( 51 ) BOTH these conditions must co-exist in order to confer jurisdiction on the income-tax officer. It is also imperative for the incometax officer to record his reasons before initiating proceedings as required by s. 148 (2 ).

( 52 ) THE grounds or reasons which led to the formation of the belief contemplated by s. 147 (a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. As H. R. Khanna J. said :"the expression "reason to believe" does not mean a purely subjective satisfaction on the part of the income-tax officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the income tax officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law. "

( 53 ) KHANNA J. went on to say :"rational connecti

Click Here to Read the rest of this document