| SooperKanoon Citation | sooperkanoon.com/76033 |
| Court | Income Tax Appellate Tribunal ITAT Agra |
| Decided On | Jan-15-2008 |
| Judge | R Garg, Vice- |
| Reported in | (2008)113ITD99Agra |
| Appellant | K.G. Hotel Pvt. Ltd., 1967 |
| Respondent | Acit |
Accountant Member correct in quashing the assessment or is the action of the Judicial Member correct in upholding the assessment? 2. The assessee company came into existence on 16.10.89. The Assessment year involved in this case is A.Y. 1991-92. As required Under Section 139 of the Act it was to file the return of income before a specified date. It did not file the same. The Assessing Officer issued notice Under Section 142(1) on 8.1.1992 to file it within 30 days. The assessee filed the return of income beyond the said 30 days on 31.12.1993 declaring net agriculture income of Rs. 1,42,567/-. The return of income is thus a belated return. The Assessing Officer proceeding on the said return of income passed the assessment order Under Section 143(3) on 30.3.1994 at the total income of Rs. 23,72,180/-. The said assessment order was set aside by the CIT(A) with the observations that "The return was filed beyond the period prescribed under Section 139 and the A.O. was required to regularise the return. The return being invalid could not have been acted upon and in order to set right the infirmity the assessment has to be restored to his file for framing fresh assessment after regularising the return as all the proceedings taken up consequent upon filing of an invalid return also become in valid." 3. The Assessing Officer, however, issued notice Under Section 148 by recording the following reasons: The assessee has failed to file its return of income for A.Y. 91-92 within statutory time limit i.e., 31.3.93. The return filed by the assessee for A.Y. 91-92 on 31.12.93 being an invalid return, has therefore been filed. On perusal of records, it is found that the assessee company has raised fresh share application money amounting to Rs. 21,91,900/- and unsecured loan to the extent of Rs. 2,62,000/- and source of which are unexplained at the hands of assessee company to the total of such deposits amounts to Rs. 24,53,900/-.
Keeping in view of above facts, I have, therefore, reason to belief that income of Rs. 24,53,900/- has escaped assessment for A.Y. 91-92. Hence, it is established that it is a fit case to issue notice Under Section 148 read with Section 147 of the I. T Act.
4. In response to this notice, the assessee opted the return of income filed originally on 31.12.1993, to be a return of income filed in compliance to the notice issued Under Section 148 of the Act. An assessment on the basis of these proceedings was made by Assessing Officer. It Is upheld by CIT(A) and is subject matter of this appeal before the Tribunal.
5. Before the Tribunal the assessee challenged the issue of reopening notice and the contention for the assessee has been that the Assessing Officer is not right in mentioning in the reasons recorded on 6.12.1995, that the assessee has failed to file its return of income within the statutory time limit i.e., 31.3.1993 and that the return filed on 31.12.1993 was an invalid return and therefore, the same has been filed. It is because an assessment order thereon was framed Under Section 143(3) on 30.3.1994; that there was no reason to believe that income of Rs. 24,53,900/ was escaped for the A.Y. 1991-92; that in fact, all the information with true and full facts have already been provided by the assessee while filing the return of income on 31.12.93; that if it were an invalid return of income, the Assessing Officer should not have acted upon such invalid return of income and framed the assessment order Under Section 143(3) of the Act on 30.3.1994; that in the assessment order, it is nowhere mentioned that income escaped to be assessed, rather, in the assessment originally made and that made after re-opening Under Section 148, the income was assessed at the same income; that the original assessment order was set aside to regularise the invalid return of income on the basis of which the original assessment order was framed; that notice Under Section 148 issued was thus at the behest of the higher authorities and therefore cannot be valid in view of the judgment of Supreme Court in the case of ITO v.Lakhman Mewal Das 103 ITR 437; that after completion of the assessment order no fresh information was gathered by the Assessing Officer to draw an inference that the income has escaped to assessment; that there was no omission or failure on the part of the assessee to disclose full and true material maters, necessary for framing fresh assessment, that as mar as such, the action on the part of the Assessing Officer was illegal and bad in law in view of the decision of Calcutta High Court in the case of Santosh Debi Band v. ITO 81 ITR 552; that any procedural defect cannot amount to get jurisdiction as is held by Hon'ble Madras High Court in the case of CIT v. T.R. Rajkumari 96 ITR 68; that after framing the assessment order, the Assessing Officer cannot say that there was escapement of income as field in the Supreme Court decision in Gemini Leather Stores AIR 1975 SC 1268; that the reasons recorded by the Assessing Officer on 6.12.95 were false reasons in so far as it mentions that the return of income originally filed on 31.12.93 was filed and he had reason to believe that an income of Rs. 24,53,900/- escaped the assessment for the assessment year 1991-92 and on the basis of such false reasons, the Assessing Officer cannot get jurisdiction to issue notice Under Section 148; that the valid course of action for the Assessing Officer was that he should have framed assessment order Under Section 144 of the I.T. Act, when he noted that it was an invalid return of income; that as the CIT(A) allowed the appeal of the assessee by restoring the matter to the file of the Assessing Officer, mentioning "the appeal is consequently to be taken as allowed for statistical purposes", the assessee had no grievance to have filed an appeal before the Tribunal. On the other hand, the contention of the revenue had been that the matter was restored to the Assessing Officer by the CIT(A) in order to set right the infirmity and to frame fresh assessment. In such circumstances, if the assessee was aggrieved then he should have filed second appeal before the Tribunal against the direction given by the CIT(A) and that the Assessing Officer has acted according to the directions given by the CIT(A); and that the return being invalid the Assessing Officer was justified in issuing notice as there was escapement or income as the assessment made thereon was invalid.
6. There struck a -difference of opinion between the two members of the Tribunal. The learned Accountant Member held the proceedings as invalid and quashed the order. He held that the fact that return filed on 31.12.93 for the A.Y. 1991-92 was beyond the statutory time limit and therefore, invalid and hence, it was filed, is patently wrong and distorted recording of facts by AC); that actually the return was not filed, but on the basis of that invalid return, order Under Section 143(3) was passed by the Assessing Officer; that there was no difference in the income original assessed and subsequently assessed by issuing notice Under Section 148 of the Act and therefore, the Assessing Officer further erred in mentioning that he has reasons to believe that income of Rs. 24,53,900/ has escaped assessment in the assessment year 1991-92; that in fact, there was no reason before the Assessing Officer to believe that income escaped assessment for the A.Y. 1991-92; and that the notice issued Under Section 148 on false recording of reason to believe, could not be held a valid proceedings due to which the subsequent action was also invalid and illegal. He also noted that the fresh assessment order was made Under Section 143(3) read with Section 251 of the I.T. Act, 1961, meaning thereby, the fresh assessment order has been made at the behest and on the directions of the CIT(A) was not permissible in view of the M.P. High Court in the case of Yeshwant Talkies v. CIT 157 ITR 103(MP), the Patna High Court in the case of Sheo Narain Jaiswal and Ors. v. ITO 176 ITR 352. Referring to ITO v. Lakhmani Mewal Das 103 ITR 437 he also noted that the reason to believe was not in good faith as there was no new material or information, on which the Assessing Officer could form a belief and it is a false recording on the fact that the A.O. has filed the belated return. Noticing the Jurisdictional High Court of Allahabad in the case of Girdhar Gopal Gulati, 269 ITR 45, he held that once the assessment was proposed to be made Under Section 143(3) of the Act, it is presumed that all the necessary enquiries have been done and the Assessing Officer cannot issue notice Under Section 148 after the assessment has been made unless there is deliberate concealment or there is information that income had escaped assessment and that therefore, the notice issued Under Section 148 was passed only on change of opinion, hence invalid.
7. The learned Judicial Member opined otherwise. She held that the proceedings, were valid. According to her the original assessment was set aside with certain direction as a result of the appeal of the assessee against the addition on merits; that this set aside order stands on record and has not been challenged as such nor upset by any higher forum and therefore there is no assessment with respect to the assessee and thus the income in the year, under consideration has not been assessed and as such, it is materially...and...significantly different from cases where different view is attempted to be taken on same facts and thus unsettle a settled position; that the action is neither barred by limitation nor by judgments where the principle has been laid that different view on same facts is not appropriate; that the reasons have been recorded and in absence of perversity, the sufficiency and adequacy thereof is not open to challenge; that it was only a facile argument that re-opening was on the direction of the CIT(A); that it was not even a case of change of opinion on same facts; that the word information is of wide connotation and can include the direction / finding or observation given by the CIT(A) the appeal since once having noticed that a return filed was beyond the period the only course of action open was to restore it for regularizing the same and this direction has been carried out and has not been challenged; that what is relevant fact is that there must be a live link of nexus with the re-opening; that it is also not a case where the Assessing Officer has considered the material and formed his opinion in the first round which stood on record and in the second round AO has sought to change the same and disturb the earlier finding with a different view subsequently on same facts; that the assessment order in the first round was set aside for regularizing the same as the return was filed beyond the time prescribed under the Act and as a result of this the income brought to tax in the present proceedings was not assessed at all. The cases of Chatturam Hariram Limited v. CIT 27 ITR 709(SC); CIT v. Narsee 40 ITR 307(SC); Kaneshwar v. State of Bihar 17 MR 388 (SC); Esthuri v. ITO 41 ITR 539 (SC) and CIT v. Bidhu 63 ITR 278 are referred to support her opinion. The facts in the cases of Yeshwant I alkies, 157 ITR 103, Sheo Narain Jaiswal and Ors. 176 ITR 352, the case of 103 ITA 437; ITO v. Lakhamani Mewal Das, were found diametrically distinct.
Accordingly, in the aforementioned facts and circumstances, she deemed it fit and proper to restore the issue to the file of the Assessing Officer with the direction that he may decide the same in accordance with law by way of a speaking order and giving the assessee an opportunity of being heard.
8. The contentions of the ld. Counsel of the assessee Shri Y.K. Kapoor are - 1) that the assessee having complied with the notice Under Section 142 of the Act issued by the Assessing Officer filed the return, submitted to the jurisdiction of AO who framed assessment and, therefore, the Department is precluded to say (sic) was invalid and that there was deemed waiver by the Department by the issue of notice Under Section 143(2) and making assessment. Reference is invited to the decision of Calcutta High Court in the case of Smt. Santosh Bedi Baid v. ITO 81 ITR 552 (Cal.), Punjab High Court in the case of Bibi Gurdarshan Kaur v. CIT 51 ITR 1 (Pun.), Special Bench decision of the Tribunal, in the case of Smt. Kirshna Verma v. ACIT 107 ITD 1 (SB), 54, 110; 2); that there is no information or a live link between the information and the reasons recorded and consequently the re assessment is bad in view of the decision of the Supreme Court in the case of ITO v. Lakhmani Mewal Das 103 ITR 437 (SC); 3) that the re opening was not by the Assessing Officer but at the behest of the CIT(A) and is therefore not valid in law; 4) that there was no need for the assessor to question the order of the CIT(A) and carry it in further appeal because it was in favour of the assessee and therefore the assessee can challenge the validity of reassessment in view of the decision of the Madhya Pradesh High Court in the case of CIT v. Princess Sarla Kumari 171 ITR 14 and; 5) that re-opening is not valid as the earlier return was pending because of the order made thereon originally was set aside by the CIT(A) and therefore the fresh proceedings for reopening are bad-in-law.
9. The Learned CIT-D.R, Shri C L Ambesh on the other hand, submitted that the return was not within the time and, therefore, it was invalid and, consequently, income escaped assessment which entitled the Assessing Officer to initiate proceedings Under Section 147 of the Act.
He also relied upon the decisions referred to in the order proposed by the Learned Judicial Member in this regard.
10. Parties are heard and their (sic) submissions carefully considered.
The return filed beyond the required date in Section 142 was belated.
Though having not filed within the time allowed under Sub-section (1) of Section 139 or under a notice issued under Sub-section (1) of Section 142, it could have been valid if the same was filed within the prescribed time Under Section 139(4) that is before the expiry of one year from the end of the relevant Assessment year or before the completion of assessment whichever is later. There was no assessment and one year period expired on 31-3-1993. The return filed on 31-12-1993 was thus not in accordance with' provisions of law and was thus invalid, ft was also so held by the CIT(A) and having not challenged it became final even otherwise.
11. It might be true that an assessment on that return was originally made by the Assessing Officer. But that has no bearing in determining the validity of the return; firstly, because no assessment in law can be made on an invalid return and the mere fact of making an assessment by the Assessing Officer on an invalid return would be of no consequence; and secondly, because on appeal of the assessee, the assessment was set aside by CIT(A) by observing that it was made on an invalid return and was to be regularized. The order of the CIT(A) had thus become final as no further appeal thereagainst was filed either by the assessee or the department. The position, as a result of this, is that there was no valid return and there was no assessment much less a valid one with respect to that return and thus the income of the year under consideration has not been assessed and considered to have escaped assessment. The case of Smt Santosh Debi Baid (supra) before Calcutta High Court was under the 1922 Act and the return was held to be not a nullity but was an irregularity which could have been considered by the Assessing Officer. This case thus is of no help to the assessee.
12. The contention of the assessee that having issued notice Under Section 14 2 the Assessing Officer could have completed the assessment by resorting to provisions of Section 144 has also no force. Even if that were so, the fact remains that there was no assessment and by virtue of provisions of the Explanation 2 Clause (a) it could be deemed a case of escapement of income. Again if the return were valid no assessment has been made and it would be a case of escaped assessment under Clause (b) to the Explanation. The Explanation for file sake convenience is reproduced hereunder: Explanation 2. 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 no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-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 Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.
13. In the case of Bibi Gurdarshan Kaur return was held to be valid and that remained to be disposed of and that is why the reopening was held to be invalid. This was a case under 1982 Act whereunder the provisions of Clauses (a) and (b) as found in the Explanation aforesaid wen: not there at that time. This case therefore does not help the assessee.
14. The contention of the assessee that the re-opening was not by the Assessing Officer but at the behest of the CIT(A) and is therefore not valid in law in my opinion has no force. The return filed on 31-12-1993 by the assessee was invalid and the Assessing Officer had on that ground reopened the assessment and this is what he has stated in the reasons recorded, namely; "The assessee has failed to file its return of income for A.Y. 91 92 within statutory time limit i.e., 31.3.93. The return filed by the assessee for A.Y. 91 92 on 31.12.93 being an invalid return, has therefore been filed". It was his decision and that it was on the direction or behest of the CIT(A). Even otherwise the CIT(A) has-only stated that return was invalid and the consequent order of assessment was also invalid. After observing this he sated the return was to be regularized and that cannot be said to a direction to Assessing Officer to issue notice Under Section 148 of the Act. The contention of the assessee is therefore has no force and is rejected.
15. The Income that has escaped assessment is brought to tax by reopening the assessment Under Section 147 which reads as under: 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 reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance as the case may be, for the assessment, year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the 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.
16. On a (lose reading of the provisions aforesaid it would be evident that the notice for reassessment can he issued only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Thereafter, subject to the provisions of Sections 148 to 153, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice-subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be.
17. This is however subject to an embargo that where an assessment under Sub-section (3) of Section 143 or this section has already been made for the assessment year, no action shall be taken for reopening under this section after the expiry of four years from the end of the assessment year, unless escapement by reason of the failure on the 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 and truly all material facts necessary for his assessment, for that assessment year. The notice Under Section 142 (1) was issued on 8-1-1992 before the close of the return and the assessee filed the return not within the period prescribed therein but much beyond that; even after the expiry of period prescribed Under Section 139(4) of the act. There was thus a failure of the assessee by not filing the return as contemplated in the proviso. But that saves only the period applicable for reopening even beyond 4 years. There is however no dispute in this case on this issue.
18. What we are concerned with in this case is, whether there was reason to believe that there was chargeable income which escaped assessment within the ken of this section. The reason to believe and the basis for the re-opening, as stated in the reasons recorded, is that the assessee company has raised fresh share application money amounting to Rs. 21,91,900/- and unsecured loan to the extent of Rs. 2,62,000/- and source of which are unexplained at the hands of assessee company to the total of such deposits amounts to Rs. 24,53,900. Is it a reason or a valid reason in law in forming the belief that income has escaped assessment? Where it remained unexplained 19. It is true that the sufficiency and adequacy of the reasons is not open to challenge in view of settle position of law and judgments on the issue and that sufficiency of reasons cannot be examined unless shown to be perverse and also that on the facts of the case no perversity has been alleged. It is however to be kept in mind that Assessing Officer to form a belief that there was the income that has escaped assessment and that escapement has to be based on the reason recording giving a Prima facie of the escapement of income chargeable to tax.
20. Loan as such is not an income as held in the Supreme Court, in CIT v. Bedi and Co. Pvt. Ltd. by observing that "the facts on record apparently indicate that the transaction was one of loan. The circumstances relied upon by the Revenue, namely, that the loan had been advanced without security, that the loan had not been repaid and no interest on the loan was paid by the assessee and that the agreement of loan was executed contemporaneously with two other agreements with regard to supply of machinery and construction of building for the paper mill cannot, without any further material, lead to the inference that the amount was not a loan but business income, ft appears to us that the last mentioned circumstance support the plea of the assessee that the said amount was received as loan " this was also a case of reopening Under Section 147. The facts were that on December 5, 1961, an order of regular assessment of the assessee was passed for the assessment year 1960-61 for which the relevant accounting year ended on May 31, 1959. Subsequently, it came to the notice of the Income tax Officer that a sum of Rs. 32,58,500 had been received by the assessee purporting to be a loan advanced under agreement dated November 15, 1958, entered into between the assessee and Parsons and Whittemore. The assessee promoted Mandya National Paper Mills (for short "the paper mills"). The capital requirement of the paper mills was proposed to be met by issue of equity and redeemable preference shares of rupees two crores and by arranging supply of machinery of Rs. 1.82 crores from two of the associates of Parsons and Whittemore. In that connection, three agreements including the loan agreement in question, were entered into among different parties on the same date.
On the said information, the Income tax Officer reopened the assessment of the assessee and issued notice under Section 147(a) of the Income-tax Act on November 25, 1968. Finding that the reply given to the said notice was not satisfactory, and disbelieving the plea that the amount was advanced as a loan, the Income tax Officer treated it as income received from business and accordingly passed the order of assessment, under Section 144 of the Income tax Act, bringing to tax the said amount of Rs. 32, 58, 500 on December 2, 1970. It was in. this context the Supreme court held that it was a loan and not income.
21. This case was under the 1922 Act where there was no provision like Section 68 of the present Act. But that would not make much difference as under this section" also loan or capital introduction is not income straight away. It has to satisfy the conditions prescribed therein.
This Section 68 reads as under: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
22. By this section also it is not that every loan or capital receipt is income chargeable to tax. It is only when the assessee offers no explanation about the nature and source of sum is found credited in the books of an assessee or when the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee. Therefore when the return was invalid and the assessment made thereon was also invalid, where was the question or an explanation by the assesses and where was the occasion with the Assessing Officer to form an opinion and hold that the assessee did not either offer an explanation or that the explanation was not satisfactory. The information in the return or the assessment which was set aside as invalid cannot constitute information for forming an opinion by the Assessing Officer It. is no information in the eye of law for even prima facie view of income chargeable to tax.
23. There is also no information from any source outside the assessment proceedings which may cast any doubt that what is credited by the assessee in the books of the assessee was not or could not be genuine.
Unless there is specific information in the hands of the Assessing Officer to have a prima facie view to the effect that such loan or capital credits could not be explained by the assessee to his satisfaction, a notice for reopening the assessment cannot be issued.
We may refer to in this connection the Delhi High Court decision in the case of United Electric Co. Pvt. Ltd. 258 ITR 317(Del) where the assessee had also receiver} certain loans. The said Loans were not doubted as the return was accepted Under Section 143(1) of the Act.
Subsequently the AO making the assessment on the assessee received some communication from the AO assessing the creditor. In the said communication the creditor had accepted that he has been giving entries for the loans. In view of the said communication, the AO of the assessee re-opened the assessment. Even in such circumstances, it was held by the Delhi High Court that there is no reason for upsetting the original assessment merely on the basis of communication received from the AO of the creditor and without any further enquiry. The High Court observed that the statement of the creditor did not include the name of the assessee nor did it make a direct reference to the assessee and therefore the same cannot be considered to be valid reference to the assessee and therefore the same cannot be considered to be valid information for the purpose of re-assessment Under Section 147. In the present case also, apart from the fact that certain credits are appearing in the books of the assessee there is nothing which could be considered as an information much less a valid information for the purpose of reopening the assessment of the assessee Under Section 147.
Inspite of the fact that the creditor had accepted that he has been giving entries for the loans, the reopening was held to be unjustified in absence of specific reference of the assessee in the statement of the creditor. In the present case even the general statement by any...body was not there to view the credits as not genuine.
24. It might be true that the word information is of wide connotation and can include the direction/finding or observation given by the CIT(A) in appeal since once having noticed that a return filed was beyond the period the only course of action open was to restore it for but that was only to regularizing the return and that would be of no consequence as the notice for reopening itself was bad and the CIT(A) had already held that the earlier return and the assessment were invalid.
25. In Chatturam Hariram Limited v. CIT 27 ITR 709, the Supreme Court has laid down that where earlier assessment proceedings had been taken but failed to result in a valid assessment owing to a lacuna in the law despite the chargeability of the income to tax, it would be a case of chargeable income escaping assessment. In the case of (sic) was held that the income is said to have escaped assessment within the meaning of this section even where there was a failure to charge the income was entirely due to oversight or inadvertence on the part of the Income Tax Authorities. In Kaneshwar v. State of Bihar 37 ITR 388 the Supreme Court held that the section is not confined to cases where income has not been returned and also covers cases where income is included in the return made by the assessee but is left unassessed by the A.O, But one should not loose sight of the fact that these were the cases where the chargeability of the income to tax was not in dispute.
26. The Supreme Court held in Esthuri v. ITO reported in 41 ITR 539 (SC) and CIT v. Bidhu reported in 63 ITR 278, that no doubt income: cannot be said to have escaped such assessment within the meaning of this section if the assessment proceedings in respect of that income which still pending and have not. yet terminated in a final order.
However, the Assessing Officer's noting "not assessed" or "not assessable" or "no proceeding" or -"filed" would ordinarily amount to a final order lawfully terminating the assessment proceedings and thereafter action can be taken under this section. But in this case no valid return was there which was required to be disposed of.
27. In ITO v. Lakhamani Mewal Das 103 ITR 437 the reopening was on the confession of one MK stating that he was only a name lender and it is on this facts the Supreme Court came to the conclusion that there was no direct/live link with the information received so as to resort to reopening. Thus, the settled position on the basis of flimsy information was frowned observed earlier there is no information on record to doubt the loans and capital introduced by the assessee. This case of the Supreme Court will apply in this case with greater force.
It is well-settled that reason to believe is not the same thing as reason to suspect and that belief cannot be based on suspicion. In our opinion there no material in the present case even to suspect that credits are not genuine. In our opinion therefore the reopening of the assessment of the assessee are without any reasons and the information.
There is no nexus between reasons recorded and the genuineness of the loans and Capital credited in the books of the assessee. It is therefore to be held that the reopening was invalid and the reassessment is to be quashed, 28. It is a trite law that to reopen an assessment under section '14/ of the Act there must be a reason and that reason, must have a rational connection or relevant bearing on the formation of the belief that there was income which escaped assessment. 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 because of the failure of the assessee to disclose fully and truly all material facts. The Courts are consistent in their approach that they cannot go into the sufficiency or adequacy of the material and substitute their own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment. The reason for the formation of the belief must be held to be in good faith and should not be a mere pretence.
29. On the facts of the Present case it cannot be said that there was any "information" available with the Assessing Officer raising any doubt about the credits of loan and capital. Therefore, there was no reason with the Assessing Officer to believe that income escaped assessment for the A.Y. 1991-92. The notice issued Under Section 148 without existence of any reason to believe, cannot be held valid.
Therefore, the subsequent assessment is also invalid and illegal. On the facts and in the circumstances of the case, therefore the action of the ld. Accountant Member is correct, in quashing the assessment and not the action of the ld. Judicial Member in upholding the assessment.