Judgment : The revenue is in appeal questioning the correctness and legality of the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in ITA No.1122/Bang/2008 dated 31.03.2009 whereunder order passed by the CIT (Appeals) dated 04.06.2008 reversing the order of assessment dated 21.07.2006 passed under Section 143(3) r/w Section 147 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’ for brevity) which was pursuant to the notice issued under Section 148 of the Act for reopening the assessment concluded on 29.10.2004. 2. The above appeal has been admitted to consider the following substantial questions of law by order dated 30.11.2010. “1) Whether the Appellate Authorities were correct in holding that reopening of assessment based on information that two Horses Tuscan and Brave Act were purchased at Rs. 1,38,729/- and Rs. 10,09,641/- was actually Rs. 5,32,784/- and Rs. 2,16,96,697/- respectively as detected by Directorate of Revenue Intelligence and customs duty of Rs. 1,87,540/- and Rs. 58,54,471.68 having been paid cannot be treated as information for the purpose of reopening assessment and bringing the same to tax, in view of the judgment of the Apex Court in Coca Cola Export Corporation 231 ITR 200? 2) Whether the Appellate Authorities have failed to take into consideration that the order passed by the Settlement Commission, which had quantified the customs duty based on the detection made by the Revenue Intelligence and the value of Horses would clearly show that income liable to tax had escaped assessment? 3. Facts in brief which has led to the filing of this appeal are as under: For the assessment year 200304 the assessee filed return of income declaring loss of Rs. 3,49,80,579/and assessment came to be concluded on 29.10.2004 determining the loss at Rs. 2,34,80,483/. Notice under Section 148 of the Act came to be issued to the assessee on 12.05.2005 and in response to the same, return of income was filed on 09.06.2005 declaring the loss of Rs. 2,34,80,483/. Thereafter, assessment came to be concluded on 21.07.2006 making additions in regard to investments on the ground that such investments were made outside the books and out of undisclosed sources. 4. 2,34,80,483/. Thereafter, assessment came to be concluded on 21.07.2006 making additions in regard to investments on the ground that such investments were made outside the books and out of undisclosed sources. 4. The assessing Officer had issued notice under Section 148 of the Act to reopen the assessment concluded on 29.10.2004 on the ground that he was in receipt of information that the Directorate of Revenue Intelligence has established that undisclosed payments had been made by the assessee towards purchase of Horses and as such, the concluded assessment came to be reopened and assessment order came to be passed under Section 147 of the Act. Being aggrieved by this order, appeal came to be filed by the assessee before CIT (Appeals), who by order dated 04.06.2008 allowed the appeal on the ground that the issue was concluded in favour of the assessee for the assessment year 199899 by the Tribunal holding that alleged violation of Customs law could not lead to the formation of opinion that the assessee has not disclosed his true and correct income and that income chargeable to tax has escaped assessment by relying upon the judgment of Hon’ble Apex court in the case of COCO COLA EXPORT CORPORATION ETC. vs. INCOME TAX OFFICER AND ANOTHER reported in (1998) 231 ITR 200 (SC). 5. Revenue pursued the matter before the Tribunal by filing an appeal and the appellate Tribunal as already noticed hereinabove, affirmed the order of the CIT (Appeals) by reiterating its order dated 02.05.2008 passed in ITA No.816/Bang/2006 in respect of the same assessee which related to the assessment year 1998-99. Hence this appeal under Section 260A of the Act by the Revenue. 6. We have heard the arguments of learned Advocates appearing for the parties namely, Sri K.V. Aravind for the revenue and Smt. S.R. Anuradha appearing for the assessee. 7. Hence this appeal under Section 260A of the Act by the Revenue. 6. We have heard the arguments of learned Advocates appearing for the parties namely, Sri K.V. Aravind for the revenue and Smt. S.R. Anuradha appearing for the assessee. 7. It is the contention of Sri K.V. Aravind, learned Advocate appearing for Revenue that both the appellate authorities committed an error in holding that reopening of assessment based on the show cause notice issued to the assessee by the Directorate of Revenue Intelligence cannot be treated as information for the purposes of reopening assessment by relying upon the judgment of the Hon’ble Apex Court in COCO COLA’s case referred to supra inasmuch as, the said judgment was rendered in the context of unamended provision of Section 147 of the Act and the assessing Officer is empowered to reopen the assessment if he has reason to believe that income has escaped assessment. In support of his submission, he relies upon the judgment of the Hon’ble Apex Court in ASSISTANT COMMISSIONER OF INCOME TAX VS. RAJESH JHAVERI STOCK BROKERS (P) LTD., reported in (2007) 291 ITR 500 (SC). 8. Per contra, Smt. S.R. Anuradha, learned Advocate appearing for assessee would support the order passed by the appellate authorities and contends that in the case of the very same assessee, for the assessment year 199899 the Tribunal has decided the issue in favour of the assessee after concluding that for alleged violation of Customs Law, the income tax authorities cannot reopen the concluded assessment and same cannot be the basis for formation of opinion. Hence, she prays for dismissal of the appeal by answering the substantial questions of law in favour of the assessee. In support of her submission, she has relied upon the judgment of Hon’ble Apex Court in COCO COLA EXPORT CORPORATION ETC. vs. INCOME TAX OFFICER AND ANOTHER reported in (1998) 231 ITR 200 (SC). RE: SUBSTANTIAL QUESTIONS OF LAW (1) & (2): 9. Adjudication and answer to the above substantial questions of law would overlap and as such both of them are taken up for being adjudicated together. 10. vs. INCOME TAX OFFICER AND ANOTHER reported in (1998) 231 ITR 200 (SC). RE: SUBSTANTIAL QUESTIONS OF LAW (1) & (2): 9. Adjudication and answer to the above substantial questions of law would overlap and as such both of them are taken up for being adjudicated together. 10. Having heard the learned Advocates appearing for parties and on perusal of the original records which has been made available by the learned counsel appearing for the revenue, it would indicate that on framing of the assessment order on 29.10.2004 which was undisputedly based on the return of income filed by the assessee for the year 2003-04, same was sought to be reopened under Section 147 of the Act and as such, a notice under Section 148 of the Act came to be issued to the assessee on 12.05.2005. The records would indicate that the jurisdictional assessing officer before issuance of such notice has opined as under to reopen the concluded assessment: “The assessee M/s United Racing & Bloodstock Breeders Ltd., has filed return of income for the A.Y. 200304 on 27.11.2003 declaring total loss of Rs. 3,49,80,579/-. The assessment has been concluded u/s. 143(3) on 29.10.2004, determining the loss at Rs. 2,34,80,483/-. Information has now been furnished by the Directorate of Revenue Intelligence, Mumbai zonal unit, 1st floor, Construction House, Ballard Estate, Mumbai that the assessee has indulged in under invoicing its imports and consequent to investigation the suppressed customs duty payable by the assessee has been quantified at Rs. 89,43,152/-. The assessee thought has appealed against such quantification, paid the duty. Under theses circumstances, there is investment made by the assessee outside the books towards such under invoiced portion while importing horses. The following two purchases of horses made in November 2002 & February 2003, relate to A.Y 200304. 1. Tuscan 2. Brave Act Consequent to receipt of this information which was not furnished by the assessee either in the return filed or during the course of assessment, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of Section 147 of the Income Tax Act. Notice u/s. 148 issued.” 11. Bare reading of Section 147 of the Act would indicate that it empowers the assessing Officer to assess or reassess the income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. Notice u/s. 148 issued.” 11. Bare reading of Section 147 of the Act would indicate that it empowers the assessing Officer to assess or reassess the income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. In the instant case, the assessing officer on conclusion of the assessment for the year 200304 on 29.10.2004 has issued the notice for its reopening and the reason assigned as could be discerned from the order sheet was on account of the information which has been secured from the Directorate of Revenue Intelligence, Mumbai Zonal Unit, I floor, Construction House, Ballard Estate, Mumbai that assessee had indulged in under invoicing its imports and consequent to investigation, the suppressed customs duty payable by the assessee has been quantified at Rs. 89,43,152/. 12. It is an undisputed fact that the Directorate of Revenue Intelligence had issued a show cause notice dated 13.02.2004 to the assessee demanding differential duty of Rs. 89,43,152/on five horses which came to be imported by the assessee. Pursuant to the said show cause notice, assessee approached the Settlement Commission by filing an application under Section 127B of the Customs Act, 1962 which proceedings culminated in an order dated 01.02.2006 whereunder assessee has agreed to pay differential customs duty of Rs. 35,69,994.68 and interest @ 18% from 15.04.2005 to 25.04.2005 on Rs. 8,90,391/-. 13. Section 147 of the Act prior to its amendment which was undisputedly from 01.04.1989 is substantially different from what it existed after amendment. The scope and effect of the amendment to Section 147 came to be considered by the Hon’ble Apex Court in ASSISTANT COMMISSIONER OF INCOME TAX vs. RAJESH JHAVERI STOCK BROKERS (P) LTD., reported in (2007) 291 ITR 500 (SC) and held as under: “16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word “reason” in the phrase “reason to believe” would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO (1991) 98 CTR (SC) 161: (1991) 191 ITR 662 (SC), for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, 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 stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [(1996) 132 CTR (SC) 162: (1996) 217 ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [(1999) 152 CTR (SC) 418: (1999) 236 ITR 34 (SC)]. 17. The scope and effect of section 147 as substituted with effect from 1st April, 1989, as also Sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of Section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. Under the old provisions of Section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under Section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income-tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.” 14. Smt. Anuradha, learned Advocate appearing for assessee relying upon the judgment of COCO COLA (supra) which was also referred to by the appellate authorities has contended that, though Section 147 of the Act has been amended with effect from 01.04.1989, the twin conditions existing in the preamended Section 147 of the Act is not wiped out in its entirety and in the substituted Section 147 of the Act, the first condition as it was existing has still remained namely, assessing Officer should have “reason to believe” for reopening the assessment already concluded and he cannot rely upon the proceedings initiated by a different authority to reopen the assessment which has been concluded. 15. Though, at first blush, this argument would look attractive, it would not detain us for long to brush aside the same for the simple reason that the assessing Officer while issuing a notice under Section 148 of the Act to reopen the assessment and for reassessment under Section 147 of the Act cannot by legal evidence arrive at a conclusion that such reason entertained by him is to be proved at that stage itself. Our view is supported by the judgment of Hon’ble Apex Court in RAJESH JHAVERI’s case referred to supra whereunder it has been held that the function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to tax payers. At the stage of issuance of notice, the assessing officer would not be concerned with the final outcome of the proceedings and such exercise is alien to Section 147 of the Act. 16. Hon’ble Apex Court in the case of GKN DRIVESHAFTS (INDIA) LTD. vs. INCOME TAX OFFICER AND OTHERS reported in (2003)259 ITR 19 has held that the assessee is required to file return of income on receipt of notice under Section 148 of the Act and then seek for reasons for issuing such notice. On such application being filed, assessing Officer is bound to furnish reasons to the assessee within a reasonable time and on receipt of reasons, notice/assessee would be entitled to file objections and thereafter assessing officer is required to pass a speaking order and dispose of the objections filed by the assessee. In fact, in the present case on hand, the assessee after receipt of notice dated 12.05.2005 has filed its return of income on 09.06.2005 along with a covering letter whereunder assessee has not called upon the assessing Officer to furnish the reasons for reopening the concluded assessment. Records also do not disclose about assessee having sought for reasons from the assessing Officer as to grounds on which assessing Officer is reopening the concluded assessment. Hence, it is too late on the day to contend that reasons had not been furnished by assessing Officer for reopening the assessment at this stage, as contended. 17. In the background of aforestated discussion, when the facts on hand are examined, it would clearly indicate that on issuance of show cause notice by the Directorate of Revenue Intelligence, the jurisdictional assessing Officer has formed an opinion about there being escapement of income of the assessee chargeable to tax. As to whether the said “reason to believe” of such escapement of income to tax by the assessee is justifiable or not, would not be an exercise which can be undertaken by the assessing Officer at the stage of issuing of notice. In that view of the matter, contention of the assessee cannot be accepted. 18. As to whether the said “reason to believe” of such escapement of income to tax by the assessee is justifiable or not, would not be an exercise which can be undertaken by the assessing Officer at the stage of issuing of notice. In that view of the matter, contention of the assessee cannot be accepted. 18. The judgment of Hon’ble Apex Court in COCO COLA’s case very heavily relied upon by the assessee would not come to the rescue of assessee for two reasons, (1) the interpretation by the Hon’ble Apex Court was in the background of unamended provision of Section 147 of the Act; and (2) the facts obtained in COCO COLA’s case was that two letters dated 04.05.1973 and 06.11.1974 issued by the Department of Economic Affairs was allegedly laying down certain ceiling on remittances on account of head office expenses and service charges and in the said assessment order excess deduction on these counts had been permitted than permissible as stipulated in these two letters, which undisputedly was clear from the very letters that the Government had reviewed such remittance facilities on different counts which was afforded to the assessee (therein) in the past and had decided that continuance of remittance facilities to the appellant would now be subject to conditions set out in the paragraphs indicated in the said letter and subject to acceptance in writing of the appellant. As to whether the expenses fell under Section 37 of the Act was an issue and in this background, the Hon’ble Apex Court held that, that would not be a ground for reopening the assessment. Whereas, in the instant case, assessing officer having gathered information that assessee had indulged in under invoicing its horse imports, which undisputedly was based on the information gathered on the basis of investigations conducted by Directorate of Revenue Intelligence and as such, the assessing Officer had held that he has “reason to believe” that income of assessee chargeable to tax had escaped assessment. Hence, we are of the view that said judgment would not come to the rescue of the assessee. 19. Hence, we are of the view that said judgment would not come to the rescue of the assessee. 19. In that view of the matter, we are of the considered view that CIT(Appeals) as well as the Appellate Tribunal were not justified in arriving at a conclusion that reopening the assessment under Section 147 of the Act by issuance of notice under Section 148 by the assessing Officer was improper. Hence, the substantial questions of law framed hereinabove have to be answered in favour of the revenue and against the assessee. 20. Having answered the substantial questions of law in favour of the revenue, we find from the perusal of records that the jurisdictional assessing Officer in the reassessment order dated 21.07.2006 has arrived at the value of “Brave Act” horse at Rs. 2,16,96,697/- and that of “Tuscan” horse at Rs. 5,32,784/- which undisputedly was not the value determined by the Settlement Commission while accepting the claim of the assessee for arriving at a settlement and directing payment of differential customs duty. In that view of the matter, we are of the considered view, it would be just and appropriate to remit the matter back to the assessing Officer for adjudicating said factual aspect. Accordingly, matter is remitted to the assessing Officer. It is made clear that Assessing Officer would be at liberty to arrive at the value of the horses after considering the contentions that may be raised by the assessee. It is also made clear that no opinion is expressed in this regard by this Court and it would be needless to state that Assessing Officer shall proceed to value uninfluenced by the order of Settlement Commission or any observations made hereinabove. 21. For the reasons aforestated, we proceed to pass the following: ORDER 1) Appeal is hereby allowed. 2) The order dated 31.03.2009 passed in ITA No.1122/Bang/2008 by Income Tax Appellate Tribunal, Bangalore Bench is hereby set aside and the matter is restored to the assessing officer for passing orders afresh keeping in mind the observations made herein above and all contentions are kept open. 3) The substantial questions of law are answered in favour of the revenue and against the assessee.