July 2008
S. 147 : A completed assessment cannot be reopened merely on the basis of suspicion
By K. B. Bhujle, Advocate
Reading Time 2 mins
New Page 1
35 Reassessment : S. 147 of Income-tax Act,
1961 : A.Y. 1989-90 : A completed assessment cannot be reopened merely on the
basis of suspicion : Reason to believe v/s reason to suspect.
[CIT v. Smt. Paramjit Kaur, 168 Taxman 39 (P&H)]
For the A.Y. 1989-90, the assessment was completed u/s.143(3)
of the Income-tax Act, 1961. On receiving the information from the Department’s
survey wing that the assessee had prepared a demand draft, which was not
accounted for in the books of account, the Assessing Officer issued a notice to
the assessee u/s.148 and completed the reassessment u/s.147 by adding the amount
of the draft to the income of the assessee. The Tribunal held that since the
Assessing Officer had failed to incorporate material and its satisfaction for
reopening the assessment, the same was invalid.
On appeal by the Revenue, the Punjab and Haryana High Court
upheld the decision of the Tribunal and held as under :
“(i) In the instant case, 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 which was not accounted for in the books of account of the
assessee. But 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 assessment. The Assessing Officer has to act on the basis of
‘reason to believe’ and not on ‘reason to suspect’.
(ii) 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 u/s.148
for reassessment proceedings was not valid.”
