Section 147 of the Income Tax Act, 1961 — Reassessment — "Reason to believe" would mean cause or justification — Assessment was rightly reopened as the only so called explanation given by assessee with regard to unexplained investments was that since her husband had expired in the year 2011, the records were not available with her to explain the source of these investments and this excuse of the assessee was not believed by the authorities below.
Facts: This appeal is filed by the assessee before the High Court taking exception to the judgment and order passed by the Tribunal whereby the Tribunal  dismissed the appeal of the assessee and upheld the exercise of power by the Assessing Officer under Section 147  for the Assessment Year (for short "A.Y.") 2007-08. According to the assessee, though the reasons recorded by the revenue, for invoking Section 147 of the I.T. Act, 1961 did not contain any basis or material whatsoever to give rise to any "reason to believe" that the assessee's income had escaped assessment, notice under Section 148 of the I.T.Act was issued.
Held, that as mentioned earlier, in the assessment proceedings against the son of the appellant the investments made in these three Mutual Funds (Birla Mutual Fund, Standard Chartered Mutual Fund and Standard Chartered Mutual Fund) were brought to tax in the hands of Mr S. Ganesh. It was the contention of Mr S. Ganesh (the son of the appellant) that he being the second holder of these investments, these amounts could not be brought to tax in his hand and could be brought to tax, if any, in the hands of the appellant. This was the specific argument made by Mr S. Ganesh in his assessment proceedings as can be seen from the order of the ITAT dated 21st November, 2012. This argument of Mr S. Ganesh can be found in paragraph 10 of the said order. It is not in dispute that these three investments stand in the name of the appellant herein as the first holder. It is also not in dispute that when she filed her return under Section 139(1) of the I.T.Act, 1961 she had not explained the source of her investments. In fact her exempt income from dividends did not form part of her return filed under Section 139(1) of the I.T.Act, 1961. Looking at all these facts, the A.O. came to the conclusion that he had "reason to believe" that the income of the appellant had escaped assessment as contemplated under Section 147 of the I.T.Act, 1961 and hence proceeded to issue the notice under Section 148 of the I.T.Act, 1961. This was upheld by the CIT(A) as well as the ITAT. Looking to all these facts and considering the decision of the Supreme Court in the case of Rajesh Jhaveri Stock Brokers P.Ltd. (supra), we do not think that the findings given by the authorities below on this issue suffer from any perversity or error apparent on the face of the record that would require our interference under Section 260A of the I.T.Act, 1961. As held by the Supreme Court in the aforesaid decision, there is "reason to believe" would mean cause or justification. If the A.O. had cause or justification to know or suppose that the income had escaped assessment, it can be said that he had "reason to believe" that the income had escaped assessment. It is the subjective satisfaction of the A.O. that has to be seen and whether that satisfaction suffers from any perversity. In the facts of the present case and especially considering the argument canvassed by the appellant's own son in his own proceedings, we are clearly of the view that the A.O. had cause or justification, and hence "reason to believe" that the income of the appellant had escaped assessment. In fact, when one looks at the merits of the matter, it is recorded that the appellant was unable to explain the source of income from which these investments have been made by furnishing her bank statements, and which finding has even not been challenged before us. The only so called explanation given was that since her husband had expired in the year 2011, the records were not available with her to explain the source of these investments. This excuse of the appellant was not believed by the authorities below, and therefore, on merits also they proceeded to make the additions. In fact, if the appellant would have produced the material to show from what source these investments were made, she would have probably succeeded in the proceedings. However, she failed to do so as recorded by the authorities below. This being the case, and since the ITAT in her son's case accepted the submission that these investments should not be brought to tax in his hands as he was the second holder and they could have been brought to tax, if any, in the hands of the first holder, namely, the appellant, we find that the A.O., in view of these observations of the ITAT, clearly had reason to believe that the income of the appellant with reference to these three investments had escaped assessment. We do not find that this subjective satisfaction of the A.O. suffers from any peversity or is vitiated by any error apparent on the face of the record which, in turn, would give rise to any substantial question of law. In view of the foregoing discussion, we do not find any merit in the appeal. It is accordingly dismissed.[2018] 48 ITCD 88 (BOM)