Bona fide reason to believe that there is escapement of income is sufficient for issue of notice under section 148

RELEVANT PARAGRAPHS:

19. As per our considered view, at the time of issue of notice, it is sufficient that prima-facie reasons and material should be with Assessing Officer that there is escapement of some income. At the time of issue of notice the Assessing Officer is not required to conclusively establish that there is escapement of income, mere bona-fide reason to believe that there is escapement of income is sufficient for issue of notice under section 148. Recently the Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri, Stock Broker Pvt. Ltd. 291 ITR 500, observed that the expression “reason to believe” in section 147 would mean cause or justification. If the Assessing Officer has caused or justified to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. What is required is “reason to believe” but not the established fact of escapement of income. At the stage of issue of notice, the only question whether there was relevant material on which a reasoned person should have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. In the instant case on the basis of reasons so recorded, we found that there was sufficient material on the basis of which a reasoned person can have reasonably formed the requisite belief that there was escapement of income. From the record it was also transpired that after deposit of inspection fee, the assessee inspected the reasons for issue of notice under section 148 and took necessary extract on 4-1-2005. After going through the reasons recorded for reopening, we are satisfied that Ld. CIT (A) was justified in upholding the reopening the assessment, as valid.

NF