Case: Aslam Mohd. Merchant Vs. Competent Authority

facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief." See also Income Tax Officer Vs. Lakshmani Mewal Das [(1976) 103 ITR 437] .In Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007 (8) SCALE 396 ], interpreting the term ‘reason to believe as used under Section 247 (a) of the Income Tax Act, 1961, it was opined: "To confer jurisdiction under Section 247(a) two conditions were required to be satisfied firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment." NON APPLICATION OF MINDApplying these tests, it is evident that the statutory requirements have not been fulfilled in the present case.39. Non-application of mind on the part of the competent officer would also be evident from the fact that a property named ‘Rose Villa which was the subject matter of the decision of this Court in Fatima Amin (supra), was also included herein. Once the show cause notice is found to be illegal, the same would vitiate all subsequent proceedings.40. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai and Another [(2007) 6 SCC 329] , this Court held: "86. It is of some significance that in the standard pro forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the assessing officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. Vs. CIT)"; RECORDING OF REASONS41. Submission of Mr. Singh that the appellants have not been able to discharge the burden of proof which was on them from the impugned orders, it would appear that they have utterly failed to prove their own independent income; they being close relative of the detune as in terms of the statutory requirements , it was for them to show that they had sufficient income from those properties.42. Had the show cause notice been valid, Mr. B.B. Singh, might have been right, but if the proceedings themselves were not initiated validly, the competent authority did not derive any jurisdiction to enter into the merit of the matter. Legality and/or validity of the notice had been questioned at several stages of the proceedings. Despite their asking, no reason was disclosed by the authority to the appellants. They had asked for additional reasons, if any, which were not reflected in the show cause notices. None was disclosed.43. It is also relevant to notice that the High Court opined that there had been a proper application of mind on the part of the Competent Authority and Appellate Tribunal as they had released some items of properties. Application of mind on the part of the Competent Authority and the Appellate Tribunal at the subsequent stage was not in question; what was in question was non application of mind on the part of the authority prior to issuance of the notice.CONCLUSION44. We are not unmindful of the purport and object of the Act. Dealing in narcotics is a social evil that must be curtailed or prohibited at any cost. Chapter VA seeks to achieve a salutary purpose. But, it must also be borne in mind that right to hold property although no longer a fundamental right is still a constitutional right. It is a human right. The provisions of the Act must be interpreted in a manner so that its constitutionality is upheld. The validity of the provisions might have received constitutional protection, but when stringent laws become applicable as a result whereof some persons are to be deprived of his/her right in a property, scrupulous compliance of the statutory requirements is imperative.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]41. Submission of Mr. Singh that the appellants have not been able to discharge the burden of proof which was on them from the impugned orders, it would appear that they have utterly failed to prove their own independent income; they being close relative of the detune as in terms of the statutory requirements , it was for them to show that they had sufficient income from those properties.Had the show cause notice been valid, Mr. B.B. Singh, might have been right, but if the proceedings themselves were not initiated validly, the competent authority did not derive any jurisdiction to enter into the merit of the matter. Legality and/or validity of the notice had been questioned at several stages of the proceedings. Despite their asking, no reason was disclosed by the authority to the appellants. They had asked for additional reasons, if any, which were not reflected in the show cause notices. None was disclosed.It is also relevant to notice that the High Court opined that there had been a proper application of mind on the part of the Competent Authority and Appellate Tribunal as they had released some items of properties. Application of mind on the part of the Competent Authority and the Appellate Tribunal at the subsequent stage was not in question; what was in question was non application of mind on the part of the authority prior to issuance of the