Under section 147 of the Income-tax Act, 1961, the assessing officer must have ?reason to believe? that income has escaped assessment, a mere change of opinion does not justify a reassessment. The assessing officer does not have the power of review on the same set of facts and law.

The proviso to the section provides that no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year unless the escapement is by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Calcutta High Court in Jay Shree Tea v CIT (245 ITR 567) held that the department did not prove that the assessee had failed to disclose fully and truly all material facts required for assessment of its income. Consequently, it held the reassessment proceedings to be bad in law.

If a search was conducted under section 132 of the Income-tax Act, 1961, before June 1, 2003, it was mandatory to make a block assessment under chapter XIV-B of the Act. This chapter relates to assessment of search cases, where undisclosed income is found as a result of search.

Section 147 of the Act is in relation to income escaping assessment and applies in a case where either income chargeable to tax has escaped assessment by virtue of either non-disclosure by way of non-filing of the return, or non-disclosure by way of omission to disclose fully and truly all material facts for the purpose of assessment. Therefore, income cannot be deemed to have escaped assessment where an assessment has been framed under Chapter XIV-B of the Act by adopting the special procedure prescribed by this chapter.

It cannot be a case of non-filing of return, considering the provisions of section 158-BC of the Act. It cannot be a case of non-disclosure of material facts, considering the fact that everything, which was undisclosed, has already been unearthed at the time of search. Section 158-BB of the Act provides that on the basis of evidence found as a result of a search and such other materials or information as are available with the assessing officer, undisclosed income of the block period shall be computed.

Therefore, even if some income has not been disclosed in the return furnished under section 158-BC of the Act, the assessing officer is bound to assess all undisclosed income, after processing the entire material available with the assessing officer. The tax department cannot take the stand that the undisclosed income has escaped assessment because the officer failed to apply his mind to the material available on record, there being no lack of disclosure.

The provisions of Chapter XIV-B of the Act, more particularly section 158-BG of the Act, provides for a situation where no order of assessment for the block period should be passed without the previous approval of either the commissioner or director, as the case may be, in respect of search cases.

In other words, not only should the assessing officer not be an officer below the rank of an assistant commissioner, etc, but the order of assessment framed has to be scrutinised by the highest officer in the hierarchy to ensure that: (1) no undisclosed income escapes assessment, and (2) there is no high pitched assessment. It would not be open to the revenue to contend that despite material being available on record it escaped scrutiny at the hands of two officers, one of them being a superior officer in the hierarchy.

The entire scheme for bringing to tax income, which has escaped assessment under sections 147 to 153 of the Act relates to a specific assessment year and different time limits are provided at different stages, which are all interlinked and commence from the end of the relevant assessment year. The definition of ?assessment year? as provided in section 2(9) pf the Act means the period of 12 months commencing on the first day of April every year.

This definition cannot be made applicable to the term ?block period?, which has been defined by section 158-B(a) of the Act. On a plain reading, the concept of block period cannot take within its fold the meaning of an assessment year. Similarly, the term ?assessment year? by its very definition, cannot be read to mean ?block period?.

The entire scheme under Chapter XIV of the Act, more particularly from sections 147 to 153 of the Act, pertaining to reassessment and the special procedure for assessing the undisclosed income of the block period under Chapter XIV-B of the Act are not only separate and distinct from each other, but if an effort is made to incorporate the scheme under Chapter XIV of the Act for the purpose of assessment of the block period, there would be a conflict between the provisions.

In the light of the provisions of section 158-BH of the Act, once there is a conflict between the two streams of procedure, the provisions of Chapter XIV-B of the Act would prevail and have primacy. Once assessment has been framed under section 158-BA of the Act in relation to undisclosed income for the block period as a result of a search, there is no question of the assessing officer issuing notice under section 148 of the Act for reopening such assessment, as this would be repugnant to the special scheme of assessment of undisclosed income for the block period. The first proviso under section 148 of the Act is required to be issued for the purpose of proceedings under Chapter XIV-B.

This point was discussed at Gujarat High Court in Cargo Clearing Agency v CIT (307 ITR 1). In this case it was held that under section 158-BA of the Act there is a positive mandate to the assessing officer to assess the undisclosed income in accordance with the provisions of Chapter XIV-B of the Act, notwithstanding anything contained in any other provisions of the Act.

Further, section 158-BH states that except as otherwise provided in Chapter XIV-B of the Act, all other provisions of the Act would apply to assessments made under Chapter XIV-B. Therefore, once the period of limitation is prescribed under section 158-BE of the Act, the time limit for completion of assessment of undisclosed income is what is provided under this section.

To conclude, section 147 gives statutory recognition to judicial pronouncements that income escapes assessment where no return of chargeable income is furnished (Expln 2(a) to s 147).

The assessing officer may also assess an item of untaxed income other than that which had led to the issue of the notice under s 148, if such income comes to his notice subsequently in the course of proceedings under this section. Assessment proceedings under s 147 may be taken more than once for the same assessment year (implication of proviso to s 147).

?The author is advocate, Supreme Court