Law:

Section:

Section 147(a) of the Income-tax Act, 1961 - Reassessment - Non-Disclosure of primary facts - ITO initiated reassessment proceedings on the ground that assessee's expenses as conjuctured by ITO could not be met within the income originally declared and assessed - No material cited by ITO to support his view - Whether reassessment proceedings valid - Held, on facts, no Facts The assessee, an advocate having substantial professional income, became a minister in the Central Government in April 1957 and continued to hold this post till January 1966. For the assessment year 1962-63, the ITO had originally assessed the assessee at the returned income of Rs. 47,100. Later on, the ITO reopened the assessment under section 147(a) on the ground that he had reason to believe that some income for that assessment year had escaped assessment. The assessee filed a return under protest showing the same income as originally disclosed. On writ, the assessee challenged the validity of the reassessment proceedings on the ground that there was no material before the ITO for the issue of the notice under section 147(a). The ITO stated in the counter-affidavit that he was of the opinion that inasmuch as in the preceding years personal and household expenses of the assessee were to the tune of Rs. 40,000 to Rs. 50,000 a year, it was difficult to believe that in the relevant assessment year the assessee had been able to meet all his household expenses from out of the sum of Rs. 9,930 which was the balance left after deducting other expenses, and that as such there was reason to believe that income chargeable to tax had escaped assessment. Held The words "if the ITO has reason to " believe" used in section 147(a) suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the ITO may act under this section on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The powers under this section are not plenary. They are subject to judicial review. Further, the words used in section 147(a) do not make conclusive the officer's own honest opinion that he has reasonable cause for the belief. The grounds on which the…

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