Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General Where while disposing case of MAL, Settlement Commission, based on statement obtained from one V, chartered accountant who appeared on behalf of MAL and other materials placed before it, was constrained to make certain observations with reference to transactions between MAL and assessee, said observations could not be conclusive proof for reopening assessment of assessee without giving assessee an opportunity to give an explanation or submit objections If the information which forms the basis for the reason to believe for the Department to reopen the assessment are materials which lack specific, relevant and reliable criterion, such materials are liable to be rejected only on the ground that there may be reason to suspect, but not reason to believe. What is relevant is whether the material has got any rational connection or live link for the purpose of reason to believe. Where while disposing the case of MAL, the Settlement Commission, based on the statement obtained from one V, chartered accountant who appeared on behalf of MAL and other materials placed before it, was constrained to make certain observations with reference to the transactions between MAL and the assessee and consequently the assessment of the assessee was reopened. Held that the observations of the Settlement Commission could definitely be a reason for reopening the assessment in respect of the assessee. But the said reason by itself could not be a conclusive proof for reopening the assessment in the absence of any explanation or objections by the assessee. Liberty was to be given to the assessee to submit his objections to the notices issued under section 148 and to the observations made against the assessee in the proceedings of the Settlement Commission, in the matter of MAL, as the said observations would not automatically bind the assessee. On receipt of such objections, the assessing authority should consider the same and dispose of the matter on merits, without being influenced by any of the observations made by the Settlement Commission in the proceedings in the case of MAL. JUDGMENT P.D. Dinakaran, J.-The…

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