Law:

Section:

Section 148, read with section 147, of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for - Assessment years 1999-2000 and 2000-01 - Whether reopening of assessment based on suspicion, presumption, conjunctures and surmises is not permissible in law - Held, yes - Whether where reopening of assessment was based on conjectures and surmises and same was sought to be justified by ignoring binding decisions, reopening of assessment was liable to be quashed and set aside - Held, yes FACTS The assessee-firm filed the return of income for the assessment years 1999-2000 and 2000-01. The assessment orders under section 143(3) were passed determining income after making various additions and disallowances. The Assessing Officer by impugned notice under section 148 sought to reopen the assessments on the grounds, inter alia, that (1) the assessee had not furnished any evidence to show that the tax was deducted at source before making remittances in foreign currency relating to payment of interest, royalty, consultancy and analytical fees; (2) that the gross dividend had been allowed against the allowable net dividend; and (3) the processing charges received by the assessee for the job work done for locals were not income derived from industrial activity and, therefore, the processing charges ought to have been excluded while computing deduction under section 80-IA/80-IB. The assessee filed a writ petition challenging the notice in which the High Court directed the assessee to file objection for reopening the assessment and further directed the Assessing Officer to dispose of the same in accordance with law. Thereafter, the assessee filed objections for reopening the assessment which were rejected by the Assessing Officer. On petition : HELD It is a settled position of law that though the power conferred under section 147 for reopening the concluded assessment are very wide, the said power cannot be exercised mechanically or arbitrarily. The expression 'reason to believe that any income chargeable to tax has escaped assessment' means entertaining a reasonable belief that particular income went unnoticed by the Assessing Officer and, hence, escaped…

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