JUDGMENT :

K.R. SHRIRAM, J.

1. Petitioner received a notice dated 16th March, 2019 under Section 148 of the Income Tax Act, 1961 (the Act) for A.Y. 2012-13. According to respondents they had reasons to believe that petitioner’s income chargeable to tax for A.Y. 2012-13 has escaped assessment. The reasons for re-opening is annexed to the petition. The reasons indicate that respondents have information that petitioner has deposited Rs. 13,40,000/- in cash during F.Y. 2011-12. Notwithstanding that petitioner has not filed return of income for A.Y. 2012-13. Therefore, the income chargeable to tax amounting to Rs. 13,40,000/- has escaped assessment due to failure on the part of the petitioner to disclose fully and truly all material facts for his assessment.

2. Petitioner filed objections dated 10th October, 2019 to the reopening of assessment. In that petitioner has explained as under:

“However, the bank, viz. Dena bank in which I hold an account, made a factual mistake in reporting the above transactions. I had deposited total cash of only Rs. 18,000/- on two occasions during the relevant year which were out of gifts received by me/out of my past savings. Whereas, the figure of Rs. 13,40,000/- reported by the bank as cash deposited, was in fact the exact amount of cash withdrawn by me, while was erroneously reported as Cash deposit in the AIR/CIB. In support of this, I have attached a copy of the bank statement for F.Y. 2011-12. Refer Annexure-1.

I have already written to Dena bank pointing out their mistake and have asked them to rectify the same and issue a clarificatory letter to me. I attach a copy of the letter submitted to them. Refer Annexure-2.

Thus, this proves that the re-opening of my case u/s 147 of the Income-tax act, 1961 was made on the basis of incorrect material facts and the same should hence be dropped.”

3. We have also considered bank statement which does not show any cash deposit of Rs. 13,40,000/-. It only shows cash deposits of Rs. 18,000/-. In the order dated 6th November, 2019 disposing the objections respondents admit and accept that there were cash deposits of only Rs. 18,000/- and not Rs. 13,40,000/- as alleged in the reasons for re-opening. But according to respondents there were deposits/credits to petitioner account other than in the form of cash, i.e. total credits of Rs. 18,81,092/- (cash and non cash) and therefore as no return of income was filed to show such credits it remained unexplained.

4. To confer jurisdiction under Section 147 of the Act, the Assessing Officer must have reasons to believe that income chargeable to tax has escaped assessment. In this case, the Assessing Officer felt that there were reasons to believe that income had escaped assessment on incorrect facts and that is even accepted in the order disposing the objections which is impugned in the petition. Therefore, the entire basis on which jurisdiction is assumed under Section 147 of the Act fails. On this ground alone, the notice dated 16th March, 2019 and consequential order on objections dated 6th November, 2019 has to be quashed and set aside.

5. Mr. Walve submitted that as per explanation 3 to Section 147 of the Act, the Assessing Officer may assess or re-assess the income in respect of any issue which has escaped assessment even if such issue comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under Sub Section 2 of the Section 148 of the Act.

6. Though, there cannot be any dispute on this statement of Mr. Walve, explanation 3 presupposes that the notice which has been issued was a valid notice. As per explanation 3 it empowers the Assessing Officer to assess or re-assess the income in respect of any issue that comes to his notice subsequently in the course of the proceedings under Section 147 of the Act but if the proceedings under Section 148 of the Act itself has been initiated wrongly, the question of