Law:

Section:

section 147(b) of the income-tax act, 1961-reassessment-aac while hearing appeal in respect of assessment year 1968-69 found the entertainment expenses having been allowed in excess of statutory limit and sent a note to ito to check up the position with respect to assessment year 1966-67-whether the note constituted information within the meaning of section 147(b)-held, no, the information should be factual or legal and could not be based on suspicion or conjecture-whether, n reassessment proceedings, items other than those on the basis of which the proceedings were reopened could be looked into-held, yes Facts While hearing an appeal in respect of assessment year 1968-69, the AAC found that the ITO had allowed entertainment expenses in excess of statutory limit and further noticed that the entertainment expenses were debited not only under the head of entertainment expenses but also under heads of account. He sent a note to the ITO to check up the position with respect to the assessment year 1966-67 and to take appropriate action for disallowing excess, if any. The ITO, thereupon, initiated reassessment proceedings and disallowed the entertainment expenses found excess. As the assessment was reopened, the ITO also looked into other matters as well and made certain additions under other heads. In appeal, the AAC found that the entertainment expenses were within the statutory limit but upheld the ITO's order in part in respect of other additions. The Tribunal held that the ITO had information in his possession on the basis of which he could proceed under section 147(b) and allowed the assessee's appeal in part. Held 1.The information as contemplated in clause (b) of section 147 might be factual or legal but it could not be based on suspicion or conjecture. The AAC had no factual information before him in relation to the assessment year 1966-67 and had only a suspicion; and the ITO based his belief on that suspicion. Suspicion could not constitute a valid ground for, initiating proceedings under section 147(b) and the ITO had acted without jurisdiction. 2. If the ITO had jurisdiction to reopen the assessment, then the entire assessment was at large and the ITO…

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