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(ii) Anant Kumar Saharia v. CIT .

3.5 The learned CIT(A) accepted the contention of the assessee by holding that the AO had acted illegally and in unwarranted manner in issuing notice under Section 148 when he had no reason to believe that income had escaped assessment. He also observed that notice under Section 148 could not be issued in making roving enquiries on the basis of vague suspicion. He thus annulled the assessment order dt. 30th March, 2000 by holding that the same was bad in law and was ab initio null and void. The relevant observations of the learned CIT(A) as per para 3.1 of his order on this issue are as under:

3.1. Keeping in view the above mentioned observations I have no hesitation in holding that while the AO might have had a faint 'reason to suspect' that income has escaped assessment, it cannot be said that he had 'reason to believe' that the income has escaped assessment. I cannot over emphasise that the requirements of law, specially when it comes to taking action under Section 147/148, have to be met within letter and spirit. The AO would do well to bear this in mind in future. In this case, there is no doubt that the AO has acted illegally and in an unwarranted manner in issuing notice under Section 148 when he had no reason to believe that income has escaped assessment. Notice under Section 148 cannot be issued for making roving enquiries on the basis of vague suspicions. Accordingly, in view of the above the assessment order dt. 30th March, 2000 is annulled as the same is bad in law and is ab initio null and void. These grounds are decided in favour of the appellant.

6.8.1 On going through the ratio of decision in the case of Mahanagar Telephones Nigam Ltd. (supra), it is found that the facts of that case and the case in hand are distinguishable. In the case of MTNL the AO had additional material or supplementary material for reopening the assessment. This material was gathered on examination of assessment in the case of the assessee for earlier year and subsequent year. It was during the course of assessment for the subsequent assessment year that the AO found that the assessee had made a wrong or incorrect claim. Thus, the opinion of the AO for reopening the assessment was based on some other material than the material disclosed by the assessee in the return of income for the assessment year involved. However, in the present case, there was no other material before the AO except the entry in the balance sheet in which receipt of gift was disclosed. The AO has reopened the assessment only on the ground that the assessee did not give details of the gift. As observed earlier, the assessee was not required to do so. To reiterate, the AO had no other material or information except the information given by the assessee himself and on the same information the AO just in order to make a roving enquiry, has initiated the reassessment proceedings which course is not justified.

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 ITO 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.' 3.1. Keeping in view the abovementioned observations I have no hesitation in holding that while the AO might have had a faint reason to suspect that income has escaped assessment, it cannot be said that he had reason to believe that the income has escaped assessment, I cannot over emphasise that the requirements of law, specially when it comes to taking action under Section 147/148 have to be met in letter and spirit. The AO would do well to bear this in mind in future. In this case, there is no doubt that the AO has acted illegally and in an unwarranted manner in issuing notice under Section 148 when he had no reason to believe that income has escaped assessment. Notice under Section 148 cannot be issued for making roving enquiries on the basis of vague suspicions. Accordingly, in view of the above, the assessment order dt. 30th March, 2000 is annulled as the same is bad in law and is ab initio null and void. These grounds are decided in favour of the appellant.