- (1.) THE petitioner is a proprietorship concern and is engaged in the business of manufacturing tubular trusses for auction platform on contract basis. The petitioner filed a return of income for the asst. yr. 1995-96. The return of the petitioner was processed under S. 143(1)(a) of the IT Act (hereinafter referred to as 'the Act') and refund was granted to the petitioner. The petitioner has been served with a notice under S. 148 of the Act for the asst. yr. 1995-96. In the present writ petition, the petitioner is impugning the notice issued under S. 148 of the Act.
(2.) THE petitioner states that respondent No. 4 while issuing notice has claimed to have reason to believe that income of the petitioner for the asst. yr. 1995-96 has escaped assessment within the meaning of S. 147 of the Act. In the notice, it is stated that respondent proposes to reassess the petitioner. The petitioner was required to file return within 31 days from the date of service of the notice under S. 148 of the Act. The petitioner submitted Annexure P/3 whereby he demanded copies of certain documents. In this reply, it was also stated by the petitioner that the original return already filed by the petitioner may be considered as return in response to notice under s. 148 dt. 15th May, 2001. The petitioner prayed for supply of copy of reasons recorded in support of issuance of notice. The request of the petitioner was accepted and authorised representative of the petitioner was permitted to go through the reasons recorded by the respondent No. 4. The petitioner impugns the notice stating inter alia on the ground that the AO has been vested with the power under S. 147 of the Act to issue a notice, only if he has reason to believe that income has escaped assessment. In fact, there is total absence of reasons. Therefore, no proceedings could be taken up under S. 147 of the Act and consequently no notice under S. 148 of the Act was liable to be issued. The petitioner has submitted that reasons supplied to the petitioner show that there are no reasons to believe but they are only reasons to suspect. No notice can be issued on the basis of reasons to suspect. The expression "reason to believe" postulates an existence of reasons to believe. Mere subjective satisfaction of the AO will not be sufficient to issue notice. The petitioner further claimed that there must be a rational and intelligible nexus between the reasons recorded and beliefs. The stand of the petitioner is that there is no direct material available in support of the reasons supplied to the petitioner which would justify that there existed reasons to believe to issue a notice under S. 148 of the Act. The petitioner has submitted that there was no reason to issue notice. The notice issuing authority has assumed that in the contract business, the net profit ranges from 8 per cent to 12 per cent. The petitioner has detailed a chart wherein he has shown that his net profit rate is below 3 per cent and up to 0.67 per cent has been accepted by the Department. The range of profit suggested by the AO shows that the respondent had only reasons to suspect. There was no basis where it can be concluded that the respondent had reason to believe to issue notice under S. 148 of the Act.
(3.) THE respondents have put in appearance and had contested the writ petition. The stand of the respondents is that petitioner has only come against notice under S. 148 of the Act. The reassessment has not been done so far. If he has any grievance against the proposed reassessment, then he can contest the same before the Departmental authorities. The respondents have further asserted that AO had reason to believe that income has escaped assessment and it is after recording of reasons, notice has been given.;