JAY KUMAR MITTAL, J. - (1.) THIS reference under s. 256(1) of the IT Act, 1961 (for short "the Act") has been made to this Court at the instance of the Revenue by the Income -tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity "the Tribunal") arising out of law : "Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in quashing the assessment order for the asst. yr. 1989 -90 by holding that the notice under s. 148 is invalid -
(2.) THE facts are that the assessee filed her original return declaring nil income and the AO on receiving the information from Survey Wing of the IT Department that Neta Metal Works prepared a demand draft for a sum of Rs. 83,040 payable at Chandigarh in favour of M/s Coal India Ltd., which was not accounted in the assessee's books of account, issued a notice under s. 148 of the Act. The AO after recording reasons framed assessment under s. 143(3) of the Act at of notice under s. 148 of the Act but set aside the assessment on the addition made by the AO and remitted the matter to him to frame a fresh assessment after allowing reasonable opportunity of being heard to her. The assessee took the incorporate material and his satisfaction for reopening the assessment, the same was invalid.
(3.) WE have heard learned counsel for the parties. Sec. 147 of the Act defines the power and jurisdiction of the AO for making an assessment or reassessment of escaped income. Sec. 148 of the Act, on the other hand, provides for initiation of the reassessment proceedings with issuance of a notice on the assessee concerned. Sec. 147 empowers the AO to assess or reassess income chargeable to tax if he has reasons to believe that the income for any assessment year has escaped assessment. The power conferred under this section is very wide, but at the same time it cannot be stated to be a plenary power. The AO can assume jurisdiction under the said provision provided there is sufficient material before him. He cannot act on the basis of his whim and fancy, and the existence of material must be real. Further, there must be nexus between the material and escapement of income. The AO must record reasons showing due application of mind before taking recourse to reassessment proceedings. Still further the AO can assume jurisdiction for reassessment proceedings provided he has reasons to believe but the same cannot be taken recourse to on the basis of reasons to suspect.;