Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts - Assessment year 2004-05 - Assessee-company was engaged in business of manufacturing and marketing of paper and business of financing - For relevant assessment year, it filed its return of income disclosing certain income, which was arrived at by showing certain income as interest earned in activity of money lending, under head 'Business' and after claiming admissible expenses and set off against brought forward losses - Assessment of assessee was completed - Subsequently, Assessing Officer issued a notice under section 147 for reopening said assessment giving reasons that assessee had claimed deduction of expenses unconnected with earning of interest and brought forward business loss was wrongly set off against income from other sources - Whether, on facts, reason recorded by Assessing Officer could be said to be vague or a mere doubt - Held, no - Whether once it was found that Assessing Officer had reason to believe that there was income escaping assessment, it was not open to Court to make a roving enquiry, since reasons were not justifiable - Held, yes FACTS The main objects of the assessee-company, as per its articles and memorandum of association, included the manufacturing and marketing of paper and business of financing. For the relevant assessment year, it filed its return of income disclosing certain income which was arrived at by showing certain income as interest earned in the activity of money lending under the head 'Business income' and after claiming admissible expenses and set off against brought forward losses. The assessment of the assessee was completed. Subsequently, the Assessing Officer issued notice under section 147 for reopening the assessment on the ground that the assessee had claimed deduction of expenditure unconnected with earning of interest and the brought forward business losses were wrongly set off against income from other sources, contrary to the provisions of section 72. The assessee filed objections to the reasonings given by the Assessing Officer and requested to drop further proceedings, but the Assessing Officer…

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