF LAW THAT A LOWER AUTHORITY IS BOUND BY THE ORDER PASSED BY THE HIGHER AUTHORITY. IN THIS CONTEXT I WILL DRAW YOUR ATTENTION TO THE JUDGMENT PASSED BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF NOKIA CORPORATION -VS- DIT (IT) (DEL) AS REPORTED IN 292 ITR 22. A COPY OF THE JUDGMENT IS PLACED AT FLAG E ANSWERING THE QUESTION WHETHER IF TRIBUNAL COULD F OLLOW ITS EARLIER ORDER PASSED BY THE SPECIAL BENCH, IN KEEPING WITH THE HI GH STANDARDS OF JUDICIAL DISCIPLINE, THERE WAS ABSOLUTELY NO REASON WHY SUBO RDINATE AUTHORITY SUCH AS COMMISSIONER (APPEAL) SHOULD FEEL HESITANT TO FOLLO W THE ORDER OF SPL. BENCH AND GIVE RELIEF TO THE ASSESSEE. HELD YES. WHETHER, ON FACTS, COMMISSIONERS (APPEAL) ALSO OUGHT TO HAVE FELT BOUND BY ORDER BASED BY THE SPL. BENCH AND OUGHT NOT TO HAVE REQUIRED ASSESSEE TO DEPOSIT SUM OF RS. 4.86 CRORES . HELD YES. BASED ON THE DISCUSSION AS WELL AS RELEVANT JUDICIA L PRONOUNCEMENT QUOTED ABOVE, I AM OF THE VIEW THAT BY IGNORING SPECIFIC D IRECTIONS OF THE OF SUPERIOR AUTHORITY, THE CIT(A) RENDERED HIS ORDER DTD. 24.12 .2007 AS IRREGULAR AND BAD IN LAW. THE HONBLE TRIBUNAL WILL DO WELL TO DECLARE T HE ORDER OF CIT(A) AS INVALID. (D) ISSUES DECIDED BY THE CIT(A),C-IL KOLKATA, ON M ERITS . IN THE PROCEEDINGS BEFORE CIT(A) CENTRAL-IL, KOLKAT A, THE ASSESSEE HAS ALSO AGITATED ON THE FOLLOWING GROUNDS :- NO. 1. THAT RE-ASSESSMENT PROCEEDINGS WERE BEYOND T HE 4 YEARS PERIOD NO. 2. THAT ALL THE INFORMATION INCLUDING THE STATE MENT OF SHRI SUNIL AGARWAL WERE AVAILABLE BEFORE THE AO WHILE MAKING ORIGINAL ASSES SMENT U/S. 143(3) ON 15.02.2002. FROM THE SAME INFORMATION NOW THE AO IS MAKING REASSESSMENT. HENCE, IT IS ONLY A CASE OF CHANGE OF OPINION. NO. 3. FROM THE SEIZED MATERIAL THE AO HAD NO EVIDE NCE THAT THERE WAS ANY UNACCOUNTED LOAN PERTAINING TO A.Y. 1999-2000. AS FAR AS THE FIRST GROUND IS CONCERNED, THIS ISSUE HAS ALREADY BEEN EXAMINED BY THE ASSESSING OFFICER AT THE PRE-ASSESSMENT STAG E IN HIS LETTER DATED 02.11.2006 ADDRESSED TO THE ASSESSEE. IN THIS LETTER ON PAGE N O. 2 HE HAS CLEARLY POINTED OUT THAT WITH THE APPROVAL OF ADMINISTRATIVE CIT CASES UPTO 6 YEARS CAN BE RE-OPENED. THERE IS NO LEGAL DISPUTE OR DIFFERENCE OF OPINION IN THI S MATTER. LD. CIT(A) HAS AGREE WITH THE SECOND AND THIRD GROU NDS TAKEN BY THE ASSESSEE AND HELD AT PARA 4.4 OF HIS ORDER AS STATE D BELOW :- 4.4. THE FACTS OF THE PRESENT CASE CLEARLY SHOW TH AT AN ASSESSING OFFICER WHO HAS A PROPER UNDERSTANDING OF INCOME TAX ACT CANNOT HOLD A BELIEF THAT THE LOAN OR CAPITAL CREDITED IN THE BOOKS OF ACCOUNT DURING THE YEAR UN DER APPEAL IS NOT GENUINE ON THE BASIS OF INFORMATION ABOUT SOME UNSPECIFIED LOAN OR CAPITAL OF PRECEDING YEARS. IN FACT THE SAME INFORMATION WAS AVAILABLE WITH THE AS SESSING OFFICER EVEN DURING THE ORIGINAL ASSESSMENT YEAR AND AT THAT TIME THIS INFO RMATION WAS NOT CONSIDERED TO BE SUFFICIENT TO HOLD THAT THE LOAN OR CAPITAL CREDITE D DURING THE YEAR COULD BE NON GENUINE. THE ABOVE MENTIONED DECISION OF HON BLE S UPREME COURT IS APPLICABLE IN THE RESENT CASE AND THEREFORE I HOLD THAT THE NOTIC E ISSUED BY ASSESSING OFFICER U/S. 148 INVALID AND THEREFORE THE ASSESSMENT ORDER OF T HE ASSESSING OFFICER IS ANNULLED. DRS ARGUMENT WE HAVE ALREADY DISCUSSED EARLIER THAT THE ORIGINAL ASSESSMENT ORDERS WERE DEVOID OF ANY KIND OF CONCLUSION BASED ON EXAMINATI ON OF SEIZED MATERIAL. WHEN THERE IS NO DISCUSSION ON THE ISSUE IN THE ASSESSME NT ORDER AND NO DETAILS WERE CALLED FOR BY THE ASSESSING OFFICER OR FILED BY THE ASSESSEE ON THE ISSUE, NO FINDING EITHER POSITIVE OR NEGATIVE WAS ARRIVED AT DURING T HE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. HENCE, THERE IS NO QUESTION OF ANY CHA NGE OF OPINION. I RELY UPON THE FOLLOWING CASE LAWS TO SUBSTANTIATE MY POINT OF VIE W: KALYANJI MAVJI &CO. VS. CIT (SC) 102 ITR 287 ESS KAY ENGINEERING CO. (P) LTD VS. CIT (SC) 247 IT R 818 REVATHY C.P. EQUIPMENTS LTD. VS. DCIT & ORS. (MAD) 241 ITR 856 A.L.A. FIRM VS. CIT (MAD) 102 ITR 622 ITO VS. PURUSHOTTAM DAS BANGUR & ANR. (SC) 224 ITR 362 FAMILY OF V.A.M. SANKARALINGA NADAR VS. CIT (MAD) 4 8 ITR 314 ANOTHER ISSUE ON WHICH CIT(A) HAS RELIED UPON TO GI VE RELIEF TO THE ASSESSEE IS THAT FROM THE SEIZED MATERIAL THE AO HAD NO EVID ENCE THAT THERE WAS ANY UNACCOUNTED LOAN PERTAINING TO A.Y. 1999-2000. IT I S ONCE AGAIN POINTED OUT THAT IN THE ORIGINAL ASSESSMENT THERE WAS NO EXAMINATION OF THE SEIZED MATERIAL. SUBSEQUENTLY, WHEN THE CASE WAS RE-OPENING U/S. 147 THE ASSESSEE HAD FAILED TO CO- OPERATE WITH THE ASSESSING OFFICER IN ORDER TO COME TO A JUST AND FAIR CONCLUSION. IN FACT, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE CLEARLY STATED TO THE AO THAT SINCE THE MATTER IS NOW MORE THAN 7 YEARS OLD IT IS NOT P OSSIBLE FOR THE ASSESSEE TO FURNISH FRESH DETAILS/FURTHER DETAILS. THIS HAS BEEN MENTIO NED ON PAGE NO.2 OF THE ASSESSMENT ORDER TWICE. HOWEVER, THE LD. CIT(A) HAS COME TO A CONCLUSION THAT THERE IS NO EVIDENCE OF ANY LOAN PERTAINING TO A.Y. 1999-2000. IF SUCH DOCUMENTS WERE AVAILABLE WITH THE LD.CIT(A) THEN HE SHOULD HA VE AT LEAST REMANDED THE MATERIAL BACK TO THE AO TO VERIFY THIS ISSUE BEFORE COMING TO ANY CONCLUSION. IN THAT SENSE THE LD. CIT(A) FAILED TO GIVE OPPORTUNITY TO THE AO BEFORE ARRIVING AT A CONCLUSION ADVERSE TO THE DEPARTMENT. THE ASSESSING OFFICER HAD EVERY REASON TO BELIEVE T HAT LOAN TRANSACTIONS ALSO PERTAIN TO A.Y. 1999-2000. THE VERY FIRST LINE ON P AGE NO. 12 OF THE ORDER OF CIT(A) STATES AS FOLLOWING :- IN HIS STATEMENT SHRI SUNIL KR. AGARWAL ADMITTED T HAT THE POLAR GROUP HAD INFLATED THE BILLS TO SUPPRESS THE INCOME AND EXCES S AMOUNT PAID ON SUCH BILLS WAS RECEIVED BACK IN CASH AND THE TOTAL AMOUNT OF SUCH SUPPRESSED INCOME SINCE 1988-89 UPTO 1998-99 WAS ABOUT 16 TO 17 CRORES. FROM THE ABOVE STATEMENT IT IS AMPLY CLEAR THAT UNA CCOUNTED CASH TRANSACTION WERE VERY MUCH BEEN CONDUCTED BY THE PO LAR GROUP RIGHT UP TO F.Y. 1998-99 WHICH PERTAIN TO A.Y. 1999-2000. INSPITE OF SUCH CLEAR CUT EVIDENCE, THE LD. CIT(A) HAS HELD THAT NO CASH TRANSACTION HAS TAKEN PLACE BETWEEN 1.4.1998 TO 31.3.1999. THE OBSERVATIONS AND CONCLUSIONS OF THE LD. CIT(A) ARE THEREFORE ACTUALLY INCORRECT AND FAULTY. FINALLY, I WILL ALSO LIKE TO MENTION THAT WITH EFFE CT FROM A.Y. 1989-99 REOPENING OF CASES CAN BE DONE BY THE AO IF HE HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT EVEN THOUGH THERE WAS NO FAI LURE ON THE PART OF THE ASSESSEE. IN THIS CONTEXT, I WILL DRAW YOUR ATTENTION TO THE FOLLOWING CASES RAKESH AGARWAL VS. ACIT(DEL) 225 ITR 496 PRAFULLA CHUNNI LAL PATEL VS. M.J. MAKWANA ACIT GUJ ARAT 236 ITR 832. ON THE BASIS OF THE ABOVE ARGUMENTS I REQUEST YOUR HONOURS TO SET-ASIDE THE INVALID AND FLAWED ORDER OF LD.CIT(A) DTD. 24.12.2. 009 AND CONFIRM THE ADDITIONS MADE BY THE AO IN ALL THE 12 CASES OF POLAR GROUP U /S. 147/143 OF THE IT ACT. 5. THE LD. AR ON THE OTHER HAND VEHEMENTLY CONTENDE D THAT THE AO WHILE FRAMING THE ASSESSMENT U/S 143(3) HAD ALL THE MATER IAL AVAILABLE WITH HIM ON ACCOUNT OF THE SEARCH AND THERE WAS NO FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. I N THE ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE, THE PROCEEDING U/S 147 CANNOT BE INITIATED. THE SEARCH CONDUCTED ON 9.1.1999 RESULTED IN SEIZURE OF THE LA PTOP COMPUTER FROM THE PERSONAL CUSTODY OF SHRI SUNIL KUMAR AGARWAL. THE STATEMENT OF SHRI SUNIL KUMAR AGARWAL WAS RECORDED ON 12.4.1999. THE ASSES SMENT WAS COMPLETED ON 7.3.2002. IT MAY LOGICALLY BE STATED THAT THE FAIL URE TO APPLY THE INFORMATION CONTAINED IN THE SEIZED LAPTOP COMPUTER AT THE TIME OF ORIGINAL ASSESSMENT MUST LIE ON THE REVENUE. ON THE BASIS OF THE SAID INFOR MATION, REVENUE CANNOT INITIATE PROCEEDINGS ON THE PLEA THAT MATERIAL FACT S WERE NOT FULLY AND TRULY DISCLOSED BY THE ASSESSEE. IN THE RECORDED REASONS ALSO, NO ESCAPEMENT HAS BEEN INDICATED. AFTER THE RECEIPT OF NOTICE U/S 14 8 THE ASSESSEE HAS CHALLENGED THE INITIATION OF PROCEEDINGS U/S 147 VOID AB INITIO VIDE LETTER DT. 2.11.2006. THE AO HAS NOT ACTED UPON THE LETTER OF THE ASSESSEE. THE OBJECTIONS FOR INITIATING THE PROCEEDINGS WERE NOT DISPOSED OFF AT THE PRE-AS SESSMENT STAGE. THE TRIBUNAL HAS SET ASIDE THE ORDER OF CIT(A) DT. 28.2 .2008. DIRECTION OF THE TRIBUNAL IS ABSOLUTELY CLEAR THAT THE ASSESSEES ARE AT LIBERTY TO SUBSTANTIATE THEIR CLAIMS BOTH LEGALLY AS WELL AS ON MERIT. THE ISSUE OF NOTICE U/S 143(2) BY THE CIT(A) HAS BEEN HELD AGAINST THE ASSESSEE. THEREFO RE, THERE COULD NOT BE ANY GRIEVANCE OF THE DEPARTMENT ON THIS ISSUE. DRAWING OUR ATTENTION TOWARDS THE REASONS TO BELIEVE, THE LD.AR CONTENDED THAT THE RE ASONS ARE VAGUE. ALL THE MATERIALS WERE AVAILABLE WITH THE AO AND AO WOULD H AVE CONSIDERED ALL THE MATERIALS WHILE FRAMING THE ASSESSMENT. NO ADEQUAT E REASONS WERE RECORDED. THE JUDGEMENT OF RAKESH AGARWAL IS NOT APPLICABLE I N THE CASE OF THE ASSESSEE AS IT DOES NOT REFER TO THE FIRST PROVISO TO SEC. 1 47. MOREOVER, IN THE AFORESAID CASE, THE INITIATION OF THE PROCEEDINGS U/S 147 WAS ON THE BASIS OF THE INTIMATION U/S 143(1)(A). THEREFORE, THIS JUDGEMENT WILL NOT ASSIST THE REVENUE. IT DOES NOT HOLD THAT THE AO IS AT LIBERTY TO CHANGE HIS OPINIO N ON THE SAME MATERIAL AT A LATER DATE. 6. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CON SIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE MATERIAL AND THE RELEVANT PROVISIONS OF THE INCOME TAX ACT. WE HAVE GONE THROUGH THE CASE LAWS AS HAS BEEN RELIED ON BEFORE US FROM BOTH THE SIDES. BEFORE DECIDING THE ISSUE INVOLVED, IT IS EXPEDIENT TO DISCUSS THE RELE VANT PROVISIONS. THE RELEVANT PROVISIONS OF SEC. 147 ARE REPRODUCED AS UNDER : 147 . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSE SS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HER EAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASS ESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT Y EAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON TH E PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDIN G FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAP ED ASSESSMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUB JECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX A ND HAS ESCAPED ASSESSMENT. EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESS ARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER P ERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PR EVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOM E-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAI MED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSE D ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RA TE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXC ESSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR A NY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCL UDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA. EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REA SSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE IN COME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, N OTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASON S RECORDED UNDER SUB-SECTION (2) OF SECTION 148. EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE FINANCE ACT, 201 2, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 6.1 FROM READING OF THIS SECTION, IT IS APPARENT TH AT THIS SECTION EMPOWERS THE AO TO ASSESS OR RE-ASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASS ESSMENT. THIS SECTION AUTHORIZES THE AO NOT ONLY TO RE-ASSESS BUT ALSO TO ASSESS THE ASSESSEE IN RESPECT OF AN INCOME WHICH ESCAPED ASSESSMENT. FOR INITIAT ING THE PROCEEDINGS UNDER THIS SECTION, NO DOUBT THERE MUST BE REASON TO BEL IEVE. REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS C AUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, IT C AN BE SAID THAT ASSESSING OFFICER HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. 6.2 THE QUESTION WHETHER THE AO HAD REASON TO BELI EVE IS A QUESTION OF JURISDICTION. THE EXPRESSION REASON TO BELIEVE A S CONTAINED IN SEC. 147 OF THE ACT DOES NOT MEAN PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE AO BUT IT MEANS THAT THE BELIEF MUST BE HELD IN GOOD FAITH AN D IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASON TO BELIEVE HAS A RATIO NAL CONNECTION OR BEARING TO THE FORMATION OF THE BELIEF OR IS BASED ON IRRELEVA NT OR EXTRANEOUS CONSIDERATION. THE WORDS ARE NOT REASON TO SUSPECT. THERE MUST BE MATERIAL RELEVANT TO THE INCOME ESCAPED BY THE ASSESSEE ON THE BASIS OF WHIC H THE AO MUST FORM PRIMA FACIE BELIEF. THE AO HAS NOT TO PROVE AT THE TIME OF RE CORDING OF THE REASONS THAT THE INCOME HAS ACTUALLY ESCAPED ASSESSMENT BUT THERE MUST BE MATERIAL RELEVANT TO THE ASSESSEE ON THE BASIS OF WHICH ONE MAY FORM PRIMA FACIE OPINION THAT THE ASSESSEE HAS ESCAPED INCOME FROM A SSESSMENT. IN RAJESH JHAVERI STOCK BROKERS (P.) LTD. CASE, 291 ITR 500 T HE HON'BLE SUPREME COURT HELD THAT THE EXPRESSION REASON TO BELIEVE MEANS CAUSE OR JUSTIFICATION AND THAT IF THE ASSESSING OFFICER HAD A CAUSE OR JUSTIFICATI ON TO KNOW THAT INCOME HAD ESCAPED ASSESSMENT IT COULD BE SAID THAT THE ASSESS ING OFFICER HAD REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. TH E EXPRESSION REASON TO BELIEVE CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER HAD FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSIO N. WHAT IS REQUIRED, IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. THE SUPREME COURT HELD THAT AT THE STAGE OF ISSUANCE OF NOTICE, THE ONLY QUESTION TO BE CONSIDERED WAS WHETHER THERE WAS RELEVANT MATERI AL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. WHE THER THE MATERIAL WOULD CONCLUSIVELY PROVE ESCAPEMENT OF INCOME WAS NOT THE CONCERN FOR THE COURT TO LOOK AT THAT STAGE. THIS IS BECAUSE THE FORMATION OF BELIEF WAS WITHIN THE REALM OF SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER . 6.3 WE HAVE CAREFULLY GONE THROUGH THE REASONS RECO RDED AS WELL AS THE ORDER OF CIT(A). WE NOTED THAT IN THIS CASE WHEN THE ASS ESSEE WENT IN APPEAL BEFORE THE CIT(A) AGAINST THE RE-ASSESSMENT ORDER DT. 29.1 2.2006, CIT(A) ON THE BASIS OF NON-SERVING OF NOTICE U/S 143(2) QUASHED THE ASS ESSMENT BUT DID NOT DECIDE THE OTHER ISSUES INVOLVED IN THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. THE REVENUE CHALLENGED THE ORDER OF CIT(A) ON THE GROUN D THAT CIT(A) WAS WRONG IN ANNULLING THE ASSESSMENT MADE U/S 147/143(3) JUS T ON TECHNICAL REASONS WITHOUT GOING INTO THE MERITS OF THE CASE RELYING O N THE ORDER OF THE HON'BLE MADRAS HIGH COURT AS REPORTED IN THE CASE OF AREVA T AND D INDIA LTD. VS. ASST. CIT, 294 ITR 233 ( SUPRA ). THE TRIBUNAL ALTHOUGH SET ASIDE THE ISSUE TO TH E FILE OF CIT(A) TO RE-DECIDE THE SAME AFTER TAKING INTO C ONSIDERATION THE DECISION OF HON'BLE MADRAS HIGH COURT IN AREVA T AND D INDIA LT D. VS. ASST. CIT REPORTED IN 294 ITR 233 ( SUPRA ). WHILE SETTING ASIDE THE ORDER TO THE FILE OF CI T(A), THE TRIBUNAL STATED THAT THE ASSESSEES ARE AT LIBERTY TO SUBSTANTIATE THEIR CLAIMS, BOTH LEGALLY AS WELL AS ON MERITS. THIS IS A FACT THAT IN THIS CASE THE CIT(A) VIDE ITS ORDER DT. 7.3.2007 HAS NOT DECIDED THE OTHER GR OUNDS TAKEN BY THE ASSESSEE AND ANNULLED THE ASSESSMENT ONLY ON THE ISSUE RELAT ING TO THE NOTICE ISSUED U/S 143(2). SINCE THE REVENUE HAS CHALLENGED THE ORDER OF CIT(A) ON THIS VERY ISSUE, THE TRIBUNAL HAS SET ASIDE, THE SAID ISSUE A S THE JURISDICTION OF THE TRIBUNAL U/S 254(1) IS LIMITED TO THE GROUNDS OF APPEAL BEFO RE IT. CIT(A) WHILE DECIDING THE FIRST ROUND OF APPEAL HAS CLEARLY OBSERVED IN P ARA 12 THAT SINCE ASSESSMENT ORDER U/S 147/143(3) ITSELF HAS BEEN HELD TO BE INV ALID, THE OTHER ISSUES RAISED BY THE APPELLANT IS NOT BEING CONSIDERED AS IT WILL BE ONLY OF ACADEMIC INTEREST. THE NATURAL CONSEQUENCE, IN OUR OPINION, OF THE ORD ER OF THE TRIBUNAL ON THE GROUNDS TAKEN BY THE ASSESSEE BEFORE THE FIRST APPE LLATE AUTHORITY BUT NOT DECIDED BY IT, GETS SURVIVED FOR ADJUDICATION. ONC E THE ISSUE ON WHICH THE CIT(A) HAS ANNULLED THE ASSESSMENT GOT RESTORED TO THE CIT(A) BY THE HIGHER APPELLATE AUTHORITY, CIT(A) IS BOUND, IN CASE THE C IT(A) DECIDES THAT ISSUE AGAINST THE ASSESSEE, TO DECIDE ALL OTHER GROUNDS T AKEN BY THE ASSESSEE. CIT(A) CANNOT BE ESTOPPED NOT TO DECIDE OTHER GROUNDS MERELY ON THE BASIS TH AT THE ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTIO N BEFORE THE TRIBUNAL AGAINST THE ORDER OF CIT(A) DT. 7.3.2007. WE, THEREFORE, DISMISS THE PLEA OF THE LD. DR THAT CIT(A) DOES NOT HAVE ANY JURISDICTION TO DECID E THE APPEAL OF THE ASSESSEE ON THE OTHER GROUNDS WHICH WERE NOT ADJUDICATED BEF ORE THE TRIBUNAL. 6.4 WE FURTHER NOTED THAT BEFORE THE CIT(A), THE AS SESSEE HAS TAKEN THREE LEGAL ISSUES; ONE ISSUE RELATES TO THE VALIDITY OF THE INITIATION OF THE PROCEEDINGS, SECOND ISSUE RELATES TO THE INITIATION OF RE-ASSESS MENT PROCEEDINGS BARRED BY LIMITATION AND THE THIRD ISSUE RELATES TO THE SERVI CE OF THE NOTICE U/S 143(2). IN THE SECOND ROUND OF APPEAL, CIT(A), WHEN THE PROCEE DINGS GOT REINSTATED BEFORE HIM, HAD DECIDED THE ISSUE IN RESPECT OF ISSUANCE A ND SERVICE OF NOTICE U/S 143(2) AGAINST THE ASSESSEE. AGAINST THAT ISSUE, THE ASSE SSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTION BEFORE US. THEREFORE, THAT ISSU E GOT CONCLUDED BY THE ORDER OF CIT(A) AND WE CANNOT ADJUDICATE THAT ISSUE. EVEN D URING THE COURSE OF THE ARGUMENT ALSO, THE LD. AR DID NOT RAISE ANY SUCH IS SUE EVEN THOUGH THE ISSUE INVOLVED, IN OUR OPINION, IS A LEGAL ISSUE. WE NOT ED THAT IN RESPECT OF VALIDITY OF THE PROCEEDINGS, THE ASSESSEE RAISED TWO ISSUES BEF ORE CIT(A); ONE RELATING TO ISSUE THAT THE PROCEEDINGS INITIATED U/S 143(3) ARE BARRED BY LIMITATION AS NOTICE U/S 148 WAS ISSUED AFTER EXPIRY OF 4 YEARS AND OTHE R ISSUE IS THAT THERE ARE NO REASONS TO BELIEVE AND THE MATERIAL AVAILABLE WAS ALREADY BEFORE THE AO. THE CIT(A), WE NOTED, HAS NOT GIVEN ANY FINDING IN RESP ECT OF THE ISSUE TAKEN BY THE ASSESSEE THAT INITIATION OF THE PROCEEDINGS ARE BAR RED BY LIMITATION IN VIEW OF PROVISO TO SEC. 147 BUT THE CIT(A) DECIDED IN FAVOU R OF THE ASSESSEE ON THE ISSUE THAT THE SAME INFORMATION WAS AVAILABLE WITH THE AO EVEN DURING THE ORIGINAL ASSESSMENT BY OBSERVING AS UNDER : 4.4 THE FACTS OF THE PRESENT CASE CLEARLY SHOW THA T AN ASSESSING OFFICER WHO HAS A PROPER UNDERSTANDING OF INCOME TAX ACT CANNOT HOLD A BELIEF THAT THE LOAN OR CAPITAL CREDITED IN THE BOOKS OF ACCOUNT DURING THE YEAR UN DER APPEAL IS NOT GENUINE ON THE BASIS OF INFORMATION ABOUT SOME UNSPECIFIED LOAN OR CAPITAL OF PRECEDING YEARS. IN FACT THE SAME INFORMATION WAS AVAILABLE WITH THE AS SESSING OFFICER EVEN DURING THE ORIGINAL ASSESSMENT YEAR AND AT THAT TIME THIS INFO RMATION WAS NOT CONSIDERED TO BE SUFFICIENT TO HOLD THAT THE LOAN OR CAPITAL CREDITE D DURING THE YEAR COULD BE NON GENUINE. THE ABOVE MENTIONED DECISION OF HBLE SUPR EME COURT IS APPLICABLE IN THE PRESENT CASE AND THEREFORE I HOLD THAT THE NOTICE I SSUED BY ASSESSING OFFICER U/S 148 WAS INVALID AND THEREFORE THE REASSESSMENT ORDER OF THE ASSESSING OFFICER IS ANNULLED. 6.5 THE ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTION BEFORE US. NOW, THE ONLY ISSUE WITH WHICH IS VESTED WITH US FOR ADJ UDICATION IS WHETHER THE AO HAS REASON TO BELIEVE ON THE BASIS OF THE INFORMA TION AVAILABLE WITH HIM. WHETHER THE REASONS TO BELIEVE RECORDED BY THE ASSE SSING OFFICER ARE BONAFIDE OR NOT, INITIATED ON THE BASIS OF THE STATEMENT OF ONE OF THE PARTNER OF THE ASSESEE AT THE TIME OF SEARCH AND SEIZURE. 6.6 IN THE ABSENCE OF BONA FIDE REASONS, IT IS A SETTLED LAW THAT, THE PROCEEDINGS U/S 147 CANNOT BE INITIATED. IT IS NOT THE CASE OF THE ASSESSEE THAT THERE IS NO REASON TO BELIEVE OR REASON TO BELIEV E ARE NOT BONAFIDE. THE SUFFICIENCY OF REASONS CANNOT BE ENTERTAINED BY THI S TRIBUNAL. WE HAVE ONLY TO SEE WHETHER THERE IS MATERIAL TO FORM THE REASON T O BELIEVE. WHETHER THE STATEMENT RECORDED DURING THE COURSE OF THE SEARCH CAN BE THE BASIS FOR REASONS TO BELIEVE SPECIALLY WHEN THIS FACT IS NOT AT ALL AVAILABLE IN THE ORIGINAL ASSESSMENT FRAMED U/S 143(3) AND THERE IS NO EVIDEN CE OF MATERIAL THAT THIS FACT HAS BEEN CONSIDERED BY THE ASSESSING OFFICER DURING THE COURSE OF FRAMING ORIGINAL ASSESSMENT U/S 143(3). 6.7 WE NOTED THAT THE WORDS INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT HAS BEEN DEFINED BY EXPLANATION 2 IN SE C. 147 AS SUBSTITUTED W.E.F. 1.4.1989. SUB-CLAUSE (C) OF THE EXPLANATION IS REL EVANT FOR US. THIS SUB-CLAUSE CLEARLY MANDATES THAT WHERE AN ASSESSMENT HAS BEEN MADE BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR (III) SUCH INCOME HAS BEEN M ADE THE SUBJECT OF EXCESSIVE RELIEF AND THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPR ECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, IT WILL BE DEEMED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OUR OP INION, EXPLANATION 2(C) IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE IN V IEW OF THE PROPOSITION OF LAW AS PRONOUNCED BY THE HON'BLE SUPREME COURT IN THE C ASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) AS REASONS RECORDED CLEARLY STIPULATES THAT THE INCOME CHARGEABLE TO TA X HAS BEEN UNDER ASSESSED. NO DECISION WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. CO UNSEL HOW THE EXPLANATION 2(C) WILL NOT APPLY IN THE CASE OF ASSESSEE. THE L D COUNSEL WENT ON ARGUING THAT THE SAME VERY MATERIAL WAS AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT, AND THEREFORE THE REASONS TO BELIEVE RECORDED ARE VAGUE AND BASED ON SUSPICION. WE ALSO NOTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) NOWHERE TOOK THE VIEW THAT SOME FRESH TANGIBLE MATE RIAL SHOULD COME SUBSEQUENTLY IN THE POSSESSION OF THE AO WHILE TAKI NG ACTION U/S 147 THE HON'BLE SUPREME COURT WHILE COMPARING THE OLD PROVI SIONS OF SEC. 147 AND THE PROVISIONS AS HAS BEEN SUBSTITUTED W.E.F. 1.4.1989 HAS CLEARLY LAID DOWN UNDER PARA 17 OF ITS DECISION THAT UNDER THE SUBSTITUTED SEC. 147 FOR REASONS TO BELIEVE EXISTENCE OF ONLY THE FIRST CONDITION IS S UFFICIENT. IF THE AO, FOR WHATEVER REASONS, HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. IT IS FURTHER STATED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITH IN THE AMBIT OF PROVISO TO SEC. 147. THE CIT(A), WE NOTED, HAS NOT ALLOWED THE RELI EF TO THE ASSESSEE ON THE APPLICABILITY OF PROVISO TO SECTION 147 AND THAT IS NOT THE ISSUE BEFORE US. NO DOUBT THE INGREDIENTS OF SEC. 147 ARE TO BE FULFILL ED. WE NOTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOLLEN MILLS L TD VS. ITO, 236 ITR 34 WHEN A SIMILAR QUESTION HAD COME BEFORE THE HON'BLE SUPREME COURT DID NOT DECIDE THE ISSUE WHETHER ANY NEW FACT CAME TO THE K NOWLEDGE OF THE ITO AFTER COMPLETING THE ASSESSMENT PROCEEDINGS. 6.8 ALTHOUGH, WE ARE OF THE OPINION THAT THE ISSUE IS DULY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 ( SUPRA ) BUT STILL WE DECIDED TO GO THROUGH THE RELEVANT PROVISIONS FROM WHICH THE WORD TANGIB LE MATERIAL OR INFORMATION HAS BEEN BORROWED BY THE COURTS WHILE INTERPRETING THE PROVISIONS OF SEC. 147 SPECIALLY WHEN UNDER THE SUBSTITUTED PROVISION W.E. F.1.4.1989, THERE IS NO SUCH REQUIREMENT THAT THE REASONS TO BELIEVE SHOULD HAV E ARISEN IN CONSEQUENCE OF INFORMATION. 6.9 WE NOTED THAT INITIALLY THE PROVISIONS FOR INCO ME ESCAPING ASSESSMENT WERE BROUGHT INTO THE STATUTE BY WAY OF SEC. 34 INC ORPORATED UNDER THE INCOME TAX ACT, 1922. THIS SECTION READS AS UNDER : 34. INCOME ESCAPING ASSESSMENT (1) IF - (A) THE INCOME-TAX OFFICER HAS REASON TO BELIEVE TH AT BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RET URN OF HIS INCOME UNDER SECTION 22 FOR ANY YEAR OR TO DISCLOSE FULLY AND TR ULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAVE ESCAPED ASSESSMENT FO R THAT YEAR, OR HAVE BEEN UNDER-ASSESSED OR ASSESSED AT TOO LOW A RATE, OR HAVE BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT, OR EXCES SIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE, THE INCOME- TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAVE ESCA PED ASSESSMENT FOR ANY YEAR, OR HAVE BEEN UNDER-ASSESSED, OR ASSESSED AT T OO LOW A RATE, OR HAVE BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THI S ACT, OR THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED, HE MAY IN CASES FALLING UNDER CLAUSE (A) AT ANY TI ME 2 [* * *) AND IN CASES FALLING UNDER CLAUSE (B) AT ANY TIME WITHIN FOUR YEARS OF THE END OF THAT YEAR, SERVE ON THE ASSESSEE, OR, IF THE ASSESSEE IS A COMPANY, ON THE PRINCIPAL OFFICER THEREOF, A NOTICE CONTAINING ALL OR ANY OF THE REQUIREMENTS WHICH MAY BE INCLUDE D IN A NOTICE UNDER SUB-SECTION (2) OF SECTION 22 AND MAY PROCEED TO ASSESS OR REAS SESS SUCH INCOME, PROFITS OR GAINS OR RECOMPUTE THE LOSS OR DEPRECIATION ALLOWANCE; AN D THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOTIC E WERE A NOTICE ISSUED UNDER THAT SUB-SECTION: 6.10 WE NOTED THAT SEC. 34 AUTHORISES THE AO TO TAK E ACTION FOR RE-ASSESSMENT UNDER TWO SITUATIONS; THE FIRST SITUATION IS GIVEN IN SEC. 34(1)(A) AND SECOND IS GIVEN IN SEC. 34(1)(B). SEC. 34(1)(A) EMPOWERS THE AO TO ASSESS OR RE-ASSESS THE ESCAPED INCOME, WHERE THE AO HAS REASON TO BELI EVE, DUE TO THE OMISSION OR FAILURE OF THE ASSESSEE TO MAKE A RETURN OF HIS INC OME U/S 22 OR TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. U/S 34(1)(A) REASON TO BELIEVE IS QUALIFIED BY THE WORDS OMIS SION OR FAILURE. SUB-CLAUSE (B) APPLIES TO A CASE WHERE THERE MAY BE NO OMISSIO N OR FAILURE BUT THE AO, IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION, HAS R EASON TO BELIEVE ABOUT THE ESCAPED INCOME. U/S 34(1)(B) THUS THE REASON TO B ELIEVE FOR ESCAPEMENT OF THE INCOME MUST HAVE ARISEN IN CONSEQUENCE OF THE INFOR MATION COMING IN THE POSSESSION OF THE AO. THE HON'BLE SUPREME COURT HA S ANALYSED THE WORD INFORMATION AS USED IN SEC. 34(1)(B) IN THE CASE OF KALYANJI MAVJI AND CO. VS CIT, 102 ITR 287 (SC) AND HAS CATEGORICALLY HELD IN THE FOLLOWING MANNER : THE WORD INFORMATION IN SECTION 34(1)(B) IS OF THE WIDEST AMPLITUDE AND COMPREHENDS A VARIETY OF FACTORS. NEVERTHELESS, TH E POWER UNDER SECTION 34(1)(B), HOWEVER WIDE IT MAY BE, IS NOT PLENARY BECAUSE THE DISCRETION OF THE INCOME-TAX OFFICER IS CONTROLLED BY THE WORDS REASON TO BELIE VE. INFORMATION MAY COME FROM EXTERNAL SOURCES OR EVEN FROM THE MATERIALS AL READY ON RECORD OR MAY BE DERIVED FROM THE DISCOVERY OF NEW AND IMPORTANT MAT TER OR FRESH FACTS. SECTION 34(1)(B) WOULD APPLY TO THE FOLLOWING CATE GORIES OF CASES : (1) WHERE THE INFORMATION IS AS TO THE TRUE AND CO RRECT STATE OF THE LAW DERIVED FROM RELEVANT JUDICIAL DECISIONS; (2) WHERE IN THE ORIGINAL ASSESSMENT THE INCOME LI ABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO OVERSIGHT, INADVERTENCE OR A MIST AKE COMMITTED BY THE INCOME-TAX OFFICER; (3) WHERE THE INFORMATION IS DERIVED FROM AN EXTER NAL SOURCE OF ANY KIND: SUCH EXTERNAL SOURCE WOULD INCLUDE DISCOVERY OF NEW AND IMPORTANT MATTERS OR KNOWLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME OF ORIGINAL ASSESSMENT; AND (4) WHERE THE INFORMATION MAY BE OBTAINED EVEN FRO M THE RECORD OF THE ORIGINAL ASSESSMENT FROM AN INVESTIGATION OF THE MA TERIALS ON THE RECORD OR THE FACTS DISCLOSED THEREBY OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW. WHERE, HOWEVER, THE INCOME-TAX OFFICER GETS NO SUB SEQUENT INFORMATION, BUT MERELY PROCEEDS TO REOPEN THE ASSESSMENT WITHOUT AN Y FRESH FACTS OR MATERIALS OR WITHOUT ANY ENQUIRY INTO THE MATERIALS WHICH FORM P ART OF THE ORIGINAL ASSESSMENT, SECTION 34(1)(B) WOULD HAVE NO APPLICATION. 6.11 FROM THE AFORESAID JUDGEMENT, WE NOTED THAT TH E HON'BLE COURT HAS INTERPRETED THAT THE WORD SUBSEQUENT INFORMATION REQUIRES FRESH FACTS AND MATERIAL OR IF THERE ARE EXISTING FACTS, THEN, THER E MUST BE ENQUIRY INTO THE MATERIALS AVAILABLE. THUS, WE NOTED THAT REQUIREME NT OF FRESH MATERIAL OR FACTS HAS BEEN INTERPRETED BY THE COURT BECAUSE SEC. 34(1 )(B) STATES THAT THE AO HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASO N TO BELIEVE. REASON TO BELIEVE SHOULD HAVE ARISEN IN CONSEQUENCE OF THE I NFORMATION AND AS THE INFORMATION CANNOT BE BASED WITHOUT MATERIAL OR FAC TS, THEREFORE, IT HAS BEEN INTERPRETED BY THE COURT THAT THERE MUST BE FRESH F ACTS OR TANGIBLE MATERIAL WITH THE AO. WE NOTED THAT IN SEC. 147, AS WAS IN EXIST ENCE PRIOR TO 1.4.1989, UNDER SUB-CLAUSE (B) SIMILAR LANGUAGE HAS BEEN USED AS HA D BEEN USED IN SEC. 34(1)(B). FOR READY REFERENCE THE SAID SECTION 147 AS WAS IN EXISTENCE PRIOR TO 1.4.1989 IS REPRODUCED AS UNDER :- 147. IF (A) THE INCOME-TAX OFFICER HAS REASON TO BELIEVE T HAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RET URN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE INCOME-TAX OFFICER OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT Y EAR, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSIO N OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE, THE INCOME- TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 T O 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION AL LOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTION S 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). 6.12 IN THIS SECTION ALSO, FOR THE PURPOSE OF REAS ON TO BELIEVE IT IS NECESSARY THAT THE REASON TO BELIEVE MUST HAVE ARISEN IN CO NSEQUENCE OF THE INFORMATION IN THE POSSESSION OF THE AO. THE INFORMATION MUST P RECEDE THE REASONS TO BELIEVE IF WE READ THE PROVISIONS OF SEC.147(B). WE NOTED THAT THE HON'BLE SUPREME COURT HAD OCCASION TO INTERPRET THE WORD I NFORMATION AS USED IN SEC. 147(B) IN THE CASE OF CIT VS. A. RAMAN & CO., 67 IT R 011(SC) AS REPRODUCED BELOW :- THE EXPRESSION INFORMATION IN THE CONTEXT IN WHI CH IT OCCURS [IN SECTION 147(B) OF THE INCOME-TAX ACT, 1961] MUST MEAN INSTRUCTION OR KNOWLEDGE DERIVED FROM AN EXTERNAL SOURCE CONCERNING FACTS OR PARTICULARS, OR AS TO LAW RELATING TO A MATTER BEARING ON THE ASSESSMENT. TO COMMENCE THE PROCEEDINGS FOR REASSESSMENT IT IS NOT NECESSARY THAT ON THE MATERIALS WHICH CAME TO THE NOTICE OF THE INCOME-TA X OFFICER, THE PREVIOUS ORDER OF ASSESSMENT WAS VITIATED BY SOME ERROR OF FACT OR LA W. THE HIGH COURT EXERCISING JURISDICTION UNDER ARTICL E 226 OF THE CONSTITUTION HAS POWER TO SET ASIDE A NOTICE ISSUED UNDER SECTION 14 7(B) OF THE INCOME-TAX ACT, 1961, IF THE CONDITION PRECEDENT TO THE EXERCISE OF THE J URISDICTION DOES NOT EXIST. THE COURT MAY, IN EXERCISE OF ITS POWERS, ASCERTAIN WHETHER T HE INCOME-TAX OFFICER HAD IN HIS POSSESSION ANY INFORMATION: THE COURT MAY ALSO DETE RMINE WHETHER FROM THE INFORMATION THE INCOME-TAX OFFICER MAY HAVE REASON TO BELIEVE THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. BUT THE JURISDICTION OF THE COURT EXTENDS NO FURTHER. WHETHER ON THE INFORMATION IN HIS POSS ESSION, HE SHOULD COMMENCE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT, MUST BE DECIDED BY THE INCOME-TAX OFFICER AND NOT BY THE HIGH COURT. THE INCOME-TAX OFFICER ALONE IS ENTRUSTED WITH THE POWER TO ADMINISTER THE ACT: IF HE HAS INFORMAT ION FROM WHICH IT MAY BE SAID, PRIMA FACIE, THAT HE HAD REASON TO BELIEVE THAT INC OME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IT IS NOT OPEN TO THE HIGH COUR T EXERCISING POWERS UNDER ARTICLE 226 OF THE CONSTITUTION TO SET ASIDE OR VACATE THE NOTICE FOR REASSESSMENT ON A REAPPRAISAL OF THE EVIDENCE. IN A PETITION UNDER ARTICLE 226 OF THE CONSTITUTION , THE TAXPAYER MAY CHALLENGE THE VALIDITY OF A NOTICE UNDER SECTION 147 OF THE INCOM E-TAX ACT, 1961, ON THE GROUND THAT EITHER OF THE CONDITIONS PRECEDENT DOES NOT EX IST, BUT AN INVESTIGATION WHETHER THE INFERENCES RAISED BY THE INCOME-TAX OFFICER ARE CORRECT OR PROPER CANNOT BE MADE. JURISDICTION OF THE INCOME-TAX OFFICER TO REASSESS INCOME ARISES IF HE HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THAT INF ORMATION MUST, IT IS TRUE, HAVE COME INTO THE POSSESSION OF THE INCOME-TAX OFFICE A FTER THE PREVIOUS ASSESSMENT, BUT EVEN IF THE INFORMATION BE SUCH THAT IT COULD HAVE BEEN OBTAINED DURING THE PREVIOUS ASSESSMENT FROM AN INVESTIGATION OF THE MATERIAL ON RECORD, OR THE FACTS DISCLOSED THEREBY, OR FROM OTHER ENQUIRY OR RESEARCH INTO FAC TS OR LAW, BUT WAS NOT IN FACT OBTAINED, THE JURISDICTION OF THE INCOME-TAX OFFICE R IS NOT AFFECTED. 6.13 FROM THE PROVISIONS OF SEC. 34(1)(B) AND 147(B ) WHICH WERE UNDER THE INCOME TAX ACT PRIOR TO 1.4.1989 IT IS APPARENT THA T FOR ARRIVING AT REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IT WAS NECESSARY THAT THE AO MUST HAVE INFORMATION IN HIS POSSESSION PRIOR TO ARRIVING AT REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT. THIS INF ORMATION HAS BEEN INTERPRETED BY THE COURTS FROM TIME TO TIME IN THE FORM OF TANGIBLE FRESH MATERIAL OR FACTS BUT WHEN WE LOOKED INTO THE PROVISIONS OF SEC. 147 WHICH HAS BEEN SUBSTITUTED W.E.F. 1.4.1989, WE NOTED THAT THERE AR E DRASTIC CHANGES IN THIS SECTION. NOW, THE ONLY CONDITION WHICH REQUIRES TO BE FULFILLED IS THAT THE AO MUST HAVE REASON TO BELIEVE THAT ANY INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT. THIS SECTION DOES NOT TALK THAT REASO N TO BELIEVE MUST BE BASED OR MUST HAVE BEEN IN CONSEQUENCE OF FRESH INFORMATION COMING INTO THE POSSESSION OF THE AO . THEREFORE, IN OUR OPINION, FOR TAKING ACTION U/S 147 THE REASON TO BELIEVE CAN BE BASED ON THE BASIS OF THE MATERIAL AVAILABLE WITH THE AO EVEN AVAILABLE AT THE TIME OF MAKING THE ASSESSMENT PROV IDED THE PRIMA FACIE MATERIAL BELONG TO THE ASSESSEE AND APPARENTLY RELATES TO TH E ASSESSMENT YEAR CONCERNED. THE COURTS HAVE FROM TIME TO TIME INTERPRETED THE W ORD REASON TO BELIEVE TO MEAN THAT THE AO MUST HAVE CAUSE OR JUSTIFICATION. AT THE STAGE OF INITIATION OF THE PROCEEDINGS IT IS NOT REQUIRED THAT THE AO MUST ESTABLISH THE ESCAPEMENT OF THE INCOME. THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. THE SCOPE AND EFFECT OF SEC.147 AS SUBSTITUTED W.E.F. 1.4.1989 IS SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS STOOD PRIOR TO SUCH SUBSTITUTION. THE COURT HAS INTERPRETED FROM TIME TO TIME THAT THERE MUST BE BONA FIDE REASON TO BELIEVE. WHERE THE AO HAS APPLIED HIS MIND TO THE MATERIAL AVAILABLE WITH HIM, HE CANNOT BE PERMITTED TO REVIEW THE ASSESSMENT IN THE GARB OF REASON TO BELIEVE. IN THIS CASE WE NOTED THAT THERE IS NO EVIDENCE OR MATERIAL BEING BROUGHT ON RECORD BY THE LD. A.R WHICH MAY PROVE THAT THE ASSESSING OFFICER HAS DULY CONSIDERED THE STATEMENT OF SUSHIL KUMAR AGARWAL WHILE FRAMING THE ORIGINAL ASS ESSMENT, ON THE BASIS OF WHICH REASONS TO BELIEVE HAVE BEEN RECORDED. THUS, WITH THE AMENDMENT BROUGHT TO SEC. 147 OF THE ACT ON AND FROM 1.4.1989 AND THE ELUCIDATION ON THE SCOPE OF THE AUTHORITY AND JURISDICTION OF THE OFFI CER U/S 147 OF THE ACT, WE ARE OF THE FIRM VIEW THAT THE PROCEEDINGS INITIATED BY THE AO U/S 147 ARE VALID AND THE AO COULD HAVE TAKEN THE ACTION U/S 147 ON THE B ASIS OF THE MATERIAL AVAILABLE ON RECORD. THERE IS NO NEED OF ANY FRESH TANGIBLE MATERIAL FOR COMING TO THE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASS ESSMENT IN VIEW OF EXPLANATION 2 CLAUSE (C) OF SEC. 147. 6.14 IN THE CASE OF PRAFUL CHUNILAL PATEL 236 ITR 8 32 AS RELIED BY LD. A.R, WE NOTED THAT THEIR LORDSHIPS OF THE HONBLE JURISDICT IONAL HIGH COURT HAVE HELD AS UNDER : 'THE POWER TO MAKE ASSESSMENT OR REASSESSMENT WITHI N FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR WOULD BE ATTRACTED EVEN IN CASES WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UPON WHIC H A CORRECT ASSESSMENT MIGHT HAVE BEEN BASED IN THE FIRST INSTANCE, AND WHETHER IT IS AN ERROR OF FACT OR LAW THAT HAS BEEN DISCOVERED OR FOUND OUT JUSTIFYING THE BEL IEF REQUIRED TO INITIATE THE PROCEEDINGS. THE WORDS ESCAPED ASSESSMENT, WHERE THE RETURN IS FILED, COVER THE CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CA USED BY EITHER AN ERRONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON-C ONSIDERATION, OR CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TRANSFER OR TRANS ACTION EVEN WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UPON WH ICH A CORRECT ASSESSMENT COULD HAVE BEEN BASED. IN CASES WHERE THE AO HAD OVERLOOKED SOMETHING AT T HE FIRST ASSESSMENT, THERE CAN BE NO QUESTION OF ANY CHANGE OF OPINION, WHEN THE I NCOME WHICH WAS CHARGEABLE TO TAX IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDE R THE LAW, BUT WAS NOT, DUE TO AN ERROR COMMITTED AT THE FIRST ASSESSMENT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS A CAUSE OR JUSTIFICATI ON TO THINK OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE A RE ASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE WORDS REASON TO BELIEV E CANNOT MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. UNLESS THE GROUND OR THE MATERIAL ON WHICH HIS BELIEF IS BASED, IS FOUND TO BE SO IRRATIONAL AS NOT TO BE WORTHY OF BEING CALLED A REASON BY ANY HONEST MAN, HIS CON CLUSION THAT IT CONSTITUTES A SUFFICIENT REASON, CANNOT BE OVERRIDDEN.' 6.15 WE ALSO NOTED THAT HONBLE GUJARAT HIGH COU RT IN THE CASE OF GRUH FINANCE LTD. VS. JT. CIT, HAVE HELD AS UNDER : 'THAT INSOFAR AS THE EXPRESSIONS REASONS TO BELIEV E AND CHANGE OF OPINION ARE CONCERNED, THOUGH MATERIAL WAS AVAILABLE ON RECORD AT THE TIME OF FIRST ASSESSMENT, WHEN NO CONSCIOUS CONSIDERATION OF THE MATERIAL WAS MADE AND A MISTAKE HAD BEEN COMMITTED IT WOULD NOT CREATE AN EMBARGO OR A BAN O N THE COMPETENT OFFICER TO EXERCISE POWERS UNDER THE AMENDED S. 147. UPON INFO RMATION THE DEPARTMENT NOTICED THAT DEPRECIATION WAS CLAIMED AND ALLOWED I N RESPECT OF MACHINERY WHICH WAS NOT AT ALL IN EXISTENCE AND THAT ASPECT WAS NOT CONSCIOUSLY CONSIDERED AT THE TIME OF FIRST ASSESSMENT. THE NOTICES OF REASSESSME NT WERE VALID.' 6.16 FROM THE ABOVE, IT IS EVIDENT THAT THE RATIO O F THE ABOVE DECISIONS SUPPORTS THE CASE OF THE REVENUE THAN THE ASSESSEE. IN THAT CASE ALSO, THE MATERIAL WAS AVAILABLE ON RECORD AT THE TIME OF FIR ST ASSESSMENT BUT THE AO HAS NOT CONSCIOUSLY CONSIDERED THE SAME AND, THEREFORE, THE REOPENING OF ASSESSMENT WAS HELD TO BE VALID. 6.17 SECTION 147 PERMITS THE REOPENING OF AN ASSESS MENT AND THE ISSUANCE OF NOTICES, ETC., IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR... THE SCOPE OF THE PHRASE REASONS TO BELIEVE - INTRODUCED IN 1989 - HAS BEEN CONSIDERED BY THE SUPREME COURT IN VARIOUS DECISIONS. IN PHOOL CH AND BJARANG LAL V. ITO [1993] 203 ITR 456 (SC), THE COURT HELD AS FOLLOWS (PAGE 477) : SINCE THE BELIEF IS THAT OF THE INCOME-TAX OFFICER , THE SUFFICIENCY OF REASONS FOR FORMING THE BELIEF, IS NOT FOR THE COURT OF JUDGE B UT IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT THERE IN FACT EXISTED NO BELIEF OR T HAT THE BELIEF WAS NOT AT ALL A BONA FIDE ONE OR WAS BASED ON VAGUE, IRRELEVANT AND NON- SPECIFIC INFORMATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK INTO THE CONCLU SION ARRIVED BY THE INCOME-TAX OFFICER AND EXAMINE WHETHER THERE WAS ANY MATERIAL AVAILABLE ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE I NCOME-TAX OFFICER AND FURTHER WHETHER THAT MATERIAL HAD ANY RATIONAL CONNECTION O R A LIVE LINK FOR THE FORMATION OF THE REQUISITE BELIEF. 6.18 THUS, WHILE THE COURT WILL NOT JUDGE THE ADEQU ACY OF THE REASONS PROVIDED BY THE ASSESSING OFFICER, THE COURT MUST ASSESS WHE THER THE BELIEF IS BASED ON RELEVANT AND SPECIFIC INFORMATION THAT COULD LEAD T O SUCH A BELIEF. THIS WELL- ACCEPTED PRINCIPLE HAS FOUND ACCEPTANCE IN ITO V. L AKHMANI MEWAL DAS [1976] 103 ITR 437 (SC); CENTRAL PROVINCES MANGANESE ORE C O. LTD. V. ITO [1991] 191 ITR 662 (SC), SRI KRISHNA PVT. LTD. V. ITO [199 6] 221 ITR 538 (SC); [1996] 9 SCC 534. 6.19 WE HAVE PERUSED THE REASONS RECORDED BY THE AO . IN OUR OPINION THE REASONS RECORDED CANNOT BE REGARDED TO BE ARBITRARY , IRRATIONAL. THE REASONS REFER TO THE MATERIAL I.E. THE STATEMENT OF THE PAR TNER OF THE FIRM RECORDED U/S 132(4) DURING THE COURSE OF THE SEARCH. IT CLEARLY STATES THAT DURING THE COURSE OF SEARCH CONDUCTED ON POLAR GROUP OF CASES WHICH INCL UDED THE ASSESSEE, TWO LAPTOP COMPUTERS WERE FOUND AND SEIZED FROM THE POS SESSION OF THE PARTNER OF THE FIRM, SHRI SUNIL KUMAR AGARWAL. IT IS NOT DENI ED THAT SHRI SUNIL KUMAR AGARWAL IS A KEY PERSON OF POLAR GROUP. SUBSEQUENT LY, THE DEPARTMENT TOOK OUT PRINTOUT LP-1 TO LP-10. THESE PRINTOUTS CONTAINED ENTRIES IN RESPECT OF BUSINESS TRANSACTIONS AND LOAN TRANSACTIONS OF THE ASSESSEE GROUP WHICH WERE NOT ENTERED IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THIS IS ALSO A FACT THAT ALL THESE TRANSACTIONS WERE CASH TRANSACTIONS AND THE TRANSACTIONS APPEARING AT LP-1, LP-2, LP-9 & LP-10 RELATE TO LOAN TRANSACT IONS RELATING TO THE ASSESSEE. THE AO CLEARLY MENTIONED IN THE REASONS THAT SHRI S UNIL KUMAR AGARWAL HAS STATED IN HIS STATEMENT BEFORE THE DDIT THAT HE HAS TAKEN CASH LOAN FROM MARKET WHICH WERE NOT ENTERED IN THE BOOKS AND INTRODUCED THIS MONEY INTO VARIOUS BUSINESSES BELONGING TO DIFFERENT CONCERNS OF POLAR GROUP AS LOAN OR SHARE CAPITAL/CAPITAL. IN THE CASE OF THE ASSESSEE, WE N OTED THAT THE SHARE CAPITAL HAS BEEN INTRODUCED BY BOTH THE PARTNERS, SHRI SUNIL KU MAR AGARWAL AND SHRI ANIL KUMAR AGARWAL TO THE EXTENT OF RS.24.9 LACS AND RS. 56.5 LACS RESPECTIVELY. INTRODUCTION OF FRESH CAPITAL APPARENTLY DEMONSTRAT ES THAT THE ASSESSEE HAS INTRODUCED MONEY BORROWED BY THE ASSESSEE BY WAY OF CASH LOAN NOT ENTERED INTO THE BOOKS OF ACCOUNTS IN THE FORM OF CAPITAL O F THE PARTNERS. A PERSON OF ORDINARY PRUDENCE WOULD HAVE BELIEVED THAT INCOME H AS ESCAPED ASSESSMENT. AT THE TIME OF RECORDING OF THE REASONS, ONLY PRIMA FACIE SATISFACTION OF THE AO IS NECESSARY. THE COURT ALSO CANNOT INVESTIGATE THE A DEQUACY OR SUFFICIENCY OF THE REASONS WHICH WEIGHED WITH THE AO IN COMING TO THE BELIEF. IN OUR OPINION, THE REASONS RECORDED ARE RELEVANT AND HAS A BEARING ON THE INCOME OF THE ASSESSEE. THE AO IS NOT REQUIRED TO HAVE A PURELY SUBJECTIVE SATISFACTION. THE BELIEF MUST BE HELD IN GOOD FAITH. IT CANNOT MERELY BE PRETENC E AS HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF NARAYANAPPA (S .) V. CIT, 63 ITR 219 (SC). WE DO NOT AGREE WITH THE FINDING OF THE CIT( A). THE AO HAS NOT INFERRED THAT THE PREFERENCE SHARES OF RS. 54 LACS ISSUED DU RING THE ASSESSMENT YEAR WERE BOGUS. THE AO, WE FOUND, HAS INFERRED IN THE REASO NS THAT THE CAPITAL INTRODUCED BY THE PARTNERS ARE OUT OF UNDISCLOSED L OAN ARRANGED BY SHRI SUNIL KUMAR AGARWAL. WE NOTED FROM THE FINDING OF CIT(A) IN PARA 4.2 THAT SHRI SUNIL KUMAR AGARWAL IN HIS STATEMENT HAS ADMITTED T HAT POLAR GROUP OF COMPANIES HAS INFLATED THE BILLS TO SUPPRESS THE IN COME AND THE EXCESS AMOUNT PAID ON SUCH BILLS WAS RECEIVED BACK IN CASH AND TH E TOTAL AMOUNT OF SUCH SUPPRESSED INCOME SINCE 1988-89 UPTO 1998-99 WAS AB OUT RS. 16-17 CRORES. CIT(A) WAS OF THE OPINION THAT IN THE STATEMENT NOT HING HAS BEEN MENTIONED IN RESPECT OF THE CASH LOAN OBTAINED DURING THE IMPUGN ED ASSESSMENT YEAR AND THEREFORE DRAWING OF ANY LOAN OR CAPITAL DURING THE IMPUGNED ASSESSMENT YEAR IS NOT A BELIEF BUT A SUSPICION. IN OUR OPINION, AT T HE TIME OF INITIATION OF THE PROCEEDINGS THE AO HAS TO LOOK INTO WHETHER THERE I S INFORMATION OR MATERIAL RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION FOR THE ESCAPEMENT OF INCOME. THE SAID STATEMENT AS CONTENDED BY THE LD. D.R AND AS STATED BY US ABOVE CLEARLY PROVE THAT INFORMATION IN THIS STATEM ENT ALSO RELATE TO IMPUGNED ASSESSMENT YEAR. IT IS NOT DENIED BEFORE US THAT TH E ASSESSEE HAS INTRODUCED FRESH CAPITAL DURING THE YEAR. THIS IS AN UNDISPUT ED FACT THAT IN THIS CASE EVEN THOUGH SEARCH HAS TAKEN PLACE IN THE CASE OF THE AS SESSEE BUT THE AO HAS NOT WHISPERED EVEN A SINGLE WORD WHILE FRAMING THE ORIG INAL ASSESSMENT ABOUT THE SEARCH AND THE CONSEQUENCE THEREOF. THE AO HAS NOT CONSIDERED THE STATEMENT OF SHRI SUNIL KUMAR AGARWAL. THE ORDER PASSED IS S ILENT AS TO THE REASONS FOR THE CONCLUSION THE AO HAS DRAWN. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. VS. ACIT, 151 TAX MAN 41 (DEL.) HAS EXPLICITLY TAKEN THE VIEW THAT IN CASES WHERE THE O RDER PASSED BY THE STATUTORY AUTHORITY IS SILENT AS TO THE REASONS FOR THE CONCL USION IT HAS DRAWN, IT CAN WELL BE SAID THAT THE AUTHORITY HAS NOT APPLIED ITS MIND TO THE ISSUE BEFORE IT NOR FORMED ANY OPINION. THE PRINCIPLE THAT MERE CHANGE OF OPINION CANNOT BE THE BASIS FOR RE-OPENING OF COMPLETED ASSESSMENT WOULD BE APPLICABLE ONLY TO SITUATION WHERE THE AO HAS APPLIED HIS MIND AND TAK EN A CONSCIOUS DECISION ON A PARTICULAR MATTER IN ISSUE. IT WILL HAVE NO APPL ICATION WHERE THE ORDER OF ASSESSMENT DOES NOT ADDRESS ITSELF TO THE ASPECT WH ICH IS THE BASIS FOR RE-OPENING OF THE ASSESSMENT. IN OUR OPINION, THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION IN RAYMOND WOOLEN MILLS LTD VS. ITO, 2 36 ITR 34 IN WHICH THE HON'BLE SUPREME COURT HAS CLEARLY LAID DOWN THAT IN DETERMINING WHETHER COMMENCING OF RE-ASSESSMENT PROCEEDINGS WAS VALID, IT IS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD RE-OPEN THE CASE. SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT NEED TO BE CONSIDERED AT THIS STAGE. CIT(A), A S IT APPEARS TO US, HAS EXAMINED THE SUFFICIENCY OF THE MATERIAL AND ON THA T BASIS HAS QUASHED THE INITIATION OF THE RE-ASSESSMENT PROCEEDINGS. 6.20 WE NOTED DELHI HIGH COURT IN THE CASE OF AGR INVESTMENT LTD. VS. ADDL. CIT, 333 ITR 146 DEALT WITH THE SIMILAR ISSUE FOR WHICH THE LD. AR WAS DULY MADE AWARE OF DURING THE COURSE OF HEARING. IN THIS CASE, WE NOTED THAT THE DELHI HIGH COURT HAS TAKEN THE VIEW THAT THE REASON S RECORDED BY THE ASSESSING OFFICER AMPLY DEMONSTRATE THAT THE INCOME HAS ESCAP ED ASSESSMENT AND THEY HELD THAT THERE WAS APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER. DELHI HIGH COURT DID NOT QUASH THE NOTICE ISSUED U/ S. 148. WHILE HOLDING SO, THE DELHI HIGH COURT HAS DISCUSSED VARIOUS DECISIONS ON THIS ISSUE AS UNDER : THE QUESTIONS THAT EMERGE FOR CONSIDERATION ARE WH ETHER THERE HAS BEEN APPLICATION OF MIND OR CHANGE OF OPINION, WHETHER THE OBJECTION S HAVE BEEN PROPERLY DEALT WITH AND WHETHER THERE IS A MERE SUSPICION OR REASON TO BELI EVE. REGARD BEING HAD TO THE AFORESAID ISSUES, WE THINK IT APPROPRIATE TO REFER TO CERTAIN CITATIONS IN THE FIELD. IN RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC), WHILE DEALING WITH THE VALIDITY OF COMMENCEMENT OF REASSESSMENT PROCEEDING S UNDER SECTION 147 OF THE ACT, THE APEX COURT HAS HELD THAT THERE IS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY O R CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THAT STAGE. THE HIGH COURT OF GUJARAT IN PRAFUL CHUNILAL PATEL V. M. J. MAKWANA, ASST. CIT [1999] 236L1R 832 HAS OPINED THAT IN TERMS OF THE P ROVISION CONTAINED IN SECTION 147, THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PH RASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFIC ER HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT , HE CAN BE SAID TO HAVE A REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE WORDS 'REASON TO BELIEVE' CANNOT MEAN THAT THE ASSESSING OFFICER SHOULD HAVE, FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. THEY ONLY MEAN THAT HE FORMS A BELI EF FROM THE EXAMINATION HE MAKES AND IF HE LIKES FROM ANY INFORMATION THAT HE RECEIV ES. IF HE DISCOVERS OR FINDS OR SATISFIES HIMSELF THAT THE TAXABLE INCOME HAS ESCAP ED ASSESSMENT, IT WOULD AMOUNT TO SAYING THAT HE HAD REASON TO BELIEVE THAT SUCH INCO ME HAD ESCAPED ASSESSMENT. THE JUSTIFICATION FOR HIS BELIEF IS NOT TO BE JUDGED FR OM THE STANDARDS OF PROOF REQUIRED FOR COMING TO A FINAL DECISION. A BELIEF, THOUGH JUSTIF IED FOR THE PURPOSE OF INITIATION OF THE PROCEEDINGS UNDER SECTION 147, MAY ULTIMATELY STAND ALTERED AFTER THE HEARING AND WHILE REACHING THE FINAL CONCLUSION ON THE BASIS OF THE INTERVENING ENQUIRY. AT THE STAGE WHERE HE FINDS A CAUSE OR JUSTIFICATION TO BE LIEVE THAT SUCH INCOME HAS ESCAPED ASSESSMENT, THE ASSESSING OFFICER IS NOT REQUIRED T O BASE HIS BELIEF ON ANY FINAL ADJUDICATION OF THE MATTER. IN GANGA SARAN AND SONS P. LTD. V. ITO [1981] 130 L1R 1 (SC), IT HAS BEEN HELD THUS (PAGE 11) : 'IT IS WELL SETTLED AS A RESULT OF SEVERAL DECISION S OF THIS COURT THAT TWO DISTINCT CONDITIONS MUST BE SATISFIED BEFORE THE INCOME-TAX OFFICER CAN ASSUME JURISDICTION TO ISSUE NOTICE UNDER SECTION 147(A). FIRST, HE MUST HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND, SECONDLY, HE MUST HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT IS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IF EIT HER OF THESE CONDITIONS IS NOT FULFILLED, THE NOTICE ISSUED BY THE INCOME-TAX OFFI CER WOULD BE WITHOUT JURISDICTION. THE IMPORTANT WORDS UNDER SECTION 147 (A) ARE 'HAS REASON TO BELIEVE' AND THESE WORDS ARE STRONGER THAN THE WORD S 'IS SATISFIED'. THE BELIEF ENTERTAINED BY THE INCOME-TAX OFFICER MUST NOT BE A RBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BAS ED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE COURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE W EIGHED WITH THE INCOME- TAX OFFICER IN COMING TO THE BELIEF, BUT THE COURT CAN CERTAINLY-EXAMINE WHETHER THE REASONS ARE RELEVANT AND 'HAVE A BEARIN G ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERTAIN THE BELIEF BEF ORE HE CAN ISSUE NOTICE UNDER SECTION 147(A). IT THERE IS NO RATIONAL AND INTELLI GIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, N O ONE PROPERLY INSTRUCTED ON FACTS AND LAW COULD REASONABLY ENTERTAIN THE BELIEF , THE CONCLUSION WOULD BE INESCAPABLE THAT THE INCOME-TAX OFFICER COULD NOT H AVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WAS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS AND THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID.' IN BIRLA VXL LTD. VS. ASST. CIT (1996) 217 ITR 1, A DIVISION BENCH OF THE GUJARAT HIGH COURT HAS OPINED THUS (PAGE 3) : 'EXPLANATION 2 TO SECTION 147 OF THE ACT, AS APPENDED TO THE NEW LY SUBSTITUTED SECTION 147 MAKES CERTAIN PROVISIONS, WHERE, IN CER TAIN CIRCUMSTANCES, THE INCOME IS DEEMED TO HAVE ESCAPED ASSESSMENT GIVING JURISDICTI ON TO THE ASSESSING OFFICER TO ACT UNDER THE SAID PROVISION. ANOTHER REQUIREMENT WHICH IS NECESSARY FOR ASSUMING JURISDICTION IS THAT THE ASSESSING OFFICER SHALL RE CORD HIS REASONS FOR ISSUING NOTICE. THIS REQUIREMENT NECESSARILY POSTULATES THAT BEFORE THE ASSESSING OFFICER IS SATISFIED TO ACT UNDER THE AFORESAID PROVISIONS, HE MUST PUT IN WRITING AS TO WHY IN HIS OPINION OR WHY HE HOLDS BELIEF THAT INCOME HAS ESCAPED ASSE SSMENT. 'WHY' FOR HOLDING SUCH BELIEF MUST BE REFLECTED FROM THE RECORD OF REASONS MADE BY THE ASSESSING OFFICER. IN A CASE WHERE THE ASSESSING OFFICER HOLDS THE OPINION THAT BECAUSE OF EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE INCOME HAS ESCAPED ASSESSMEN T, THE REASONS RECORDED BY THE ASSESSING OFFICER MUST DISCLOSE THAT BY WHAT PROCES S OF REASONING HE HOLDS SUCH A BELIEF THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANC E HAS BEEN COMPUTED IN THE ORIGINAL ASSESSMENT. MERELY SAYING THAT EXCESSIVE LOSS OR DE PRECIATION ALLOWANCE HAS BEEN COMPUTED WITHOUT DISCLOSING REASONS WHICH LED THE A SSESSING AUTHORITY TO HOLD SUCH BELIEF, IN OUR OPINION, DOES NOT CONFER JURISDICTIO N ON THE ASSESSING OFFICER TO TAKE ACTION UNDER SECTIONS 147 AND 148 OF THE ACT. WE ARE ALSO OF THE OPINION THAT, HOWSOEVER WIDE THE SCOPE FOR TAKING ACTION UNDER SECTION 148 OF THE ACT BE, IT DOES NOT CONFER JURISDICTION ON A CHANGE OF OPINION ON THE INTERPRETATION OF A P ARTICULAR PROVISION FROM THAT EARLIER ADOPTED BY THE ASSESSING AUTHORITY. FOR COMING TO THE CONCLUSION WHETHER THERE HAS BEEN EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR THERE H AS BEEN UNDER ASSESSMENT AT A LOWER RATE OR FOR APPLYING THE OTHER PROVISIONS OF EXPLANATION 2, THERE MUST BE MATERIAL THAT HAS NEXUS TO HOLD OPINION CONTRARY TO WHAT HAS BEEN EXPRESSED EARLIER. THE SCOPE OF SECTION 147 OF THE ACT IS NOT FOR REVIEWING ITS EARLIER ORDER S UO MOTU IRRESPECTIVE OF THERE BEING ANY MATERIAL TO COME TO A DIFFERENT CONCLUSION APART FROM JUST HAVING SECOND THOUGHTS ABOUT THE INFERENCES DRAWN EARLIER. (EMPHASIS ADDED) IN SHEO NARAIN ]AISWAL V. ITO [1989J 176 I1R 352 (PATNA), IT WAS HELD THAT REASSESSMENT PROCEEDINGS CAN BE INITIATED UNDER SEC TION 147(A) OF THE ACT IF THE INCOME-TAX OFFICER HAS REASON TO BELIEVE THAT THERE HAS BEEN ESCAPEMENT OF INCOME AND THAT THE SAID INCOME ESCAPED ASSESSMENT BY REASON O F THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT PERIOD OR YEAR. BOTH CONDITIONS ARE CONDITIONS PRECEDENT FOR THE ASSUMPTION OF JURISDICTION UNDER SECTION 148 OF THE ACT. IN PHOOL CHAND BAJRANG LAL V. ITO [1993J 203 I1R 456, THE APEX COURT HAS HELD THUS (PAGE 477) : FROM A COMBINED REVIEW OF THE JUDGMENTS OF THIS CO URT, IT FOLLOWS THAT AN INCOME-TAX OFFICER ACQUIRES JURISDICTION TO REOPEN AN ASSESSME NT UNDER SECTION 147(A) READ WITH SECTION 148 OF THE INCOME-TAX ACT, 1961, ONLY IF ON THE BASIS OF SPECIFIC, RELIABLE AND RELEVANT INFORMATION COMING TO HIS POSSESSION SUBSE QUENTLY, HE HAS REASONS, WHICH HE MUST RECORD, TO BELIEVE THAT, BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT DURING THE CONCLUDED ASSESSMENT PROCEEDI NGS, ANY PART OF HIS INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAS ESCAP ED ASSESSMENT. HE MAY START REASSESSMENT PROCEEDINGS EITHER BECAUSE SOME FRESH FACTS HAD COME TO LIGHT WHICH WERE NOT PREVIOUSLY DISCLOSED OR SOME INFORMATION W ITH REGARD TO THE FACTS PREVIOUSLY DISCLOSED COMES INTO HIS POSSESSION WHICH TENDS TO EXPOSE THE UNTRUTHFULNESS OF THOSE FACTS. IN SUCH SITUATIONS, IT IS NOT A CASE OF MERE CHANGE OF OPINION OR THE DRAWING OF A DIFFERENT INFERENCE FROM THE SAME FACTS AS WERE EAR LIER AVAILABLE BUT ACTING ON FRESH INFORMATION. SINCE THE BELIEF IS THAT OF THE INCOME-TAX OFFICER, THE SUFFICIENCY OF REASONS FOR FORMING THE BELIEF IS NOT FOR THE COURT TO JUDGE BU T IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT THERE IN FACT EXISTED NO BELIEF I OR THAT THE BELIEF WAS NOT AT ALL A BONA FIDE ONE O R WAS BASED ON VAGUE, IRRELEVANT AND NON-SPECIFIC INFORMATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK INTO THE CONCLUSION ARRIVED AT BY THE INCOME-TAX O FFICER AND EXAMINED WHETHER THERE WAS ANY MATERIAL AVAILABLE ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE INCOME-TAX OFFICER AND FURTHER WHETHE R THAT MATERIAL HAD ANY RATIONAL CONNECTION. OR A LIVE LINK FOR THE FORMATION OF THE REQUISITE BELIEF ... ( EMPHASISE SUPPLIED)) IN ANANT KUMAR SAHARIA V. CIT [1998] 232 ITR 533 (GAUHATI), IT WAS HELD AS FOLLOWS (PAGE :539) : 'THE BELIEF IS THAT OF THE ASSESSING OFFICER AND TH E RELIABILITY OR CREDIBILITY OR FOR THAT MATTER THE WEIGHT THAT WAS ATTACHED TO THE MATERIALS NATURALLY, DEPENDS ON THE JUDGMENT OF THE ASSESSING OFFICER. THIS COURT IN EXERCISE OF POWER UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA CANNOT GO INTO THE SUFFICIENCY OR ADEQUACY OF THE MATERIALS. AFTER ALL THE ASSESSING OFFICER ALONE IS ENTRUSTED TO ADMINISTER THE IMPUGNED ACT AND IF THERE IS PRIMA F ACIE MATERIAL AT THE DISPOSAL OF THE ASSESSING OFFICER THAT THE INCOME C HARGEABLE TO INCOME-TAX ESCAPED ASSESSMENT THIS COURT IN EXERCISE OF POWER UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA SHOULD REFRAIN FROM EXERCISIN G THE POWER. IN THE INSTANT ALSO, THE CASE OF THE PETITIONER WAS FAIRLY CONSIDERED AND THEREAFTER THE ABOVE DECISION IS TAKEN.' (UNDERLINING IS OURS) IN BOMBAYPHARMA PRODUCTS V. ITO (1999] 237 ITR 614 (MP), IT WAS HELD AS FOLLOWS (PAGE 616) : 'IT IS ALSO ESTABLISHED THAT THE NOTICE ISSUED UN DER SECTION 148 OF .,''. THE ACT SHOULD FOLLOW THE REASONS RECORDED BY THE INCOME-TAX OFFIC ER, FOR REOPENING OF THE ASSESSMENT AND SUCH REASONS MUST HAVE A MATERIAL BEARING ON TH E QUESTION OF ESCAPEMENT OF INCOME BY THE ASSESSEE FROM ASSESSMENT BECAUSE OF H IS FAILURE OR OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. WHETHER SUCH REASONS ARE SUFFICIENT OR NOT, IS NOT A MATTER TO BE DECIDED BY THE COURT. BUT THE EXISTENCE OF THE B ELIEF IS SUBJECT TO SCRUTINY IF THE ASSESSEE SHOWS CIRCUMSTANCES THAT THERE WAS NO MATERIAL BEFORE THE INCOME-TAX OFFICER TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT.' (EMPHASIS ADDED) IN H. A. NANJI AND CO. V. ITO [1979] 120 ITR 593 (CAL), IT HAS BEEN HELD THAT AT THE TIME OF ISSUE OF NOTICE OF THE REASSESSMENT, IT IS NOT INCUMBENT ON THE INCOME-TAX OFFICER TO COME TO A FINDING THAT INCOME HAS ESCAPE D ASSESSMENT BY REASON OF THE OMISSION OR FAILURE OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. IT HAS BEEN FURTHER HELD THAT THE BELIEF WHICH THE INCOME-TAX OFFICER ENTERTAINS AT THAT STAGE IS A TENTATIVE BEL IEF ON THE BASIS OF THE MATERIALS BEFORE HIM WHICH HAVE TO BE EXAMINED AND SCRUTINISED ON SU CH EVIDENCE AS MAY BE AVAILABLE IN THE PROCEEDINGS FOR REASSESSMENT. THE DIVISION B ENCH HELD THAT THERE MUST BE SOME GROUNDS FOR THE REASONABLE BELIEF THAT THERE HAS BE EN A NONDISCLOSURE OR OMISSION TO FILE A TRUE OR CORRECT RETURN BY THE ASSESSEE RESUL TING IN ESCAPEMENT OF ASSESSMENT OR IN UNDERASSESSMENT. SUCH BELIEF MUST BE IN GOOD FAI TH, AND SHOULD NOT BE A MERE PRETENCE OR CHANGE OF OPINION ON INFERENTIAL FACTS OR FACTS EXTRANEOUS OR IRRELEVANT TO THE ISSUE AND THE MATERIAL ON WHICH THE BELIEF IS B ASED MUST HAVE A RATIONAL CONNECTION OR LIVE LINK OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. IN N. D. BHATT, LAC OF I. T. V. I. B. M. WORLD TRADE CORPORATION [1995] 216 ITR 811 (BORN), IT HAS BEEN HELD THUS (PAGE 823) : 'IT IS ALSO WELL-SETTLED THAT THE REASONS FOR REOPE NING ARE REQUIRED TO BE RECORDED BY THE ASSESSING AUTHORITY BEFORE ISSUING ANY NOTICE UNDER SECTION 148 BY VIRTUE OF THE PROVISIONS OF SECTION 148(2) AT THE RELEVANT TIME. ONLY THE REASON SO RECORDED CAN BE LOOKED AT FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED UNDER SECTION 148.' IN HINDUSTAN LEVER LTD. V. R. B. WADKAR, ASST. CIT (NO.1) [2004] 268 ITR 332 (BORN), A DIVISION BENCH HAS OPINED THUS (PAGE 338) : ' ... THE REASONS ARE REQUIRED TO BE READ AS THEY W ERE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS P ERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOW ED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFIC ER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPE AK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH TO THE CON CLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNE D ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FO R HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHO ULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENES S. THE REASONS RECORDED MUST DISCLOSE HIS MIND. REASONS ARE THE MANIFESTATI ON OF MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE SELF-EXPLAN ATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROV IDE THE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE ASSESSING OFFICER, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON REC ORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS, NOT D ISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT AS SESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EV IDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLU DED ASSESSMENT.' (UNDERLINING IS OURS) IN ASST. CIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500 (SC), IT HAS BEEN RULED OUT(PAGE 511) : 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING O FFICER TO ASSESS OR, RE- ASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WOR D REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUST IFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNO W OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HA VE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSI ON CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED- THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF TH E 'ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE P UBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE P ROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CON DITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS RE QUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMEN T OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE A SSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION. (EMPHASIS SUP PLIED ) IN THIS CONTEXT, WE MAY REFER WITH PROFIT TO A DIVI SION BENCH DECISION OF THIS COURT IN SFIL STOCK BROKING LTD. [2010] 325 ITR 285 , WHEREIN THE BENCH WAS DEALING WITH THE VALIDITY OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE BENCH REPRODUCED THE INITIAL ISSUANCE OF NOTICE AND THEREAFTER REFERRED TO THE REASONS FOR ISSUE OF NOTICE UNDER SECTION 148 WHICH WAS PROVIDED TO THE ASSESSEE. THEREAFTER, THE BENCH REFERRED TO THE DEC ISIONS IN CIT V. ATUL JAIN [2008] 299 ITR 383 (DELHI), ASST. CIT V. RAJESH JHA VERI STOCK BROKERS P. LTD. [2007] 291 ITR 500 (SC), JAY BHARAT MARUTI LTD. VS. CIT [2010] 324 ITR 289; 223 CTR 269 (DEL) AND CIT V. BATRA BHATTA CO. [2010] 321 ITR 526; 174 TAXMAN 444(DELHI) AND EVENTUALLY HELD THUS (PAG E 290): IN THE PRESENT CASE, WE FIND THAT THE FIRST SENTENC E OF THE SO- CALLED REASONS RECORDED BY THE ASSESSING OFFICER IS MERE INFORMATION RECEIVED FROM THE DEPUTY DIRECTOR OF INCOME-TAX (IN VESTIGATION). THE SECOND SENTENCE IS A DIRECTION GIVEN BY THE VERY SA ME DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION) TO ISSUE A NOTICE UND ER SECTION 148 AND THE THIRD SENTENCE AGAIN COMPRISES OF A DIRECTION B Y THE ADDITIONAL COMMISSIONER OF INCOME-TAX TO INITIATE PROCEEDINGS UNDER SECTION 148 IN RESPECT OF CASES PERTAINING TO THE RELEVANT WARD . THESE THREE SENTENCES ARE FOLLOWED BY THE FOLLOWING SENTENCE, W HICH IS THE CONCLUDING PORTION OF THE SO-CALLED REASONS : THUS, I HAVE SUFFICIENT INFORMATION IN MY POSSESSI ON TO ISSUE NOTICE UNDER SECTION 148 IN THE CASE OF M/S. SFIL STOCK BROKING LTD. ON THE BASIS OF REASONS RECORDED AS AB OVE. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFI CER REFERRED TO THE INFORMATION AND THE TWO DIRECTIONS AS REASONS ON THE BASIS OF WHICH HE WAS PROCEEDING TO ISSUE NOTICE UNDER SECTION 148. WE AR E AFRAID THAT THESE CANNOT BE THE REASONS FOR PROCEEDING UNDER SECTION 147/148 OF THE SAID ACT. THE FIRST PART IS ONLY AN INFORMATION AND THE SECOND AND THE THIRD PA RT OF THE BEGINNING PARAGRAPH OF THE SO-CALLED REASONS ARE MERE DIRECTIONS. FROM THE SO-CALLED REASONS, IT IS NOT AT ALL DISCERNIBLE AS TO WHETHER THE ASSESSING OFFI CER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTLY ARRIVED AT A BELIEF T HAT, ON THE BASIS OF THE MATERIAL WHICH HE HAD BEFORE HIM, INCOME HAD ESCAPED ASSESSM ENT. CONSEQUENTLY, WE FIND THAT THE TRIBUNAL HAS ARRIVED AT THE CORRECTION ON FACTS. THE LAW IS WELL SETTLED. THERE IS NO SUBSTANTIAL QUESTION OF LAW WHICH ARISE S FOR OUR CONSIDERATION.(EMPHASIS IS OURS) AT THIS JUNCTURE, IT IS PROFITABLE TO REFER TO THE AUTHORITY IN GKN DRIVE SHAFTS (INDIA) LTD. V. ITO [2003} 259 ITR 19 (SC) ; [2003] 179 ITR 11 (SC )WHEREIN THEIR LORDSHIPS OF THE APEX COURT HAVE HELD THUS (PAGE 20 ) ; 'WE SEE NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER UNDER CHALLENGE. HOWEVER WE CLARIFY THAT WHEN A NOTICE UN DER SECTION 14 OF THE INCOME-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE A RETURN AND IF HE SO DESIRES, T O SEEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, TH E NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE AS SESSING OFFICER IS BOUND I DISPOSE OF THE SAME BY PASSING A SPEAKING O RDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE P ROCEEDINGS, THE ASSESSING OFFICER HAS TO DISPOSE OF THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSME NT IN RESPECT OF THE ABOVE SAID FIVE ASSESSMENT YEARS. IN SARTHAK SECURITIES CO. P. LTD. VS. ITO (WRIT PE TITION NO.6087 OF 2010 DECIDED ON OCTOBER 18, 2010)(2010) 329 ITR 110 (DEL HI), A DIVISION BENCH OF THIS COURT, AFTER REPRODUCING SECTION 147 OF THE ACT AND RELYING ON CERTAIN DECISIONS IN THE FIELD, EXPRESSED THE VIEW AS FOLLOWS (PAGE 122): THE OBTAINING FACTUAL MATRIX HAS TO BE TESTED ON T HE ANVIL OF THE AFORESAID PRONOUNCEMENT OF LAW. IN THE CASE AT HAND , AS IS EVINCIBLE, THE ASSESSING OFFICER WAS AWARE OF THE EXISTENCE OF FOUR COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION . BOTH THE ORDERS CLEARLY EXPOSIT THAT THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION BY THE INVESTIGATION WING AND THERE IS NO MENTION THAT THESE COMPANIES ARE FICTITIOUS COMPANIES. NEITHER THE RE ASONS IN THE NOTICE NOR THE COMMUNICATION PROVIDING REASONS REMOTELY IN DICATE INDEPENDENT APPLICATION OF MIND. TRUE IT IS AT THAT STAGE, IT IS NOT NECESSARY TO HAVE ESTABLISHED FACT OF ESCAPEMENT OF INCOME BUT WHAT IS NECESSARY IS THAT THERE IS RELEVANT MATERIAL ON WH ICH A REASONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. TO E LABORATE THE CONCLUSIVE PROOF IS NOT GERMANE AT THIS STAGE BUT T HE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUNDATION OR PLATFORM OF PR UDENCE WHICH A REASONABLE IS REQUIRED TO APPLY. AS IS MANIFEST FR OM THE PERUSAL OF THE SUPPLY OF REASONS AND THE ORDER OF REJECTION OF OBJ ECTION, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY. TH EIR EXISTENCE IS NOT DISPUTED. WHAT IS MENTIONED IS THAT THESE COMPANIES WERE USED AS CONDUITS. IN THAT VIEW OF THE MATTER, THE PRINCIPLE LAID DOWN IN CIT V. LOVELY EXPORTS (P) LTD. (2009) 319 ITR (ST) 5 (SC) GETS SQUARELY ATTRACTED. THE SAME HAS NOT BEEN REFERRED TO WHILE PASSING THE ORDER OF REJECTION. THE ASSESSEE IN HIS OBJECTIONS HAD CLEAR LY STATED THAT THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE-COMPANY THROUGH BANKING CHANNEL. THE IDENT ITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTANC ES, IT WOULD NOT BE APPROPRIATE TO REQUIRE THE ASSESSEE TO GO THROUG H THE ENTIRE GAMUT OF PROCEEDINGS. IT IS TOTALLY UNWARRANTED. THE PRESENT FACTUAL CANVAS HAS TO BE SCRUTINIZED ON THE TOUCHSTONE OF THE AFORESAID ENUNCIATION OF LAW. IT IS WORTH NOTING TH AT THE LEARNED COUNSEL FOR THE PETITIONER HAS SUBMITTED WITH IMMENSE VEHEMENCE THA T THE PETITIONER HAD ENTERED INTO CORRESPONDENCE TO HAVE THE DOCUMENTS BUT THE ASSESS ING OFFICER TREATED THEM AS OBJECTIONS AND MADE A COMMUNICATION. HOWEVER, OFFIC ER TREATED THEM AS OBJECTIONS AND MADE A COMMUNICATION. HOWEVER, ON A SCRUTINY OF THE ORDER, IT IS PERCEIVABLE THAT THE AUTHORITY HAS PASSED THE ORDER DEALING WITH THE OBJECTIONS IN A VERY CAREFUL AND STUDIED MANNER. HE HAS TAKEN NOTE OF THE FACT THAT THE TRANSACTIONS INVOLVING RS. 27LAKHS MENTIONED IN THE TABLE IN ANNEXURE P-2 CONS TITUTE FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODA TION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOME. THE ASSESSING OF FICER HAS REFERRED TO THE SUBSEQUENT INFORMATION AND ADVERTED TO THE CONCEPT OF TRUE AND FULL DISCLOSURE OF FACTS. IT IS ALSO NOTICEABLE THAT THERE WAS SPECIFI C INFORMATION RECEIVED FROM THE OFFICE OF THE DIRECTOR OF INCOME-TAX (INV-V) AS REGARDS TH E TRANSACTIONS ENTERED INTO BY THE ASSESSEE-COMPANY WITH A NUMBER OF CONCERNS WHICH HA D MADE ACCOMMODATION ENTRIES AND THEY WERE NOT GENUINE TRANSACTIONS. AS WE PERCEIVE, IT IS NEITHER A CHANGE OF OPINION NOR DOES IT CONVEY A PARTICULAR INTERPRE TATION OF A SPECIFIC PROVISION WHICH WAS DONE IN A PARTICULAR MANNER IN THE ORIGINAL ASS ESSMENT AND SOUGHT TO BE DONE IN A DIFFERENT MANNER IN THE PROCEEDING UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEVE HAS BEEN APPROPRIATELY UNDERSTOOD BY THE AS SESSING OFFICER AND THERE IS MATERIAL ON THE BASIS OF WHICH THE NOTICE WAS ISSUE D. AS HAS BEEN HELD IN PHOOL CHAND BAJRANG LAL [1993] 203 ITR 456 (SC), BOMBAY PHARMA PRODUCTS [1999] 237 ITR 614 (MP) AND ANANT KUMAR SAHARIA [1998] 232 ITR 533 (GAUHATI), THE COURT, IN EXERCIS E OF JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PERTAINING TO SUFFICIENCY OF REASONS FOR FORMATION OF THE BELIEF, CANNOT INTERFE RE. THE SAME IS NOT TO BE JUDGED AT THAT STAGE. IN SFIL STOCK BROKING LTD. [2010] 325 ITR 285 (DELHI), THE BENCH HAS INTERFERED AS IT WAS NOT DISCERNIBLE WHETHER THE AS SESSING OFFICER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTLY ARRIVED A T A BELIEF ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM THAT THE INCOME HAD ESCAPED ASSESSMENT. IN OUR CONSIDERED OPINION, THE DECISION RENDERED THEREIN IS NOT APPLI CABLE TO THE FACTUAL MATRIX IN THE CASE AT HAND. IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. [2010] 329 ITR LLE (DELHI), THE DIVISION BENCH HAD NOTED THAT CERTAIN COMPANIES WERE USED A~ CONDUITS BUT THE ASSESSEE HAD, AT THE STAGE OF ORIGINAL ASSESSMENT, FURNISHED THE NAMES OF THE COMPANIES WITH WHICH IT HAD ENTERED INTO TRANSACTIO NS AND THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION AND FURTHER THE REASON RECORDED DOES NOT INDICATE APPLICATION OF MIND. THAT APART, THE EXISTENCE OF T HE COMPANIES WAS NOT DISPUTED AND THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE M ADE TO THE ASSESSEE-COMPANY THROUGH THE BANKING CHANNEL. REGARD BEING HAD TO TH E AFORESAID FACT SITUATION, THE COURT HAD INTERFERED. THUS, THE SAID DECISION IS AL SO DISTINGUISHABLE ON THE FACTUAL SCORE. 6.21 IN THE CASE OF ITO VS. PURUSHOTTAM DAS BANGUR AND A NOTHER, 224 ITR 362 (SC) AS RELIED HEAVILY BY LD. DR , WE N OTED THAT THE APEX COURT HELD AS UNDER:- HELD, REVERSING THE DECISION OF THE HIGH COURT, THA T THE LETTER OF THE DEPUTY DIRECTOR REFERRED TO THE STATEMENT CONTAININ G FINANCIAL INFORMATION REGARDING THE COMPANY IN QUESTION WHICH WAS ANNEXED TO THE LETTER. THE STATEMENT CONTAINED INFORMATION DERIVED FROM THE BO MBAY STOCK EXCHANGE DIRECTORY INDICATING THAT DURING THE PERIOD 1965 70, THE COMPANY HAD PROSPERED, THAT THE BOOK VALUE PER EQUITY SHARE HAD RISEN FROM RS.318.55 FOR THE YEAR ENDING DECEMBER 31, 1965, TO RS.401 FOR TH E YEAR ENDING DECEMBER, 31, 1970, THE EARNING PER SHARE HAD RISEN FROM RS.8 .37 PER TO RS.44/- PER SHARE AND THAT THE DIVIDEND PERCENTAGE HAD ALSO RIS EN FROM 2 PER CENT TO 10 PER CENT FOR THE SAME PERIOD. ON THE BASIS OF THE I NFORMATION CONTAINED IN THE LETTER OF THE DEPUTY DIRECTOR AND THE DOCUMENTS ANN EXED TO IT, THE INCOME-TAX OFFICER COULD HAVE HAD REASON TO BELIEVE THAT THE F AIR MARKET VALUE OF THE SHARES WAS FAR MORE THAN THE SALE PRICE AND THAT TH E MARKET QUOTATIONS FROM THE CALCUTTA STOCK ASSOCIATION SHOWN BY THE RESPOND ENT AT THE TIME OF ORIGINAL ASSESSMENT WERE MANIPULATED ONES AND THAT AS A RESU LT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IT COULD NOT BE SAID TH AT THE INFORMATION THAT WAS CONTAINED IN THE LETTER WAS NOT DEFINITE INFORMATIO N, AND COULD NOT BE ACTED UPON BY THE INCOME-TAX OFFICER FOR TAKING ACTION UN DER SECTION 147(B) OF THE ACT. MERELY BECAUSE THE NOTICE WAS SENT ON THE NEXT DAY AFTER RECEIPT OF THE LETTER, THIS DID NOT MEAN THAT THE INCOME-TAX OFFIC ER DID NOT APPLY HIS MIND TO THE INFORMATION CONTAINED IN THE SAID LETTER. ON TH E BASIS OF THE FACTS AND INFORMATION CONTAINED IN THE SAID LETTER, THE INCOM E-TAX OFFICER, WITHOUT ANY FURTHER INVESTIGATION, COULD HAVE FORMED THE OPINIO N THAT THERE WAS REASON TO BELIEVE THAT INCOME OF THE RESPONDENT CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE NOTICE UNDER SECTION 147(B) WAS VAL ID. 6.22 WE NOTED THAT THE APEX COURT IN THE CASE OF ITO VS. PURUSHOTTAM DAS BANGUR AND ANOTHER, 224 ITR 362 (SC) HAS SETTL ED THE LAW ON THIS ISSUE THAT AT THE TIME OF INITIATION OF THE PROCEEDINGS U /S. 147, THE ASSESSING OFFICER SHOULD HAVE THE MATERIAL RELEVANT TO THE ASSESSEE. THE INFORMATION RECEIVED FROM THE INVESTIGATION WING IS ALSO MATERIAL IF IT CONTA INS THE INFORMATION REGARDING THE ASSESSEE. THE ASSESSING OFFICER AT THE TIME OF RECORDING OF THE REASONS/FORMATION OF BELIEF IS NOT SUPPOSED TO COUN TER THE EVIDENCE OR MATERIAL COLLECTED BY HIM WITH THE ASSESSEE. EVEN THE SOURCE OF THE MATERIAL CANNOT BE ASKED BY THE ASSESSEE. IF THE MATERIAL OR THE INFOR MATION BELONGS TO THE ASSESSEE, IN OUR OPINION, THE ASSESSING OFFICER HAS A BONA FI DE BELIEF TO RECORD THE REASONS. THE COURT CANNOT LOOK INTO THE SUFFICIENCY OF THE MATERIAL HELD BY THE ASSESSING OFFICER FOR THE FORMATION OF THE BELIEF. ONCE THE PROCEEDINGS ARE INITIATED, THE ONUS IS ON THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS ESCAPED THE INCOME AND FOR THAT HE HAS TO GIVE THE HEARING TO THE ASSESSEE AND GIVE ALL THE MATERIAL AND EVIDENCE COLLECTED BY HIM SO THAT THE ASSESSEE MAY CONTRADICT THE SAME. IF THE ASSESSING OFFICER DOES NOT HAVE THE MATERIAL, THE REASONS CANNOT BE REGARDED TO BE BONA FIDE AND THE INITIATION OF THE PROCEEDINGS CAN BE QUASHED. IF THE INITIATION IS VALID AND SUBS EQUENTLY, THE ASSESSEE PROVES THAT THERE IS NO ESCAPEMENT OF INCOME, THE ASSESSME NT SO FRAMED COULD BE QUASHED/CANCELLED. WE NOTED THAT IN THE DECISIONS R ELIED ON BY THE LEARNED AR, THE DECISION OF THE HONBLE SUPREME COURT REPORTED IN 224 ITR 362 (SC) WHICH HAS SETTLED THE POSITION OF LAW HAS NOT BEEN DISCUS SED. THE LAW PRONOUNCED BY THE SUPREME COURT IS THE LAW OF LAND AND IS BINDING ON ALL THE COURTS WHAT TO TALK OF THIS BENCH OF THE TRIBUNAL. THE DECISION OF APEX COURT IN THE CASE OF JOHRI LAL (HUF) VS. CIT (SUPRA), SHEO NATH SINGH VS . AAC (SUPRA) AND GANGA SARAN & SONS (P) LTD. VS. ITO (SUPRA) ALSO, IN OUR OPINION, WILL NOT ASSIST THE ASSESSEE AS IN THE CASE OF THE ASSESSEE, THE ASSESS ING OFFICER WHILE RECORDING THE REASONS HAS THE RELEVANT MATERIAL TO FORM THE BELIE F FROM WHICH A PERSON OF ORDINARY PRUDENCE COULD FORM AS HELD BY US IN EARLI ER PARAGRAPH. 7. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) IN RESPECT OF ALL THE ASSESSEES ON THIS ISSUE AND HOLD THAT THE AO HAS R EASON TO BELIEVE TO INITIATE THE RE-ASSESSMENT PROCEEDINGS. SINCE WE NOTED IN TH E PRECEEDING PARAGRAPH THE CIT(A) HAS NOT GIVEN ANY FINDING ON THE GROUND OF THE ASSESSEE THAT INITIATION OF THE PROCEEDINGS ARE BARRED BY LIMITATIONS, THIS ISSUE WILL AUTOMATICALLY GET SURVIVED BEFORE CIT(A). 8. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE ALLOWED. 9. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF I TAT RULES, 1963 BY PUTTING ON THE NOTICE BOARD OF THE BENCH AT KOLKA TA ON 12.00.2014. SD/- (MAHAVIR SINGH) JUDICIAL MEMBER SD/- (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : KOLKATA DATED : 12.09.2014 *SSL&A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES