Income Tax Officer, Ward-4 Bhilai v. Santosh Jain

}0]AfBEFORE THE HON'BLE HIGH COURT OF CHHATTISGARHAT BILASPURTax Case (Income Tax Appeal) No./2008Appellant t ^°i>..:^Income Tax Officer, Ward-4,^yy^^{u^...-Bhilai (C.G.) -'".,-?,h.ft "T^vJ--y<''^•'^-A'^'^^J^f^ss-"i''VERSUS ...-yft!^»-RespondentSantosh Jain(-fProp.M/s.TaraRe-rollingMill,Vaishali Nagar, Bhilai (C.G.)!NCOME TAX APPEAL U/S. 260 A OF INCOME TAX ACT. 1961. k HIGH COURT OF CHHATTISGARH. BILASPUR DJB:Hon'ble Shri Satish K. Aenihotri &Hon'ble Shri Manindra Mohan Shrivastava. JJ. Tax Case (Income Tax Appeall No.24/2008 APPELLANT Income Tax Officer, Ward-4 Bhilai VersusSantosh Jain RESPONDENT APPELLANT Tax Case (Income Tax Apneall No.26/2008 Income Tax Officer, Ward-4 BhUai RESPONDMIT Versus/Santosh Jain And *ax Case (Income Tax Anoeall No.27/2008 Income Tax Officer, Ward-4 Bhilai APPELLANT VersusSantosh Jain RESPONDENT Income Tax Appeals u/S 260 A of the Income Tax ActJS61 Judtanent for consideration rSd/-M.M.ShrivastavaJudgeM.M.ShrivastavaJudge Hon'ble Shri Satish K. Aenihotri «L -^ 's-y^ .Sd/-s-atishKA@uIiotri !Judge T Post for pronouncement ofjudgment (^.1-2012 SaV- n-h • '5 h.'riVW-l-V^C- HIGH COURT OF CHHATTISGARH : BILASPUR ^cv JUDGMENT(DeUvered on J2_. 1.20 12) Per Manindra Mohan Shrivastava. J. 1. This order shall govem disposal of the aforementioned appeals, ascomraonissuesof law,basedonsiinilarfacts,ariseforconsideration.comraonissuesof law,basedonsiinilarfacts,ariseforconsideration. 2. Brief and relevant facts necessary for decision of the three taxappeals, as reflected from ftie records, are that fhe respondentassessee/respondent derived incoine from maniifacturing andtrading of iron 8s steel items i.e. M.S. Rods, angles, channels andM.S. Tar etc. under the trade name of M/s. Tara Re-rolling Mill,Tedesara. Information was received from Assistant Commissioner,Central Excise Tax,Bhilai that the assessee effected hugebusiness ta-ansactions during^ the relevant accoiinting period,relevant assessment years being 1993-94, 1994-95 8s 1995-96.According to sales tax assessment orders, the tumover/salesduring various assessment years were as below: In respect of the aforesaid three assessment years, assessee did notffle income tax retum. Upon receipt of such information and salestax assessment orders regarding huge tumover, the Assessing ~ / Officer invoked jurisdiction under Section 147 of the Income TaxAct, 1961 (hereinafter referred to as "the Act") and notices underSections 148 of the Act was issued to the assessee by recordingsatisfaction vide order dated 24.3.2000, recorded separately in eachof thecases.Lateron,fortheof makingregularpurposeassessment, statutory notices were issued and the Assessing Officerpassed an order of assessment under Section 143 (3) of the Act on15.3.2002 in all the three appeals pertaining to assessment ,years1993-94, 1994-95 8s 1995-96. In respect of relevant assessmentyears, the total income of the assessee was computed as below: The Assessing Officer also initiated penalty proceedings underSection 271 (1) (b), 271 (1) (c), 27I'-A and 271-B of the Act. Inaddition, interest was also charged under Section 234 A/23^-B/234-C of the Act. 3. Aggrieved by the orders of assessment and computation ofincomeand initiation of the assessee filed separate penalty proceedings,appeals in each of the cases, containing similar grounds of appealbased on similar facts. The three appeals were dismissed byCommissioner of Income Tax (Appeals) Raipur [in short "C.I.T.(A)"]. Detailed order was passed in appeals arising out of orders of assessment of assessment 1993-94 on 10.7.2003 and the yearsappeal pertaining to assessment years 1994-95 and 1995-96 werealsodismissedrecording thatonsimilar groiinds,appealspertaining[to][ assessment]years[1993-94][ has][ been][ dismissed.] 3. Aggrieved by the orders of assessment and computation ofincomeand initiation of the assessee filed separate penalty proceedings,appeals in each of the cases, containing similar grounds of appealbased on similar facts. The three appeals were dismissed byCommissioner of Income Tax (Appeals) Raipur [in short "C.I.T.(A)"]. Detailed order was passed in appeals arising out of orders of assessment of assessment 1993-94 on 10.7.2003 and the yearsappeal pertaining to assessment years 1994-95 and 1995-96 werealsodismissedrecording thatonsimilar groiinds,appealspertaining[to][ assessment]years[1993-94][ has][ been][ dismissed.] 4. The assessee thereafter preferred appeal before the IncomeTax Appellate Tribunal (in short "the Tribunaf}. The assessee forthe first time raised an issue with regard to legality and validity ofthe order of the Assessing Officer in invoking and jurisdiction under Section 147 of the Act, in addition to ofherpower groundsraised in the appeal. 5. The three appeals were decided by a common order, which isimpugned in these appeals. Though the Tribunal noted as manyas Gve grounds raised by the assessee in the appeals, fheTribunal came to the conclusion fhat the action of AssessingOfficer in re-opening the case under Section 147 of the Act wasnot Based on such conclusion, the orders of assessment justified.and order passed in appeals were set aside in all the cases. TheTribunal did not take up other issue raised in the appeal in viewof the conclusion that the very re-opening of the case by theAssessingOfBcerinpurportedexerciseofpoweriinderSection 147 ofthe Act was notjustified. 6. In fhe three appeals, which have been preferred by the assesseeagainst the common order, goveming all the three appeals,against the common order, goveming all the three appeals, following questions of law were framed by this Court in TaxAppeal No.27/08. "1.Whether, the Tribunal was right in lawholding that the provisions of Section 147of the Income Tax Act, 1961 were wronglyinvoked by the A.O. in spite of the fact theassesseehadoriginallynotfiledanyreturnsof income for the AssessmentYears 1993-94 ?Whether, the Tribunal was right in lawholding that the provisions of Section 147of the Income Tax Act, 1961 were wronglyinvoked by the A.O. in spite of the fact theassesseehadoriginallynotfiledanyreturnsof income for the AssessmentYears 1993-94 ?2.Whether, the Tribunal was right in law inholding that information received from theCentralExciseDepartmentwasnotsufficientevidencetowarranttheinvoking of provisions of Section 147 ofthe Income Tax Act, 1961?"holding that information received from theCentralExciseDepartmentwasnotsufficientevidencetowarranttheinvoking of provisions of Section 147 ofthe Income Tax Act, 1961?" 7. In other two cases also, the questions oflaw framed are the same,except that they pertain to different assessment years.except that they pertain to different assessment years. 7. In other two cases also, the questions oflaw framed are the same,except that they pertain to different assessment years.except that they pertain to different assessment years. 8. Learned counsel for the appellant, assailing the legality andvalidity of the orders passed by the Tribunal in three cases,submitted that the Assessing Officer was fully justified cin re-opening thecaseof theassesseein respectof theassessment 1993-94, 1994-95 & 1995-96 upon receipt of yearsvalidity of the orders passed by the Tribunal in three cases,submitted that the Assessing Officer was fully justified cin re-opening thecaseof theassesseein respectof theassessment 1993-94, 1994-95 & 1995-96 upon receipt of yearsauthentic information by the Asst. Commissioner, Central Excise,Bhilai. He submitted that the sales tax assessment orders, whichhavenotbeendisputedbytheassessee,disclosedhugetumover/sales during the three assessment years. Thc assesseehad not filed income retum in respect of any of the aforesaidthree Upon receipt of such information in respzct of three years.Bhilai. He submitted that the sales tax assessment orders, whichhavenotbeendisputedbytheassessee,disclosedhugetumover/sales during the three assessment years. Thc assesseehad not filed income retum in respect of any of the aforesaidthree Upon receipt of such information in respzct of three years. m assessment years, the Assessing Of&cer recorded specific reasonin its order dated 24.3.2000 in each of the cases, foi-ghis beliefthat the incoiae chargeable to tax has escaped assessment.Thereafter, notices under Section 148 of fhe Act were issued toassessee foUowed by regular assessment and based on his bestjudginentassessment,incomeinrespectofeachof theassessment years was duly computed and tax demanded, inaddition to initiation of penalty proceedings and charging interest.Leamed coimsel further submitted that at the stage of recordingreaspn to beUeve so as to invoke power under Section 147 of theact, the Assessing Officer is not reqiwed to. make a detaUassessment like a regular asse&sment and actually determine bycoinputing income, but, all that is required is bona fide reasonbased on relevant material mformation that income has escapedassessment. He submits that once there is such a material, torecord reason for belief, the assessment is then to be made in themanner prescribed under fhe law. It is contended that theinaterial which was considered by jthe Assessing Officer to recordreason for his belief regarding income having escaped assessmentwas neither extraneous nor UTelevant. He submits that duringthreeassessmenttheassesseehaddeclaredhisyears,tumover/sales which showed that the tumover were very hugeand not small or negligible. He sub.inits that such a material wassufGcient to invoke jurisdiction under Section 147 ofthe Act. 9. On the other hand, learned counsel for the assessee-respondentsubmitted that the re-opening of the case under Section 147 ofthe Act, is wholly unjustified. Learned counsel submits that suchan information regarding turnoverof saleundersales taxassessment year, by itself, wifhout there being any evidence ofearning income, could not at all be made a basis to invokejurisdiction under Section 147 of the Act. He urgcd that baldstatements of earning huge profits made by Asst. Commissioner,Central Excise, were without any basis. Such obser\'ationiJtlRenot based on any evidence and, therefore, on such obscure andvague statement, assessment could not be re-opened. He furthersubmits that sales tax assessment never gavea;~.y detail ofincome earned in a given course. Therefore, only on that basis,the Assessing Officer was not justified in re-opening the case.Learned counsel for the respondent -assessee furthc'- contendedthat while invoking under Section 147 of the Act, the powerAssessing Officer has completely ignored the statutory schemeunder Section 147 of the Act in case where no retu.i n h£'a^^filed. It is sirgued that in order to invoke provision u!~.der''">Sctibn147 ofthe Act, the Assessing Officer is not only requi-.-cd to recordthat no return of income was furnished, but alsc that totalincome or the total income of any other person i"i respect ofwhich he is assessable under this Act during the prcvious yearexceeded the maximum amount which is not d'n.rgeable toincome tax. In the present case, the Assessing Officer failed to see that the net profit of assessee, carrying on sunU.ar trade ofbusiness in the area, was not based on incoine frora sale of theproducts,[but]profit[was][ because][ of][ income][ from][ other][ sources.][ It]is contended that this relevant aspect was corapletely overlookedby the Assessing OfEicer and C.I.T.(A)and,therefore, thecoinputation ofincome by assuraing rainunum average net profit@0.5% could not be applied. In support of his contention, leamedcounsel for the respondent -assessee relied upon the decisions ofSmt. Mua Ananta Naik & Ors. Vs. Deputy Commissioner ofInconie Tax (Investigatlon) & Ors.1, Jogat Mohan Kapiir Vs.Wealth Tax Officer & Ors.2, Sitaram Jmdal Vs. Income TaxOfiRcer & Qrs.3 and CommlsslOUer of Income Tax Vs. ShreeRajasthan Syntex Ltd.4.i i 10. We have considered the rival submissions made by learaedcounsel for the parties and perused the records. 11. It is not in dispute that in the three appeals that in respect ofassessment 1993-94, 1994-95 & 1995-96, the assessee had yearsnot filed any retum. It is also not in dispute that in respect ofperiod[relevant][ to][ the][ assessment]years1993-94,1994-95SB1995-96, the Assessing Officer received information from theAsst. Commissioner, Central Excise, Bhilai regarding eaming ofhuge profit. The respondent-assessee has not disputed the figuresof tumover/salesstatedin variousorderspassedby fhe '(2009) 221 CTR(Bom.) 149 2(1995)125CTR(Cal)428 3(1972)S4rTR162(Cal.) 4 (2008) 217 CTR (Raj) 209 '~-^^y i 10. We have considered the rival submissions made by learaedcounsel for the parties and perused the records. 11. It is not in dispute that in the three appeals that in respect ofassessment 1993-94, 1994-95 & 1995-96, the assessee had yearsnot filed any retum. It is also not in dispute that in respect ofperiod[relevant][ to][ the][ assessment]years1993-94,1994-95SB1995-96, the Assessing Officer received information from theAsst. Commissioner, Central Excise, Bhilai regarding eaming ofhuge profit. The respondent-assessee has not disputed the figuresof tumover/salesstatedin variousorderspassedby fhe '(2009) 221 CTR(Bom.) 149 2(1995)125CTR(Cal)428 3(1972)S4rTR162(Cal.) 4 (2008) 217 CTR (Raj) 209 '~-^^y Assessing Officer, C.T.I.(A) and the Tribunal. The order passed bythe Assessing Officer in the three cases shows that basis forinvoking jurisdiction under Section147of the Act was aninformation of Asst. Commissioner, Central Excise, Bhilai and theAssessing Officer had also taken into consideration the sales taxassessment orders obtained from the Sales Tax Department inrespect of the three assessment For the assessment years. year1993-94 turnover/sales was Rs.ll,25,81,857/-.Similarly theAssessing Officer also noted for the year 1994-95 8a, 1995-Q<^ thesalestax assessmentordersobtainedfromtheSales TaxDepartment,whichdisclosedturnover/salesasRs.15,04,03,280/-andRs.l7,80,00,000/-respectivley.TheAssessing Officer kept in view the net profit shown by theassessee in the same line of business in the area in those relevant The fact that the assessee had not filed income returnyears.during the three assessment years was also noted. The aforesaidmaterial constituted reason to believe fhat income chargeable totax has escaped assessment during the relevant assessment with which we are concemed in these three case^Iyears,only after separately recording detailed reasoo vide order dated24.3.2000 in eachof the cases, that the Assessing Officerproceeded to invoke his power under Section 147 ofthe Act. 12. In order to decide the formulated in these three questions questionsappeals, it is apposite to refer to the provision contained inSection 147 ofthe Act, which is extracted herein below:Section 147 ofthe Act, which is extracted herein below: ^* " 147. If the AssessingOfficer,has reason tobelieve that any income chargeable to tax hasescaped assessment for any assessment year, hemay, subject to the provisions of Sections 148 to153, assess or reassess such income and also anyother income chargeable to tax which has escapedassessmentandwhichcomestohisnoticesubsequentiy in the coiirse of the proceedingsunder this section, or re-compute the loss or thedepreciation atlowance or any other aUowance, asthecasemaybe,fortheassessmentyearconcemed(hereinafter in fhis section and insections 148 to 153, referred to as the relevantassessment year) Provided that where an assessment under sub-section (3) of section 143 or this section has beenmade for the relevant assessment no action year,shall be taken under this section after the expiryof fourfromtheendof therelevant yearsassessment year, unless any income chargeable totax has escaped assessment for such assessmentyear by reason of the failure on the part of theassessee to make a retum under Section 139 or inresponse to a notice issued under sub-section (1)of section 142 or section148 or to disclose fidlyand truly all material facts necessary for hisassessment, for that assessment year . ExpZanation1:ProductionbeforetheAssessingOfficerof accountbooksorotherevidence from which material eviderice could withduediligencehavebeendiscoveredbytheAssessing OfGcer will not necessarily amoiint to disclosure within the meaning of the foregoingproviso. Expiation 2: For the purposes ofthis section,the following shall also be deemed to be caseswhereincoraechargeabletotax hasescapedassessment, namely:- ExpZanation1:ProductionbeforetheAssessingOfficerof accountbooksorotherevidence from which material eviderice could withduediligencehavebeendiscoveredbytheAssessing OfGcer will not necessarily amoiint to disclosure within the meaning of the foregoingproviso. Expiation 2: For the purposes ofthis section,the following shall also be deemed to be caseswhereincoraechargeabletotax hasescapedassessment, namely:- (a) where no return of income has beenfurnished by the assessee although his totalincome or the total income of any otherperson in respect of which he is assessableunder this Act during the previous yearexceeded the maxirnum amount which is not ,-chargeable to income-tax: (b)where a return of income has beenfurnishedbytheassesseebutnoassessment has been made and it is rioticedby the Assessing Officer that fhe assesseehas understated fhe inconie or has claimedexcessive loss, deduction, allowance or reliefin the return where an assessment has been made, but-(c) (i) income chargeable to tax has beenunder assessed ; orunder assessed ; or (ii) such income has been assessed attoo low a rate; ortoo low a rate; or (ii) such income has been made thesubiect of excessive relief under thisAct; orsubiect of excessive relief under thisAct; or (iv) excessive loss or depreciationallowance or any other allowanceunder this Act has been computed.allowance or any other allowanceunder this Act has been computed. 13. The provision contained in Section 147 of the Act invest the Assessing Officer wifh the power to assess or re-assess anyincome chargeable to tax which has escaped assessment for anyassessment year.It has been provided that if the Assessing Officer has reason to beUeve that any income chargeable to taxhas escaped for any assessment year then he may, subject toprovision of Section 148 to 153, assess or re-assess such income.The Assessing Officer has also been invested with the to powerassess or re-assess any other income chargeable to tax which hasescaped assessment and which comes to his notice subsequentiyin the course of fhe proceedings under Section 147 of fhe Act. Themain provision as it existed during relevant period is followed bya proviso and two explanations.It may be clarified fhat secondproviso was inserted subsequently by the Finance Act 2008w.r.e.f 1.4.2008, wifh which we are not concemed in the presentcase. Explanation 2 that certain cases specified in clause provides(a),(b) and(c) shall be deemed to be cases where incomechargeable to tax has escaped assessment. Clause (a) providesthat where no retum of incoine has been fumished by theassessee although his total income or fhe total income of anyother person in respect ofwhich he is assessable under fhis Actduring the previous year exceeded the maximum amount which isnot chargeable to income tax. Therefore, raerely because noretum of income has been filed, deeming fiction would not beattracted, unless it is also found that the total income during the exceeded the maximum amount which is notprevious yearchargeable to income tax. In other words, in order to attractdeeming fiction under clause (a) of Explanation 2, two conditionsare required to be satisfied. One is that no retum of income has "^s-s^-. ?:s f^ been fumished by the assessee. Second is that his total income orthe total income of any other in respect of which he is personassessable under this Act during the previous year exceeded themaximum amount which is not chargeable to inconie tax. Unlesstheaforesaidtwoconditionsaresatisfied,itwillnotbetoapplythedeemingfictionasinpermissibleprovidedExplanation 2. 14. The provision contained in Section 147 of the Act came up forconsideration before the Supreme Court in the case of RayihondWoolen Mills Ltd. Vs. Inconne -tax Officer5 and it was held asunder: We have only to see whether there was primafacie some material on the basis of which theDepartment could reopen the case. The sufficiencyor correctness of the material is not a thing to beconsidered at this stage." "^s-s^-. ?:s f^ been fumished by the assessee. Second is that his total income orthe total income of any other in respect of which he is personassessable under this Act during the previous year exceeded themaximum amount which is not chargeable to inconie tax. Unlesstheaforesaidtwoconditionsaresatisfied,itwillnotbetoapplythedeemingfictionasinpermissibleprovidedExplanation 2. 14. The provision contained in Section 147 of the Act came up forconsideration before the Supreme Court in the case of RayihondWoolen Mills Ltd. Vs. Inconne -tax Officer5 and it was held asunder: We have only to see whether there was primafacie some material on the basis of which theDepartment could reopen the case. The sufficiencyor correctness of the material is not a thing to beconsidered at this stage." InasubsequentdecisioninthecaseofAssistantCommissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers(P) Ltd.6, the Supreme Court considered the scope, meaning andimport more elaborately, as below:Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers(P) Ltd.6, the Supreme Court considered the scope, meaning andimport more elaborately, as below: "16. Sec. 147 authorises and permits the A.O. to Sec. 147 authorises and permits the A.O. toassess or reassess inconie chsirgeable to tax if hehasreasontobelievethatincoraeforanyassessment has escaped assessment.The yearhasreasontobelievethatincoraeforanyassessment has escaped assessment.The yearword "reason" in the "reason to believe" phrase phrasewould mean cause or If the A.O. has justification. justification. cause or justification to know or suppose thatinconie had escaped assessment, it can be said tohave reason to believe that an income had escapedassessment. The expression cannot be read tomean that the AO shoiild have finally ascertainedthe fact by legal evidenceor conclusion.Thefunction of the AO is to administer fhe statute withsolicitude for the public exchequer with an inbuiltidea of faimess to taxpayers. As observed by theDelhi High Court in Central Provinces ManganeseOre Co. Ltd. Vs. ITO (1991) 98 CTR (SC) 161:(1991) 191 ITR 662 (SC), for initiation of actionunder S.47(a)(as the provision stood at Cherelevanttime)fulfilknentof thetworequisiteconditions in that regard is essential. At fhat-stage,the Enal outcome of the proceeding is not relevant.In other words, at the irutiation stage, what is"reasonrequiredistobelieve",butnottheestabUshed fact of escapement of income. At thestage issue of notice, the only question is whetherthere was relevant niaterial on which a reasonablepersoncouldhaveformedarequisitebelief.Whether the materials would conclusively prove theescapement is not the concem at that stage. This isso because the formation of belief by the AO iswithin the realm. of subjective satisfaction [see ITOvs. Selected Dalurband Coal Co. (P) Ltd. (1996) 132CTR (SC) 162: (1996) 217 ITR 597 (SC); RaymondWoolen MMs Ltd. Vs. ITO (1999) 152CTR (SC) 418: (1999) 236 ITR 34 (SC)." 15.Therefore, if the A.O. has cause or justification to know or evensuppose that in fact it escaped assessment, it can be said to have 15.Therefore, if the A.O. has cause or justification to know or evensuppose that in fact it escaped assessment, it can be said to have reason to believe that income had escaped assessment. In orderto invoke jurisdiction under Section 147 of the Act, that much ofsatisfaction would be sufficient.That is not a stage where theAssessing OfRcer is required to finally ascertain the fact by legalevidence by a long drawn of meticulous examination. The processfinal outcome of the proceeding is not relevant. That is the stageof initiation and not Bnal determination. To say, therefore, thattheAssessingOfBcershouldhavefinallyascertaincdbyestablished legal evidence to conclude that particular incoiaechargeable to tax has escaped assessment is not the intention oflaw. At the stage of issue of a notice by invoking provision ofSection 147 of the Act, all that is required to be seen is whetherthere was relevant material on which a reasonable could personhave forined a requisite belief. Whether the materials wouldconclusively prove the escapeinent is not the concern at thatstage. In substance, the formation of belief by the AssessingOfficer is only within the realm of subjective satisfaction. 16.In the light of the aforesaid decision of the Supreme Court-andimport ofprovision under Section 147 ofthe Act, the order passedby the Assessing Officer in cases in hand is required to beexamined. 17.What constituted "reason to believe", was receipt of a definiteinformation from the office of Asst. Commissioner, Central Excise,Bhilai, regarding earning of huge profit. The Assessing Officer inthree orders passed separately in each of the cases in hand,information from the office of Asst. Commissioner, Central Excise,Bhilai, regarding earning of huge profit. The Assessing Officer inthree orders passed separately in each of the cases in hand, incidentally on 24.3.2000, took into consideration the order ofassessment by the Sales Tax Officer relatmg to the relevant years.TheAssessingOfficerfoundthattheassesseehadhugetumover/sale ofthe manufacturing products. For the assessmentyear 1993-94 tumover/sales was Rs.11,25,81,857/-. Similarlythe Assessing Officer also noted in the 1994-95 & 1995-96, yearthesalesassessinentorderobtainedfromfheSalesTaxDepartmentwhichdisclosedtumover/salesasRs.15,04,03,280/-andRs.l7,80,00,000/-respectivley.Thefigures of tumover are not smaU. This was coupled with the factthat for the relevant assessment the assessee did not file years,incometaxretum.TheAssessingOfficeralsotookintoconsideration that assessees who were in similar business hadearned profit. In the considered opinion of this Court, receipt ofinformation and disclosure of aforesaid fact in each of the threecasesdefinitelyconstitutedreasonsforbelief thatincomechargeable to tax had escaped assessment. Present is not a casewhere the assessee had disclosed such information regardingtumover and gave details which were subjected to assessment.Therefore, the subjective satisfaction of the assessee was basedon relevant material and cannot be said to be mere ipse-dixit. Ashas already been discussed and held hereinabove that what isrequired to invoke jurisdiction under Section 147 of the Act iscauseorjusti&cationandnotfinalascertainmentuponexamination ofevidence. The material taken into consideration by the Assessing Officer in the matter of exercise of power under"causeSection147oftheAct,constitutedsufiicientorjustification".At that stage, no more exercise was required to beundertaken by the Assessing Officer. Applying the test which hasbeen laid down by the Supreme Court in the case of RajeshJhaveri (supra), we have no hesitation to hold that in each of thethree cases, the Assessing Officer was in invoking justifiedprovision under Section 147 of the Act. It is not a case wher;° theAssessing Officer sought to exercise power under Section 147 ofthe Act only on one circiunstance i.e. non-filing of retum, sp as tosay that deeming provision in clause (a) of Explanation 2 couldnot be attracted in the absence of there being any considerationas to whether total income during the previous year exceeded theinaxim.um amount which is not chargeable to income tax. Theorder of the Assessing Officer does not show that the onlyoperative cause or justification to invoke power under Section 147of the Act was non-Eling of the return. In fact, the AssessingOfficer has taken into consideration the receipt of informationfromtheAsstt.Commissioner,CentralExcise,salestaxassessment orders of the relevant years.Not'only this, theturnover/sales figures were also found to be very high.[ Non-Eling]of the return in the relevant assessment was in addition to yearsthe aforesaid circumstances which were noticed and taken intoconsideration by the Assessing Officer to invoke power underSection 147 oftheAct. :i?'r.y'•^.'^,.<!?i ^. 18. :i?'r.y'•^.'^,.<!?i ^. 18. Present is not a case where the iinder Section 147 of the powerAct has been invoked under deeming provision contained uiclause (a) of Expkination 2. Therefore, the submission of leamedcoiinsel for the respondent-assessee that the Assessing Officerwas notjustified in reopening the case only on the ground ofnon-filing of ret.un, on facts, is not acceptable and has to be rejected.The Tribunal feU into grave error of law in iinduly restricting thescope of power and jurisdiction under Section 147 of the Act byholding that there is no evidence on record that fhe assesseeeamed income on huge transactions and that assessees in similarline of business inciirred loss before income froin other sourcesduring the relevant year. The approach of the Tribunal as adoptedis clearly erroneous in law because that would am.oi.mt to firstfinally ascertain on established legal evidence regarding preciseincorae having escaped assessment as a condition precedent forexercise of xuider Section 147 of the Act. That is not the powerobject behind the confennent of power i.mder Section 147 of theAct. The condition precedent for exercise of statutory power underSection 147 of the Act is "reason to believe" and not actual andfinal assessment on definite material. The exercise, therefore, atthe initial stage is actuated by reason to believe and not thatAssessing Officer shoiild have finally ascertained the fact by legalevidence or conclusion. In the words of the Supreme Coiirt in fhecase of Rajesh Jhaveri (supra)-["the]function of the AO is it to powerAct has been invoked under deeming provision contained uiclause (a) of Expkination 2. Therefore, the submission of leamedcoiinsel for the respondent-assessee that the Assessing Officerwas notjustified in reopening the case only on the ground ofnon-filing of ret.un, on facts, is not acceptable and has to be rejected.The Tribunal feU into grave error of law in iinduly restricting thescope of power and jurisdiction under Section 147 of the Act byholding that there is no evidence on record that fhe assesseeeamed income on huge transactions and that assessees in similarline of business inciirred loss before income froin other sourcesduring the relevant year. The approach of the Tribunal as adoptedis clearly erroneous in law because that would am.oi.mt to firstfinally ascertain on established legal evidence regarding preciseincorae having escaped assessment as a condition precedent forexercise of xuider Section 147 of the Act. That is not the powerobject behind the confennent of power i.mder Section 147 of theAct. The condition precedent for exercise of statutory power underSection 147 of the Act is "reason to believe" and not actual andfinal assessment on definite material. The exercise, therefore, atthe initial stage is actuated by reason to believe and not thatAssessing Officer shoiild have finally ascertained the fact by legalevidence or conclusion. In the words of the Supreme Coiirt in fhecase of Rajesh Jhaveri (supra)-["the]function of the AO is it to administer the statute with solicitude for the public exchequerwith an inbuilt idea offairness to taxpayers" . 19. administer the statute with solicitude for the public exchequerwith an inbuilt idea offairness to taxpayers" . 19. Leamed counsel for the respondent-assessee sought to impressupon the fact that the Assessing Officer and CIT (A) were notcorrect in coniing to conclusion that assessees in the similar lineof business in the relevant years had earned profit, because theprofit was not because of the business, but, on account of incomefrom other sources. That is something which is in the reakn ofactual assessment after having invoked under Section 147 powerof the Act and that by itself would not vitiate the exercise of powerunderSection147of the Act.There were other causeorjustification which constituted "reason to believein the presentcase. That was not the only reason for the Assessing Officer toform belief that income has escaped assessment. Presently we arenotconcemedastowhetherinultimateanalysisafterassessment made, the assessee had earned income in thoseyears. Our considerations are conEned only to the que;-2ions oflaw, which have been framed.{ 20.In view of the decision of the Supreme Court in the case of RajeshJhaveri and discussions and conclusion as above, none (supra)of the decisions cited by learned counsel for the respondent cometo the aid of the assessee, because in each of those cases, ondtfferent factual conclusion was arrived at with regard premises,to existence of "reason to believe . 21. The upshot of aforesaid discussions and conclusion we havedrawn after examining the statutory scheme of Section 147 of theAct and judgment of the Supreme Court , the orders passed bythe Tribunal in each of the cases cannot be sustained in law andhas to be set aside. We accordingly set aside the order passed bythe Tribunal in each of the appeals before us in three cases. Wenoticed that only on the issue as to whether Assessing Officer wasjustified in re-opening the case under Section 147 , the Tribunalupset the orders of the Assessing Officer and CTI (A), withoutgoing into other issues framed by it.Once it is held thatAssessing OfGcer was justiGed in re-opening the case underSection147of the Act, the other issues relating to actualassessnient of income, determination of tax followed by penalty,interest etc., would be matters for consideration with which weare not concemed, because the Tribunal has not into those goneaspects raised before it by the assessee. Therefore, we remit allfhe three cases to the Tribunal for consideration of issues framedby it, except the aspect relating to re-opening of case underSection 147 of the Act. 22. The Tribunal shall decide all other issues in accordance with law.The three Tax Cases(Income Tax Appeals)areaccordinglyallowed. ^ SdA .:sati^K:AgffiJiotri I SdAM.M.ShrivastavaJudge