# M/s Awlesh Kumar Singh v. U.O.I. & Anr

- **Citation:** (2022) 5 ILRA 1556
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-05-05
- **Case number:** Writ Tax No. 378 of 2022
- **Bench:** Surya Prakash Kesarwani, Jayant Banerji
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-awlesh-kumar-singh-v-u-o-i-anr-48446
- **Pages:** 14

## Headnote

A. Civil Law - Income Tax Act , 1961 -
Section 34 (1-A)- Reason to believe-
Meaning Scope and Consequences- words
'reason o believe' suggest that belief must be
that of an honest and reasonable person based
upon reasonable grounds and the I.T.O. may act
on direct or circumstantial evidence but not on
mere suspicion, gossip or rumour.

B. Civil Law - Income Tax Act , 1961 -
Section 47 (a) - important words as used
in Section 47 (a) of th Act are stronger than
the
words
"is
satisfied".
The
belief
entertained by the I.T.O. must not be
arbitrary or irrational. It must be based on
reasons which are relevant and material. The
use of the words "reason to believe" in
Section
147
has
to
be
interpreted
schematically
and
the
as
the
liberal
interpretation of the words would have the
consequences of conferring arbitrary power
on the assessing officer.

C. Change of Opinion- the words "change
of opinion implies formulation of opinion and
then
a
change
thereon.
In
terms
of
assessment
proceedings,
it
means
formulation of belief by an assessing officer
resulting from what he thinks on a particular
question.

D. Reassessment of income under Section
147 of the Income Tax Act, 1961 - Cannot
be made and change of opinion. Accordingly
notice issued under Section 148 of I.T. Act
quashed (para 23, 25 & 26)

Writ Petition allowed with cost of Rs.

## Text

_Characters 0–39,923 of 46,767. This is a partial read: ask again with offset=39923 for what follows._

1556 INDIAN LAW REPORTS ALLAHABAD SERIES
deceased but the evidence of the informant
P.W.1-Rakesh Kumar shows that on the
date of the incident at about 2:00 a.m.,
when convict/appellant and two other
assailants entered into the house, his
nephew raised alarm and on his alarm, he
woke up and saw that convict/appellant and
other two assailants assaulted his mother.
Thus, the prosecution has failed to establish
the
common
intention
of
the
convict/appellant to murder the deceased,
hence conviction and sentence of the
convict/appellant for the offence with the
aid of Section 34 I.P.C. is not sustainable.

64. In view of the foregoing
discussions, we pass the following order :--

(A) Capital Case No. 02 of 2020

As the appellant has murdered the
deceased, which was his individual act and
he is responsible for the same, hence he is
liable to be convicted for the offence under
Section 302, 307, 323, 452 I.P.C. as
''simpliciter'.

Accordingly, this Court modify
the conviction of the appellant for the
offences under Sections 302/34, 307/34,
323/34 and 452/34 I.P.C to Section 302,
307, 323, 452 I.P.C. as ''simpliciter' and
set-aside
the
death
sentence
of
the
convict/appellant under Section 302 I.P.C.
and instead sentence him to imprisonment
for life.

Convict/appellant Buddha is in
jail and shall serve out the sentence.

Subject to this alteration in the
sentence, Capital Case No. 1 of 2020 is
dismissed.

(B) Jail Appeal No. 364 of 2020
:-

The instant appeal is partly
allowed. This Court modify the conviction
of the appellant for the offences under
Sections 302/34, 307/34, 323/34 and
452/34 I.P.C to Section 302, 307, 323, 452
I.P.C. as ''simpliciter' and set-aside the
death sentence of the convict/appellant
under Section 302 I.P.C. and instead
sentence him to imprisonment for life.

Appellant Buddha is in jail and
shall serve out his sentence.

65. Before parting, we record our
appreciation rendered by Shri Raza Zaheer,
learned Amicus Curiae who assisted this
Court in the disposal of the abovecaptioned reference and appeal, therefore,
this Court deem it appropriate to direct for
payment to Shri Raza Zaheer, learned
Amicus Curiae for his valuable assistance
as per Rules of the Court.

66. Let Shri Raza Zahir, learned
Amicus Curiae be paid remuneration as per
Rules of the Court within a month.

67. Office is directed to send a
certified copy of this judgment along with
lower court record to the court concerned
for information and compliance.
----------

(2022)05ILR A1556
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 05.05.2022

BEFORE

THE HON'BLE SURYA PRAKASH
KESARWANI, J.
THE HON'BLE JAYANT BANERJI, J.

Writ Tax No. 378 of 2022

M/s Awlesh Kumar Singh ...Petitioner
Versus
U.O.I. & Anr. ...Respondents

Counsel for the Petitioner:
Sri Krishna Mohan Singh, Sri Aloke Kumar
5 All. M/s Awlesh Kumar Singh Vs. U.O.I. & Anr.
1557
Counsel for the Respondents:
A.S.G.I., Sri Praveen Kumar, Ms. Sheetla
Prasad Gound, Sri Gaurav Mahajan

A. Civil Law - Income Tax Act , 1961 -
Section 34 (1-A)- Reason to believe-
Meaning Scope and Consequences- words
'reason o believe' suggest that belief must be
that of an honest and reasonable person based
upon reasonable grounds and the I.T.O. may act
on direct or circumstantial evidence but not on
mere suspicion, gossip or rumour.

B. Civil Law - Income Tax Act , 1961 -
Section 47 (a) - important words as used
in Section 47 (a) of th Act are stronger than
the
words
"is
satisfied".
The
belief
entertained by the I.T.O. must not be
arbitrary or irrational. It must be based on
reasons which are relevant and material. The
use of the words "reason to believe" in
Section
147
has
to
be
interpreted
schematically
and
the
as
the
liberal
interpretation of the words would have the
consequences of conferring arbitrary power
on the assessing officer.

C. Change of Opinion- the words "change
of opinion implies formulation of opinion and
then
a
change
thereon.
In
terms
of
assessment
proceedings,
it
means
formulation of belief by an assessing officer
resulting from what he thinks on a particular
question.

D. Reassessment of income under Section
147 of the Income Tax Act, 1961 - Cannot
be made and change of opinion. Accordingly
notice issued under Section 148 of I.T. Act
quashed (para 23, 25 & 26)

Writ Petition allowed with cost of Rs.
5000. (E-12)

List of Cases cited:-

1. St. of U.P. & ors. Vs Aryaverth Chawal Udyog
& ors. (2015)17 SCC 324(Paras 28-50)

2. The Commissioner of Sales Tax, U.P. Vs M/s
Bhagwan Industries (P) Ltd., Lucknow AIR 1973
SC 370(Para 9 and 10)
3. M/s Parmarth Steel & Alloys Pvt. Ltd. Vs St. of
U.P. & ors. Writ Tax No. 874/2010(Decided on
28.03.2022)(Para 17)

4. Shivnath Singh Vs Appellate Assistant CIT
(1972)3 SCC 234(Para 10)

5. U.O.I. & ors. Vs M/s Rai Singh Dev Singh
Bisht & ors. AIR 1974 SC 478

6. I.T.O. Vs Lakhmani Mewal Das (1976)3 SCC
757(Para 11 and 12)

7. M/s S. Gangasaran & sons (P) Ltd. Calcutta
Vs I.T.O. & ors. (1981)3 SCC 143(Para 6)

8. Income Tax Officer, Ward No. 62 Vs Tech
Span India Pvt. Ltd. & anr. (2018)6 SCC 685
(Para 14-18)

9. Radha Krishna Industries Vs St. of H.P.
(2021)6 SCC 771
(Delivered by Hon'ble Surya Prakash
Kesarwani, J.
&
Hon'ble Jayant Banerji, J.)

1. Heard Sri Aloke Kumar, learned
counsel for the petitioner and Sri Praveen
Kumar, learned Senior Standing Counsel
for the Income Tax Department.

2. This writ petition has been filed
praying for the following relief:-

"(i) Issue a suitable writ, order or
direction in the nature of certiorari
quashing the notice dated 31.03.2021 and
22.11.2021(contained as Annexure 2 and 4
to the writ petition) issued by respondent
n.2 for reassessment under Section 148 and
143(2) read with Section 147 of the Act for
the assessment year 2017-18.

(i-a) Issue a suit writ, order or
direction in the nature of certiorari
quashing the order dated 30/03.2022
(contained as Annexure No.8 to the writ
1558 INDIAN LAW REPORTS ALLAHABAD SERIES
petition) passed by the respondent no. 3
under section 147 read with section 144B
of the Income Tax Act, 1961 for the
assessment year 2017-18"

Facts

3. Briefly stated facts of the present
case are that the petitioner derives income
from
civil
contract
work.
For
the
Assessment Year 2017-18, the petitioner
filed a return of income on 21.03.2018
along with audit report dated 02.11.2017.
The case of the petitioner was selected for
scrutiny and notice under section 143(2) of
the Income Tax Act, 1961 (hereinafter
referred to as "the Act, 1961") was issued
on 13.08.2018 which was followed by
notices under Section 142(1) of the Act,
1961.
A
show
cause
notice
dated
07.12.2019 was also issued to the petitioner
and the petitioner submitted entire details
as required by the assessing officer.

4. Vide notice dated 23.11.2019 under
Section 142(1) of the Act, 1961 issued during
the course of regular assessment proceedings,
the assessing officer required the petitioner to
furnish reply on several points and also
required him to furnish entire details of all the
accounts maintained with the Bank/Post
Office/Financial Institutions and the cash
deposited by him in the Bank during the
demonetization period. Every details with
regard to cash deposit were also required to be
furnished. The petitioner furnished the entire
details which were examined by the assessing
authority. After thorough scrutiny of the case,
the assessment order under Section 143(3) of
the Income Tax Act, 1961 was passed on
25.12.2019 by the assessing officer, assessing
the petitioner's total income at Rs. 44,74,620/-.
He made an addition of Rs. 2,00,000/-.

5. Thereafter, notice dated 31.03.2021
under Section 148 of the Income Tax Act,
1961 for the Assessment Year 2017-18 was
issued by the assessing officer to the
petitioner. The assessing officer recorded
"reason to believe" as under:-

" As per the information received
from the Investigation Wing under category
of High Risk CRIU/VRU Information on
Insight Portal of he Department, the
assessee has deposited cash in aggregating
sum
of
Rs.
4,97,24,000/-
during
demonetization period which is being
treated as undisclosed income during the
previous year related to the assessment
year under consideration".

6. Aggrieved with the aforesaid notice
for reassessment under Section 148 of the
Income Tax Act, 1961, the petitioner has
filed
the
present
writ
petition
on
07.02.2022
which
was
subsequently
amended. The reliefs sought in the present
writ petition have been quoted above.

7. In paragraph 8 of the counter
affidavit
dated
25.04.2022,
the
respondent no.2 has stated as under:-

(8) That in the present case, since
there was information that the assessee has
undertaken huge financial transactions,
much beyond the taxable limit, considering
all the details and materials available on
record,
the
case
was
selected
for
reassessment under Section 147/148 of
Income Tax Act, 1961 as per CBDT
Circular F.No. 225/40/2921/ITA-II dated
04.03.2021
which
prescribes
for
guidelines regarding categories of cases to
be considered as 'potential cases" for
taking action under Section 148 of the Act
by the jurisdictional assessing officer. The
present case is covered under Clause-1(iii)
(a) of the aforesaid circular. For the kind
perusal of this Hon'ble Court, a true
5 All. M/s Awlesh Kumar Singh Vs. U.O.I. & Anr.
1559
photostat copy of the circular dated
04.03.2021 is being filed herewith and
marked as Annexure CA-2 to the present
affidavit.

8. In paragraph 8 of the counter
affidavit, the respondent no.2 has referred
and relied upon the Circular of CBDT
dated 04.03.2021, which is reproduced
below.

F. No. 225/40/2021/ITA-II

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Ndw Delhi, the 4th March, 2021.

To

All. Pr. Chief Commissioner of Income
Tax/Chief Commissioners of Income Tax.

Madam/Sir,

Subject:-
Instructions
regarding
selection of cases for issue of notice under
section 148 of the Income Tax Act, 1961regarding.

1. The Central Board of Direct Taxes
(Board), in exercise of its power under
section 119 of the Income Tax Act, 1961
(Act), with an objective of streamlining the
process of selection of cases for issue of
notice under section 148 of the Act, hereby
directs that the following categories of
cases be considered as 'potential cases' for
taking action under section 148 of the Act
by 31.03.2021 for the A.Y. 2013-14 to A.Y.
2017-18 by the jurisdiction Assessing
Officer (JAO):

i. Cases where there are Audit
Objection (Revenue/Internal) which require
section under section 148 of the Act;

ii.Cases of information from any
other
Government
Agency/Law
Enforcement Agency which require action
under section 148 of the Act;

iii. Potential cases including:-

(a) Reports of Directorate of
Income -tax (Investigation),

(b) Reports of Directorate of
Intelligence & Criminal Investigation.

(c)
Cases
from
Non-Filer
Management System (NMS) & other cases
as flagged by the Directorateof Income -tax
(System) as per risk profiling;

iv.
Cases
where
information
arising
out
of
field
survey
section,
regarding action under Section 148 of the
Act.

v. Cases of information received
from any Income -Tax authority regarding
action under Section 148 of the Act with the
approval of the Chief Commissioner of
Income Tax Concerned.

2. No other category of cases,
except the above, shall be considered for
taking action under section 148 of the Act
by the JAO.

3. It is clarified that action under
Section 148 of the Act shall be taken by
the Assessing Officer in respect of the
above categories of cases after forming a
reasonable belief that income chargeable
to tax has escaped assessment and reasons
to believe shall be recorded and required
sanction as per section 151 of the Act shall
be obtained before issuing notice under
section 148 of the Act.

4. These instructions shall not be
applicable to the Central charges and
International Taxation charges for which
separate instructions are being issued.

5. Issues with the approval of the
Chairman, CBDT.

(Rajarajeswari R)"

Submissions

9. Learned counsel for the petitioner
submits that there was no basis or material
before the assessing authority for recording
'reasons to believe' and consequently
1560 INDIAN LAW REPORTS ALLAHABAD SERIES
proceeding under Section 148 of the
Income Tax Act, was itself without
jurisdiction.

10.

Learned
counsel
for
the
respondents submits that notice under
section 148 of the Income Tax Act, 1961
was issued on the basis of Circular dated
04.03.2021 inasmuch as, the petitioner's
case was considered as 'potential case'
for taking action under section 148 of the
Act,1961 by the assessing authority and
averments in this regard has been made in
paragraph 8 of the counter affidavit. He
further submits that the petitioner has not
submitted any objection to the 'reasons to
believe' recorded by the assessing authority,
instead he directly filed the present writ
petition. Since the petitioner has not
submitted any objection to "reasons to
believe" recorded by assessing authority,
therefore, writ petition is not maintainable.

Discussion & Findings

11. We have carefully considered the
submissions of learned counsels for the
parties.

12. In the impugned reassessment
order dated 30.03.2022, the respondent
no.3 has recorded conclusion, as under:-

"Considering the facts of the
case,
the
submission/documentary
evidences filed by the assessee in response
to show cause, were found not verifiable
and acceptable to justify the genuineness of
transactions. Notice u/s 133(6) of the I.T.
Act, dated 09.02.2021 issued for same
amount
of
Rs.
1,05,00,000/-
from
department. In notice u/s 133(6), it is seen
that in notice 133(6), details have been
sought regarding source of cash deposits in
SBN Notes, amounting to Rs. 1,05,00,000/-
in bank accounts during the period
08.11.2016 to 31.03.2017. Period mention
in notice u/s 133(6) is specific, not for
period 01.04.2016 to 31.03.2017 (for F.Y.
2016-17).

Once again, it has stated that the
submission/documentary evidences filed by
the assessee, were found not verifiable and
acceptable to justify the genuineness of
transactions.

Subject to the above remarks, the
amount of Rs. 38,83,000/- is added as
undisclosed income and the assessment is
completed u/s147 r.w.s. 144B of IT Act,
1961 after adding Rs. 38,83,000/- as
undisclosed income."

13. The first question that needs to
be considered in the present writ petition is
as to whether "reason to believe"
recorded by the assessing officer was
totally unfounded and whether it was
based on "change of opinion".

Reason to Believe-Meaning, Scope
and Consequence:-

14. In the case of State of Uttar
Pradesh & Others vs. Aryaverth Chawal
Udyog & Others reported in (2015) 17
SCC 324 (paragraphs 28 to 30), the
Hon'ble Supreme Court has held as under:

"28. This Court has consistently
held that such material on which the
assessing Authority bases its opinion must
not be arbitrary, irrational, vague, distant
or irrelevant. It must bring home the
appropriate rationale of action taken by the
assessing Authority in pursuance of such
belief. In case of absence of such material,
this Court in clear terms has held the
action taken by assessing Authority on
such "reason to believe" as arbitrary and
bad in law.
5 All. M/s Awlesh Kumar Singh Vs. U.O.I. & Anr.
1561

In case of the same material
being
present
before
the
assessing
Authority during both, the assessment
proceedings and the issuance of notice for
re-assessment proceedings, it cannot be
said by the assessing Authority that "reason
to believe" for initiating reassessment is an
error discovered in the earlier view taken
by
it
during
original
assessment
proceedings.
(See:
Delhi
Cloth
and
General Mills Co. Ltd. v. State of
Rajasthan, (1980) 4 SCC 71).

29. The standard of reason
exercised by the assessing Authority is laid
down as that of an honest and prudent
person who would act on reasonable
grounds and come to a cogent conclusion.
The necessary sequitur is that a mere
change of opinion while perusing the same
material cannot be a "reason to believe"
that a case of escaped assessment exists
requiring assessment proceedings to be
reopened. (See: Binani Industries Ltd. v.
CCT,(2007) 15 SCC 435; A.L.A. Firm v.
CIT, (1991) 2 SCC 558). If a conscious
application of mind is made to the relevant
facts and material available or existing at
the relevant point of time while making the
assessment and again a different or
divergent view is reached, it would
tantamount to "change of opinion".

If an assessing Authority forms
an opinion during the original assessment
proceedings on the basis of material facts
and subsequently finds it to be erroneous; it
is not a valid reason under the law for reassessment. Thus, reason to believe cannot
be said to be the subjective satisfaction of
the assessing Authority but means an
objective
view
on
the
disclosed
information in the particular case and
must be based on firm and concrete facts
that some income has escaped assessment.

30. In case of there being a
change of opinion, there must necessarily
be a nexus that requires to be established
between the "change of opinion" and the
material present before the assessing
Authority. Discovery of an inadvertent
mistake or non-application of mind during
assessment would not be a justified ground
to reinitiate proceedings under Section
21(1) of the Act on the basis of change in
subjective opinion (CIT v. Dinesh Chandra
H. Shah, (1972) 3 SCC 231; CIT v. Nawab
Mir Barkat Ali Khan Bahadur, (1975) 4
SCC 360)."

 (emphasis supplied)

15. In the case of The Commissioner
of Sales-Tax U.P. vs. M/s. Bhagwan
Industries (P) Ltd., Lucknow, AIR 1973
SC 370 (Paras 9 & 10), Hon'ble Supreme
Court has held as under:

"9. The controversy between the
parties has centered on the point as to
whether the assessing authority in the
present case had reason to believe that any
part of the turnover of the respondent had
escaped
assessment
to
tax
for
the
assessment year 1957-58. Question in the
circumstances arises as to what is the
import of the words "reason to believe", as
used in the section. In our opinion, these
words convey that there must be some
rational basis for the assessing authority
to form the belief that the whole or any
part of the turnover of a dealer has, for
any reason, escaped assessment to tax for
some year. If such a basis exists, the
assessing authority can proceed in the
manner laid down in the section. To put it
differently, if there are, in fact, some
reasonable grounds for the assessing
authority to believe that the whole or any
part of the turnover of a dealer has
escaped assessment, it can take action
under the section. Reasonable grounds
necessarily postulate that they must be
1562 INDIAN LAW REPORTS ALLAHABAD SERIES
germane to the formation of the belief
regarding escaped assessment. If the
grounds are of an extraneous character,
the same would not warrant initiation of
proceedings under the above section. If,
however, the grounds are relevant and
have a nexus with the formation of belief
regarding
escaped
assessment,
the
assessing authority would be clothed with
jurisdiction to take action under the
section.
Whether
the
grounds
are
adequate or not is not a matter which
would be gone into by the High Court or
this Court, for the sufficiency of the
grounds which induced the assessing
authority to act is not a justiciable issue.
What can be challenged is the existence of
the belief but not the sufficiency of
reasons for the belief. At the same time, it
is necessary to observe that the belief must
be held in good faith and should not be a
mere pretence.

10. It may also be mentioned that
at the stage of the issue of notice the
consideration which has to weigh is
whether there is some relevant material
giving rise to prima facie inference that
some turnover has escaped assessment.
The question as to whether that material
in sufficient for making assessment or reassessment under section 21 of the Act
would be gone into after notice is issued to
the dealer and he has been heard in the
matter or given an opportunity for that
purpose. The assessing authority would
then decide the matter in the light of
material already in its possession as well
as fresh material procured as a result of
the enquiry which may be considered
necessary."

 (Emphasis supplied)

16. A Division Bench of this Court,
while dealing with the validity of the reassessment notice under Section 148 in
Writ Tax No.874 of 2010 (M/S Parmarth
Steel And Alloys Pvt. Ltd. vs. State of
U.P. and Others, decided on 28.03.2022,
held as under (Para 17) :

"17. It is settled principles of law
that proceedings under Section 21 of the Act,
1948 can be initiated if the material on
which the Assessing Authority bases its
opinion, is not arbitrary, irrational, vague,
distant or irrelevant. There must be some
rational basis for the assessing authority to
form the belief that the whole or any part of
the turnover of a dealer has, for any reason,
escaped assessment to tax for some year. If
such a basis exists, the assessing authority
can proceed in the manner laid down in
Section 21 of the Act, 1948. If the grounds
are of an extraneous character, the same
would not warrant initiation of proceedings
under the above section. If, however, the
grounds are relevant and have a nexus with
the formation of belief regarding escaped
assessment, the assessing authority would be
clothed with jurisdiction to take action
under the section. Whether the grounds are
adequate or not is not a matter which would
be gone into by the High Court for the
sufficiency of the grounds which induced the
assessing authority to act is not a justiciable
issue. The question as to whether that
material in sufficient for making assessment
or re-assessment under section 21 of the Act
would be gone into after notice is issued to
the dealer and he has been heard in the
matter or given an opportunity for that
purpose. The assessing authority would then
decide the matter in the light of material
already in its possession as well as fresh
material procured as a result of the enquiry
which may be considered necessary.

17. In the case of Sheo Nath Singh
vs. Appellate Assistant CIT, (1972) 3
SCC 234 (Para-10), Hon'ble Supreme
5 All. M/s Awlesh Kumar Singh Vs. U.O.I. & Anr.
1563
Court
while
considering
the
similar
provisions of Section 34 (1-A) of the Indian
Income Tax Act, 1922, held as under:-

"................. There can be no
manner of doubt that the words "reason to
believe" suggest that the belief must be that
of an honest and reasonable person based
upon reasonable grounds and that the
Income Tax Officer may act on direct or
circumstantial evidence but not on mere
suspicion, gossip or rumour. The Income
Tax Officer would be acting without
jurisdiction if the reason for his belief that
the conditions are satisfied does not exist
or is not material or relevant to the belief
required by the section. The court can
always examine this aspect though the
declaration or sufficiency of the reasons for
the belief cannot be investigated by the
court."

18. In the case of Union Of India And
Others vs M/S. Rai Singh Dev Singh Bist &
others, AIR 1974 SC 478 : (1973) 3 SCC 581
(para-5), Hon'ble Supreme Court held as
under:-

"................. before an Income-tax
Officer can be said to have had reason to
believe that some income had escaped
assessment, he should have some relevant
material before him from which he could have
drawn the inference that income has escaped
assessment. His vague feeling that there might
have been some escape of income from
assessment is not sufficient... .............."

19. In the case of ITO vs. Lakhmani
Mewal Das, (1976) 3 SCC 757 (para-11 and
12), Hon'ble Supreme Court has held as
under:-

"11. As stated earlier, the reasons
for the formation of the belief must have a
rational connection with or relevant
bearing on the formation of the belief.
Rational connection postulates that there
must be a direct nexus or live link between
the material coming to the notice of the
Income-tax Officer and the formation of his
belief that there has been escapement of the
income of the assessee from assessment in
the particular year because of his failure to
disclose fully and truly all material facts. It
is no doubt true that the court cannot go
into the sufficiency or adequacy of the
material and substitute its own opinion for
that of the Income-tax Officer on the point
as to whether action should be initiated for
reopening assessment. At the same time we
have to bear in mind that it is not any and
every material, howsoever vague and
indefinite or distant, remote and farfetched,
which would warrant the formation of the
belief relating to escapement of the income
of the assessee from assessment. The fact
that the words "definite information" which
were there in section 34 of the Act of 1922
at one time before its amendment in 1948
are not there in section 147 of the Act of
1961 would not lead to the conclusion that
action cannot be taken for reopening
assessment even if the information is
wholly vague, indefinite, farfetched and
remote. The reason for the formation of the
belief must be held in good faith and should
not be a mere pretence.

12. The powers of the Income-tax
Officer to reopen assessment though wide
are not plenary. The words of the statute
are "reason to believe" and not "reason to
suspect". The reopening of the assessment
after the lapse of many years is a serious
matter. The Act, no doubt, contemplates the
reopening of the assessment if grounds exist
for believing that income of the assessee
has escaped assessment. The underlying
reason for that is that instances of
concealed
income
or
other
income
1564 INDIAN LAW REPORTS ALLAHABAD SERIES
escaping assessment in a large number of
cases come to the notice of the income-tax
authorities after the assessment has been
completed. The provisions of the Act in this
respect depart from the normal rule that
there should be, subject to right of appeal
and revision, finality about orders made in
judicial and quasi-judicial proceedings. It
is, therefore, essential that before such
action is taken the requirements of the law
should be satisfied. The live link or close
nexus which should be there between the
material before the Income-tax Officer in
the present case and the belief which he
was to form regarding the escapement of
the income of the assessee from assessment
because of the latter's failure or omission to
disclose fully and truly all material facts
was missing in the case. In any event, the
link was too tenuous to provide a legally
sound basis for reopening the assessment.
The majority of the learned Judges in the
High Court, in our opinion, were not in
error in holding that the said material
could not have led to the formation of the
belief that the income of the assessee
respondent
had
escaped
assessment
because of his failure or omission to
disclose fully and truly all material facts.
We would, therefore, uphold the view of the
majority and dismiss the appeal with
costs."

20. In the case of M/s. S. Ganga
Saran and Sons (P) Ltd. Calcutta vs.
ITO and others, (1981) 3 SCC 143 (Para6), Hon'ble Supreme Court held as under:-

"6. It is well settled as a result of
several decisions of this Court that two
distinct conditions must be satisfied before
the Income Tax Officer can assume
jurisdiction to issue notice under section
147 (a). First, he must have reason to
believe that the income of the assessee has
escaped assessment and secondly, he must
have
reason
to
believe
that
such
escapement is by reason of the omission or
failure on the part of the assessee to
disclose fully and truly all material facts
necessary for his assessment. If either of
these conditions is not fulfilled, the notice
issued by the Income Tax Officer would be
without jurisdiction. The important words
under section 147 (a) are "has reason to
believe" and these words are stronger than
the words "is satisfied". The belief
entertained by the Income Tax Officer must
not be arbitrary or irrational. It must be
reasonable or in other words it must be
based on reasons which are relevant and
material. The Court, of course, cannot
investigate into the adequacy or sufficiency
of the reasons which have weighed with the
Income Tax Officer in coming to the belief,
but the Court can certainly examine
whether the reasons are relevant and have
a bearing on the matters in regard to which
he is required to entertain the belief before
he can issue notice under section 147 (a). It
there is no rational and intelligible nexus
between the reasons and the belief, so that,
on such reasons, no one properly instructed
on facts and law could reasonably entertain
the belief, the conclusion would be
inescapable that the Income Tax Officer
could not have reason to believe that any
part of the income of the assessee had
escaped assessment and such escapement
was by reason of the omission or failure on
the part of the assessee to disclose fully and
truly all material facts and the notice
issued by him would be liable to he struck
down as invalid."

21. In the case of Income Tax
Officer, Ward No.62 vs. TechSpan India
(P.) Ltd. and another, (2018) 6 SCC 685
(Paras 14 to 18), Hon'ble Supreme Court
held as under:
5 All. M/s Awlesh Kumar Singh Vs. U.O.I. & Anr.
1565

"14. The language of Section 147
makes it clear that the assessing officer
certainly has the power to re-assess any
income which escaped assessment for any
assessment year subject to the provisions of
Sections 148 to 153. However, the use of
this power is conditional upon the fact that
the assessing officer has some reason to
believe that the income has escaped
assessment. The use of the words ''reason to
believe' in Section 147 has to be interpreted
schematically as the liberal interpretation
of the word would have the consequence of
conferring
arbitrary
powers
on
the
assessing officer who may even initiate
such re-assessment proceedings merely on
his change of opinion on the basis of same
facts and circumstances which has already
been considered by him during the original
assessment proceedings. Such could not be
the intention of the legislature. The said
provision was incorporated in the scheme
of the IT Act so as to empower the
Assessing Authorities to re-assess any
income on the ground which was not
brought on record during the original
proceedings and escaped his knowledge;
and the said fact would have material
bearing on the outcome of the relevant
assessment order.

15. Section 147 of the IT Act does
not allow the re-assessment of an income
merely because of the fact that the
assessing officer has a change of opinion
with regard to the interpretation of law
differently on the facts that were well within
his knowledge even at the time of
assessment. Doing so would have the effect
of giving the assessing officer the power of
review and Section 147 confers the power
to re-assess and not the power to review.

16. To check whether it is a case
of change of opinion or not one has to see
its meaning in literal as well as legal terms.
The words "change of opinion" implies
formulation of opinion and then a change
thereof.
In
terms
of
assessment
proceedings, it means formulation of belief
by an assessing officer resulting from what
he thinks on a particular question. It is a
result of understanding, experience and
reflection.

17. It is well settled and held by
this court in a catena of judgments and it
would be sufficient to refer Commissioner
of Income Tax, Delhi vs. Kelvinator of
India Ltd. (2010) 320 ITR 561(SC)
wherein this Court has held as under: (SCC
p.725, para 5-7)

"5....where the Assessing Officer
has reason to believe that income has
escaped assessment, confers jurisdiction to
reopen the assessment. Therefore, post-1-41989, power to reopen is much wider.
However, one needs to give a schematic
interpretation to the words "reason to
believe".....
Section
147
would
give
arbitrary powers to the Assessing Officer to
re-open assessments on the basis of "mere
change of opinion", which cannot be per se
reason to reopen.

6. We must also keep in mind the
conceptual difference between power to
review and power to reassess. The
Assessing Officer has no power to review;
he has the power to reassess. But
reassessment has to be based on fulfillment
of certain precondition and if the concept of
"change of opinion" is removed, as
contended on behalf of the Department,
then, in the garb of re-opening the
assessment, review would take place.

7. One must treat the concept of
"change of opinion" as an in-built test to
check abuse of power by the Assessing
Officer. Hence, after 1-4-1989, Assessing
Officer has power to reopen, provided there
is "tangible material" to come to the
conclusion that there is escapement of
income from assessment. Reasons must
1566 INDIAN LAW REPORTS ALLAHABAD SERIES
have a live link with the formation of the
belief."

18. Before interfering with the
proposed reopening of the assessment on
the ground that the same is based only on a
change in opinion, the court ought to verify
whether the assessment earlier made has
either expressly or by necessary implication
expressed an opinion on a matter which is
the basis of the alleged escapement of
income that was taxable. If the assessment
order
is
non-speaking,
cryptic
or
perfunctory in nature, it may be difficult to
attribute to the assessing officer any
opinion on the questions that are raised in
the proposed reassessment proceedings.
Every attempt to bring to tax, income that
has
escaped
assessment,
cannot
be
absorbed by judicial intervention on an
assumed change of opinion even in cases
where the order of assessment does not
address itself to a given aspect sought to be
examined in the reassessment proceedings."

22. In the case of Radha Krishna
Industries vs. State of H.P., (2021) 6 SCC
771, Hon'ble Supreme Court reiterated the
law laid down in its earlier judgments in
the case of Kelvinator of India Limited
(supra) and TechSpan India (P.) Ltd.
(supra) and held that the power to reopen
an assessment must be conditioned on the
existence of "tangible material" and that
"reasons must have a live link with the
formation of the belief".

23. The law laid down in the
judgment referred above, leaves no manner
of doubt that:-

(a) The assessing officer under
Section 147 of the Act, 1961 has the power
to re-assess any income which escaped
assessment to tax for any assessment year
subject to the provisions of Sections 148 to
153. The power to reassess under Section
147 of the Act, 1961 has been incorporated
so as to empower the Assessing Authorities
to re-assess any income on the ground
which escaped his knowledge.

(b)
The
words
"reason
to
believe" suggest that the belief must be
bona fide and must be that of an honest and
reasonable person based upon reasonable
grounds and that the Income Tax Officer
may act on direct or circumstantial
evidence but not on mere suspicion, gossip
or rumour. His vague feeling that there
might have been some escapement of
income from assessment is not sufficient.
The reasons for the formation of the belief
must be based on tangile material and must
be based on a rational connection with or
relevant bearing on the formation of the
belief. Rational connection postulates that
there must be a direct nexus or live link
between the material coming to the notice
of the Income-tax Officer and the formation
of his belief that there has been escapement
of the income of the assessee from
assessment in the particular assessment
year. In other words, such material on
which the assessing Authority bases its
opinion must not be arbitrary, irrational,
vague, distant or irrelevant. If the grounds
for formation of "reason to believe" are of
an extraneous character, the same would
not warrant initiation of proceedings under
Section 147 of the Act, 1961.

(c) If, there are, in fact, some
reasonable grounds for the assessing
authority to believe that the whole or any
part of income of the assessee has escaped
assessment, it can take action under Section
147 of the Act, 1961. If the grounds taken
for initiating reassessment proceedings
under Section 147 of the Act, 1961 are
relevant and have a nexus with the
formation of belief regarding escaped
assessment, the assessing authority would
5 All. M/s Awlesh Kumar Singh Vs. U.O.I. & Anr.
1567
be clothed with jurisdiction to take action
under the section. Whether the grounds are
adequate or not is not a matter which would
be gone into by the High Court for the
sufficiency of the grounds which induced
the assessing authority to act is not a
justiciable issue. What can be challenged is
the existence of the belief but not the
sufficiency of reasons for the belief. The
belief must be held in good faith and
should not be a mere pretence.

Change of Opinion

(f) Reassessment of income under
Section 147 of the Act, 1961 cannot be
made on change of opinion. The words
"change of opinion" implies formulation of
opinion and then a change thereof. If the
Assessing
Officer
has
earlier
made
assessment for the same Assessment Year
expressing an opinion of a matter either
expressly or by necessary implication then
on the same matter, a reassessment
proceedings for the alleged escapement of
income from assessment to tax, cannot be
initiated as it would be a case of "change of
opinion". If the assessment order is nonspeaking, cryptic or perfunctory in nature,
then it may be difficult to attribute to the
assessing officer any opinion on the
questions that are raised in the proposed
reassessment proceedings. If a conscious
application of mind is made to the relevant
facts and material available or existing at
the relevant point of time while making the
assessment and again a different or
divergent view is reached, it would
tantamount to "change of opinion". If the
assessing Authority forms an opinion
during the original assessment proceedings
on the basis of material facts and
subsequently finds it to be erroneous; it is
not a valid reason under the law for reassessment.

24. Coming to the facts of the present
case, we find that during the course of
regular
assessment
proceedings,
the
assessing officer had required all details of
the cash deposited by the petitioner in the
bank during the Assessment Year 2017-18,
which were furnished by the petitionerassessee. The assessing officer required
various other details by notice dated
23.11.2019 under Section 142(1) of the Act,
1961 which were also furnished by the
petitioner
and
thereafter,
the
regular
assessment order under section 143(3) of
the Act, 1961 dated 25.12.2019 was passed.
The explanation submitted by the petitioner
regarding cash deposits in bank during
Assessment Year 2017-18, was accepted by
the assessing officer.

25. After the assessing officer had
earlier made assessment for the same
assessment
year
and
accepted
the
explanation of the petitioner regarding cash
deposits in bank, reassessment proceedings
for the alleged escapement of the income
from assessment to tax on the ground of
cash deposits in bank which were earlier
considered by the assessing officer in
regular assessment proceedings, would
amount to "change of opinion". Since the
assessing officer, during the course of the
regular
assessment
proceedings,
consciously applied his mind to the cash
deposits in bank by the petitioner, then
initiation of the reassessment proceedings
on the same set of facts would tantamount
to "change of opinion".