Sri K. Gangadhar, vs. The Income-tax Officer,

The petitioners filed objections to the reasons indicated by the Assessing Officers contending that the cases would not fall under Section 147(1), as everything turned upon presumptions and surmises without any factual basis. The objections were rejected by the Assessing Officers by the orders impugned in these writ petitions forcing the petitioners to come up with the above writ petitions. 7. The orders rejecting the objections, are also identically worded and hence the relevant portion of one of those orders is extracted for easy appreciation as follows: “3(ii) It may be specifically mentioned here that there is nothing in Section 147 of the I T Act, 1961 to suggest that an AO cannot reopen an assessment where he had failed to investigate and find out fact of the case truth at initial stage. Reliance is placed on the decision of Hon’ble High Court in the case of Ramprasad vs. AO (1995) 82 Taxman 199 (Allahabad). The Hon’ble Supreme Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 has clearly held that intimation u/s 143(1) is not ‘assessment’, so there is no question of treating the re-assessment in such cases as based on change of opinion. Here in the instant case of assessee, the case is covered by

Though the learned counsel for the petitioners as well as the learned Standing Counsel for the respondents raised several contentions, we are of the considered view that one contention of the petitioners is sufficient for the disposal of all these writ petitions. Admittedly, the notices under Section 148 was issued on the sole ground that the total income admitted by each of these petitioners, constituted a very small percentage of their gross receipts for the relevant assessment year and that therefore there was income that

But the reasons for reopening owefully fall short of the reasons that could form the basis for reopening of assessments. There is no indication in the reasons as to who are the assessees with whom any comparison was made. If the Assessing Officers had compared the gross receipts of yet another assessee in the same line of business and pointed out as to how the income returned by such assessee was at a consistently higher rate of the total receipts, the petitioners could have been in a position to point out how the admitted total income in their cases fell for short. Without making an actual comparison with named assessees in the same line of business, the Assessing Officers cannot leave it to presumptions and surmises.

The learned Standing Counsel for the respondents/ Department took us through various decisions of the Tribunal where the similar reopening of assessments made on the same line of reasons were upheld, wherever books of accounts were not maintained, estimating the income to be 5% of the gross receipts. But it appears that in those cases, the very rationale for reopening of assessment and the very jurisdiction of the Assessing Officer to reopen assessments on the basis of such flimsy reasons, was not considered. Therefore, we cannot make a comparison of the cases on

Under Section 147(1), the Assessing Officer is entitled to reopen assessment, if he has reason to believe that any income chargeable to tax has escaped assessment for the assessment year. Two conditions ought to be satisfied for the invocation of the power under Section 147. They are: (1) the existence of a reason to believe and (2) the escapement of any income chargeable to tax from assessment. The reason to believe on the part of the Assessing Officer, should arise out of concrete facts which could at least form the foundation for reopening. Without any concrete facts, reopening cannot be ordered merely on the presumption that the returned income is very shockingly lower than the total gross receipts. Therefore, we are of the considered view that the Assessing Officers completely erred in reopening assessments on the basis of either a suspicion that there is suppression of income or on the basis that persons in the same line of business are returning a higher income. Without even mentioning the comparables, no initiation of proceedings under Section 147 can be made.

In the order rejecting the objections, the Assessing Officer has relied upon Clause (b) under Explanation 2 to Section 147. Clause (b) under Explanation 2 to Section 147 deals with cases where a return of income has been furnished

But to come to the conclusion that there was understatement of income, it is not sufficient for the Assessing Officers to just arrive at the percentage of gross receipts that were declared as income, without even referring to other assessees whose admitted income was at a better percentage of the gross receipts than the petitioners. Therefore, the invocation of the jurisdiction under Section 147 on the basis of suspicions and presumptions cannot be sustained. Therefore, the writ petitions are allowed. The miscellaneous petitions, if any, pending in these writ petitions shall stand closed. No costs. ___________________________ V.RAMASUBRAMANIAN, J.