# Uphill Farms Pvt. Ltd., Noida, U.P v. Union of India & Anr

- **Citation:** (2022) 5 ILRA 1596
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-05-19
- **Case number:** Writ Tax No. 518 of 2022
- **Bench:** Surya Prakash Kesarwani, Jayant Banerji
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/uphill-farms-pvt-ltd-noida-u-p-v-union-of-india-anr-48452
- **Pages:** 10

## Headnote

A. Civil Law - Income Tax Act , 1961 -
Section 147 - The assessing officer under
Section 147 of the Act has power to reassess
any income which escaped assessment to tax
for any assessment year subject to provisions of
Section 148 to 153 of the Act.

B. Reassessment of Income under Section 147
of the Act cannot be made on change of
opinion.

C. The words 'reason to 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.

D. Notice issued to the petitioner u/s 148 of the
Act failed to pass the standard of reason as that
of an honest and prudent person.

Writ Petition allowed with cost of Rs.
5,000. (E-12)

List of Cases cited:-

## Text

1596 INDIAN LAW REPORTS ALLAHABAD SERIES
instructions dated 23.04.2022 and the statement
made in paragraph 10 of the personal affidavit
dated 19.05.2022 aforequoted.

(vi) The Local Committee shall
dispose off each grievance petition within two
months from the end of the month in which
grievance petition is received by it and its result
and action taken on administrative side, if any,
shall be communicated in writing to the
concerned assessee within next four weeks.

(vii) The CBDT shall regularly
monitor and shall take all necessary steps from
time to time for effective implementation of the
scheme/ instructions dated 23.04.2022 and
necessary modifications/ improvements therein
in the interest of assessees so as to achieve the
object of the aforesaid scheme/ policy decision/
instructions dated 23.04.2022.
----------
(2022)05ILR A1596
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 25.04.2022

BEFORE

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

Writ Tax No. 518 of 2022

Uphill Farms Pvt. Ltd., Noida, U.P.
 ...Petitioner
Versus
Union of India & Anr. ...Respondents

Counsel for the Petitioner:
Vedika Nath, Sri Nishant Mishra

Counsel for the Respondents:
A.S.G.I., Sri Gaurav Mahajan, Sri Manu
Ghildyal

A. Civil Law - Income Tax Act , 1961 -
Section 147 - The assessing officer under
Section 147 of the Act has power to reassess
any income which escaped assessment to tax
for any assessment year subject to provisions of
Section 148 to 153 of the Act.

B. Reassessment of Income under Section 147
of the Act cannot be made on change of
opinion.

C. The words 'reason to 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.

D. Notice issued to the petitioner u/s 148 of the
Act failed to pass the standard of reason as that
of an honest and prudent person.

Writ Petition allowed with cost of Rs.
5,000. (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
5 All. Uphill Farms Pvt. Ltd., Noida, U.P. Vs. Union of India & Anr.
1597
(Delivered by Hon'ble Surya Prakash
Kesarwani, J.
&
Hon'ble Jayant Banerji, J.)

1. Heard Shri Nishant Mishra, learned
counsel for the petitioner and Shri Manu
Ghildyal, learned Standing Counsel for the
respondent-Income Tax Department.

2. By order dated 11.04.2022, this
Court specifically directed the respondent
no.2, vide paragraph 10 of the order, as
under :-

"10. In view of the aforesaid, we
direct the respondent no.2 to file a short
counter affidavit by means of his personal
affidavit stating as to how the notice under
Section 148 of the Act, 1961 issued by him
to the petitioner was a valid notice and how
the respondent no.2 could get jurisdiction
to issue notice under Section 148 of the Act,
1961 when the very basis of issuing notice,
ie., 'reason to believe', recorded by him was
totally unfounded, non-existent and wholly
baseless."

3. Today, a counter affidavit dated
22.04.2022 on behalf of the respondent
no.2 has been filed by Kumari Sukanya
Kirti, Assistant Commissioner of Income
Tax, Circle 5(3)(1), Noida. In paragraph 3
thereof, the respondent no.2 has stated as
under :-

"3. That, vide order dated
11.04.2022,
the
Hon'ble
Court
has
specifically sought reply to the following
questions:-

(i) how the notice under Section
148 of the Act, 1961 issued by him to the
petitioner was a valid notice?

(ii) how the respondent no.2
could get jurisdiction to issue notice
under Section 148 of the Act, 1961 when
the very basis of issuing notice, ie.,
'reason to believe', recorded by him was
totally
unfounded,
non-existent
and
wholly baseless."

4. Perusal of the counter affidavit
shows that there is not even a whisper
with respect to the query of the Court (as
itself mentioned by the respondent no.2
in
paragraph
3(ii)
of
her
counter
affidavit). On the other hand, in the reassessment order, it has been specifically
mentioned that "on perusal of the
documentary evidence submitted by the
assessee in reference to the information
available on record, no inference is drawn
in connection with the amount of Rs.45
lakhs". It shall not be out of place to
mention that the petitioner submitted
objection to the 'reason to believe'
recorded by the assessing authority. In his
objection, the petitioner has specifically
stated that the petitioner has not entered
into any transaction amounting to Rs.45
lakhs during the year under consideration
which has been made basis for recording
the "reason to believe" and to issue notice
under Section 148 of the Income Tax Act,
1961 (hereinafter referred to as the 'Act,
1961'). The petitioner has also produced
documentary evidences to show that no
transaction of Rs.45 lakhs as alleged was
entered by the petitioner. Despite of these
facts, on totally baseless and unfounded
grounds, a notice under Section 148 of
the Act, 1961 was issued by the
respondent no.2 and, in a most arbitrary
manner, the objection of the petitioner
was not considered by the asssessing
authority and was arbitrarily rejected.

5. Despite our order dated 11.04.2022,
the respondent no.2 has deliberately filed
an evasive affidavit (counter affidavit) in
1598 INDIAN LAW REPORTS ALLAHABAD SERIES
which there is no whisper with regard to
the second query of the Court.

Reason to Believe - Meaning, Scope
and Consequence:-

6. 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.

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)

7. 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
5 All. Uphill Farms Pvt. Ltd., Noida, U.P. Vs. Union of India & Anr.
1599
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 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)

8. 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
1600 INDIAN LAW REPORTS ALLAHABAD SERIES
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 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.

9. In the case of Sheo Nath Singh vs.
Appellate Assistant CIT, (1972) 3 SCC
234 (Para-10), Hon'ble Supreme 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."

10. 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...
.............."

11. 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
5 All. Uphill Farms Pvt. Ltd., Noida, U.P. Vs. Union of India & Anr.
1601
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
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."

12. 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
1602 INDIAN LAW REPORTS ALLAHABAD SERIES
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."

13. 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:

"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
5 All. Uphill Farms Pvt. Ltd., Noida, U.P. Vs. Union of India & Anr.
1603
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
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."

14. 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".

15. In view of the above discussion,
we summarize the principles, powers
and limitations on exercise of powers
under Section 147/148 by Income Tax
Officers/ Authorities under the Income
tax Act, 1961, as under:-

(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)
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
1604 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

(c)
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.

(d) 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
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.

(e) The question as to whether the
material on the basis of which the assessing
authority has formed the belief for "reason
to believe" is sufficient, for making
assessment or reassessment under Section
47 of the Act, 1961, would be gone into
after the notice is issued to the assessee and
he is heard or given an opportunity for that
purpose. The assessing authority would
then decide the matter in the light of
material already in his possession as well as
fresh material procured as a result of
inquiry, if any, which may be considered
necessary.

16. Perusal of the impugned notice
under Section 148 of the Act, 1961 and
other impugned orders clearly shows that
the "reason to believe" recorded by the
assessing authority, failed to pass the
standard of reason exercised by the
5 All. M/s Gobind Tobacco Manufacturing Co., Panipat (Haryana) & Anr. Vs. State of U.P. &
 Ors.
1605
assessing authority to be that of an honest
and prudent person who would act on
reasonable grounds and come to a cogent
conclusion. The reasons recorded were
totally unfounded and consequently the
jurisdictional notice under Section 148 of
the Act, 1961 issued by the assessing
authority was without jurisdiction. Once
the notice under Section 148 of the Act,
1961 issued by the assessing authority was
without
jurisdiction,
the
subsequent
proceedings, including re-assessment order,
cannot be sustained.

17. For all the reasons afore-stated,
the impugned notice dated 31.03.2021
under Section 148 of the Act, 1961 issued
by the respondent no.2, the order dated
09.03.2021 rejecting the objection of the
petitioner, the re-assessment order dated
31.03.2022 under Section 147 of the Act,
1961 for the Assessment Year 2013-14 and
the demand notice dated 31.03.2022 issued
under Section 156 of the Act, 1961 cannot
be sustained and are hereby quashed.

18. For all the reasons aforestated, the
writ petition is allowed with cost of
Rs.5000/-, which the respondents shall
deposit with the High Court Legal Services
Committee, High Court, Allahabad within
three weeks from today, failing which the
amount shall be recovered as fine.
----------
(2022)05ILR A1605
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 17.05.2022

BEFORE

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

Writ Tax No. 600 of 2022
M/s Gobind Tobacco Manufacturing Co.,
Panipat (Haryana) & Anr. ...Petitioners
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioners:
Sri Aloke Kumar

Counsel for the Respondents:
C.S.C.

A. Civil Law - I.G.S.T. Act, 2017 -
Section 207 - C.G.S.T. Act, 2017 -
Section 129 (1) - Seizure of Goods and
Vehicle- Petitioner no. 1 dispatched the
consignment of Bijli Spit Tobacco to Nepal
from Panipat under Invoice dated 14.01.2022
through transporter Ankit Transport Service.
On same day petitioner no.01 generated EWay bill from the portal of Government of
India. Due to imposition of strict and rigid
condition imposed by Nepal Government for
entry in Nepal due to Covid 19 pandemic the
driver of the vehicle did not fulfill the
conditions so imposed. The goods were left
in godown of petitioner no. 02 for onward
transport to Nepal and by that time the
period specified in E-Way bill expired. The
petitioner no.02 arranged the vehicle and
generated E-Way bill on 26.05.2022 in
compliance of Rule 138 and 138-A. Thus,
there was no intention for evasion of tax.
Accordingly, seizure of good and vehicle is
illegal and arbitrary.

Writ Petition allowed. (E-12)

List of Cases cited:-

1. Assistant Commissioner(ST) & ors. Vs M/s
Satyam Shivam Papers Pvt. Ltd. & anr. Special
Leave to Appeal No. 21132 of 2021(Decided on
12.01.2022)
(Delivered by Hon'ble Surya Prakash
Kesarwani, J.
&
Hon'ble Jayant Banerji, J.)

1. Heard Shri Aloke Kumar, learned
counsel for the petitioners and Shri Nimai