P G FOILS LIMITED Vs. INCOME TAX SETTLEMENT

JUDGEMENT

(1.) THE unsuccessful writ petitioner/assessee is the appellant in this appeal, which is directed against the order dated 1.9.2003 made in W.P.No.12598 of 2003, where the appellant/writ petitioner/assessee had chosen to challenge the order of the first respondent/Settlement Commission dated 28.10.2002, based on which notices dated 21.3.2003 under Section 148 of the Income Tax Act, 1961 (in short, 'the Act'), were issued to the appellant/writ petitioner/ assessee, stating the reason for re-opening the assessment with respect to assessment years 1995-96 and 1996-97, as contemplated under Section 147 of the Act.

(2.) THE facts, in nutshell, are as follows: THE first respondent/Settlement Commission has passed an order dated 28.10.2002 with respect to one M/s. Mohan Aluminium (P) Ltd., Bangalore (hereinafter will be referred to as 'MAL'), for the assessment year 1995-96. Before the Settlement Commissioner, one V.Jagadisan, Chartered Accountant, who appeared on behalf of MAL admitted that the duty free imported materials were sold in the open market and undisclosed profits were earned by it. It was further submitted that MAL was experiencing severe liquidity problem at the relevant time and in order to tide over this difficulty, it had indulged in unauthorised sale of the imported items and unable to mobilise funds for such imports, MAL came to an understanding with M/s. P.G. Foils Ltd., the appellant/writ petitioner/assessee herein, for its business. As per the said understanding, the appellant/writ petitioner/assessee would finance the entire operation and import the aluminium items for MAL and they also undertook to sell these items in the open market. It was further stated that the profits from such imports and sales were agreed to be shared equally between MAL and the appellant/ writ petitioner/assessee and that for convenience of operation, MAL opened a bank account in the State Bank of Bikaner and Jaipur at Mumbai in its own name and authorised the appellant/writ petitioner/assessee to operate the same.

(3.) IT is trite law that the subsequent information, based on which the reassessment was proposed, should be definite, specific, relevant and reliable and then only such material would constitute to satisfy the test of reason to believe, because such reason to believe should not be construed as a reason to suspect. In other words, what is relevant is whether the material has got any rational connection or live link for the purpose of reason to believe. To put otherwise, if the information which forms the basis for the reason to believe for the department to reopen the assessment are materials which lacks specific, relevant and reliable criterions, such materials are liable to be rejected only on the ground that they may be reason to suspect, but not reason to believe, vide Phool Chand Bajrang Lal's case reported in 203 ITR 456 {AIR 1993 SC 2390} {1993 4 SCC 77}.