The Judgment of the Court was delivered by

Ramesh Ranganathan, J.:— Introduction: The “Satyam scam”, allegedly running into a few thousand crores, came to light on a letter of confession dated January 7, 2009 being addressed to the board of directors of Satyam Computer Services Limited (“SCSL” for short) by Sri B. Rama-linga Raju, the then chairman. This was followed by his alleged confession in prison on February 23, 2009 to the effect that the books of account had been fudged Rs. 1,230 crores was arranged to SCSL to run their operations; and money was raised by pledging the shares of M/s. Maytas Infra Limited apart from the shares of SCSL. Several agencies, including the Income-tax Department, caused investigation into different aspects of the “scam”. According to the Income-tax Department, more than 370 companies were promoted by Sri B. Ramalinga Raju and his immediate family members. Commencing March, 2009 assessments, finalized for the year 2002-03, of several of these companies were sought to be reopened, and notices under section 148 of the Income-tax Act, 1961 (“the Act” for brevity) were issued calling upon them to show cause why the assessments should not be reopened under section 147 of the Act. Several of these companies invoked the extraordinary jurisdiction of this court under article 226 of the Constitution of India and filed W.P No. 28300 of 2009 and batch. Either before writ petitions were filed, or during the period they were pending before this court, the assessing authority passed reassessment orders aggrieved by which some of these companies preferred appeals before the Commissioner of Income-tax (Appeals) (“the CIT(A)” for brevity). Fifty-eight writ petitions filed before this court (in W.P No. 28300 of 2009 and batch) by companies against whom reassessment orders were passed, were dismissed as infructuous by the order of this court dated February 2, 2011 giving them liberty to raise all questions, including on the jurisdiction of assessing authority to reopen assessment, before the Commissioner of Income-tax (Appeals). Nine writ petitions, wherein reassessment orders have not yet been passed as a result of the interim stay granted by this court, were heard elaborately, and are now being disposed of by this common order.

Facts in brief

2. The facts in W.P No. 27817 of 2009 may be taken as illustrative of all the cases in this batch of writ petitions. The notice issued under section 148 of the Act dated March 26, 2009, seeking to reopen assessment of the year 2002-03, and the notice issued under section 142(2A) of the Act dated December 15, 2009, for the assessment years 2002-03 and 2007-08, are under challenge by the petitioner, a company engaged in setting up plants for generation of power. As stated in the affidavit, filed in support of the said writ petition, the petitioner was originally one amongst the Satyam group of companies. After July, 2003, the petitioner, Gautami Power Limited, was taken over by the GVK group of companies. The name of the petitioner-company was, subsequently, changed to GVK Gauthami Power Limited. For the assessment year 2002-03 the petitioner filed its return of income on March 28, 2003. It is their case that during the accounting year, relevant to the assessment year 2002-03, they were in the process of setting up a power plant and, therefore, did not submit any profit and loss account. The first respondent completed assessment, and passed the assessment order dated March 21, 2005 under section 143(3) of the Act. The petitioner claims to have paid the tax levied without prejudice to their remedies under the Act. They also filed a return of income on October 23, 2007 for the assessment year 2007-08. It is their case that, during the accounting year relevant to the assessment year 2007-08, they had not commenced business and, therefore, did not submit their profit and loss account. The second respondent assessed the returns filed by the petitioner, under section 143(1) of the Act, and granted refund of tax.

3. Thereafter, in exercise of his powers under section 148 of the Act, the second respondent issued notice dated March 26, 2009 informing the petitioner that, since their income for the assessment year 2002-03 had escaped assessment, he proposed to reopen the assessment after obtaining sanction of the Commissioner of Income-tax (Central), Hyderabad (CIT). The petitioner was called upon to file their return in the prescribed form. In reply thereto the petitioner vide letter dated May 26, 2009, while enclosing their return for the assessment year 2002-03, requested that the reasons for reopening the assessment be furnished to them as the notice dated March 26, 2009 was bereft of reasons. An order under section 281B of the Act was passed vide proceedings dated August 13, 2009, and the property of the petitioner was attached. The first respondent, vide proceedings dated August 17, 2009, called for various records and information relating to the assessment year 2002-03. On September 14, 2009 the second respondent furnished to the petitioner the reasons for issuance of the notice under section 148 of the Act for the assessment year 2002-03 which, amongst others, records that he had reason to believe that income chargeable to tax, which had escaped assessment, was more than Rs. 1 lakh in terms of section 149 read with section 148 of the Act. The petitioner, vide letter dated September 22, 2009, filed their reply and objections to the assessment for the year 2002-03 being reopened. The first respondent, vide proceedings dated December 9, 2009, informed the petitioner that their objections were not acceptable. A notice dated December 15, 2009 was issued under section 142(2A) calling upon the petitioner to submit their comments on the proposal to refer their case for audit. Aggrieved thereby, this writ petition was filed.

Contentions

4. Sri C. Kodandaram, learned senior counsel appearing on behalf of the petitioner, would submit that, in the absence of specific information available with the Department that the petitioner had either concealed their income or had furnished inaccurate particulars of income and as the reasons recorded were general and vague, the second respondent was not justified in issuing notice under section 148 of the Act; the impugned notice was based on the mere suspicion that the petitioner's income may have escaped assessment since M/s. Maytas Infra Limited, a company of the Satyam group, had made substantial investment towards the equity capital of the petitioner-company; invocation of section 142(2A) was only to harass the petitioner; the notice issued under section 148 of the Act on March 26, 2009 is bereft of reasons; the reasons furnished by the assessing authority on September 14, 2009, (at the petitioner's request), merely referred to the confessional statements of Sri B. Ramalinga Raju dated January 7, 2009 and February 21, 2009 which related only to the books of account of SCSL, and not to the petitioner-company; merely because the petitioner was originally incorporated by Sri B. Ramalinga Raju, his confession cannot form the basis for reopening assessment of the petitioner; the petitioner has no direct nexus with the alleged fraud committed by Sri B. Ramalinga Raju; its management was taken over by the GVK group way back in the year 2003; during the said period the father of Sri B. Ramalinga Raju was the director of the petitioner-com-pany; the petitioner's case falls within the proviso to section 147; while suspicion may be the initial trigger for exercising jurisdiction under sections 147 and 148, the reason to believe that income has escaped assessment must be based on the material on record and should be certain; no fishing expedition or a roving enquiry is permissible; the “reasons to believe” should be relatable to non-disclosure, fully and truly, of all material facts; the impugned notice under section 148 suffers from nonapplication of mind; there is no material on which the assessing authority could have arrived at his subjective satisfaction that income of the petitioner had escaped assessment; the reasons assigned in the proceedings dated March 26, 2009, and in the subsequent note dated December 9, 2009, are at variance with each other; at the stage of issuance of notice under section 148, “reason to believe” should be capable of being co-related with the averments in the counter-affidavit filed by the assessing authority; and the reasons now furnished to this court, in the counter-affidavits filed by the assessing authority, have no connection with the reasons which were furnished earlier. Learned senior counsel would rely on Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191 (SC); AIR 1961 SC 372, Barium Chemicals Ltd. v. CLB, [1966] 36 Comp Cas 639 (SC); AIR 1967 SC 295, Sheo Nath Singh v. AAC of I.T, [1971] 82 ITR 147 (SC); (1972) 3 SCC 234, Ganga Saran and Sons P. Ltd. v. ITO, [1981] 130 ITR 1 (SC); (1981) 3 SCC 143, Manish Maheshwari v. Asst. CIT, [2007] 289 ITR 341 (SC), Ramesh Chandra Sankla v. Vikram Cement, (2008) 14 SCC 58, Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., [2007] 291 ITR 500 (SC); (2008) 14 SCC 208, Sarthak Securities Co. P. Ltd. v. ITO, [2010] 329 ITR 110 (Delhi), Haryana Acrylic Manufacturing Co. v. CIT, [2009] 308 ITR 38 (Commissioner Of Income-Tax v. Jet Airways (I) Ltd., [2011] 331 ITR 236 (Bom); [2010] 195 Taxman 117 (Bom).

5. Ms. K. Mamatha, learned counsel appearing for some of the petitioners, would submit that, inasmuch as the assessing authority did not have reason to believe that income had escaped assessment, the petitioner cannot be subjected to the needless ordeal of having to appear before him in reassessment proceedings; the confession of Sri B. Ramalinga Raju, as recorded in the subsequent assessment order of Maytas Infra-tec Private Limited, was false,; as the earlier notice issued on March 26, 2009 was not accompanied by reasons it is not a notice in the eye of law; the reasons for reopening must be furnished within a reasonable time; the reasons were, however, furnished more than six months after the notice dated March 26, 2009 was issued, and just before the time limit for passing the reassessment order was drawing to a close; and by the time the reasons were furnished, at the petitioner's request on September 14, 2009, the limitation of six years for reopening the assessment had elapsed. Learned counsel would rely on Haryana Acrylic, [2009] 308 ITR 38 (Delhi); GKN Driveshafts (India) Ltd. v. ITO, [2003] 259 ITR 19 (SC); (2003) 1 SCC 72, ITO v. Madnani Engineering Works Ltd., [1979] 118 ITR 1 (SC); (1979) 2 SCC 455.

6. Sri J.V Prasad, learned senior standing counsel for income-tax, would submit that the petitioner-company was incorporated by Sri B. Ramalinga Raju; their admission that the GVK group had taken over the petitioner company in July, 2003 meant that they were part of the Satyam group of companies for the year 2001-02; they were under the influence and control of Sri B. Ramalinga Raju who had set up as many as 370 companies including the petitioner; in the light of the “scam” in SCSL necessary steps to protect the interests of the Revenue were required to be taken; when Sri B. Ramalinga Raju confessed to have fudged accounts, the completed proceedings under section 143(3) of the Act was required to be looked into again; reopening of the assessment was on the basis of information gathered by the Department after the confession of Sri B. Ramalinga Raju on January 7, 2009; the authorized officer had caused investigation at his end, and had taken the decision to reopen the assessment of the petitioner for the assessment year 2002-03; the Assessing Officer had recorded his reasons and satisfaction which was endorsed by the Additional Commissioner, and the Commissioner of Income-tax; the Assessing Officer had applied his mind and had caused due verification; the satisfaction recorded for reopening the assessment cannot be said to be arbitrary as there was material based on which the Assessing Officer had reason to believe that there was escapement of income; at the stage of issue of notice it would suffice if prima facie material is available with the Assessing Officer; the Assessing Officer is not required to conclusively establish that there was escapement of income; as the petitioner did not reply to the show-cause notice dated December 15, 2009, proposals for special audit were sent to the Commissioner of Income-tax for approval; after due approval the company was directed to get its accounts audited as its financial results were in doubt because of their inter-relationship with SCSL, and the influence of Sri B. Ramalinga Raju over the affairs of the petitioner; having regard to the complexity and the circumstances it was the considered opinion of the Assessing Officer that, in the interests of Revenue, the veracity of the accounts could only be ascertained by carrying out an audit under section 142(2A) of the Act; the petitioner had not made out any Case for interference by this court under article 226; larger public interest required reopening of the assessment; the mere fact that the notice dated March 26, 2009 does not disclose all the reasons would not render the proceedings initiated under section 147 invalid as it is evident from the material on record that the Assessing Officer had reason to believe that income had escaped assessment; the sufficiency or adequacy of such reasons are not matters which would be examined by this court, more so as no order of reassessment has as yet been passed; the petitioners have a remedy under the Act to appear before the Income-tax Officer and, in case they suffer an adverse order, to carry the matter in appeal to the Commissioner of Income-tax (Appeals) before whom they can raise all questions including on the jurisdiction of the Income-tax Officer to reopen the assessment under section 147 of the Act; and, in the light of the massive fraud committed by Sri B. Ramalinga Raju and as the petitioner is one of the several companies floated by him to evade tax, this court should refrain from exercising its discretion under article 226 as any finding recorded by this court, on the question of jurisdiction, would effect the appeals pending before the Commissioner of Income-tax (Appeals). Learned senior standing counsel would place reliance on Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC); Bhimraj Pannalal v. CIT, [1961] 41 ITR 221 (SC); A.L.A Firm v. Commissioner Of Income Tax, Madras, [1991] 189 ITR 285 (SC); IAC of IT v. V.I.P Industries Ltd., [1991] 191 ITR 661 (SC); Central Provinces Manganese Ore Co. Ltd. v. I.T.O, Nagpur, [1991] 191 ITR 662 (SC); Phool Chand Bajrang Lal v. ITO, [1993] 203 ITR 456 (SC); ITO v. Selected Dalurband Coal Co. P. Ltd., [1996] 217 ITR 597 (SC); Sri Krishna P. Ltd. v. ITO, [1996] 221 ITR 538 (SC); Associated Stone Industries (Kotah) Ltd. v. CIT, [1997] 224 ITR 560 (SC), Raymond Woollen Mills Ltd. v. ITO, [1999] 236 ITR 34 (SC) and Rajesh Jhaveri, [2007] 291 ITR 500 (SC).

Material on record

7. The records placed before us, in so far as they relate to the petitioner in W.P No. 27817 of 2009, contain copies of the shareholders agreement executed on July 2, 2003 between Maytas Infra Limited, M/s. IJM Corporation, Malaysia and M/s. Nagarjuna Construction Co. Ltd. on the one hand and the GVK companies on the other. The said agreement shows that M/s. Maytas Infra Ltd., M/s. IJM Corporation, Malaysia and M/s. Nagarjuna Construction Co. Ltd., together with their affiliates, held 100 per cent, of the equity share capital of the petitioner company and, with effect from the effective date, while M/s. Maytas Infra Limited and M/s. IJM Corporation were to reduce their holding to 20 per cent, each of the petitioner's equity capital, M/s. Nagarjuna Construction Company Limited was to hold 10 per cent, and the remaining 50 per cent, of the equity capital of the petitioner-company was to be held by the GVK companies. The shareholders agreement was signed on behalf of Maytas Infra Ltd. by its director Sri B. Teja Raju. (son of Sri B. Ramalinga Raju). The shareholders agreement was amended initially on June 11, 2004, and later on October 23, 2006, and the shareholding of M/s. Maytas Infra Ltd. was reduced to 19. 50 per cent, of the petitioner's equity capital. The record also contains the director's report, for the financial year ending March 31, 2002, which reveals that Sri B. Rama Raju S/o. Sri B. Ramalinga Raju was then the vice-chairman and managing director of the petitioner-company. The record contains several other letters which, for reasons stated hereinafter, need not be referred to in this order.

Sections 147 to 149 of the Act: Scope and ambit

8. Before considering the question, whether this court should exercise discretion to adjudicate upon the jurisdiction of the Income-tax Officer to issue notice under section 147, it is useful to examine the scope and purport of sections 147 to 149 of the Act, and cull out the principles laid down in this regard by various judicial pronouncements of the Supreme Court.

9. Section 34 of the Indian Income-tax Act, 1922 related to income escaping assessment. In Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC) the Supreme Court held that, in order to confer jurisdiction under section 34 to issue notice in respect of assessments beyond four years from the end of the relevant year, two conditions must be satisfied (i) the Income-tax Officer should have reason to believe that there has been underassessment, and (ii) he should have reason to believe that such underassessment has resulted from non-disclosure of material facts; and both these requirements were conditions precedent to be satisfied before the Income-tax Officer would have jurisdiction to issue the notice.

10. section 147 of the Income-tax Act, 1961 as it originally stood was similar to section 34 of the Indian Income-tax Act, 1922. Section 147 was amended firstly by the Direct Tax Laws (Amendment) Act, 1987, and later by the Amending Act, 1989. It is useful to read section 147 of the Income-tax Act, 1961 as it originally stood, after it was amended by the Direct Tax Laws (Amendment) Act, 1987, and later by the Amending Act, 1989, in juxtaposition with each other.

Prior to the Direct Tax Laws (Amendment) Act, 1987, section 147 read as under: After enactment of the Direct Tax Laws (Amendment) Act, 1987, i.e, prior to 1st April, 1989, section 147 of the Act, read as under: After the Amending Act, 1989, section 147 read as under: 147. Income escaping assessment.— If— (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). 147. Income escaping assessment.— If the Assessing Officer, for reasons to be recorded by him in writing is of the opinion that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depredation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). 147. Income escaping assessment.— If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any, assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such

assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.

11. Under section 147 of the Income-tax Act, 1961, as it originally stood, an assessment could be reopened only if the Income-tax Officer had reason to believe that income chargeable to tax had escaped assessment under two situations, i.e, (i) omission or failure on the part of the assessee to make a return under section 139 for any assessment year; or (ii) disclose fully and truly all material facts necessary for his assessment. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words “reason to believe” but also inserted the word “opinion” in section 147 of the Act. However, on receipt of representations from companies against omission of the words “reason to believe”, Parliament re-introduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer. But in section 147 of the Act, with effect from April 1, 1989, the twin conditions of the pre-amended section 147 were given a go-by and only one condition remained, viz., where the Assessing Officer had reason to believe that income has escaped assessment. Post-April 1, 1989, the power to reopen assessment under section 147 is much wider (Commissioner Of Income Tax, Delhi v. Kelvinator Of India Limited, [2010] 320 ITR 561 (SC). The scope and effect of section 147 as substituted with effect from April 1, 1989, and sections 148 to 152, are substantially different from the provisions as they stood prior to such substitution. Under the substituted section 147 if the Assessing Officer, for whatever reason, has reason to believe that income has escaped assessment, he has the jurisdiction to reopen the assessment (Rajesh Jhaveri, [2007] 291 ITR 500 (SC)).

12. It is only in cases where an assessment under section 143(3) or section 147 has been made for the relevant assessment year that the first proviso to section 147 prohibits action from being taken under section 147 after expiry of four years from the end of the relevant assessment year unless (i) any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139; or (ii) in response to a notice issued under section 142(1) or section 148, the assessee does not disclose fully and truly all material facts necessary for that assessment year. After expiry of four years, but not after six years, from the end of the relevant assessment year the jurisdiction conferred on the Assessing Officer to reopen assessment under section 147 is similar to section 34 of the Indian Income-tax Act, 1922, and section 147 of the Income-tax Act, 1961 as it originally stood. The conditions, stipulated in section 147 of the Income-tax Act, 1961 as it originally stood, must be fulfilled if the case falls within the ambit of the first proviso to section 147 of the Act (Rajesh Jhaveri, [2007] 291 ITR 500 (SC)).

13. The word “reason”, in the phrase “reason to believe” in section 147, would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income has escaped assessment he can be said to have reason to believe that income has escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion (Central Provinces Manganese Ore Co. Ltd., [1991] 191 ITR 662 (SC); Rajesh Jhaveri, [2007] 291 ITR 500 (SC)). The words “has reason to believe” are stronger than the words “is satisfied” (Ganga Saran and Sons P. Ltd., [1981] 130 ITR 1 (SC)). A schematic interpretation should be given to the words “reason to believe” failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments, on the basis of “mere change of opinion”, which cannot per se be a reason to reopen assessment. The Assessing Officer has no power to review. He has the power to reassess. But reassessment has to be based on fulfilment of certain pre-conditions and, if the concept of “change of opinion” is removed, then, in the garb of reopening the assessment, review would take place. The concept of “change of opinion” must be treated as an in-built test to check abuse of power by the Assessing Officer. Hence, after April 1, 1989, the Assessing Officer has the power to reopen provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief (Kelvinator of India Ltd., [2010] 320 ITR 561 (SC).

14. The words “reason to believe” suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds. The Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief, that the conditions are satisfied, do not exist or is not material or relevant to the belief required by section 147 (Sheo Nath Singh, [1971] 82 ITR 147 (SC); (1972) 3 SCC 234, Chhugamal Rajpal v. S.P Chaliha, [1971] 79 ITR 603 (SC)). The belief entertained by the Income-tax Officer must not be arbitrary or irrational. At the stage of initiation of action under section 147, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is “reason to believe” but not the established fact of escapement of income. At the initiation stage the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether the material would conclusively prove the escapement is not of concern at that stage as the formation of belief by the Assessing Officer is within the realm of his subjective satisfaction (Selected Dalurband Coal Co. P. Ltd., [1996] 217 ITR 597 (SC), Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (SC), Central Provinces Manganese Ore Co. Ltd., [1991] 191 ITR 662 (SC); Rajesh Jhaveri, [2007] 291 ITR 500 (SC)). Whether the material is relevant for formation of the requisite belief will differ from case to case (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

15. The words “failure to disclose fully and truly all material facts necessary for his assessment”, in the first proviso to section 147, postulate a duty on every assessee to disclose fully and truly all material facts necessary for his assessment (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)). The disclosure must not only be true but must be full—”fully and truly”. A false assertion, or statement, of material fact therefore attracts the jurisdiction of the Income-tax Officer under section 147 (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)). The expression “material facts” refers only to primary facts, and the duty of the assessee is to disclose primary facts. There is no duty cast on the assessee to indicate or draw the attention of the Income-tax Officer to the inferences that can be drawn from the primary facts disclosed (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC), Associated Stone Industries (Kotah) Ltd., [1997] 224 ITR 560 (SC)). Every disclosure is not and cannot be treated as a true and full disclosure. A disclosure may be false or true. It may be a full disclosure or it may not. A partial disclosure may very often be misleading. What is required is a full and true disclosure of all material facts necessary for making assessment for that year (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)). What facts are material, and necessary for assessment, will differ from case to case (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)). The duty of disclosing all primary facts, relevant to the decision on the question before the assessing authority, lies on the assessee. The assessee's omission to bring to the assessing authority's attention particular items in the account books, or the particular portions of the documents which are relevant, amount to “failure to disclose fully and truly all material facts necessary for his assessment”. It is the assessee's duty to disclose all primary facts which could have been discovered by the assessing authority from the documents and other evidence disclosed (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)). The assessee's duty to disclose is in the context of the two requirements—called conditions precedent—which must be satisfied before the Income-tax Officer gets jurisdiction to reopen the assessment under section 147/148. This obligation can neither be ignored nor watered down. Nor can anyone suggest that a false disclosure satisfies the requirement of full and true disclosure (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)). Finality of proceedings is certainly a consideration, but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year—and not to others (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

16. All that is necessary to give special jurisdiction is that the Income-tax Officer had, when he assumed jurisdiction, some prima facie grounds for believing that there had been some non-disclosure of material facts. Whether these grounds are adequate or not, for arriving at the conclusion that there was non-disclosure of material facts, would not be open for the court's investigation (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)). At the stage of examining the validity of the notice under section 148/147, the enquiry is only to see whether there are reasonable grounds for the Income-tax Officer to believe, and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

17. An Income-tax Officer may start reassessment proceedings either because some fresh facts have come to light which where not previously disclosed or some information, with regard to the facts previously disclosed, comes into his possession which tends to expose the falsity of those facts. In such situations it is a case of acting on fresh information. One of the purposes of section 147 is to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and, when that falsity comes to notice, to turn around and say “you accepted my lie, now your hands are tied and you can do nothing”. It would be a travesty of justice to allow the assessee that latitude (Phool Chand Bajrang Lal, [1993] 203 ITR 456 (SC)).

18. It is the duty of the assessee, who wants the court to hold that jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been escapement of income (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)). It is for the assessee to establish that there existed no belief or that the belief was not bona fide or was based on vague, irrelevant and non-specific information.

19. All the requirements stipulated by section 147 must be given due and equal weight (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)). 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 him and further whether that material had any rational connection or a live link for the formation of the requisite belief. Since the belief is that of the Income-tax Officer the sufficiency of reasons for forming the belief is not for the court to judge. (Phool Chand Bajrang Lal, [1993] 203 ITR 456 (SC)). The court cannot investigate into the adequacy or sufficiency of the reasons which weighed with the Income-tax Officer in coming to the belief, but can examine whether the reasons are relevant and have a bearing on matters in regard to which the Income-tax Officer is required to entertain the belief before he can issue notice under section 147. If there is no rational and intelligible nexus between the reasons and the belief so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment, and the notice issued by him would be liable to be struck down as invalid (Ganga Saran and Sons P. Ltd., [1981] 130 ITR 1 (SC)).

20. The order of the authority can be challenged if it is beyond the limits of the Act or is passed on grounds extraneous to the Act or if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction requisite under the legislation. In any one of these situations it can well be said that the authority did not honestly form its opinion or that, in forming it, it did not apply its mind to the relevant facts (Barium Chemicals Ltd., [1966] 36 Comp Cas 639 (SC); AIR 1967 SC 295).

21. As the formation of belief by the Income-tax Officer is essentially within his subjective satisfaction (Selected Dalurband Coal Co. Pvt. Ltd., [1996] 217 ITR 597 (SC)), the court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a matter to be considered at this stage (Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (SC)) Even if the formation of opinion is subjective, the existence of circumstances relevant to the inference as the sine qua non for action must be demonstrable. If the action is questioned on the ground that no circumstances leading to an inference of the kind contemplated by the section exists, the action might be exposed to interference unless the existence of the circumstances is made out. It is not sufficient to assert that the circumstances exist and give no clue to what they are because the circumstances must be such as to lead to conclusions of certain definiteness (Barium Chemicals Ltd., [1966] 36 Comp Cas 639 (SC); AIR 1967 SC 295).

22. The necessary jurisdictional facts must exist before the Income-tax Officer can exercise jurisdiction under section 147 of the Act. A “jurisdictional fact” is a fact which must exist before a Tribunal or an authority assumes jurisdiction over a particular matter. If the jurisdictional fact does not exist the Tribunal or authority cannot act. If a Tribunal or authority wrongly assume the existence of such a fact, a writ of certiorari lies. The underlying principle is that, by erroneously assuming existence of a jurisdictional fact, an inferior Tribunal or authority cannot confer upon itself jurisdiction which it otherwise does not possess. The existence of a jurisdictional fact is thus the sine qua non or condition precedent for the exercise of power by an authority or a Tribunal of limited jurisdiction (Ramesh Chandra Sankla, (2008) 14 SCC 58, Arun Kumar v. Union of India, [2006] 286 ITR 89 (SC); (2007) 1 SCC 732 and Carona Ltd. v. Parvathy Swami-nathan and Sons, (2007) 8 SCC 559.

23. While examining the question whether there was relevant material before the assessing authority based on which he had reasons to believe that income has escaped assessment it must be borne in mind that, in sending his report to the Commissioner, the Income-tax Officer might not fully set out what he thought amounted to reasons as it is conceivable that the report may not be drawn up carefully and may not contain a reference to all the reasons that operated on his mind (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)). The Calcutta and Delhi High Courts, in Equitable Investment Co. P. Ltd. v. ITO, [1988] 174 ITR 714 (Cal) and Sarthak Securities Co. P. Ltd. v. ITO, [2010] 329 ITR 110 (Delhi) held that where a notice issued under section 148 of the Act, after obtaining sanction of the Commissioner of Income-tax is challenged, the only document to be looked into for determining the validity of the notice is the report on the basis of which sanction of the Commissioner of Income-tax has been obtained; and the Income-tax Department cannot rely on any other material apart from the report. As the Constitution Bench of the Supreme Court, in Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC), has held otherwise, reliance placed by the petitioners on Equitable Investment Co. P. Ltd., [1988] 174 ITR 714 (Cal) and Sarthak Securities Co. P. Ltd., [2010] 329 ITR 110 (Delhi) is misplaced.

24. Even if nothing relevant is disclosed, an opportunity may be given to the Revenue to produce the records containing those reasons for the purpose of finding out whether the Income-tax Officer had any reason to believe that income had escaped assessment (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC), Sheo Nath Singh, [1971] 82 ITR 147 (SC); (1972) 3 SCC 234 and Chhugamal Rajpal, [1971] 79 ITR 603 (SC))

25. In Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC) the Supreme Court, while holding that the Income-tax Officer would have the opportunity to tell the court in the affidavit filed by him what reasons he took into consideration, asked the Income-tax Department's counsel what were the reasons which weighed with the Income-tax Officer. To quote (page 205):

“To ascertain whether the Income-tax Officer could have had in mind any non-disclosure as a ground for thinking that by reason of such non-disclosure an underassessment had occurred—apart from what was mentioned in the affidavit—we enquired from respondent's counsel whether he could suggest any other non-disclosure that might have taken place. Mr. Sastri suggested two. One is that the sales had not been disclosed the other that the memorandum and articles of association of the company had not been shown. This suggestion is against the record and we have no hesitation in repelling it. Not only is it not the ground set out by the Income-tax Officer at any stage not even in the affidavit in court, but the matters mentioned by the officer that the assessee had claimed that the profits realised were of a casual nature obviously indicate that the assessee disclosed that a surplus resulted from the sales which were also disclosed.”

26. Even if the reasons furnished by the Income-tax Officer to the assessee do not, ex facie, disclose his satisfaction of the basic facts essential for exercise of jurisdiction under section 147 of the Act, the court can look into the records produced before it to ascertain whether there was relevant material which led the Income-tax Officer to arrive at his satisfaction that income has escaped assessment. In ITO v. Biju Patnaik, [1991] 188 ITR 247 (SC), the Supreme Court observed (page 251):

“It is undoubtedly true that the notice does not prima facie disclose the satisfaction of the two conditions precedent enjoined under section 147(a), but in the counter affidavit filed by the Income-tax Officer in the High Court he stated all the material facts… Thus, though ex facie the notice does not disclose the satisfaction of the requirement of section 147(a), from the record and the averments in the counter affidavit it is clear that the Income-tax Officer had applied his mind to the facts and, after prima facie satisfying himself of the existence of those two conditions precedent, reached the conclusion for reopening the assessment. It is settled law that, in an administrative action, though the order does not ex facie disclose the-satisfaction by the officer of the necessary facts, if the record discloses the same, the notice or the order does not per se become illegal,

(emphasis1 supplied)”

27. Even material gathered by other agencies may be relied upon by the Income-tax Officer as reasons for his belief that there has been escapement of income. In Central Provinces Manganese Ore Co. Ltd., [1991] 191 ITR 662 (SC), the Supreme Court opined (page 666):

“So far as the first condition is concerned, the Income-tax Officer, in his recorded reasons, has relied upon the fact as found by the Custom Authorities that the appellant had under-invoiced the goods it exported. It is no doubt correct that the said finding may not be binding upon the income-tax authorities but it can be a valid reason to believe that the chargeable income has been under-assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income-tax Officer believe that there has been under-assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income-tax Officer under section 147(a) of the Act was satisfied.”

(emphasis supplied)

28. There is no single rule of universal application to determine whether the material before the Income-tax Officer is sufficient for his being satisfied that there has been escapement of income. This aspect would depend on the facts and circumstances of each case. In Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (SC), the Supreme Court held (page 35):

“We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority.”

29. Reliance is, however, placed by Ms. K. Mamatha, learned counsel for the petitioners, on the observations of the Supreme Court, in GKN Driveshafts (India) Ltd., [2003] 259 ITR 19 (SC), that when a notice under section 148 of the Act is issued the proper course of action for the assessee is to file his return and, if he so desires, to seek reasons for issuing the notice the Assessing Officer is bound to furnish reasons within a reasonable time; and, on receipt of reasons, the assessee is entitled to file objections to the issuance of notice, and the Assessing Officer is bound to dispose of the same by passing a speaking order. Learned counsel would contend that the “reason to believe” must be made out only from the reasons furnished by the Assessing Officer to the assessee at the latter's request; and the records cannot be examined to ascertain whether there was material on record for the formation of belief by the Assessing Officer. Relying on GKN Drive-shafts (India) Ltd., [2003] 259 ITR 19 (SC) the Delhi High Court, in Haryana Acrylic, [2009] 308 ITR 38 (Delhi), held that a notice under section 148 without the communication of the reasons therefor is meaningless inasmuch as the Assessing Officer is bound to furnish the reasons within a reasonable time; in a case, where the notice has been issued within the said period of six years, but the reasons have been furnished beyond that period, any proceedings pursuant thereto would be hit by the bar of limitation inasmuch as the issuance of the notice, and the communication and furnishing of reasons, go hand-in-hand.

30. We respectfully disagree with the opinion expressed by the Delhi High Court in Haryana Acrylic, [2009] 308 ITR 38 (Delhi). Section 148(2) of the Act merely requires the Assessing Officer, before issuing notice under section 148(1), to record his reasons for doing so. If reasons are recorded, the requirement of section 148(2) must be held to have been complied with. Further the time limit for issuing a notice under section 148, in cases where the income which has escaped assessment is more than one lakh rupees, is six years under section 149(1)(b) of the Act. The limitation prescribed therein is merely for issuance of notice under section 148, and not for passing a reassessment order. The judgment of the Delhi High Court, in Haryana Acrylic, [2009] 308 ITR 38 (Delhi), runs contrary to the plain language of section 147, 148 and 149 of the Act. The Supreme Court, in GKN Driveshafts (India) Ltd., [2003] 259 ITR 19 (SC), did not hold that the period of limitation should be reckoned on the date of communication of reasons by the Income-tax Officer. The observations of the Delhi High Court in Haryana Acrylic, [2009] 308 ITR 38 (Delhi), are contended to be a logical consequence of the law laid down in GKN Driveshafts (India) Ltd., [2003] 259 ITR 19 (SC). Observations of courts are neither to be read as Euclid's theorems nor as provisions of a statute, and that too taken out of their context (Amur Nath Om Prakash v. State of Punjab, (1985) 1 SCC 345; Collector of Central Excise v. Alnoori Tobacco Products, [2004] 3 RC 165; (2004) 6 SCC 186, London Graving Dock Co. Ltd. v. Horton, [1951] AC 737 (HL), Home Office v. Dorset Yacht Co. Ltd., [1970] 2 All ER 294 (HL), Shepherd Homes Ltd. v. Sandham (No. 2), [1971] 1 WLR 1062 (Ch D), British Railways Board v. Herrington, [1972] 2 WLR 537 (HL)). The decision of a court is only an authority for what it actually decides. What is of the essence in a decision is its ratio, and not every observation found therein nor what logically follows from the various observations made in it (State of Orissa v. Sudhansu Sekhar Misra, AIR 1968 SC 647, Quinn v. Leathern, [1901] AC 495 (HL)). We are unable, therefore, to accept the submission of Ms. K. Mamatha, learned counsel for the petitioners, that the limitation of six years should be reckoned not with reference to the date on which the notice is issued, but the date on which reasons are furnished by the Assessing Officer at the assessee's request.

Principles governing exercise of jurisdiction to reopen assessment—and the scope of sections 147 to 149 of the Act:

31. The principles, culled out from the aforementioned judicial pronouncements of the Supreme Court, and on a literal construction of sections 147 to 149 of the Act, are as under:

(i) In section 147 of the Act, with effect from April 1, 1989, the twin conditions of the pre-amended section 147 were given a go-by, and only one condition remained, viz., where the Assessing Officer had reason to believe that income has escaped assessment (Kelvinator of India Ltd., [2010] 320 ITR 561 (SC)).

(ii) Post-April 1, 1989, the power to reopen assessment under section 147 is much wider. The scope and effect of section 147 as substituted with effect from April 1, 1989, and sections 148 to 152, are substantially different from the provisions as they stood prior to such substitution (Rajesh Jhaveri, [2007] 291 ITR 500 (SC)).

(iii) The Assessing Officer has the power under section 147 to reopen assessment provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment (Kelvinator of India Ltd., [2010] 320 ITR 561 (SC)).

(iv) However, the conditions stipulated in section 147 of the Income-tax Act, 1961 as it originally stood, viz., the Assessing Officer has reason to believe that, by reason of (i) omission or failure on the part of the assessee to make a return under section 139 for any assessment year, or (ii) the assessee's failure to disclose fully and truly all material facts necessary for his assessment, income has escaped assessment, must be fulfilled if the case falls within the ambit of the first proviso to section 147 (Rajesh Jhaveri, [2007] 291 ITR 500 (SC)).

(v) The first proviso to section 147 is attracted only in cases where an assessment, under section 143(3) or section 147, has been made for the relevant assessment year.

(vi) Section 148(2) of the Act requires the Assessing Officer, before issuing notice under section 148(1), to record his reasons. If reasons are recorded, before the notice under section 148(1) is issued, the requirement of section 148(2) must be held to have been complied with.

(vii) The limitation for issuing a notice under section 148, in cases where the income which has escaped assessment is more than one lakh rupees, is six years under section 149(1)(b) of the Act.

(viii) The Assessing Officer has no power to review. He has the power only to reassess. The concept of “change of opinion” must be treated as an in-built test to check abuse of power by the Assessing Officer (Kelvinator of India Ltd., [2010] 320 ITR 561 (SC)).

(ix) The Income-tax Officer acquires jurisdiction to reopen assessment under section 147 read with section 148 of the Act only if, on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reason, which he must record, to believe that any part of the assessee's income has escaped assessment.

(x) The words “has reason to believe” in section 147 are stronger than the words “is satisfied” (Ganga Saran and Sons P. Ltd., [1981] 130 ITR 1 (SC)).

(xi) These words suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds. The Income-tax Officer may act on direct or circumstantial evidence, but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief, that the conditions are satisfied, do not exist or is not material or relevant to the belief required by the section (Sheo Nath Singh, [1971] 82 ITR 147 (SC); (1972) 3 SCC 234 and Chhugamal Rajpal, [1971] 79 ITR 603 (SC)).

(xii) The belief entertained by the Income-tax Officer must not be arbitrary or irrational (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xiii) The expression “reason to believe” cannot be read to mean that the Assessing Officer should have finally ascertained the fact of escapement of income by legal evidence or conclusion (Central Provinces Manganese Ore Co. Ltd., [1991] 191 ITR 662 (SC) and Rajesh Jhaveri, [2007] 291 ITR 500 (SC)).

(xiv) The words failure to disclose “fully and truly all material facts necessary for his assessment”, in the first proviso to section 147, postulate a duty on every assessee to disclose fully and truly all material facts necessary for his assessment (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)).

(xv) Every disclosure is not, and cannot be treated to be, a true and full disclosure. A disclosure may be false or true. It may be a full disclosure or it may not. A partial disclosure may very often be misleading. What is required is a full and true disclosure of all material facts necessary for making assessment for that year (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xvi) The disclosure must not only be true but must be full—”Fully and truly”. A false assertion, or statement, of material fact attracts the jurisdiction of the Income-tax Officer under section 147 (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xvii) The expression “material facts” refers only to primary facts which the assessee is duty bound to disclose. There is no duty cast on the assessee to indicate or draw the attention of the Income-tax Officer to the inferences which can be drawn from the primary facts disclosed (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC) and Associated Stone Industries (Kotah) Ltd., [1997] 224 ITR 560 (SC).

(xviii) What facts are material, and necessary for assessment, will differ from case to case (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)).

(xix) The duty of disclosing all primary facts, relevant to the decision on the question before the assessing authority, lies on the assessee. It is the assessee's duty to disclose all primary facts which could have been discovered by the assessing authority from the documents and other evidence disclosed (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)).

(xx) The assessee's obligation, to disclose all material facts necessary for his assessment fully and truly, is in the context of the two requirements—called conditions precedent—which must be satisfied before the Income-tax Officer gets jurisdiction to reopen the assessment under section 147/148. This obligation can neither be ignored nor watered down (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xxi) Finality of proceedings is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year—and not to others (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xxii) All that is necessary to give special jurisdiction is that the Income-tax Officer had, when he assumed jurisdiction, some prima facie grounds for believing that there had been some non-disclosure of material facts. Whether these grounds are adequate or not, for arriving at the conclusion that there was non disclosure of material facts, would not be open for the court's investigation (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)).

(xxiii) All the requirements stipulated by section 147 must be given due and equal weight (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xxiv) While sending his report, to the Commissioner, the Income-tax Officer might not fully set out what he thought amounted to reasons as it is conceivable that the report may not be drawn up carefully, and may not contain a reference to all the reasons that operated on his mind (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)).

(xxv) It is the duty of the assessee, who wants the court to hold that jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been escapement of income (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)).

(xxvi) It is for the assessee to establish that there existed no belief or that the belief was not at all bona fide or was based on vague, irrelevant and non-specific information (Phool Chand Bajrang Lal, [1993] 203 ITR 456 (SC)).

(xxvii) At the stage of examining the validity of the notice under section 148/147, the enquiry is only to see whether there are reasonable grounds for the Income-tax Officer to believe, and not whether the omission/failure and the escapement of income is established (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)).

(xxviii) Whether the material would conclusively prove the escapement is not of concern at the initiation stage (Selected Dalurband Coal Co. P. Ltd., [1996] 217 ITR 597 (SC), Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (SC), Central Provinces Manganese Ore Co. Ltd., [1991] 191 ITR 662 (SC) and Rajesh Jhaveri, [2007] 291 ITR 500 (SC)).

(xxix) 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 him, and further whether that material had any rational connection or a live link for the formation of the requisite belief (Phool Chand Bajrang Lal, [1993] 203 ITR 456 (SC)).

(xxx) The court can examine whether the reasons are relevant, and have a bearing on matters in regard to which the Income-tax Officer is required to entertain the belief before he can issue notice under section 147. If there is no rational and intelligible nexus between the reasons and the belief so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment (Ganga Saran and Sons P. Ltd., [1981] 130 ITR 1 (SC)).

(xxxi) As the formation of belief by the Income-tax Officer is essentially within his subjective satisfaction (Selected Dalurband Coal Co. (P) Ltd., [1996] 217 ITR 597 (SC)), at the initiation stage the court has only to see whether there was some prima facie material on the basis of which the Department could reopen the case (Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (SC)).

(xxxii) Since the belief is that of the Income-tax Officer the adequacy or sufficiency of reasons for forming the belief is not for the court to investigate or judge (Phool Chand Bajrang Lal, [1993] 203 ITR 456 (SC) and Ganga Saran and Sons P. Ltd., [1981] 130 ITR 1 (SC)).

(xxxiii) Even if the reasons furnished by the Income-tax Officer to the assessee does not, ex facie, disclose his satisfaction of the basic facts essential for the exercise of jurisdiction under section 147 of the Act, the court can look into the records, produced before it, to ascertain whether there was relevant material which led the Income-tax Officer to arrive at his satisfaction that income has escaped assessment (Biju Patnaik, [1991] 188 ITR 247 (SC)).

(xxxiv) Even if nothing relevant is disclosed an opportunity may be given to the Revenue to produce the records to find out whether the Income-tax Officer had any reason to believe that income had escaped assessment (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC), Sheo Nath Singh, [1971] 82 ITR 147 (SC); (1972) 3 SCC 234 and Chhugamal Rajpal, [1971] 79 ITR 603 (SC)).

(xxxv) Material gathered by other agencies can be relied upon by the Income-tax Officer as material forming the basis for his reason to believe that there has been escapement of income (Central Provinces Manganese Ore Co. Ltd., [1991] 191 ITR 662 (SC).

(xxxvi) There is no single rule of universal application to determine whether the material before the Income-tax Officer is sufficient for his being satisfied that there has been escapement of income. This aspect would depend on the facts and circumstances of each case (Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (SC)).

(xxxvii) The limitation prescribed under section 149(1)(b) of the Act is merely for issuance of notice under section 148(1), and not for passing the order of reassessment.

(xxxviii) The period of limitation prescribed in section 149(1)(b) of six years is to be reckoned from the end of the relevant assessment till the date on which the notice under section 148(1) is issued, and not till the date on which reasons are furnished by the Assessing Officer at the assessee's request.

Exercise of jurisdiction under article 226 of the Constitution—Is discretionary

32. The principles enumerated hereinabove shall be borne in mind both by the assessing authority during reassessment proceedings and the Commissioner of Income-tax (Appeals) in the appeals pending before him. For reasons stated infra, we do not intend examining each of the notices issued under sections 148(1) and 142(2A) which are under challenge in these writ petitions. It is no doubt true that it is the duty of the High Court to give relief in a fit case and where the action of the authority, acting without jurisdiction, subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Court would issue appropriate orders or directions to prevent such consequences (Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC)), it is well to remember that the jurisdiction of the High Court, under article 226 of the Constitution of India, being discretionary a writ is not issued as a matter of course. A writ of mandamus is not a writ of course or a writ of right but is, as a rule, discretionary (C.R Reddy Law College Employees' Association v. Bar Council of India, [2004] 5 ALD 180). A writ of certiorari is also discretionary and is not issued merely because it is lawful to do so (Champalal Binani v. CIT, [1970] 76 ITR 692 (SC); (1971) 3 SCC 20). One of the principles inherent is that the exercise of discretionary power should be for the sake of justice (State of Maharashtra v. Prabhu, (1994) 2 SCC 481). One of the limitations imposed by this court, on itself, is that it would not exercise jurisdiction unless substantial injustice has ensued or is likely to ensue. It would not allow itself to be turned into a court of appeal to set right mere errors of law which do not occasion injustice (Sangram Singh v. 1. Election Tribunal, Kotah, AIR 1955 SC 425). Even if a legal flaw might be electronically detected, this court would not interfere save manifest injustice or a substantial question of public importance is involved (Rashpal Malhotra v. Mrs. Saya Rajput, (1987) 4 SCC 391 : AIR 1987 SC 2235 and Council of Scientific and Industrial Research v. K.G.S Bhatt, (1989) 4 SCC 635 : AIR 1989 SC 1972).

33. As noted hereinabove, similar to those issued in this batch of writ petitions, notices, under section 148 of the Act, for the assessment year 2002-03 were issued in respect of 58 other companies which were said to have been promoted by Sri B. Ramalinga Raju. These notices were subjected to challenge, in W.P No. 28300 of 2009 and batch, including on the jurisdiction of the assessing authority to initiate action under section 147, and issue notices under section 148(1) of the Act. Interim orders of stay were granted in these cases on condition of payment of 50 per cent, of the tax with a default clause. When these writ petitions were subsequently listed before us on January 29, 2011 we were informed, that, after receipt of notices under section 148 of the Act, all the companies in the said batch of 58 writ petitions had filed their reply raising objections to the reassessment; assessment orders were passed under section 147 read with section 143 of the Act; and appeals, under section 246 of the Act, were filed before the Commissioner of Income-tax (Appeals) against the orders of reassessment.

34. While dismissing this batch of 58 writ petitions, in W.P No. 28300 of 2009 and batch, by order dated February 2, 2011 this court observed that, as assessment orders had already been passed, and the petitioners therein had availed of the effective statutory remedy under the Act, it would not be proper to express any opinion on the merits of the case either in relation to the exercise of jurisdiction under section 147 or section 143(3) of the Act; all issues raised were being left open as they could also be raised along with the grounds of appeal before the Commissioner of Income-tax (Appeals); and liberty was being given to raise all grounds available under law before the appellate authority if the appeals were still pending.

35. As the question of the assessing authority's jurisdiction to reopen assessment, under section 147 read with section 148 of the Act, is also amongst the issues permitted to be raised in the appeals filed before the Commissioner of Income-tax (Appeals) any finding recorded or observation made by us, in this batch of writ petitions, on the jurisdiction of the assessing authority to reopen the assessment under section 147 read with section 148 of the Act would have a direct bearing on the appeals pending before the Commissioner of Income-tax (Appeals) as our opinion, (whichever view we take either in favour of the petitioners or the Revenue), would bind the Commissioner of Income-tax (Appeals), and would render all the appeals pending before him infructuous. It would, therefore, be inappropriate for this court either to refer to the contents of the letters and other documents which form part of the record placed before us, or to record a finding as to whether or not the material on record discloses the assessing authority's satisfaction, and show that he had reasons to believe that the income of the petitioner companies had escaped assessment. The petitioners have an effective remedy under the Act to appear before the assessing authority in the reassessment proceedings, raise all grounds available to them in law including that he lacks jurisdiction to reopen the assessment and, in case an adverse order is passed, to prefer appeals to the Commissioner of Income-tax (Appeals). As the remedy, under article 226 of the Constitution, is discretionary the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere (K.S Rashid and Son v. Income-tax Investigation Commission, [1954] 25 ITR 167 (SC); [1954] SCR 738). Liberty is given to the petitioners herein to raise all contentions before the assessing authority, including on his jurisdiction to reopen the assessment. Both the assessing authority during the reassessment proceedings, and the Commissioner of Income-tax (Appeals) while deciding the appeals filed before him, shall be guided by the principles hereinabove mentioned. The petitioners have effective remedies under the Act, including an appeal to the Income-tax Appellate Tribunal. If need be, they can invoke the jurisdiction of this court later, as an appeal is provided thereto under section 260A of the Act. We are, therefore, not inclined to exercise discretion under article 226 of the Constitution of India to adjudicate these writ petitions on its merits.

36. Subject to the observations made hereinabove, the writ petitions fail and are, accordingly, dismissed. However, in the circumstances, without costs.