High Court of Punjab and Haryana
Commissioner of Income-tax, Jalandhar
v.
Smt. Paramjit Kaur
M.M.KUMAR AND AJAY KUMAR MITTAL, JJ.
INCOME-TAX REFERENCE NO. 18 OF 1998
August 6, 2007
Section 147 of the Income tax Act, 1961 -
Income escaping assessment - General - Assessment year 1989 - 90 - Whether
Assessing Officer in reassessment proceedings has to act on basis of ‘reasons
to believe’ and not on basis of ‘reasons to suspect’ - Held, yes -Assessing
Officer had initiated reassessment proceedings on basis of information received
from department’s survey circle that a demand draft got prepared by assessee,
was not accounted in her books of account - Assessing Officer had not examined
and corroborated information so received before recording his own satisfaction
of escaped income and initiating reassessment proceedings - Whether Assessing
Officer had acted only on basis of suspicion and it had failed to incorporate
material and his satisfaction for reopening assessment and, therefore, issuance
of notice under section 148 for reassessment proceedings was not valid. - Held,
yes
The assessee filed her original return declaring nil income. The Assessing Officer on receiving the information from department’s survey wing that assessee prepared a demand draft, which was not accounted in her books of account, issued a notice under section 148. The Assessing Officer after recording reasons framed assessment under section 143(3). On appeal, the first appellate authority upheld the validity of notice under section 148 but set aside the assessment on the addition made by the Assessing Officer and remitted the matter to him to frame a fresh assessment after allowing reasonable opportunity of being heard to her. A second appeal, the Tribunal held that since the Assessing Officer had failed to incorporate material and its satisfaction for reopening the assessment, the same was invalid.
Section 147 empowers the Assessing Officer to assess or re-assess income
chargeable to tax if he has reasons to believe that the income for any
assessment year has escaped assessment. The power conferred under this section
is very wide, but at the same time it cannot be stated to be a plenary power.
The Assessing Officer can assume jurisdiction under the said provision provided
there is sufficient material before him. He cannot act on the basis of his whim
and fancy, and the existence of material must be real. Further, there must be
nexus between the material and escapement of income. The Assessing Officer must
record reasons showing due application of mind before taking recourse to
reassessment proceedings. The Assessing Officer can assume jurisdiction for
re-assessment proceedings provided he has reasons to believe but the same
cannot be taken recourse to on the basis of reasons to suspect. (
It was undisputed that the Assessing Officer had initiated reassessment
proceedings on the basis of information received from the survey circle that
the assessee had got prepared a demand draft for a sum of Rs. 83,040/- which
was not accounted in the books of account of the assessee. The Assessing
Officer had not examined and corroborated the information received from the
survey circle before recording his own satisfaction of escaped income and
initiating reassessment proceedings. The Assessing Officer had, thus, acted
only on the basis of suspicion and it could not be said that the same was based
on belief that the income chargeable to tax had escaped income. The Assessing
Officer has to act on the basis of ‘reasons to believe’ and not on ‘reasons to
suspect’. The Tribunal had, thus, rightly concluded that the Assessing Officer
had failed to incorporate the material and his satisfaction for reopening the
assessment and, therefore, the issuance of notice under section 148
re-assessment proceedings was not valid. (