[ad_1]
In Synfonia Tradelinks Private Limited v. Income Tax Officer, Ward-22(4), the Court reiterated the principles governing the initiation of proceedings under Section 147 of the IT Act as under:
i. The reasons which lead to the formation of opinion or belief that the assessee’s income chargeable to tax has escaped assessment should be inextricably connected. In other words, the reasons for the formation of opinion should have a rational connection with the formation of the belief that there has been an escapement of income chargeable to tax [See: ITO v. Lakhmani Mewal Das, 1976 3 SCC 757]
ii. The expression “reason to believe” is stronger than the word “satisfied”. The belief should be based on material that is relevant and cogent. [See: Ganga Saran & Sons Pvt. Ltd. v. ITO, 1981 3 SCC 143].
(ii)(a) The assessing officer should have reasons to believe that the taxable income has escaped assessment. The process of reassessment cannot be triggered based on a mere suspicion. The expression “reason to believe” which is found in Section 147 of the IT Act does not have the same connotation as “reason to suspect”. The order recording reasons should fill this chasm. The material brought to the knowledge of the assessing officer should have nexus with the formation of belief that the taxable income of the assessee escaped assessment; the link being the reasons recorded, in that behalf, by the assessing officer.
iii. The A.O. is mandatorily obliged to record reasons before issuing notice to the assessee under Section 148(1) of the IT Act. This is evident from the bare perusal of sub-section (2) of Section 148 of the IT Act.
iv. No notice can be issued under Section 148 of the IT Act by the A.O. after the expiry of four years from the end of the relevant Assessment Year (AY) unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner arrives at a satisfaction based on the reasons recorded by the A.O. that it is a fit case for issuance of a notice under Section 148 of the IT Act. [See: Section151(1) of the IT Act].
v. The limitation for issuance of notice under Section 148 of the IT Act as prescribed under Section 149 of the IT Act commences from the date of its issuance while the time limit for passing the order of assessment, reassessment, computation and re-computation as prescribed under Section 153 of the IT Act commences from the date of service [See: R.K. Upadhyay v. Shanab Bhai P. Patel, (1987) 3 SCC 96].
A jurisdictional error would occur, which can be corrected by a writ court, if reasons to believe are based on grounds that are either arbitrary and/or irrational. [See: Sheo Nath Singh v. Appellate ACIT, Calcutta (1972) 3 SCC 234].”
[ad_2]
Source link
