AVADH BEHARI J. - The petitioner, Shri. A. K. Sen, is a senior advocate. He was enrolled as an advocate in the Calcutta High Court in March, 1941. Very soon he was in large practice. Soon he was in the front rank. He has a substantial professional income and was being assessed to income-tax. In April, 1957, he became the Minister of law in the Central Govt. This post he continued to hold till January, 1966.
When the petitioner joined the Govt. 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 income of Rs. 30,300, property income of 2/3rds of Rs. 9,000 and interest income of Rs. 2,795 and professional and royalty income of Rs. 8,005.42. On this return, the ITO assessed him and determined the tax which the petitioner paid.
A notice dated August 7, 1974, was issued to the petitioner. The ITO proposed to reassess the petitioners 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 I.T. Act, 1961 (the Act.) The petitioner was informed that a notice under ss. 147/148 of the Act dated March 24, 1971, was issued to him and was served on him. The petitioner denied the service of the notice. Thereupon the ITO gave him a copy of the notice dated March 24, 1971.
On August 21, 1974, the petitioner wrote to the ITO 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 ITO to initiate reassessment proceedings against him.
A notice date September 9, 1974, was issued to the petitioner. The ITO intimated to him that after deducting other expenses, there was only a sum of Rs. 9,930 for the petitioners 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 the ITO his household and personal expenses and the source from which they were met. This notice was served on the petitioner on September 12, 1974.
On September 24, 1974, the petitioner brought a writ petition under art. 226 of the Constitution challenging the validity of proceedings taken pursuant to the notice dated March 24, 1971, August 7, 1974, and September 9, 1974. The petitioners case is that there is no material for the issue of the notice dated March 24, 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 ITO in his counter-affidavit dated November 8, 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 reason to believe that income chargeable to tax had escaped assessment.
The single question for decision is whether the ITO had reasonable cause to believe that income chargeable to tax had escaped assessment under s. 147(a).
On behalf of the petitioner, it is urged in the first place that it is incorrect the the petitioners personal and domestic expenses for the earlier years were between Rs. 40,000 and 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 assistants, 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.
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 ITO who had assessed him for the year in question.
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 on facts. It is a conjectural opinion. A pure guess-work. A convenient assumption that overlooks known facts. More a product of the ITO imagination than of factual belief. It is more a hypothetical construction without a known counterpart in reality. But the Act requires that there must exist reasonable grounds, known to the officer, before he can validly exercise the power 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' in which his expenses were of that order. It is a vague assertion, an 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 and perquisites as a minister. If the petitioner enjoyed free residential accommodation, free use of staff car and the services of personal assistance, 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.
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 ITO 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 ITO 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 ITO 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 ITO v. Madnani Engineering Works Ltd. : 118ITR1(SC) .
The words 'reason to believe' appear in most modern 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  2 WLR 1, 22 (HL) :
'However read, they must be intended to serve in some sense as a condition limiting the exercise of an otherwise arbitrary power. (Nakkuda Ali v. Jayaratne  AC 66, 77 (PC)'.
These words do not make conclusive the officers own honest opinion that he had 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  AC 206 (HL) held that the belief entertained by the officer was not justiciable. Lord Atkin dissented. Now, it had been held by the House of Lords in the recent tax decision of IRC v. Rossminster Ltd.  2 WLR 1, 49 (HL), that Lord Atkin was right and that the majority were wrong. Lord Diplock has said :
'..... I think the time has come to acknowledge openly that the majority of this House in Liversidge v. Anderson were expediently and, at that time, perhaps, excusably, wrong and the dissenting speech of Lord Atkin was right.'
Lord Scarman at p. 104 (of  1 All ER) said that the ghost of Liversidge 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 Nakkuda Ali v. Jayaratne  AC 66, 75 (HL) and no one has sought to revive it. It is now beyond recall.
The Supreme Court in a long line of decisions has held that the matter is justiciable. [See ITO v. Madnani Engineering Works : 118ITR1(SC) ].
We are, thereforee, not satisfied on the affidavit of the ITO that there was any material before him on which he could have formed the required belief for reopening the assessment proceedings. The notice under s. 147(a) of the Act for the reopening of the assessment must in the circumstances be held to be void.
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.