Full Judgment Text
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PETITIONER:
INCOME TAX OFFICER, I WARD, DIST, VI, CALCUTTA & ORS.
Vs.
RESPONDENT:
LAKHMANI MEWAL DAS
DATE OF JUDGMENT30/03/1976
BENCH:
KHANNA, HANS RAJ
BENCH:
KHANNA, HANS RAJ
GOSWAMI, P.K.
CITATION:
1976 AIR 1753 1976 SCR (3) 956
1976 SCC (3) 757
CITATOR INFO :
F 1977 SC 429 (10)
R 1986 SC1857 (7)
RF 1987 SC1897 (32)
ACT:
Income Tax Act, 1961-S. 148-Scope of-Words & Phrases-
"Reason to believe" meaning of ’rational nexus’-What
postulates.
HEADNOTE:
In March 1967, after obtaining the satisfaction of the
Commissioner the appellant issued a notice under s. 148 of
the Income Tax Act, 1961 stating that he had reason to
believe that the respondent’s income chargeable to tax for
the assessment year 1958-59 had escaped assessment. The
respondent replied that the I.T.O. had no competence or
jurisdiction to reopen the assessment under s. 147 of the
Act on a mere change of opinion. Since there was no reply
from the appellant, the respondent moved the High Court for
a writ. The High Court held that the conditions precedent
for the exercise of jurisdiction by the Income Tax Officer
were not fulfilled because the report submitted by the
Income Tax Officer to the Commissioner under s. 147(a) was
defective. On appeal to this Court it was contended that the
High Court was not right in holding that the Income Tax
Officer’s report was defective.
Dismissing the appeal,
^
HELD: The High Court was right in holding that the
material before the Income Tax Officer could not have led to
the formation of the belief that the income of the assessee
had escaped assessment because of his failure or omission to
disclose fully and truly all material facts. [965H]
1. (a) The two conditions required to be satisfied
before the Income Tax Officer issued a notice under s. 148
of the Income Tax Act are that he must have reason to
believe (i) that the income chargeable to tax had escaped
assessment and (ii) that such income had escaped assessment
by reason of the omission or failure on the part of
assessee, to disclose fully and truly material facts
necessary for assessment for that year. Both these
conditions must co-exist in order to confer jurisdiction on
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the Income Tax Officer. Further the Income Tax Officer
should record his reasons before initiating proceedings
under s. 148(2); before issuing the notice after the expiry
of four years from the end of the relevant assessment year,
the Commissioner should be satisfied on the reasons recorded
by the Income Tax Officer that it was a fit case for the
issue of such notice. [962C-D]
(b) The duty cast upon the assessee does not extend
beyond making a true and full disclosure of the primary
facts. It is then for the Income Tax Officer to draw the
correct inference from the primary facts. Where his
inference subsequently appears to be erroneous, mere change
of opinion with regard to that inference would not justify
initiation of action for reopening the assessment. [962F-G]
(c) The grounds or reasons leading to the formation of
the belief under s. 147(a) must have a material bearing on
the question of escapement of income. Once there exist
reasonable grounds for the Income Tax Officer to form the
above belief, that would be sufficient to clothe him with
jurisdiction to issue notice. While the sufficiency of
grounds which induce the Income Tax Officer to act is not
justiciable, it is open to the assessee to contend that the
Income Tax Officer did not hold the belief that there was
such non-disclosure. The expression "reason to believe" does
not mean a purely subjective satisfaction on the part of the
Income-Tax Officer. It is open to the Court to examine
whether the reasons for the formation of the belief have a
rational connection with or relevant bearing on the
formation of the belief and are not extraneous or irrelevant
for the purpose of the section. [962H]
957
Chhugamal Rajpal v. S. P. Chaliha 79 I.T.R. 603,
Calcutta Discount Co. Ltd. v. Income-Tax Officer, 41 I.T.R.
191 and S. Narayanappa & Ors. v. Commissioner of Income Tax
63 I.T.R. 219 followed.
In the instant case the grounds given by the Income Tax
Officer for reopening the assessment were (i) that the three
persons whose names were mentioned in the list of creditors,
were known name lenders and (ii) that another person shown
as a creditor of the assessee had since confessed that he
was doing only name lending. The first ground mentioned by
the Income Tax Officer could not have led to the formation
of the belief that the income of the respondent had escaped
assessment for that year because of his failure or omission
to disclose fully and truly all material facts. The High
Court was justified in excluding that ground from
consideration. [963D-E]
As regards the second ground there is nothing to show
that the confession of another person related to a loan to
the assessee and not to someone else. There is no indication
as to when the confession was made and whether it related to
the assessment year sought to be re-opened. To infer from
that confession that it related to the period of assessment
and that it pertained to the loan shown to have been
advanced to the assessee would be far-fetched. [964G]
2(a). Rational connection postulates that there must be
a direct nexus or live link between the material coming to
the notice of the Income Tax Officer and the formation of
his belief that there had been escapement of income of the
assessee from assessment in the particular year. It is not
any and every material, howsoever vague and indefinite or
distant, remote and far-fetched which would warrant the
formation of the belief relating to escapement of the income
of the assessee from assessment. The fact that the words
"definite information" in s. 34 of 1922 Act before its
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amendment in 1948 do not find a place in s. 147 would not
lead to the conclusion that action could now be taken for
reopening assessment even if the information was wholly
vague, indefinite, far-fetched and remote. [965B-D]
(b) The powers of the Income Tax Officer to reopen
assessment, though wide, are not plenary. The words are
"reason to believe" and not "reason to suspect". The
provisions of the Act depart from the normal rule that there
should be finality about orders made in judicial and quasi-
judicial proceedings. It is, therefore, essential that
before such action is taken the requirement of the law
should be satisfied. [965E-F]
In the instant case the live link or close nexus
between the material before the Income Tax Officer and the
belief which he was to form regarding the escapement of the
income was missing or at any rate the link was too tenuous
to provide a legally sound basis for reopening the
assessment. [G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2526 of
1972.
Appeal from the Judgment and Order dated the 13th
January, 1972 of the Calcutta High Court in Matter No. 326
of 1967.
G. C. Sharma and S. P. Nayar, for the Appellant.
D. Pal, B. Sen, (Mrs.) Leila Seth, P. K. Pal, S. R.
Agarwala and Parveen Kumar for the Respondent.
The Judgment of the Court was delivered by
KHANNA, J. This appeal on certificate is against the
Full Bench judgment of the Calcutta High Court whereby on
petition under article 226 of the Constitution of India
filed by the respondent that court by majority quashed
notice under section 148 of the Income-tax Act, 1961
(hereinafter referred to as the Act) issued by appeallant
No. 2 (Income-tax Officer E Ward, Hundi Circle, Calcutta)
(hereinafter referred to
958
as the appellant) for the purpose of reopening assessment of
the income of the respondent for the assessment year 1958-
59.
The respondent was assessed for the assessment year
1958-59 under section 23(3) of the Indian Income-tax Act,
1922 on June 14, 1960. His total income was assessed to be
Rs. 37,872. While making the assessment the Income-tax
Officer allowed deduction of a sum of Rs. 15,991 by way of
expenses claimed by the respondent. The expenses included
Rs. 10,494/4 As/3 Pies by way of interest. According to the
respondent, he produced through his authorised
representative all books of accounts, bank statements and
other necessary documents in connection with the return. On
March 14, 1967 the respondent received notice dated March 8,
1967 issued by the appellant under section 148 of the Act
stating that the appellant had reason to believe that the
respondent’s income which was chargeable to tax for the
assessment year 1958-59 had escaped assessment within the
meaning of section 147 of the Act and that the notice was
being issued after obtaining the necessary satisfaction of
the Commissioner of Income-tax. The respondent was called
upon to submit within 30 days from the date of the service
of the notice a return in the prescribed form of his income
for the assessment year 1958-59. On May 2, 1967 the
respondent through his lawyer stated that there was no
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material on which the appellant had reason to believe that
the respondent’s income had escaped assessment and,
therefore, the condition precedent for the assumption of
jurisdiction by the appellant had not been satisfied. The
appellant was said to have no competence or jurisdiction to
re-open the assessment under section 147 of the Act on a
mere change of opinion. The appellant was also called upon
to furnish all the materials on which he had reason to
believe that income had escaped assessment. As, according to
the respondent, there was no satisfactory response from the
appellant, he filed petition under article 226 of the
Constitution for quashing the impugned notice.
It was denied in the affidavit on behalf of the
appellant that all materials relevant and necessary for the
assessment of the respondent’s income for the assessment
year 1958-59 had been produced before the Income-tax Officer
at the time of the original assessment. It was further
stated:
"Subsequent to the assessment for the assessment
year 1958-59, it was discovered, inter alia, that some
of the loans shown to have been taken and interests
alleged to have been paid thereon by the petitioner
during the relevant assessment year were not genuine.
The Income-tax Officer had reason to believe and bona
fide believed that the said alleged loans and the
interest alleged to have been paid thereon are not
genuine. If necessary, I crave leave to produce before
the hon’ble Judge hearing the application, the relevant
records on the basis of which the said Income-tax
Officer had reason to believe that the income of the
petitioner escaped assessment as aforesaid at the
hearing of the application."
During the pendency of the proceedings the High Court
directed that a copy of the report made by the appellant to
the Commissioner of
959
Income-tax for obtaining latter’s sanction under section 147
be produced. The report was accordingly produced, and the
same reads as under:
"There are hundi loan credits in the name of
Narayan singh Nandalal, D. K. Naraindas, Bhagwandas
Srichand, etc., who are known name-lenders, and also
hundi loan credit in the name, Mohansingh Kanayalal,
who has since confessed he was doing only name-lending.
In the original assessment these credits were not
investigated in detail. As the information regarding
the bogus nature of these credits is since known,
action under section 147 (a) is called for to reopen
the assessment and assess these credits as the
undisclosed income of the assessee. The assessee is
still claiming that the credits are genuine in the
assessment proceedings for 1962-63. Commissioner’s
sanction is solicited to reopen the assessment for
1958-59, under section 147(a)."
All the three Judges who constituted the Full Bench found
that the assessee was not being charged with omission to
disclose all facts: he was charged for having made an untrue
disclosure because the assessee had stated that he had
received certain sums of money from certain persons as loans
when, in fact, he had not received any sum at all from these
persons. It was also stated by the assessee at the time of
the original assessment that he had paid interest to certain
persons when, in fact, he had not, if the information
received later was true. The duty of the assessee, it was
held, was not only to make a full disclosure of all material
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facts, his duty was also to make a true disclosure of facts
and not to mislead the assessing officer by disclosing
certain things which did not represent facts. The High Court
accordingly held that once an assessee infringes this rule,
any subsequent discovery of fact by the assessing officer
which would raise a resonable belief in his mind that the
assessee had not made a true and correct disclosure of the
facts and had thereby been responsible for escapement of his
income from assessment would attract section 147 of the Act.
Two of the learned Judges, A. K. Mukherjea and S. K.
Mukherjea JJ., however, took the view that the conditions
precedent for the exercise of jurisdiction by the Income-tax
Officer under section 147 of the Income-tax Act were not
fulfilled in the case as the report submitted by the Income-
tax Officer to the Commissioner for sanction under section
147(a) was defective. The defects in the report, in the
opinion of the High Court, were the same as had been pointed
out by this Court in the case of Chhugamal Rajpal v. S. P.
Chaliha.(1) The Commissioner, while according permission for
taking action under section 147, it was observed, acted
mechanically because the Commissioner had not expressly
stated that he was satisfied that this was a fit case for
the issue of notice under section 148. As against the
majority, Sabyasachi Mukherji J. held that notice under
section 148 of the Act was valid and did not suffer from any
infirmity. It was
960
also observed that the Commissioner of Income-tax had not
acted improperly in giving sanction.
In the result, by majority the High Court quashed the
notice issued by the appellant to the respondent.
In appeal before us Mr. Sharma on behalf of the
appellants has assailed the judgment of the majority of the
learned Judges in so far as they have held that the report
submitted by the Income-tax Officer to the Commissioner of
Income-tax for sanction was defective. As against that, Dr.
Pal on behalf of the assessee-respondent has canvassed for
the correctness of the view taken by the majority regarding
the defective nature of the report. Dr. Pal has in his own
turn assailed the finding of all the three learned Judges of
the High Court in so far as they have held that the assessee
was being charged with omission to disclose true facts.
Contention has also been advanced by Dr. Pal that the
material on the basis of which the Income-tax Officer
initiated these proceedings for reopening the assessment did
not have a rational connection with the formation of the
belief that the assessee had not made a true disclosure of
the facts at the time of the original assessment.
Before dealing with the points of controversy, it would
be useful to reproduce the relevant provisions of the Act.
Sections 147 and 148 which deal with income escaping
assessment and issue of notice where income has escaped
assessment read as under:
"147. Income escaping assessment.-If-
(a) the Income-tax Officer has reason to believe
that, by reason of the omission or failure on the part
of an assessee to make a return 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 year, 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
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believe that income chargeable to tax has escaped
assessment for any assessment year,
he may, subject to the provisions of section 148 to 153,
assess or ressess such income or recompute the loss or the
depreciation allowance, as the case may be, for the
assessment year concerned (hereinafter in sections 148 to
153 referred to as the relevant assessment year).
Explanation 1.-For the purposes of this section,
the following shall also be deemed to be cases where
income chargeable to tax has escaped assessment,
namely:-
(a) where income chargeable to tax has been under
assessed; or
961
(b) where such income has been assessed at too low
a rate; or
(c) where such income has been made the subject of
excessive relief under this Act or under the Indian
Income-tax Act, 1922 (XI of 1922); or
(d) where excessive loss or depreciation allowance
has been computed.
Explanation 2.-Production before the Income-tax
Officer of account books or other evidence from which
material evidence could with due diligence have been
discovered by the Income-tax Officer will not
necessarily amount to disclosure within the meaning of
this section.
148. Issue of notice where income has escaped
assessment.-
(1) Before making the assessment, reassessment or
recomputation under section 147, the Income-tax Officer
shall serve on the assessee a notice containing all or
any of the requirements which may be included in a
notice under sub-section (2) of section 139; and the
provisions of this Act shall, so far as may be, apply
accordingly as if the notice were a notice issued under
that sub-section.
(2) The Income-tax Officer shall, before issuing
any notice under this section, record his reason for
doing so."
Sub-section (1) of section 149 prescribes the time limit for
notice and reads as under:
"(1) No notice under section 148 shall be issued"
(a) in cases falling under clause (a) of section
147-
(i) for the relevant assessment year, if eight
years have elapsed from the end of that year, unless
the case falls under sub-clause (ii);
(ii) for the relevant assessment year, where eight
years, but not more than sixteen years, have elapsed
from the end of that year, unless the income chargeable
to tax which has escaped assessment amounts to or is
likely to amount to rupees fifty thousand or more for
that year;
(b) in cases falling under clause (b) of section
147, at any time after the expiry of four years from
the end of the relevant assessment year."
Section 151 pertains to the sanction for issue of notice and
reads as under:
"151. Sanction for issue of notice.-(1) No notice
shall be issued under section 148 after the expiry of
eight years from the end of the relevant assessment
year, unless the Board is satisfied on the reasons
recorded by the Income-tax Officer that it is a fit
case for the issue of such notice.
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962
(2) No notice shall be issued under section 148
after the expiry of four years from the end of the
relevant assessment year, unless the Commissioner is
satisfied on the reasons recorded by the Income-tax
Officer that it is a fit case for the issue of such
notice."
The provisions of sections 147 to 153 of the Act correspond
to those of section 34 of the Indian Income-tax Act, 1922.
There have been some points of departure from the old law,
but it is not necessary for the purpose of the present case
to refer to them.
It would appear from the perusal of the provisions
reproduced above that two conditions have to be satisfied
before an Income-tax Officer acquires jurisdiction to issue
notice under section 148 in respect of an assessment beyond
the period of four years but within a period of eight years
from the end of the relevant year, viz., (1) the Income-tax
Officer must have reason to believe that income chargeable
to tax has escaped assessment, and (2) he must have reason
to believe that such income has escaped assessment by reason
of the omission or failure on the part of the assessee (a)
to make a return under section 139 for the assessment year
to the Income-tax Officer, or (b) to disclose fully and
truly material facts necessary for his assessment for that
year. Both these conditions must co-exist in order to confer
jurisdiction on the Income-tax Officer. It is also
imperative for the Income-tax Officer to record his reasons
before initiating proceedings as required by section 148(2).
Another requirement is that before notice is issued after
the expiry of four years from the end of the relevant
assessment years, the Commissioner should be satisfied on
the reasons recorded by the Income-tax Officer that it is a
fit case for the issue of such notice. We may add that the
duty which is cast upon the assessee is to make a true and
full disclosure of the primary facts at the time of the
original assessment. Production before the Income-tax
Officer of the account books or other evidence from which
material evidence could with due diligence have been
discovered by the Income-tax Officer will not necessarily
amount to disclosure contemplated by law. The duty of the
assessee in any case does not extend beyond making a true
and full disclosure of primary facts. Once he has done that
his duty ends. It is for the Income-tax Officer to draw the
correct inference from the primary facts. It is no
responsibility of the assessee to advise the Income-tax
Officer with regard to the inference which he should draw
from the primary facts. If an Income-tax Officer draws an
inference which appears subsequently to be erroneous, mere
change of opinion with regard to that inference would not
justify initiation of action for reopening assessment.
The grounds or reasons which lead to the formation of
the belief contemplated by section 147(a) of the Act must
have a material bearing on the question of escapement of
income of the assessee from assessment because of his
failure or omission to disclose fully and truly all material
facts. Once there exist reasonable grounds for the Income-
tax Officer to form the above belief, that would be
sufficient to clothe him with jurisdiction to issue notice.
Whether the grounds are adequate or not is not a matter for
the court to investigate. The
963
sufficiency of grounds which induce the Income-tax Officer
to act is, therefore, not a justiciable issue. It is, of
course, open to the assessee to contend that the Income-tax
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Officer did not hold the belief that there had been such
non-disclosure. The existence of the belief can be
challenged by the assessee but not the sufficiency of
reasons for the belief. The expression "reason to believe"
does not mean a purely subjective satisfaction on the part
of the Income-tax Officer. The reason must be held in good
faith. It cannot be merely a pretence. It is open to the
court to examine whether the reasons for the formation of
the belief have a rational connection with or a relevant
bearing on the formation of the belief and are not
extraneous or irrelevant for the purpose of the section. To
this limited extent, the action of the Income-tax Officer in
starting proceedings in respect of income escaping
assessment is open to challenge in a court of law [see
observations of this Court in the cases of Calcutta Discount
Co. Ltd. v. Income-tax Officer and S. Narayanappa & Ors. v.
Commissioner of Income-tax while dealing with corresponding
provisions of the Indian Income-tax Act, 1922].
Keeping the above principles in view, we may now turn
our attention to the facts of the present case. Two grounds
were mentioned in the report made by the Income-tax Officer
for reopening the assessment of the assessee respondent with
a view to show that his income had been under-assessed
because of his failure to disclose fully and truly material
facts necessary for the assessment. One was that Mohansingh
Kanayalal, who was shown to be one of the creditors of the
assessee, had since confessed that he was doing only name-
lending. The other ground was that Narayansingh Nandalal, D.
K. Naraindas, Bhagwandas Srichand, etc., whose names too
were mentioned in the list of the creditors of the assessee,
were known name-lenders. So far as the second ground is
concerned, neither the majority of the Judges of the High
Court nor the learned Judge who was in the minority relied
upon that ground. Regarding that ground, the learned Judge
who was in the minority observed that no basis had been
indicated as to how it became known that those creditors
were known namelenders and when it was known. The majority
while not relying upon that ground placed reliance upon the
case of Chhugamal Rajpal (supra). In that case the Income-
tax Officer while submitting a report to the Commissioner of
Income-tax for obtaining his sanction with a view to issue
notice under section 148 of the Act stated:
"During the year the assessee has shown to have
taken loans from various parties of Calcutta. From
D.I.’s Inv. No. A/P/Misc. (5) D.I./63-64/5623 dated
August 13, 1965, forwarded to this office under C.I.T.,
Bihar and Orissa, Patna’s letter No. Inv. (Inv.) 15/65-
66/1953-2017 dated Patna September 24, 1965 it appears
that these persons are name-lenders and the
transactions are bogus. Hence, proper investigation
regarding these loans is necessary. The names of some
of the persons from whom money is alleged to have been
taken on loan on hundis are:
1. Seth Bhagwan Singh Sricharan
964
2. Lakha Singh Lal Singh
3. Radhakissen Shyam Sunder
The amount of escapement involved amounts to Rs.
1,00,000."
In dealing with that report this Court observed:
"From the report submitted by the Income-tax
Officer to the Commissioner, it is clear that he could
not have had reasons to believe that by reason of the
assessee’s omission to disclose fully and truly all
material facts necessary for his assessment for the
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accounting year in question, income chargeable to tax
has escaped assessment for that year, nor could it be
said that he, as a consequence of information in his
possession, had reasons to believe that the income
chargeable to tax has escaped assessment for that year.
We are not satisfied that the Income-tax Officer had
any material before him which could satisfy the
requirements of either clause (a) or clause (b) of
section 147. Therefore he could not have issued a
notice under section 148".
Reference to the names of Narayansingh Nandalal, D. K.
Naraindas, Bhagwandas Srichand, etc., in the report of the
Income-tax Officer to the Commissioner of Income-tax in the
instant case does not stand on a better footing than the
reference to the three names in the report made by the
Income-tax Officer in the case of Chuugamal Rajpal. We
would, therefore, hold that the second ground mentioned by
the Income-tax Officer, i.e., reference to the names of
Narayansingh Nandalal, D. K. Naraindas, Bhagwandas Srichand,
etc., could not have led to the formation of the belief that
the income of the respondent assessee chargeable to tax had
escaped assessment for that year because of the failure or
omission of the assessee to disclose fully and truly all
material facts. All the three learned Judges of the High
Court, in our opinion, were justified in excluding the
second ground from consideration.
We may now deal with the first ground mentioned in the
report of the Income-tax Officer to the Commissioner of
Income-tax. This ground relates to Mohansingh Kanayalal,
against whose name there was an entry about the payment of
Rs. 74 Annas 3 as interest in the books of the assessee,
having made a confession that he was doing only name-
lending. There is nothing to show that the above confession
related to a loan to the assessee and not to someone else,
much less to the loan of Rs. 2,500 which was shown to have
been advanced by that person to the assessee-respondent.
There is also no indication as to when that confession was
made and whether it relates to the period from April 1, 1957
to March 31, 1958 which is the subject-matter of the
assessment sought to be reopened. The report was made on
February 13, 1967. In the absence of the date of the alleged
confession, it would not be unreasonable to assume that the
confession was made a few weeks or months before the report.
To infer from that confession that it relates to the period
from April 1, 1957 to March
965
31, 1958 and that it pertains to the loan shown to have been
advanced to the assessee, in our opinion, would be rather
far-fetched.
As stated earlier, the reasons for the formation of the
belief must have a rational connection with or relevant
bearing on the formation of the belief. Rational connection
postulates that there must be a direct nexus or live link
between the material coming to the notice of the Income-tax
Officer and the formation of his belief that there has been
escapement of the income of the assessee from assessment in
the 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 adequacy of the
material and substitute its own opinion for that of the
Income-tax Officer on the point as to whether action should
be initiated for reopening assessment. At the same time we
have to bear in mind that it is not any and every material,
howsoever vague and indefinite or distant, remote and far-
fetched, which would warrant the formation of the belief
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relating to escapement of the income of the assessee from
assessment. The fact that the words "definite information"
which were there in section 34 of the Act of 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 cannot be taken for reopening assessment even if the
information is wholly vague, indefinite, far-fetched and
remote. The reason for the formation of the belief must be
held in good faith and should not be a mere pretence.
The powers of the Income-tax Officer to reopen
assessment though wide are not plenary. The words of the
statute are "reason to believe" and not "reason to suspect".
The reopening of the assessment after the lapse of many
years is a serious matter. The Act, no doubt, contemplates
the reopening of the assessment if grounds exist for
believing that income of the assessee has escaped
assessment. The underlying reason for that is that instances
of concealed income or other income escaping assessment in a
large number of cases come to the notice of the income-tax
authorities after the assessment has been completed. The
provisions of the Act in this respect depart from the normal
rule that there should be, subject to right of appeal and
revision, finality about orders made in judicial and quasi-
judicial proceedings. It is, therefore, essential that
before such action is taken the requirements of the law
should be satisfied. The live link or close nexus which
should be there between the material before the Income-tax
Officer in the present case and the belief which he was to
form regarding the escapement of the income of the assessee
from assessment because of the latter’s failure or omission
to disclose fully and truly all material facts was missing
in the case. In any event, the link was too tenuous to
provide a legally sound basis for reopening the assessment.
The majority of the learned Judges in the High Court, in our
opinion, were not in error in holding that the said material
could not have led to the formation of the belief that the
income of the assessee respondent had escaped assessment
because of his failure or omission to disclose fully and
truly all material facts. We would, therefore, uphold the
view of the majority and dismiss the appeal with costs.
P.B.R. Appeal dismissed.
966