THE Delhi high court has ruled that the tax authorities cannot initiate assessment proceedings simply on belief of escapement of tax, or belief that some income has escaped tax, effectively curbing powers of the revenue department to open past cases. Such belief must be based on prudence which a reasonable person is required to apply, said the high court quashing the income escaping assessment proceedings initiated by the Revenue department under section 147 of the Income Tax Act against an assessee. "The formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply," said a bench comprising Chief Justice Deepak Misra and Justice Manmohan in its order. The court added that the reasons why the assessing officer believed some income had escaped tax needed to be recorded as well.
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