10. Section 147 provides that “……………….. the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, the may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable tot ax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section ……..”
11. The law is clear from the above extraction. What is to be assessed is the income which the Assessing Officer has believed to have escaped assessment and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the reassessment proceedings. One has to see that the issue of notice under section 148 should be on the basis of belief of the Assessing Officer that income chargeable to tax has escaped assessment. If the Assessing Officer has such a valid belief, issue of notice under section 148 will be upheld. First stage of reassessment is over. That is, a valid reassessment notice should be served on the assessee. The consequential proceeding is that the income of the assessee will be reassessed. While re-doing the assessment, the Assessing Officer may bring to tax the income which he had initially thought of escapement for the purpose of issuing notice under section 148. The power of the Assessing Officer is not confined to those items noticed earlier by the Assessing Officer. The law has further stated that the Assessing Officer may make additions of income which has come to his notice subsequently in the course of the proceedings under section 147. That means once the assessment is lawfully reopened by the Assessing Authority after issue of notice under section 148, the item to be assessed is not that income which was initially relied upon by the Assessing Officer alone, but also all other items of income which has come to his notice in the course of reassessment proceedings under section 147. It means all items of income may be assessed other than those which would have already been assessed in original assessment.
12. It does not mean that the Assessing Officer should invariably add the items of income based on which the belief of escapement was formed by the Assessing Officer. What is to be relied on by the Assessing Officer is the “belief of escapement” and not fool-proof evidence In a case where the Assessing Officer has reason to believe that a particular item of income has escaped assessment and if that is demonstrated in the proceedings, he can issue notice under section 148. Once the assessment is reopened in that manner, the Assessing Officer cannot mechanically make an addition. He should give an opportunity to the assessee to explain the position and notice under section 143(2) must be issued. If the Assessing Officer is satisfied by the evidence produced by the assessee and also on the explanation offered by him, it is within the power of the Assessing Officer not to add that particular item based on which the Assessing Officer has formed a belief that income was or has been escaped assessment. Even though a particular cause was the base of action, still the assessee can explain before the Assessing Officer and the Assessing Officer can accept the contention of the assessee and exonerate the assessee from proposal. It means the reason on which the belief was formed by the Assessing Officer regarding escapement of income can be explained by the assessee and if acceptable, acted upon by the Assessing Authority. An addition is not a must When the Assessing Officer is satisfied that there was no reason for an addition on the matter based on which the notice under section 148 was issued, does not mean that the Assessing Officer cannot bring to tax any other income which has escaped assessment and which has come to his notice subsequently in the course of proceedings under section 147. After reopening the assessment, if the Assessing Officer points out few more items of income that have escaped assessment, those items can be brought to tax. This position is not influenced by the fact that the original item on which the notice under section 148 was issued, on the basis of some other item In dependent of that item, the Assessing Officer can make additions in respect of the income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under section 147.
13 Therefore, in the facts and circumstances of the case, the finding of the CIT(Appeals) that the additions made by the Assessing Officer on the income escaping assessment have to be deleted is against law. Therefore, his order on this point is set aside. We find that the conclusion arrived at by the CIT (Appeals) is erroneous in law and the action of the Assessing Officer in making the additions on the reassessment is sustainable in law. Therefore, those additions have to be upheld on merits.