R.S. Syal, A.M.: This appeal by assessee is directed against order passed by CIT(A) on 10th Sept., 2004, in relation to asst. yr. 1998-99. In first ground, assessee has assailed validity of notice issued under s. 148 of IT Act, 1961. Briefly stated, facts of case are that assessee is charitable trust and its objects, inter alia, include welfare of general society. trust came into existence on 17th Oct., 1995, and was granted registration by Registrar of Societies on same day. Registration under s. 12AA was granted by CIT on 14th Aug., 1997. return of income for year under consideration was filed on 31st Dec., 1999, declaring nil income, duly accompanied with audit report in Form No. 10B. return was processed under s. 143(1)(a) on 21st March, 2000. Thereafter, notice under s. 148 was issued on 28th May, 2001, on basis of reasons recorded and forming part of assessment order as under: "During year under consideration, trust has shown receipt of donation of Rs. 30,16,598 in corpus fund, whereas amount has been received without specific directions, therefore, this amount cannot be treated for corpus. Further, registration under s. 12A(a) was granted w.e.f. 14th Aug., 1997, therefore, donation of Rs. 12,11,100 received before 14th Aug., 1997, is liable to tax, which has not been shown as taxable." In compliance to notice under s. 148, assessee-trust filed its reply on 14th June, 2001, stating that return filed on 31st Dec., 1999, may be treated as return in response to notice under s. 148. Assessment was completed on total income of Rs. 33,09,100. In first appeal, assessee challenged validity of notice under s. 148, but without any success. Before us, learned counsel for assessee strenuously argued that lower authorities had erred in initiating proceedings by issuance of notice under s. 148 and upholding same respectively. It was stated that trust received Rs. 30,16,598 as donations towards corpus and applied sum of Rs. 24,65,543 for its purposes within meaning of s. 11 of Act. He invited our attention towards p. 12 of paper book, being corpus account, income and expenditure account and balance sheet as on 31st March, 1998. Our attention was further drawn towards p. 13 of paper book, being copy of registration certificate under s. 12A(a) issued by CIT on 2nd Feb., 1998, effective from 14th Aug., 1997. It was contended that AO had invalidly assumed jurisdiction under s. 147 on change of his opinion when all necessary facts were duly disclosed by assessee in its return of income and no new material/information surfaced justifying issuance of notice under s. 148. Per contra, learned Departmental Representative defended impugned order by contending that learned CIT(A) was right in upholding issuance of notice under s. 148. We have heard rival submissions and perused relevant material on record in light of precedents relied upon. There is no dispute about fact that assessee furnished its return of income under s. 139(4) on 31st Dec., 1999, and notice under s. 148 was issued on 28th May, 2001. Though return was processed under s. 143(1)(a), but no regular assessment was framed. AO issued notice under s. 148 by assigning reasons extracted above. careful perusal of reasons recorded by AO reveals that there are broadly two parts of reasons for assuming jurisdiction under s. 148. first part of reasons is that donation receipts shown by assessee-trust as towards corpus fund were received without any specific direction. possibility of canvassing such view by AO could have been based either on t h e availability of any material found from record justifying his conclusion or som e information coming to his notice after filing of return by assessee in this regard. Since assessee had shown receipt of donation of Rs. 30,16,598 in corpus fund and admittedly, there is no mention of other material available on record contradicting this assertion of assessee, first possibility is ruled out. In like manner, there is no reference in reasons nor any material is placed before us establishing receipt of any reliable information by AO from any quarter casting doubt over assessee s stand in this regard. Even no such adverse finding was given by AO while passing orders under s. 143(3)/147 for immediately two preceding years, namely, asst. yrs. 1996-97 and 1997-98. It shows that AO made presumption of receipts shown by assessee towards corpus donations, as without any specific direction and then to authenticate his presumption, initiated reassessment proceedings. At this juncture, we would like to highlight difference between regular assessment under s. 143(3) and reassessment under s. 147. It is important to bear in mind that both sections operate in different fields and do not have any overlapping jurisdiction. Whereas s. 143(3) empowers AO to make assessment, when return is filed under s. 139 or in response to notice under s. 143(1), if he considers it necessary or expedient to ensure that assessee had not understated income or has not computed excessive loss or has not underpaid tax in any manner, he shall serve on assessee notice requiring him to appear, on date to be specified therein, in his office or to be produced or cause to be produced any evidence or material on which he m y rely in support of contents of his return. After considering such evidence, as led by assessee in response to notice under s. 143(2) and s. 142(1), AO passes order determining total income or loss as per order under s. 143(3). Proviso to s. 143(2), at material time, provides that no notice under s. 143(2) shall be served on assessee after expiry of 12 months from end of month in which return is furnished. This shows that powers of AO are very wide when he selects case for scrutiny assessment under s. 143(3). He has to satisfy himself that assessee had not understated income or claimed excessive expenditure in any manner. AO is authorised to look into all aspects connected with income of that year. He can, subject to other provisions, go into any aspect of assessment and consider it from angle of taxability. On contrary, power of AO under s. 147 is restricted to taxing income which has escaped assessment. In order to assume jurisdiction under this section, he has to form opinion and record reasons that income chargeable to tax has escaped assessment. When these conditions are fulfilled, then AO starts assessment or reassessment to tax such escaped income and also any other income chargeable to tax, which has escaped assessment and comes to his notice in course of proceedings under s. 147. AO and comes to his notice in course of proceedings under s. 147. AO cannot initiate reassessment proceedings simply to verify contents of return unlike power which is vested in him in making regular assessment. time-limit for issuance of notice under s. 148 has been prescribed under s. 149 of Act. Once return is filed under s. 139, or in response to notice under s. 142(1) and period of 12 months from end of month in which return is furnished is expired, AO cannot issue notice for making assessment under s. 143(3). He cannot assume ousted jurisdiction by venturing to make assessment indirectly in garb of reassessment by issuance of notice under s. 148. In order to invoke power under s. 147, it is sine qua non that AO should have reason to believe about escapement of income. He cannot seek general information to verify contents of return, which power i s available only while framing regular assessment within stipulated period. reasons to believe that income has escaped assessment should be preceded by issuance of notice under s. 148 and not vice versa, that is, such reasons to believe should exist prior to issuance of notice regarding escapement of income. It is impermissible to make fishing enquiries to determine income that has escaped assessment in course of proceedings pursuant to notice under s. 148. It is trite law that "reasons to believe" cannot be substituted with "reasons to suspect". Notice can be issued only on ground of "reasons to believe". belief contemplated in this section is belief of prudent man and such belief must be bona fide and not mala fide. Similarly, doubt or suspicion in mind of AO cannot empower him to initiate proceedings under s. 147. In case of Bir Arjna Enterprises (P) Ltd. vs. ITO (1994) 116 CTR (J&K) 628: (1994) 204 ITR 258 (J&K), it was held that powers under s. 147 are though wide but not plenary and existence of reason based upon some material prima facie showing escapement of assessment is condition precedent for exercise of jurisdiction under s. 147. It is further relevant that reasons in possession of AO should have direct nexus with formation of belief that income chargeable to tax has escaped assessment. Hon ble Supreme Court in case of ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220: (1976) 103 ITR 437 (SC) held that reasons which led to formation of belief contemplated by s. 147(a), must have material belief on question of escapement of income of assessee from assessment. It has been held that expression "reason to believe" does not mean purely subjective satisfaction on part of ITO. Where live-link between material before ITO and belief he was to form regarding escapement of income was missing, such material was held to be not sufficient to form belief that income chargeable to tax has escaped assessment. Similar view was reiterated in Ganga Saran & Sons (P) Ltd. vs. ITO & Ors. (1981) 22 CTR (SC) 112: (1981) 130 ITR 1 (SC) by holding that belief entertained by AO must not be arbitrary or irrational. above discussion boils down that reasons to believe about escapement of income having direct nexus with some live material must exist prior to issuance of notice under s. 148. Such reasons should be based upon some cogent material and not mere ipse dixit of AO. Where AO records reasons in realm of doubt and suspicion, devoid of any relevant material, such reasons cannot justify initiation of reassessment proceedings. Even cl. (b) of Expln. 2 to s. 147 would not come to assistance of Revenue because that applies only where return of income has been furnished by assessee but no assessment has been made and it is noticed by AO that assessee has understated income or has claimed excessive loss, deduction, allowance or relief in return. Although no assessment was made in this case prior to issuance of notice under s. 148 but other condition of this clause, namely, understatement of income by assessee is not fulfilled. This clause deems understatement of income or claim of excessive loss, deduction, etc. as case where income chargeable to tax has escaped assessment. But in order to bring item within purview of s. 147, it is of utmost importance that AO should have reasons to believe, based on relevant and cogent material, that such income has escaped assessment. It is also not arbitrary or irrational satisfaction of AO empowering him to pick up any case for reassessment and disturbing finality to proceedings, without complying with necessary conditions as laid down in relevant sections. Adverting to facts of present case, we find that there was no material, direct or indirect, available with AO, which could show that receipt of donation amounting to Rs. 30,16,598 was without any specific receipt of donation amounting to Rs. 30,16,598 was without any specific direction of corpus fund. assessee had shown receipts as having been received in corpus fund coupled with report of auditor in this regard. AO had not enquired into nature of contributions before issuance of notice under s. 148. Such inference was not even possible from assessments for earlier years, as he had not given such finding while completing assessment for immediately two preceding years. In view of these facts, we feel no hesitation in holding that first part of reasons recorded by AO was not relevant in issuing notice under s. 148. Now, we turn to second part of reasons assigned by AO that as trust was granted registration w.e.f. 14th Aug., 1997, donations received prior to date of registration amounting to Rs. 12,11,100 were liable to be taxed. It is admitted position that CIT granted registration w.e.f. 14th Aug., 1997, though trust came into existence on 17th Oct., 1995. In order to evaluate and examine authenticity of this reason, it is relevant to consider provisions of s. 12A, which deal with granting of registration. This section provides that provisions of ss. 11 and 12 shall not apply in relation to income of any trust or institution unless conditions as prescribed in cls. (a) and (b) are fulfilled. There is no dispute about cl. (b). Clause (a) provides that person in receipt of income has made application for registration of trust or institution in prescribed manner to CIT before 1st day of July, 1973, or before expiry of period of one year from date of creation of trust or establishment of institution, whichever is earlier, and such trust or institution is registered under s. 12AA. Proviso to this clause deals with situation where application for registration of trust or institution is made after expiry of aforesaid period. It has been provided that provisions of ss. 11 and 12 shall apply in relation to income of such trust or institution from date of creation of trust if CIT, for reasons to be recorded in writing, is satisfied that person in receipt of income was prevented from making application before expiry of aforesaid period for sufficient reasons. Our case does not fall in this clause of proviso because CIT has not condoned delay and has granted registration w.e.f. 14th Aug., 1997. Clause (ii) of this proviso provides that where CIT is not satisfied, then provisions of ss. 11 and 12 shall apply from 1st day of financial year in which application is made. instant case is covered within this clause. plain reading of this clause makes it clear that where registration is granted by learned CIT without condoning delay, registration shall take effect from 1st day of financial year in which registration is applied for. Apparently, application was moved in financial year 1997-98 as registration was granted w.e.f. 14th Aug., 1997. That being position, provisions of ss. 11 and 12 granting exemption to income from property for charitable or religious purposes or income of trust or institution from contributions, would be available to assessee from 1st April, 1997. Therefore, donations received by trust after 1st April, 1997, and before 14th Aug., 1997, (the date from which registration was granted by CIT), would also be exempt from taxation in terms of ss. 11 and 12. Hence, second reason recorded by AO for issuing notice under s. 148 that donations during interregnum were liable to tax, also does not have legal legs to stand on. It shows that both reasons assigned by AO before invoking provisions of s. 147 were in total defiance of legal provisions in this regard and hence fail to withstand judicial scrutiny. As very foundation for making present assessment is found to be unsustainable in terms of issuance of invalid notice under s. 148, naturally, all proceedings flowing therefrom are liable to be quashed. We order accordingly. This legal ground raised by assessee is accepted and assessment order is set aside. In view of our finding on first legal ground, we do not think it expedient to deal with other grounds on merits. For this proposition, we draw support from order passed by Special Bench of Tribunal in case of Rahul Kumar Bajaj vs. ITO (1999) 64 TTJ (Nag)(SB) 200: (1999) 69 ITD 1 (Nag)(SB) holding that where preliminary legal issue, i.e., reopening of assessment is decided in assessee s favour, then there is no requirement to decide other issues on merits. In result, appeal of assessee is allowed. *** BIGABASS MAHESHWARI SEWA SAMITI v. INCOME TAX OFFICER