Heard Shri Prakhar Tandon In Person And Shri Gaurav Mahajan, Learned Seniorstanding Counsel For The Income Tax Department v. Assessing Officer, Ward

Court No. - 3 Case :- WRIT TAX No. - 379 of 2022Petitioner :- Prakhar TandonRespondent :- Assessing Officer, Ward No.1(3)(5), Kanpur And 2 OthersCounsel for Petitioner :- Prakhar TandonCounsel for Respondent :- A.S.G.I.,Gaurav Mahajan Hon'ble Surya Prakash Kesarwani,J.Hon'ble Jayant Banerji,J. 1.Heard Sri Prakhar Tandon, Advocate, in person and Sri S.P. Singh,learned Additional Solicitor General of India assisted by Sri DineshVarun, learned counsel for the respondent no.3 and Sri Gaurav Mahajan,learned counsel for the respondent - Income Tax Department. 2.This writ petition has been filed praying for the following relief : “i) Issue a writ, order or direction in the nature of certiorari to quash theimpugned notice dated 30.03.2021 U/s 148 of I.T. Act, 1961 issued by therespondent no.1. ii) Issue a writ, order or direction in the nature of certiorari to quash theimpugned order dated 09.02.2022 passed by the assessing officer rejectingthe petitioner’s objection to the impugned notice dated 30.03.2021. iii) Issue a writ, order or direction in the nature of certiorari to quash theimpugned show cause notice dated 14.02.2022 U/s 144 of I.T. Act, 1961issued by the respondent no.1.” 3.This writ petition was heard at length on 06.04.2022 and18.04.2022. On 18.04.2022, this Court passed the order in which the orderdated 06.04.2022 was also reproduced. The aforesaid orders contain thefacts of the case as well the controversy. The order dated 18.04.2022 isreproduced below : On 06.04.2022, this Court passed the following order : "1. On the oral request of the learned counsel for the petitioner, the National FacelessAssessment Centre, Delhi through Additional/Joint/Deputy/Assistant Commissioner ofIncome Tax/Income Tax Officer, is allowed to be impleaded as respondent no. 4. 2. Necessary correction in the array of party shall be carried out within three days. 3. Notice on behalf of the respondent no. 4 has been accepted by Shri GauravMahajan, learned Senior Standing Counsel for the Income Tax Department. 4. Heard Shri Prakhar Tandon in person and Shri Gaurav Mahajan, learned SeniorStanding Counsel for the Income Tax Department. 5. Number of cases are regularly coming before this Court challenging the noticesunder Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act,1961') or the re-assessment order under Section 147 of the Act, 1961 and some ofwhich, prima facie, indicated arbitrary exercise of powers and harassment by theIncome Tax Authorities including the officers at the National Faceless AssessmentCentre, Delhi. Suffice would be to refer to some of the writ petitions in this regard,namely, Writ Tax No. 465 of 2022 (Harish Chandra Bhati Vs. Principal Commissionerof Income Tax Noida and 2 others) in which in respect of one co-owner of the sameproperty the land was held to be agricultural land beyond eight kilometers of themunicipal limits and thus sale thereof not liable to long term capital gain tax, while inrespect of the same property the other co-owner was held to be liable to tax andcapital gain tax has been assessed, in Writ Tax No. 202 of 2022 (Katiyar Cold StoragePrivate Limited Vs. Union of India and 2 others) the challenge is to the notice underSection 148 of the Act, 1961, which has been issued on the basis of an anonymousinformation about some other person regarding cash deposit and despite thepetitioner-assessee repeatedly disclosed every fact before the assessing authority andthe National Faceless Assessment Centre that neither the information relates to himnor any such transaction was entered by him and yet National Faceless AssessmentCentre baselessly created huge tax liability even after admitting that the informationwhich was made basis to issue notice under Section 148, was totally unfounded. 6. The present writ petition is an another example of illegal, arbitrary andunauthorized exercise of powers and practicing harassment on assessees by therespondent-Income Tax Authorities/National Faceless Assessment Centre inasmuch asthe impugned notice under Section 148 of the Act, 1961 for the assessment year 2013-14 has been issued to the petitioner on the basis of an alleged information that thepetitioner gained the capital gain of Rs. 26,02,150/- during the assessment year inquestion by sale of an immovable property but has not disclosed it in his income taxreturn. The income declared by the petitioner in his income tax return for assessmentyear 2013-14 is Rs. 82,010/-. The petitioner submitted objection to the reasons beforethe assessing authority in which he specifically stated that he has not sold anyimmovable property during the assessment year in question. Yet, in a most arbitrarymanner the objection filed by him was rejected by the respondent no. 4 vide orderdated 14.2.2022 who had not take pain even to look as to whether there is any suchinformation and if it is there then whether it relates to the petitioner or has any factualfoundation. The respondent no. 4, thereafter, issued draft re-assessment order dated14.2.2022 in which in eight pages he merely reiterated or reproduced the contents ofthe notice, reasons, objection to the reasons filed by the assessee and the orderrejecting the objections. Thereafter, at the ninth page, he all together changed thestory and without any whisper about unfounded jurisdictional notice under Section148 of the Act, 1961, he mentioned that the petitioner has purchased house property for a consideration of Rs. 10,00,000/- and since the income disclosed by him duringthe assessment year in question is Rs. 82,010/-, therefore, the differential amount ofRs. 9,17,990/- is added under Section 69 of the Act, 1961. This itself evidences thateither there was no information with the assessing authority for sale of property orcapital gain of Rs. 26,02,150/- by the petitioner during the assessment year 2013-14or the information was totally unfounded and unverified. Prima facie, the authoritiesacted without jurisdiction, arbitrarily and to harass the assessee. The draft re-assessment order issued by the respondent no. 4 dated 14.2.2022 itself shows thatthere was no material before the assessing authority to issue notice under Section 148of the Act, 1961, the notice itself would be without jurisdiction and no proceeding forre-assessment could have been carried against the petitioner and yet the respondentsin continuation of their journey to harass the assessee, continued with the re-assessment proceedings. It is informed by Shri Gaurav Mahajan, learned SeniorStanding Counsel for the respondents that as per oral instructions received by him,re-assessment order has been passed. 7. Matter requires consideration not only because, prima facie, the entire proceedingsunder Section 148 of the Act, 1961 are without jurisdiction but also on account ofarbitrary exercise of powers and harassment of assessee, which prima facie, isbecoming a practice of the respondents which needs to be checked by the higherauthorities. 8. Learned counsel for the respondents prays for and is granted a week's time to file acounter affidavit. Petitioner shall have three days, thereafter, to file a rejoinderaffidavit. 9. Put up as a fresh case for further hearing on 18.4.2022 at 2:00 PM along withrecords of Writ Tax No. 202 of 2022 (Katiyar Cold Storage Private Limited Vs. Unionof India and 2 others) and Writ Tax No. 465 of 2022 (Harish Chandra Bhati Vs.Principal Commissioner of Income Tax Noida and 2 others). 10. Considering the facts and circumstances of the case, all proceedings inconsequence to the impugned notices and the draft re-assessment order, shall remainstayed till the next date fixed. 11. Liberty is granted to the petitioner to file an amendment application bringing onrecord the re-assessment order, if any. " 8. Learned counsel for the respondents prays for and is granted a week's time to file acounter affidavit. Petitioner shall have three days, thereafter, to file a rejoinderaffidavit. 9. Put up as a fresh case for further hearing on 18.4.2022 at 2:00 PM along withrecords of Writ Tax No. 202 of 2022 (Katiyar Cold Storage Private Limited Vs. Unionof India and 2 others) and Writ Tax No. 465 of 2022 (Harish Chandra Bhati Vs.Principal Commissioner of Income Tax Noida and 2 others). 10. Considering the facts and circumstances of the case, all proceedings inconsequence to the impugned notices and the draft re-assessment order, shall remainstayed till the next date fixed. 11. Liberty is granted to the petitioner to file an amendment application bringing onrecord the re-assessment order, if any. " Today, learned Senior Standing counsel for the respondent Nos. 1, 2 and 4 prays forand is granted two weeks and no more time to file counter affidavit. The respondent no.4 shall separately file a counter affidavit within the same period. The respondent no.3 shall file a counter affidavit in which it shall be communicatedthat what action and measures are being proposed by the Government against illegaland arbitrary exercise of powers by the respondent nos.1, 2 and 4 while issuing noticeunder Section 148 of the Income Tax Act, 1961 or while passing the reassessmentorder under Section 147 of the Act, 1961. Connect with Writ Tax No.465 of 2022 and put up as a fresh case for further hearingon 4.5.2022. Interim order passed earlier is extended till the next date fixed.In the event counter affidavit is not filed within the time allowed as aforesaid, and therespondent no.2 shall remain personally present and shall show cause for non filingof the counter affidavit. This order shall be communicated in writing by the learned counsel for the IncomeTax Department to all the respondents within three days.” 4.Undisputedly, the Assessing Authority issued notice under Section148 of the Income Tax Act 1961, dated 30.03.2021. The reasons to believerecorded by the Assessing Authority for issuing aforesaid notice underSection 148 is reproduced below :- “Sir/Madam/M/s. Whereas I have reasons to believe that your income chargeable to Tax for theAssessment Year 2013-14 has escaped Assessment within the meaning ofsection 147 of the Income Tax Act, 1961. I, therefore, propose to assess/re-assess the income/loss for the saidAssessment Year and I hereby require you to deliver to me within 30 daysfrom the service of this notice, a return in the prescribed form for the saidAssessment Year. This notice is being issued after obtaining the necessary satisfaction of thePCIT, Kanpur-1 Rakesh Kumar GuptaWard 1(3)(5), Kanpur” 5.In this case there is information on INSIGHT PORTAL that duringthe F.Y. 2012-13 relevant to A.Y. 2013-14 the Assessee was engaged insale of immovable property with a capital gain of Rs.26,02,150/- wasoccurred, as per insight verification details. The petitioner filedobjection to the aforesaid notice under Section 148 of the Act 1961,reasons to believe in which the petitioner has specifically stated inparagraphs 4, 5, 6 & 7 of the reply as under :- “4. That in reply to the reason recorded by the AO, it is submitted that thereason recorded is based on conjecture and surmises. It is most trulysubmitted that assessee has not sold any property in the year F.Y. 2012-13and as such there is no alleged capital gain of Rs.26,02,150/- out of sale ofimmovable property in the year F.Y.2012-13 relevant to A.Y. 2013-14. Thereason has been recorded without due application of mind. There is no reasonto believe that the income of the assessee in the F.Y. 2012-13 chargeable totax has escaped assessment. 5. That the finding of the assessing officer that during the previous yearrelevant to the above period, the assessee was having income exceeding thetaxable limit is false and perverse.relevant to the above period, the assessee was having income exceeding thetaxable limit is false and perverse. 5. That the finding of the assessing officer that during the previous yearrelevant to the above period, the assessee was having income exceeding thetaxable limit is false and perverse.relevant to the above period, the assessee was having income exceeding thetaxable limit is false and perverse. 6. That the AO, has no reason to believe that this is a fit case for reopeningand there is an escapement of income under the income Tax Act, 1961. 7. That the approval by the PCIT-1 Kanpur was given in a most cryptic andmechanical manner without applying the judicious mind and thus thesanction is not a valid sanction within the meaning of Section 151 of I.T. Act,1961.” 6.The objection filed by the petitioner was rejected by therespondent no.4 vide order dated 09.02.2022, stating as under : “6.The assessee has claimed in point 6 that the AO has no reason tobelieve that this is a fit case for reopening. Rebuttal by the AO: Assessee has claimed that AO has no reason to believe that this is a fit casefor reopening. In the case of the assessee, case has been reopened as there isa clear reason to believe that income has escaped assessment afterinformation has been received from the INSIGHT portal of income taxdepartment. This is very specific information received in the office of Jurisdiction AO fromADIT(Inv.)-I, Kanpur, it clearly leads to prima-facie belief that income hasescaped assessment as assesee has been involved in the sale of immovableproperty with a gain of Rs.26,02,150/-. It is pertinent to mention here that inCIT V Nova Promoters & Finlease (P) Ltd (ITA No.342 of 2011) dated15.02.2012, the Hon’ble Delhi High Court, which is the jurisdictional HighCourt, held that “We are aware of the legal position that at the stage ofissuing the notice u/s 148, the merits of the matter are not relevant and theAssessing Officer at that stage is required to form only a prima facie belief oropinion that income chargeable to tax has escaped assessment.” 7.Thereafter, the respondent no.4 prepared a draft reassessment orderdated 14.02.2022 which was followed by reassessment order dated12.03.2022 under Section 147 read with Section 144 and 144 B of theAct, 1961. In the draft order and reassessment order the respondent no.4has taken altogether a new stand that the petitioner assessee hadpurchased an immovable property for consideration of Rs.10,00,000/-during the A.Y. 2013-14 and after adjusting the disclosed income asper ITR Rs.82,010/- added the balance amount of Rs.9,17,990/- in thetotal income of the petitioner. Aggrieved with the aforesaid impugnednotice under Section 148 of the Act, 1961 and the reassessment order, thepetitioner has filed the present writ petition. 8.It is wholly undisputed that “reasons to believe” recorded by theAssessing Authority for assuming jurisdiction under Section 148 of theAct, 1961 by issuing impugned notice, was totally unfounded and nonexistent. The Assessing Authority formed the “reasons to believe” on theground that petitioner – Assessee has sold an immovable property andgained the capital gain of Rs.26,2,0150/- during the F.Y. 2012-13 relevantto A.Y. 2013-14 but has not shown the same in his return of income,which was totally unfounded and not bonafide. Reason to Believe – Meaning, Scope and Consequence:- 9.In the case of State of Uttar Pradesh & Others vs.Aryaverth Chawal Udyog & Others reported in (2015) 17 SCC 324(paragraphs 28 to 30), the Hon'ble Supreme Court has held as under: "28. This Court has consistently held that such material on which theassessing Authority bases its opinion must not be arbitrary,irrational, vague, distant or irrelevant. It must bring home theappropriate rationale of action taken by the assessing Authority inpursuance of such belief. In case of absence of such material, thisCourt in clear terms has held the action taken by assessing Authorityon such “reason to believe” as arbitrary and bad in law. Reason to Believe – Meaning, Scope and Consequence:- 9.In the case of State of Uttar Pradesh & Others vs.Aryaverth Chawal Udyog & Others reported in (2015) 17 SCC 324(paragraphs 28 to 30), the Hon'ble Supreme Court has held as under: "28. This Court has consistently held that such material on which theassessing Authority bases its opinion must not be arbitrary,irrational, vague, distant or irrelevant. It must bring home theappropriate rationale of action taken by the assessing Authority inpursuance of such belief. In case of absence of such material, thisCourt in clear terms has held the action taken by assessing Authorityon such “reason to believe” as arbitrary and bad in law. In case of the same material being present before the assessingAuthority during both, the assessment proceedings and the issuance ofnotice for re-assessment proceedings, it cannot be said by the assessingAuthority that “reason to believe” for initiating reassessment is anerror discovered in the earlier view taken by it during originalassessment proceedings. (See: Delhi Cloth and General Mills Co. Ltd.v. State of Rajasthan, (1980) 4 SCC 71). 29. The standard of reason exercised by the assessing Authority islaid down as that of an honest and prudent person who would act onreasonable grounds and come to a cogent conclusion. The necessarysequitur is that a mere change of opinion while perusing the samematerial cannot be a “reason to believe” that a case of escapedassessment exists requiring assessment proceedings to be reopened.(See: Binani Industries Ltd. v. CCT,(2007) 15 SCC 435; A.L.A. Firm v.CIT, (1991) 2 SCC 558). If a conscious application of mind is made tothe relevant facts and material available or existing at the relevantpoint of time while making the assessment and again a different ordivergent view is reached, it would tantamount to “change of opinion”. If an assessing Authority forms an opinion during the originalassessment proceedings on the basis of material facts and subsequentlyfinds it to be erroneous; it is not a valid reason under the law for re-assessment. Thus, reason to believe cannot be said to be thesubjective satisfaction of the assessing Authority but means anobjective view on the disclosed information in the particular case andmust be based on firm and concrete facts that some income hasescaped assessment. 30.In case of there being a change of opinion, there mustnecessarily be a nexus that requires to be established between the“change of opinion” and the material present before the assessingAuthority. Discovery of an inadvertent mistake or non-application ofmind during assessment would not be a justified ground to reinitiateproceedings under Section 21(1) of the Act on the basis of change insubjective opinion (CIT v. Dinesh Chandra H. Shah, (1972) 3 SCC231; CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4 SCC 360)." (emphasis supplied) 10.In the case of The Commissioner of Sales-Tax U.P. vs. M/s.Bhagwan Industries (P) Ltd., Lucknow, AIR 1973 SC 370 (Paras 9 &10), Hon’ble Supreme Court has held as under: 30.In case of there being a change of opinion, there mustnecessarily be a nexus that requires to be established between the“change of opinion” and the material present before the assessingAuthority. Discovery of an inadvertent mistake or non-application ofmind during assessment would not be a justified ground to reinitiateproceedings under Section 21(1) of the Act on the basis of change insubjective opinion (CIT v. Dinesh Chandra H. Shah, (1972) 3 SCC231; CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4 SCC 360)." (emphasis supplied) 10.In the case of The Commissioner of Sales-Tax U.P. vs. M/s.Bhagwan Industries (P) Ltd., Lucknow, AIR 1973 SC 370 (Paras 9 &10), Hon’ble Supreme Court has held as under: “9. The controversy between the parties has centered on the point as towhether the assessing authority in the present case had reason tobelieve that any part of the turnover of the respondent had escapedassessment to tax for the assessment year 1957-58. Question in thecircumstances arises as to what is the import of the words "reason tobelieve", as used in the section. In our opinion, these words conveythat there must be some rational basis for the assessing authority toform the belief that the whole or any part of the turnover of a dealerhas, for any reason, escaped assessment to tax for some year. If sucha basis exists, the assessing authority can proceed in the manner laiddown in the section. To put it differently, if there are, in fact, somereasonable grounds for the assessing authority to believe that thewhole or any part of the turnover of a dealer has escaped assessment,it can take action under the section. Reasonable grounds necessarilypostulate that they must be germane to the formation of the beliefregarding escaped assessment. If the grounds are of an extraneouscharacter, the same would not warrant initiation of proceedingsunder the above section. If, however, the grounds are relevant andhave a nexus with the formation of belief regarding escapedassessment, the assessing authority would be clothed with jurisdictionto take action under the section. Whether the grounds are adequateor not is not a matter which would be gone into by the High Court orthis Court, for the sufficiency of the grounds which induced theassessing authority to act is not a justiciable issue. What can bechallenged is the existence of the belief but not the sufficiency ofreasons for the belief. At the same time, it is necessary to observe that the belief must be held in good faith and should not be a merepretence. 10. It may also be mentioned that at the stage of the issue of notice theconsideration which has to weigh is whether there is some relevantmaterial giving rise to prima facie inference that some turnover hasescaped assessment. The question as to whether that material insufficient for making assessment or re-assessment under section 21of the Act would be gone into after notice is issued to the dealer andhe has been heard in the matter or given an opportunity for thatpurpose. The assessing authority would then decide the matter in thelight of material already in its possession as well as fresh materialprocured as a result of the enquiry which may be considerednecessary.” (Emphasis supplied) 11.A Division Bench of this Court, while dealing with the validity ofthe re-assessment notice under Section 148 in Writ Tax No.874 of 2010(M/S Parmarth Steel And Alloys Pvt. Ltd. vs. State of U.P. andOthers, decided on 28.03.2022, held as under (Para 17) : (Emphasis supplied) 11.A Division Bench of this Court, while dealing with the validity ofthe re-assessment notice under Section 148 in Writ Tax No.874 of 2010(M/S Parmarth Steel And Alloys Pvt. Ltd. vs. State of U.P. andOthers, decided on 28.03.2022, held as under (Para 17) : “17.It is settled principles of law that proceedings under Section 21of the Act, 1948 can be initiated if the material on which the AssessingAuthority bases its opinion, is not arbitrary, irrational, vague, distantor irrelevant. There must be some rational basis for the assessingauthority to form the belief that the whole or any part of the turnover ofa dealer has, for any reason, escaped assessment to tax for some year.If such a basis exists, the assessing authority can proceed in themanner laid down in Section 21 of the Act, 1948. If the grounds are ofan extraneous character, the same would not warrant initiation ofproceedings under the above section. If, however, the grounds arerelevant and have a nexus with the formation of belief regardingescaped assessment, the assessing authority would be clothed withjurisdiction to take action under the section. Whether the grounds areadequate or not is not a matter which would be gone into by the HighCourt for the sufficiency of the grounds which induced the assessingauthority to act is not a justiciable issue. The question as to whetherthat material in sufficient for making assessment or re-assessmentunder section 21 of the Act would be gone into after notice is issued tothe dealer and he has been heard in the matter or given an opportunityfor that purpose. The assessing authority would then decide the matterin the light of material already in its possession as well as freshmaterial procured as a result of the enquiry which may be considerednecessary. 12.In the case of Sheo Nath Singh vs. Appellate Assistant CIT,(1972) 3 SCC 234 (Para-10), Hon’ble Supreme Court while considering the similar provisions of Section 34 (1-A) of the Indian Income Tax Act,1922, held as under:- “…………….. There can be no manner of doubt that the words"reason to believe" suggest that the belief must be that of an honest andreasonable person based upon reasonable grounds and that the IncomeTax Officer may act on direct or circumstantial evidence but not onmere suspicion, gossip or rumour. The Income Tax Officer would beacting without jurisdiction if the reason for his belief that theconditions are satisfied does not exist or is not material or relevant tothe belief required by the section. The court can always examine thisaspect though the declaration or sufficiency of the reasons for thebelief cannot be investigated by the court.” 13.In the case of Union Of India And Others vs M/S. Rai Singh DevSingh Bist & others, AIR 1974 SC 478 : (1973) 3 SCC 581 (para-5),Hon’ble Supreme Court held as under:- “…………….. before an Income-tax Officer can be said to havehad reason to believe that some income had escaped assessment, heshould have some relevant material before him from which he couldhave drawn the inference that income has escaped assessment. Hisvague feeling that there might have been some escape of income fromassessment is not sufficient… …………..” 14.In the case of ITO vs. Lakhmani Mewal Das, (1976) 3 SCC 757(para-11 and 12), Hon’ble Supreme Court has held as under:- 13.In the case of Union Of India And Others vs M/S. Rai Singh DevSingh Bist & others, AIR 1974 SC 478 : (1973) 3 SCC 581 (para-5),Hon’ble Supreme Court held as under:- “…………….. before an Income-tax Officer can be said to havehad reason to believe that some income had escaped assessment, heshould have some relevant material before him from which he couldhave drawn the inference that income has escaped assessment. Hisvague feeling that there might have been some escape of income fromassessment is not sufficient… …………..” 14.In the case of ITO vs. Lakhmani Mewal Das, (1976) 3 SCC 757(para-11 and 12), Hon’ble Supreme Court has held as under:- “11. As stated earlier, the reasons for the formation of the belief musthave a rational connection with or relevant bearing on the formation ofthe belief. Rational connection postulates that there must be a directnexus or live link between the material coming to the notice of theIncome-tax Officer and the formation of his belief that there has beenescapement of the income of the assessee from assessment in theparticular year because of his failure to disclose fully and truly allmaterial facts. It is no doubt true that the court cannot go into thesufficiency or adequacy of the material and substitute its own opinionfor that of the Income-tax Officer on the point as to whether actionshould be initiated for reopening assessment. At the same time we haveto bear in mind that it is not any and every material, howsoever vagueand indefinite or distant, remote and farfetched, which would warrantthe formation of the belief relating to escapement of the income of theassessee from assessment. The fact that the words "definiteinformation" which were there in section 34 of the Act of 1922 at onetime before its amendment in 1948 are not there in section 147 of theAct of 1961 would not lead to the conclusion that action cannot betaken for reopening assessment even if the information is wholly vague,indefinite, farfetched and remote. The reason for the formation of thebelief must be held in good faith and should not be a mere pretence. 12. The powers of the Income-tax Officer to reopen assessment thoughwide are not plenary. The words of the statute are "reason to believe"and not "reason to suspect". The reopening of the assessment after thelapse of many years is a serious matter. The Act, no doubt,contemplates the reopening of the assessment if grounds exist forbelieving that income of the assessee has escaped assessment. Theunderlying reason for that is that instances of concealed income orother income escaping assessment in a large number of cases come tothe notice of the income-tax authorities after the assessment has beencompleted. The provisions of the Act in this respect depart from thenormal rule that there should be, subject to right of appeal andrevision, finality about orders made in judicial and quasi-judicialproceedings. It is, therefore, essential that before such action is takenthe requirements of the law should be satisfied. The live link or closenexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to formregarding the escapement of the income of the assessee fromassessment because of the latter's failure or omission to disclose fullyand truly all material facts was missing in the case. In any event, thelink was too tenuous to provide a legally sound basis for reopening theassessment. The majority of the learned Judges in the High Court, inour opinion, were not in error in holding that the said material couldnot have led to the formation of the belief that the income of theassessee respondent had escaped assessment because of his failure oromission to disclose fully and truly all material facts. We would,therefore, uphold the view of the majority and dismiss the appeal withcosts.” 15.In the case of M/s. S. Ganga Saran and Sons (P) Ltd. Calcuttavs. ITO and others, (1981) 3 SCC 143 (Para-6), Hon’ble Supreme Courtheld as under:- “6. It is well settled as a result of several decisions of this Courtthat two distinct conditions must be satisfied before the Income TaxOfficer can assume jurisdiction to issue notice under section 147 (a).First, he must have reason to believe that the income of the assesseehas escaped assessment and secondly, he must have reason to believethat such escapement is by reason of the omission or failure on the partof the assessee to disclose fully and truly all material facts necessaryfor his assessment. If either of these conditions is not fulfilled, thenotice issued by the Income Tax Officer would be without jurisdiction.The important words under section 147 (a) are "has reason to believe"and these words are stronger than the words "is satisfied". The beliefentertained by the Income Tax Officer must not be arbitrary orirrational. It must be reasonable or in other words it must be based onreasons which are relevant and material. The Court, of course, cannotinvestigate into the adequacy or sufficiency of the reasons which haveweighed with the Income Tax Officer in coming to the belief, but theCourt can certainly examine whether the reasons are relevant and havea bearing on the matters in regard to which he is required to entertainthe belief before he can issue notice under section 147 (a). It there is norational and intelligible nexus between the reasons and the belief, sothat, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would beinescapable that the Income Tax Officer could not have reason tobelieve that any part of the income of the assessee had escapedassessment and such escapement was by reason of the omission orfailure on the part of the assessee to disclose fully and truly allmaterial facts and the notice issued by him would be liable to he struckdown as invalid.” 16.In the case of Income Tax Officer, Ward No.62 vs. TechSpanIndia (P.) Ltd. and another, (2018) 6 SCC 685 (Paras 14 to 18),Hon’ble Supreme Court held as under: “14. The language of Section 147 makes it clear that the assessingofficer certainly has the power to re-assess any income which escapedassessment for any assessment year subject to the provisions ofSections 148 to 153. However, the use of this power is conditional uponthe fact that the assessing officer has some reason to believe that theincome has escaped assessment. The use of the words ‘reason tobelieve’ in Section 147 has to be interpreted schematically as theliberal interpretation of the word would have the consequence ofconferring arbitrary powers on the assessing officer who may eveninitiate such re-assessment proceedings merely on his change ofopinion on the basis of same facts and circumstances which hasalready been considered by him during the original assessmentproceedings. Such could not be the intention of the legislature. The saidprovision was incorporated in the scheme of the IT Act so as toempower the Assessing Authorities to re-assess any income on theground which was not brought on record during the originalproceedings and escaped his knowledge; and the said fact would havematerial bearing on the outcome of the relevant assessment order. 15. Section 147 of the IT Act does not allow the re-assessment of anincome merely because of the fact that the assessing officer has achange of opinion with regard to the interpretation of law differently onthe facts that were well within his knowledge even at the time ofassessment. Doing so would have the effect of giving the assessingofficer the power of review and Section 147 confers the power to re-assess and not the power to review. 15. Section 147 of the IT Act does not allow the re-assessment of anincome merely because of the fact that the assessing officer has achange of opinion with regard to the interpretation of law differently onthe facts that were well within his knowledge even at the time ofassessment. Doing so would have the effect of giving the assessingofficer the power of review and Section 147 confers the power to re-assess and not the power to review. 16. To check whether it is a case of change of opinion or not one has tosee its meaning in literal as well as legal terms. The words “change ofopinion” implies formulation of opinion and then a change thereof. Interms of assessment proceedings, it means formulation of belief by anassessing officer resulting from what he thinks on a particularquestion. It is a result of understanding, experience and reflection. 17. It is well settled and held by this court in a catena of judgments andit would be sufficient to refer Commissioner of Income Tax, Delhi vs.Kelvinator of India Ltd. (2010) 320 ITR 561(SC) wherein this Courthas held as under: (SCC p.725, para 5-7) “5….where the Assessing Officer has reason to believe that income hasescaped assessment, confers jurisdiction to reopen the assessment.Therefore, post-1-4-1989, power to reopen is much wider. However, oneneeds to give a schematic interpretation to the words "reason to believe"…..Section 147 would give arbitrary powers to the Assessing Officer to re-openassessments on the basis of "mere change of opinion", which cannot be perse reason to reopen. 6. We must also keep in mind the conceptual difference between power toreview and power to reassess. The Assessing Officer has no power to review;he has the power to reassess. But reassessment has to be based on fulfillmentof certain precondition and if the concept of "change of opinion" is removed,as contended on behalf of the Department, then, in the garb of re-openingthe assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test tocheck abuse of power by the Assessing Officer. Hence, after 1-4-1989,Assessing Officer has power to reopen, provided there is "tangible material"to come to the conclusion that there is escapement of income fromassessment. Reasons must have a live link with the formation of the belief.” 18. Before interfering with the proposed reopening of the assessmenton the ground that the same is based only on a change in opinion, thecourt ought to verify whether the assessment earlier made has eitherexpressly or by necessary implication expressed an opinion on a matterwhich is the basis of the alleged escapement of income that wastaxable. If the assessment order is non-speaking, cryptic or perfunctoryin nature, it may be difficult to attribute to the assessing officer anyopinion on the questions that are raised in the proposed reassessmentproceedings. Every attempt to bring to tax, income that has escapedassessment, cannot be absorbed by judicial intervention on an assumedchange of opinion even in cases where the order of assessment does notaddress itself to a given aspect sought to be examined in thereassessment proceedings.” 17.In the case of Radha Krishna Industries vs. State of H.P., (2021)6 SCC 771, Hon’ble Supreme Court reiterated the law laid down in itsearlier judgments in the case of Kelvinator of India Limited (supra) andTechSpan India (P.) Ltd. (supra) and held that the power to reopen anassessment must be conditioned on the existence of “tangible material”and that “reasons must have a live link with the formation of the belief”. 18.Since the impugned notice under Section 148 of the Act, 1961 is ajurisdictional notice and the “reasons to believe” recorded by theAssessing Authority was totally unfounded and not bonafide, therefore,the notice itself was without jurisdiction and the Assessing Authoritycould not have assumed jurisdiction to issue notice under Section 148 ofthe Act, 1961. Therefore, the impugned notice under Section 148 of the 18.Since the impugned notice under Section 148 of the Act, 1961 is ajurisdictional notice and the “reasons to believe” recorded by theAssessing Authority was totally unfounded and not bonafide, therefore,the notice itself was without jurisdiction and the Assessing Authoritycould not have assumed jurisdiction to issue notice under Section 148 ofthe Act, 1961. Therefore, the impugned notice under Section 148 of the Act, 1961 issued by the Assessing Authority can not be sustained anddeserves to be quashed. Consequently, the impugned reassessment ordercan also not stand and, therefore, it also deserves to be quashed. 19.For all the reasons aforestated, the writ petition is allowed. 20.The impugned notice under Section 148 of the Act, 1961 and theimpugned reassessment order under Section 147 read with Section 144and 144 B of the Act, 1961 passed by the respondent no.5 are herebyquashed. Order Date :- 6.5.2022/vkg