Avadh Behari Rohatgi, J.
(1) The petitioner Shri A. K. Sen is a senior advocate. He was enrolled as an advocate in the Calcutta High Court in Mach 1941. Very soon he was in large practice. Soon he was in the front rank. He had a substantial professional income and was being assessed to income tax. In April 1957 he became the minister of Law in the Central Government. This post he continued to hold till January 1966. . '
(2) When the petitioner joined the Government of India his income dwindled. His main source of income was salary as a minister. For the assessment year 1962-63 he filed his return showing a salary in come of Rs. 30,300, a property income of 2/3rd of Rs. 9000 and interest income of Rs. 2795 and professional and royalty income of Rs. 8005-42. On this return the income tax officer assessed him and determined the tax which the petitioner paid.
(3) A notice dated 7th August, 1974 was issued to the petitioner. The income tax officer proposed to reassess the petitioner's income for the assessment year 1962-63 on the ground that he had reason to believe that income for that assessment year had escaped assessment within the meaning of s. 147 of the Income Tax Act, 1961 (the Act). The petitioner was informed that a notice under ss. 147/148 of the Act dated 24th March 1971 was issued to him. and was served on him. The petitioner denied the service of the notice. Thereupon the income tax officer gave him a copy of the notice dated 24th March 1971.
(4) On 21st August 1974 the petitioner wrote to the income tax officer objecting to the notice and the reassessment proceedings proposed to be taken for the assessment year 1962-63. He, however, filed under protest a fresh return for the year 1962-63 repeating the same income as had been shown in the first return and objecting at the same time to the jurisdiction of the income tax officer to initiate reassessment proceedings against him.
(5) A notice dated 9th September, 1974 was issued to the petitioner. The income-tax officer intimated him that after deducting other expenses, there was only a sum of Rs. 9030 for the petitioner's domestic expenses but on the contrary domestic and household expenses for the earlier years were of the order of Rs. 40,000 to Rs. 50,000 per year. He was requested to intimate to him his household and personal expenses and the source from which they were met. This notice was served on the petitioner on 12th September, 1974.
(6) On 24th September, 1974, the petitioner brought a writ petition under article 226 of the Constitution challenging the validity of proceedings taken pursuant to the notice dated 24th March 1971, 7th August 1974 and 9th September, 1974. The petitioner's case is that there is no material for the issue of the notice dated 24-3-1971 under s. 147 of the Act and for initiating proceedings for reopening the assessment for the year 1962-63. The purport and object of the three notices is to reopen the assessment proceedings for the year 1962-63 on the ground that the income had escaped assessment. The ground for such belief, as stated by the income tax officer in his counter-affidavit dated 8th November, 1974, is that he 'was of the opinion that inasmuch as in the preceding years personal and household expenses of the petitioner were to the tune of Rs. 40,000 to Rs. 50,000 a year, it was difficult to believe that in the previous year relevant to the assessment year 1962-63 the petitioner had been able to meet all his household expenses from out of his net income of Rs. 9,930 and as such there was a reason to believe that income chargeable to tax had escaped assessment'.
(7) The single question for decision is whether the I.T.O. had reasonable cause to believe that income chargeable to tax had escaped assessment under section 147(a).
(8) On behalf of the petitioner it is urged in the first place that it is incorrect that the petitioner's personal and domestic expenses for the earlier years were between Rs. 40,000 to Rs. 50,000, or that the same were his expenses after he had become a minister in the Government. During the relevant assessment year 1962-63 the petitioner was a minister and in that capacity he enjoyed free accommodation including free water and electricity, free use of staff car for his duties and the services of a secretary and four personal assistans, several peons and orderlies. As a cabinet minister he was also in receipt of a sumptuary allowance of Rs. 500 per month i.e. Rs. 6,000 per year of which four fifths, i.e. Rs. 4,860 was free of tax and was not included in the income tax return.
(9) In the second place it is said that all the primary and necessary facts were stated by the petitioner in his return and the accompanying statements and all other relevant and necessary information was furnished by him to the income tax officer who had assessed him for the year in question.
(10) That in 'the preceding years personal and household expenses of the petitioner were to the tune of Rs. 40,000 to Rs. 50,000 per year' is not an opinion which has any foundation in facts. It is a conjectural opinion. A pure guess .work. A convenient assumption that overlooks known facts. More a product of the income tax officer's imagination than of factual belief. It is more a hypothetical construct without a known counterpart in reality. But the Act requires that there must in fact exist reasonable grounds, known to the officer, before he can validly exercise the powers conferred by the section. There is nothing to show that the petitioner disclosed to the authorities that he was spending Rs. 40,000 to Rs. 50,000 per year. Nor is it shown specifically what are those 'preceding years' invention of the imagination. After the petitioner became a minister in the Government his income declined. But he was in enjoyment of -allowances, comforts, amenities, perquisities as a minister. If the in which his expenses were of that order. It is a vague assertion, an petitioner enjoyed free residential accommodation, free use of staff car and the services of personal assistants, peons and orderlies it cannot be assumed with any show of reason that his household expenses continued to be the same as when he was practicing as a lawyer.
(11) The words 'if the income tax officer has reason to believe' used in s. 147(a) suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the I.T.O. may act under this section on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The powers under this section are not plenary. They are subject to judicial review. The I.T.O. in his affidavit has merely stated his belief but has not set out any material on the basis of which he formed such belief. There is nothing in the affidavit to suggest that the income tax officer had any material before him that would warrant a belief that a part of the income of the petitioner had escaped assessment by reason of his failure to make a true and full disclosure of the material facts. [See I.T.O. v. Madnani Engineering Works Ltd., : 118ITR1(SC) .](1)
(12) The words 'reason to believe' appear in most modem statutes. Words such as 'reasonable cause to believe' or 'has reason to believe' are commonly found when a legislature or law-making authority confers powers on a minister or official. As Lord Radcliffe said:
'However read, they must be intended to serve in some sense as a condition limiting the exercise of an otherwise arbitrary power'.
[Nakuda Ali v. S. Jayaratoe (1951) A. C. 66(77)] (2)
(13) These words do not make conclusive the officer's own honest opinion that he has reasonable cause for the prescribed belief. The grounds on which the officer acted must be sufficient to induce in a reasonable person the required belief before he can validly reopen a completed assessment under s. 147(a). In England the majority in Liversidge v. Anderson (1942) A. C. 206 (3) held that the belief entertained by the officer was not justiciable. Lord Atkin dissented. Now it has been held by the House of Lords in the recent tax decision of I.R.C. v. RossiminsterLtd. (1980) I All Er 80 (4) that Lord Atkin was right and that the majority were wrong. Lord Dip- lock has said:
'Ithink the time has come to acknowledge opnly that the majority of the House in Levirsidge v. Anderson were expediently and, at that time, perhaps, excusably wrong and the dissenting speech of Lord Atkin was tight'
(14) Lord Scaman (at p. 104) said that the ghost of Liveisidge v Anderson no longer flutters in the pages of our books and need no longer haunt the law. It was laid to rest by Lord Radcliffe in Nakuda Ali v. S. Javaratna (1951) A. C. 66(75) and no one has sought to revive it. It is now beyond recall.
(15) The Supreme Court in a long line of decisions has held that the matter is justiciable. (See I.T.O. v. Madnani Engineering Work supra).
(16) We are, thereforee, not satisfied on the affidavit of the in come-tax officer that there was any material before him on which he could have formed the required belief for reopening the assessment proceedings- The notice under 6. 147(a) of the Act for the reopening of the assessment must in the circumstances be held to be void.
(17) We accordingly allow the writ petition and quash the notices dated March 24, 1971, August 7, 1974 and September 9 1974 and the proceedings initiated there under. We, however, make no order as to costs.