Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General Assessment year 1998-99 Where on basis of information given by Dy. Director of Income-tax (Inv.), Assessing Officer reopened assessment and from so-called reasons, it was not at all discernible as to whether Assessing Officer had applied his mind to information and independently arrived at a belief that, on basis of material which he had before him, income had escaped assessment, reopening of assessment was not justified [In favour of assessee] After the completion of the assessee's assessment the Deputy Director of Income- tax (Inv.) informed the Assessing Officer of the assessee that during the course of investigation, one SG, proprietor of R.K., had stated on oath that the transactions through certain bank account were only paper transactions in which the party was intending to take bills paid in cash and issue cheques/drafts showing the said amounts as sale of shares. It was further informed that the assessee was neither a share broker nor a member of any stock exchange and that it was doing the work of giving entries. Further, information was given that the entry of Rs. 20,70,000 in account No. 003097 dated 28-2-1998 and 1-3-1998 was nothing but entry taken by paying cash. Thereafter, on the basis of the aforesaid information, a notice under section 148 was issued by the Assessing Officer to the assessee, which was allegedly the beneficiary of the bogus claim of long-term capital gain shown on sale/purchase of shares. Accordingly, reassessment was completed. Held that, in the present case, the first sentence of the so-called reasons recorded by the Assessing Officer was mere information received from the Deputy Director of Income-tax (Inv.). The second sentence was a direction given by the very same Deputy Director of Income-tax (Inv.) to issue a notice under section 148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. It was clear that the Assessing Officer referred to the information and the two directions as 'reasons' on the basis…

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