These cross-appeals one by assessee and another by Revenue, have been filed against order of CIT(A), Jalandhar, for asst. yr. 1990- 91. Since issues involved are common, these were heard together and are being disposed of by this consolidated order for sake of convenience. First, we take up assessee s appeal in ITA No. 429/2000. Ground Nos. 1 and 2 relate to sustaining action of AO for reopening assessment under s. 147 which go to very root of reassessment completed by AO. These grounds are extracted as under: "1. That, on facts and circumstances of case, learned CIT(A) has gravely erred in upholding reopening under s. 147 as valid, which is bad in law and on facts and based on insufficient and inadequate material. That, on facts and circumstances of case, CIT(A) has gravely erred in holding that page No. 53 of Annex. A-9 of seizure during search was balance sheet of business of assessee. It is based on conjectures and surmises. That, while holding as above, CIT(A) has considered certain facts which could not be made base as mentioned in paras 2.5 and 2.6 of his order, which has resulted in wrongly holding it as such. That, while holding as above, CIT(A) has ignored that there was neither any corresponding books of account to correlate imaginary entries in this paper nor any asset found and seized during search pertaining to year under assessment to corroborate contemplated entries." facts of case are that assessee had filed return on 14th Sept., 1990 declaring therein total income of Rs. 52,019. same was processed under s. 143(1)(a) on 31st Oct., 1990. Subsequently, IT authorities carried out search action under s. 132(1) of IT Act, 1961 (in short Act ) at business premises and residential premises of partners on 24th Oct., 1994 which resulted in seizure of number of incriminating documents relating to undisclosed business transactions. These seized documents also included p. 53 of Annex. A-9 seized during course of search which was balance sheet of t h e assessee relating to assessment year under consideration. same indicated difference in assets and liabilities amounting to Rs. 3,16,800 i.e. assets side was shown more than liabilities side. AO, therefore, reopened assessment under s. 147 on basis of seized documents. In response to notice issued under s. 148, assessee filed return declaring total income of Rs. 52,020 on 27th March, 1998 i.e. at same amount as declared in original return. During course of reassessment proceedings, assessee was confronted with entries in seized documents. After considering replies submitted by assessee, AO completed reopened assessment on 31st March, 1990 on total income of Rs. 13,53,000. Being aggrieved, assessee filed appeal before CIT(A), where action of AO for reopening assessment was inter alia challenged. It was submitted before CIT(A) that reasons recorded by AO for reopening assessment were not in accordance with law and facts. It was submitted that AO has based his reasons on pp. 48 to 53 of Annex. A-9 seized during course of search and alleged balance sheet was for asst. yr. 1991-92 onwards. Thus, it was contended that reopening of assessment for asst. yr. 1990-91 by relying on balance sheet for asst. yr. 1991-92 was bad in law and without any basis. It was also argued that AO had referred to detailed reasons mentioned in assessment order for asst. yrs. 1992-93 and 1993-94. These orders were quashed by learned CIT(A) vide order dt. 27th July, 1998 and, therefore, no reliance could be placed on such orders. It was submitted that reasons recorded by AO had not been linked with formation of belief regarding income having escaped assessment and that AO did not apply his mind to facts of case before reopening assessment. learned CIT(A) considered these submissions and observed that search was conducted at godown premises of assessee which was evident from Panchnama dt. 25th Oct., 1994 and 14th Dec., 1994. Search was also conducted at residential premises of partners whereas survey was conducted at shop premises of assessee. undisputed position was that documents referred to in reasons recorded were seized and, therefore, objection raised by assessee was not material. He further referred therefore, objection raised by assessee was not material. He further referred to p.53 of Annex. A-9 which was balance sheet for assessment year under consideration and said page indicated excess of assets over liabilities to extent of Rs. 3,16,800. learned CIT(A) observed that on basis of such material and evidence, AO rightly entertained belief that income chargeable to tax had escaped assessment. He further observed that objection of assessee that assessment orders for asst. yrs. 1992-93 and 1993-94 were quashed by CIT(A) was without any merit because those appeals were decided in July, 1998 whereas assessment for assessment year under consideration was reopened on 26th Feb., 1998. Thus, he upheld action of AO for initiating reassessment proceedings. assessee is aggrieved with order of CIT(A). Hence, this appeal before us. learned counsel for assessee, Sh. P.N. Arora, submitted that AO has reopened assessment without due application of mind. He referred to p. 3 of Departmental paper book (in short DPB ) No. 2 which is proforma in which proposal for reopening assessment was submitted to Dy. CIT (Central) Amritsar. He submitted that col. 7 of said proforma refers to section under which assessment is to be reopened as 147(b) of Act. He submitted that assessment was reopened on 26th Feb., 1998. Sec. 147(b) ceased to exist in statute w.e.f. 1st April, 1989. As per amended provisions of Act which came into force w.e.f. 1st April, 1989, there is only one section i.e. s. 147 for reopening assessment. He submitted that on same proforma, Dy. CIT, Central Cir. Amritsar, accorded his approval with following remarks: "Yes, it is fit case". He submitted that since s. 147(b) did not exist in statute at time when assessment was reopened, action of AO without application of mind was illegal and bad in law. He further referred to forwarding letter of Asstt. CIT, Central Cir. (2), Jalandhar for submitting proposal to Dy. CIT, Central Cir. Amritsar. He submitted that while forwarding proposal, AO had sent case records for asst. yr. 1991-92 and assessment record for assessment year under consideration was not sent to Dy. CIT. He then referred to reasons recorded by AO for reopening assessment, copy placed t backside of p. 3 of DPB where he has referred to pp. 48 to 53 of Annex. A-9. He then referred to detailed reasons recorded in assessment order for asst. yrs. 1992-93 and 1993-94 without mentioning gist thereof. This again shows lack of application of mind by AO. learned counsel, therefore, submitted that initiation of reassessment proceedings under s. 147(b) when section did not exist in statute was illegal and bad in law. For this proposition, he relied on following judgment: (i) In case of Sunrolling Mills (P) Ltd. vs. ITO (1986) 54 CTR (Cal) 268: (1986) 160 ITR 412 (Cal). He submitted that since it is jurisdictional defect, same could not be cured under s. 292B of Act. He further submitted that Dy. CIT, Central has accorded approval for reopening assessment without due application of mind and, therefore, such action was illegal and bad in law. He relied on following judgments: (i) Chhugamal Rajpal vs. S.P. Chaliha & Ors. (1971) 79 ITR 603 (SC). (ii) Mohinder Singh Malik vs. Chief CIT & Ors. (2003) 183 CTR (P&H) 237: (2004) 267 ITR 716 (P&H). learned counsel also submitted that reopening of assessment o n basis of subsequent assessment years was not valid. He relied on following judgments: (i) Dass Friends Builders (P) Ltd. vs. Dy. CIT (2006) 201 CTR (All) 447: (2006) 153 TAXMAN 282 (All); (ii) Nitin P. Shah alias Modi vs. Dy. CIT (2005) 194 CTR (Guj) 306: (2005) 146 TAXMAN 536 (Guj); (iii) Tribunal Patna Bench (Third Member) in case of Dy. CIT vs. Narendra Mohan Bagroy (2004) 84 TTJ (Pat)(TM) 570: (2004) 90 ITD 90 (Pat)(TM). He further submitted that recording of satisfaction before initiating reassessment proceedings is condition precedent for assuming jurisdiction before issue of notice under s. 148. He submitted that in present case, reasons recorded by AO are vague and unspecific for assessment year under consideration and, therefore, reopening of assessment was bad in law. He relied on judgment of Hon ble Rajasthan High Court in case of CIT vs. Shiv Ratan Soni (2005) 194 CTR (Raj) 126: (2005) 146 TAXMAN 392 (Raj). He further argued that AO could not make additions which do not form part of reasons recorded at time of issue of notice under s. 148. He relied on following judgments: (i) CIT vs. Sun Engineering (P) Ltd. (1992) 107 CTR (SC) 209: (1992) 198 ITR 297 (SC) (ii) Tribunal, Amritsar Bench in case of D.D. Cotton (P) Ltd. vs. Asstt. CIT in ITA No. 555/Asr/2004 for asst. yr. 1999-2000. (iii) decision of Tribunal (SMC), Amritsar Bench in case of Bishamber Dass Hari Krishan vs. ITO in ITA No. 127/Asr/2001 for asst. yr. 1993-94. (iv) Three judgments of Hon ble Punjab & Haryana High Court in case of Vipin Khanna vs. CIT (2002) 175 CTR (P&H) 335: (2002) 255 ITR 220 (P&H), Amrinder Singh Dhiman vs. ITO (2004) 192 CTR (P&H) 351: (2004) 269 ITR 378 (P&H) and CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H). learned Departmental Representative heavily relied on orders of t h e authorities below. He submitted that all arguments advanced by learned counsel are untenable in view of fact that has not assailed order of CIT(A). He further submitted that s. 147(b) mentioned in proposal submitted to Dy. CIT for initiation of reassessment proceedings no longer existed on date when reasons for reopening assessment were recorded. Thus, it was merely technical mistake for which s. 292B would take care of. He further referred to p. 8 of DPB which is copy of p. 53 of Annex. A-9 seized during course of search. He submitted that this document is balance sheet of assessee for asst. yr. 1990-91. same clearly shows difference in balance sheet amounting to Rs. 3,16,800 inasmuch as assets side of balance sheet was higher than liabilities side of assessee. He further referred to p. 3 of DPB which is copy of reasons recorded by AO for initiating reassessment proceedings. He submitted that AO has specifically referred to pp. 48 to 53 of Annex. A-9 which also included balance sheet for assessment year under consideration. Thus, learned Departmental Representative submitted that there is direct nexus between material coming in possession of AO as result of search and formation of belief that income of Rs. 3,16,800 represented by excess of assets over liabilities side in balance sheet had escaped assessment. He submitted that submission of Authorised Representative that there was no material available with AO to initiate reassessment proceedings was without any merit. He further referred to p. 4 of DPB which is copy of letter dt. 9th/17th Feb., 1998 of Asstt. CIT, Central Cir. 2, Jalandhar, to Dy. CIT, forwarding therewith proposal to reopen assessment for asst. yr. 1990-91. He submitted that in enclosures indication of (sic) for asst. yr. 1991-92 is mentioned. This shows that assessment records for asst. yr. 1990-91 had also been sent along with proposal for reopening assessment. Thus he submitted that order of CIT(A) for upholding action of AO to reopen assessment does not warrant any interference. We have heard both parties at some length and given our thoughtful consideration to rival submissions, examined facts, evidence and material placed on record. We have also gone through orders of authorities below and referred to relevant pages of paper book to which our attention has been drawn. first issue that requires to be decided by this Bench is whether learned CIT(A) was justified in sustaining action of AO for reopening assessment. undisputed facts of case are that in return of income filed, assessee had declared total income of Rs. 52,019. balance sheet as per books of account prepared by assessee is at p. 8 of APB. same shows totals of debit and credit side at Rs. 14,72,749. Subsequent search action under s. 132(1) of Act has resulted in seizure of certain incriminating documents which included p. 53 of Annex. A-9, which is copy of balance sheet for financial year 1989-90 relevant to asst. yr. 1990- 91. said balance sheet indicated total of liabilities side at Rs. 17,02,700 and total of assets side aggregating to Rs. 20,19,500. assets side is higher by Rs. 3,16,800. This could happen if assessee had not disclosed correct profit in books of account maintained which should have found credited to capital accounts of partners. difference may also represent bogus liabilities shown in regular books of account. However, in this case, on same page assessee has shown profit of Rs. 3,15,000 which means that difference was partly on account of profit not shown in regular books of account. In fact, difference also appear in other accounts appearing on credits and debits side i.e. capital account, sundry creditors sundry debtors etc. AO has recorded following reasons for reopening assessment: "A search under s. 132 took place on business premises of assessee firm and residential premises of partners. Pages 48 to 53 of Annex. A-9 are balance sheets relevant to asst. yr. 1991-92 onwards. These disclose that assessee had disclosed income as is evident from excess of assets over liabilities and also undisclosed sales mentioned therein. Further, as per detailed reasons mentioned in assessment order for asst. yrs. 1992-93 and 1993-94, I have reasons to believe that income to tune of Rs. 3,16,800 has escaped assessment." In proposal submitted to Dy. CIT, Central Circle, AO has mentioned section under which assessment is to be reopened as under s. 147(b). This section did not exist in statute w.e.f. 1st April, 1989. Dy. CIT, Central Circle, accorded approval by mentioning "Yes, it is fit case". perusal of forwarding letter of AO to Dy. CIT, shows that only assessment record for asst. yr. 1991-92 where pp. 48 to 53 of Annex. A-9 seized from residence of partners have been referred to by AO in reasons. assessment order for asst. yr. 1991-92 was passed on 16th Jan., 1998. proposal to reopen assessment was sent to Dy. CIT (Central) on 20th Feb., 1998. It is, therefore, clear that same was on record. perusal of same shows that in para 5 of said order, AO has referred to seized documents pp. 48 to 53 which according to him reflect balance sheets for asst. yrs. 1990-91 to 1994-95. In fact, these balance sheets were confronted to Sh. Vinod Kakkar whose statement was recorded on 10th Nov., 1994, where he stated that these were rough balance sheets prepared for taking carried forward from M/s Eagle Flasks Industries Ltd. There is no denial that these documents from M/s Eagle Flasks Industries Ltd. There is no denial that these documents do not belong to assessee. Item No. (vii) of para 6 refers to entries recorded on p. 53 relating to asst. yr. 1990-91 where Rs. 40,000 have been reduced from Rs. 2,00,000 to show that balance in account of Sh. Yash Pal at Rs. 1,60,000. It also refers to fact that deposits of Rs. 2,00,000 taken from A.I. Enterprises does not find mention in rough balance sheet. Further, AO has referred to sales for asst. yr. 1990-91 shown in return at Rs. 27,21,920 whereas figure at p. 53 of Annex. A-9 indicates sales at Rs. 42,20,000. On p. 4 of assessment order, AO has also worked out difference in balance sheet for asst. yrs. 1990-91 to 1993-94 and amount of Rs. 3,16,800 referred to above relating to assessment year under reference has been clearly mentioned. Obviously, assessment record for asst. yr. 1991-92 which also contained assessment order accompanied proposal for reopening assessment. Now what is required to be seen whether AO was justified for initiating reassessment proceedings on basis of these facts and evidence. Before recording our findings on this issue, we consider it appropriate to reproduce provisions of s. 147 of Act. "147. If AO has reason to believe that any income chargeable to tax h s escaped assessment for any assessment year, he may, subject to provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section or recompute loss or depreciation allowance or any other allowance, as case may be, for assessment year concerned (hereafter in this section and in ss. 148 to 153 referred to as relevant assessment year): Provided that where assessment under sub-s. (3) of s. 143 or this section has been made for relevant assessment year, no action shall be taken under this section after expiry of four years from end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under s. 139 or in response to notice issued under sub-s. (1) of s. 142 or s. 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Explanation 1 .. Explanation 2. For purpose of this section, following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: (a) (b) (c) where assessment has been made, but (i) income chargeable to tax has been under-assessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." bare reading of above provisions of Act shows that AO can initiate reassessment proceedings, if he has, reason to believe that any income chargeable to tax has escaped assessment for any assessment year subject to provisions of ss. 148 to 153 of Act. In such case AO is empowered to assess or reassess such income. Such escapement of income could be due to omission or failure on part of assessee to disclose fully and truly all material facts necessary for assessment. Such escapement of income could also be without any omission or failure on part of assessee to disclose fully and truly all material facts. proviso to s. 147 provides that in case assessment completed under s. 143(3) or 147 is to be reopened after expiry of four years from end of relevant assessment year, AO could take recourse of such action only if escapement of income chargeable to tax was on account of assessee s failure to disclose fully and truly all material facts necessary for assessment. In case such assessment completed under s. 143(3) or 147 is to be reopened within period of four years from end of relevant assessment year, requirement to establish escapement of income due to omission and failure on part of assessee to disclose fully and truly all material facts, is not required to be established. In this case, original return filed was processed under s. 143(1)(a) and no assessment under s. 143(3) had been made. Therefore, requirement that escapement of income was due to omission and failure on part of assessee to disclose fully and truly all material facts mentioned in proviso to s. 147 was not applicable. expression used in s. 147 is that if AO has reason to believe that any income chargeable to tax has escaped assessment. expression "reason to believe" used in s. 147 has special significance. It does not mean reason to suspect . It is reasonable belief of honest and reasonable person based upon reasonable grounds. expression used is not satisfied . reason to believe requires higher level of evidence and material than requirement of satisfaction of AO which essentially means material which comes to notice of AO must be definite, specific and direct and not unspecific or vague. This issue was considered by Hon ble Supreme Court in case of ITO vs. Lakhmani Mewal Dass 1976 CTR (SC) 220: (1976) 103 ITR 437 (SC) where apex Court observed that "reason to believe" does not mean "reason to suspect". reasons for formation of belief contemplated under s. 147 necessary for reopening of assessment must have rational connection or relevant bearing on formation of belief. Rational connection postulates that there must be direct nexus or live link between material coming to notice of ITO and formation of his belief that there has been escapement of income of assessee. apex Court further observed that it was not every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant formation of belief relating to escapement of income of assessee from assessment. Again this issue was considered by Hon ble Supreme Court in case of Ganga Saran & Sons (P) Ltd. vs. ITO (1981) 22 CTR (SC) 112: (1981) 130 ITR 1 (SC), where apex Court observed that expression "reason to believe" was ker than words satisfied . belief entertained by AO must not be arbitrary or irrational. It must be reasonable or in other words, it must be based on reasons which are relevant and material. If there is no rational and intelligible nexus between reasons and belief, reopening of assessment would be without jurisdiction and bad in law. Now case of assessee also requires to be decided in light of legal position discussed above. first submission of assessee is that AO has initiated reassessment proceedings by invoking provisions of s. 147(b) of Act which did not exist in statute and, therefore, assessment is illegal and bad in law. learned counsel has relied on judgment of Hon ble Calcutta High Court in case of Sunrolling Mills (P) Ltd. vs. ITO (supra). We have referred to judgment and we find that same is of no help to assessee. facts of case before Hon ble Calcutta High Court were that AO had initiated action under s. 147(b) and later by referring to provisions of s. 292B had contended that proceedings initiated in this case may be regarded as initiated under s. 147(a) of Act. Hon ble High Court took notice of fact that basis of initiating reassessment proceedings was that assessee had not properly accounted for recovery waste material in original assessment. However, Hon ble High Court noted that assessee had disclosed all material facts necessary for assessment and AO had applied his mind to facts and circumstances of case while completing original assessment. Therefore, reopening of assessment was merely change of opinion which could not be justified under s. 147(a). Hon ble High Court has held that ITO cannot convert proceeding under s. 147(b) into proceeding under s. 147(a) unless facts and materials forming basis of reasons recorded under s. 148(2) satisfy conditions precedent for assumption of jurisdiction under s. 147(a). relevant findings recorded on p. 412 (headnotes) of judgment of Hon ble High Court are as under: "The reasons for initiating proceedings under s. 147(b) of IT Act, 1961, cannot be reasons for initiating proceedings under s. 147(a). ITO cannot convert proceeding under s. 147(b) into proceeding under s. 147(a) unless facts and materials forming basis of reasons recorded under s. 148(2) satisfy conditions precedent for assumption of jurisdiction under s. 147(a) also, Sec. 292B does not empower ITO to treat proceeding taken under s. 147(b) as proceeding under s. 147(a). This is not mere technicality. under s. 147(b) as proceeding under s. 147(a). This is not mere technicality. It is question of jurisdiction." (Emphasis, italicised in print, supplied is ours) bare reading of above para shows that Hon ble High Court has quashed reassessment because conditions precedent for assumption of jurisdiction under s. 147(a) were not met as issues had been considered while completing original assessment under s. 147(a). This means that if conditions for reopening assessment under s. 147(a) exist, reopening of assessment can be considered even though AO had initiated proceedings under s. 147(b). Now sub-s. (b) of s. 147 did not exist in statute. Therefore, action of AO can also be seen and considered in light of provisions of s. 147 of Act provided conditions necessary for reopening assessment exist. Admittedly, s. 147(b) did not exist in statute when assessment was reopened. In fact, in reasons recorded, AO has not mentioned that assessment was being reopened under s. 147(b) of Act. basis for reopening assessment is document at p. 53 of Annex. A-9 which showed difference between assets and liabilities to extent of Rs. 3,16,800 in balance sheet. Admittedly, in return of income filed, position shown in balance sheet was different from same. There is direct nexus between information coming to notice of AO by way of p. 53 of Annex. A- 9 seized during search and formation of belief that income of Rs. 3,16,800 represented by excess of assets over liabilities in balance sheet had escaped assessment. Therefore, in present case, conditions for initiating reassessment proceedings under s. 147 exist and reopening is bona fide. mere fact that s. 147(b) was erroneously mentioned in proforma would not vitiate initiation of reassessment proceedings for assessment year under consideration. Hence, this submission of assessee is rejected. other plea of learned Authorised Representative is that reopening of assessment on basis of subsequent assessment years is not valid. He has relied on judgment of Hon ble Allahabad High Court in case of Dass Friends Builders (P) Ltd. vs. Dy. CIT (supra). facts of case before High Court were that original assessment for asst. yr. 1995-96 was completed under s. 143(3). Subsequently, while completing assessment for asst. yr. 1996-97, AO noticed certain defects in books of account for which income was estimated by applying net profit rate of 10 per cent. By referring to his finding recorded in assessment order for asst. yr. 1996- 97, AO, then proceeded to initiate reassessment proceedings on assumption that similar defects in books must have existed in asst. yr. 1995-96. On these facts, Hon ble High Court held that expression used in s. 147 is reason to believe and not reason to suspect . It must be reasonable belief based on information on record and in good faith and not in mere pretence for initiating reassessment proceedings. Therefore, reopening of assessment on basis of asst. yr. 1996-97 was held to be invalid. These are not facts of present case. There is seized document at p. 53 of Annex. A-9 found during course of search which indicated difference in assets and liabilities to extent of Rs. 3,16,800 in balance sheet. difference is direct and specific and not something vague or unspecific. assessee has not denied factum of seized document belonging to it. It only stated that same was rough working of carried forward from earlier assessment years. Even entries recorded therein and name of partners show that balance sheet relates to assessee. Thus, on basis of entries recorded on seized document, AO was prima facie justified in entertaining belief that difference of Rs. 3,16,800 showing excess of assets higher than liabilities side had escaped assessment. Thus, reopening of assessment in present case is not based on mere suspicion or pretence or on basis of assessment completed for subsequent assessment year. Be that as it may, issue whether assessment could be reopened on basis of specific information obtained by AO in assessment proceedings o f subsequent assessment year came to be considered by Hon ble Supreme Court and Hon ble Punjab & Haryana High Court in following cases: (i) Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC) 418: (1999) 236 ITR 34 (SC): case of Revenue was that assessee was charging to its P&L a/c, fiscal duties paid during year as well as labour charging to its P&L a/c, fiscal duties paid during year as well as labour charges, power, fuel, wages, chemicals, etc. However, while valuing its closing stock, elements of fiscal duty and other direct manufacturing costs were not included. This resulted in undervaluation of closing stock and understatement of profits. AO initiated action for earlier assessment years on basis of subsequent assessment completed by AO for subsequent assessment year. On these facts, Hon ble Supreme Court upheld reassessment proceedings as valid though same was opened by referring to assessment completed for subsequent assessment year. (ii) Ess Kay Engineering Co. (P) Ltd. vs. CIT (2001) 166 CTR (SC) 396: (2001) 247 ITR 818 (SC): In this case, Hon ble Supreme Court held that mere fact that case of assessee was accepted as correct in original assessment for assessment year does not preclude ITO to reopen assessment for earlier year on basis of his findings of facts made on basis of fresh materials obtained in course of assessment for next assessment year. (iii) Shri Pal Jain vs. ITO (2004) 188 CTR (P&H) 82: (2004) 267 ITR 540 (P&H): In this case, Hon ble Punjab & Haryana High Court held that acquiring of fresh information, specific in nature and reliable in character, relating to concluded assessment which goes to expose falsity of statement made by assessee at time of original assessment is different from drawing fresh inference from same facts and material which were available with ITO at time of original assessment proceedings. two situations are distinct and different. Thus, where transaction itself, on basis of subsequent information, is found to be bogus transaction itself, mere disclosure of transaction at time of original assessment proceedings cannot be said to be disclosure of "true" and "full" facts in case and ITO would have jurisdiction to reopen concluded assessment in such case. Thus, from ratio of two authoritative pronouncements of Hon ble Supreme Court and Hon ble jurisdictional High Court of Punjab & Haryana, it is clear that if there is specific and definite information in regard to concluded assessment and such information is obtained while completing assessment, AO by relying on assessment order for subsequent assessment year can reopen assessment for earlier assessment year and such reopening would be legal and valid. case of Revenue stands on ker footings for reason that information about difference in balance sheet was found during course of search carried out at premises of assessee at much later stage in year 1994. In present case, AO had not completed original assessment under s. 143(3) and, therefore, it is not case of change of opinion. Thus, action of AO for reopening assessment by relying on such seized material found subsequently was legal and valid. Accordingly, this submission is also rejected. third objection of learned Authorised Representative is that there must be satisfaction recorded by AO before reopening case. learned counsel has relied on judgment of Hon ble Rajasthan High Court in case of CIT vs. Shiv Ratan Soni (supra) (copy placed at pp. 118 to 127 of paper book). It is settled law that formation of belief that income chargeable t o tax has escaped assessment to tax is condition precedent for assuming jurisdiction under s. 147 of Act. For this purpose, it is mandatory on part of AO to record reasons under s. 148 before initiating action under s. 147. action of AO as to whether AO correctly assumed jurisdiction for issuing of notice is to be seen solely on basis of reasons recorded. But each case would need to be seen in light of its own facts. reasons recorded in present case has been reproduced in preceding paras of this order. In reasons recorded, AO has referred to pp. 48 to 53 of Annex. A-9 which are balance sheets relevant to asst. yr. 1990-91 onwards. AO has erroneously mentioned in reasons balance sheets for asst. yr. 1991- 92 onwards. However, difference of Rs. 3,16,800 is based on seized document at p. 53 relating to assessment year under consideration. details thereof have been duly mentioned in assessment order for asst. yr. 1991- 92 for which case records were also sent to Dy. CIT, Central. Thus, mere mention that these were balance sheets relevant to asst. yr. 1991-92 onwards would not vitiate reassessment proceedings. Reliance of learned Authorised Representative on judgment of Hon ble Rajasthan High Court in case of CIT vs. Shiv Ratan Soni (supra) is misplaced because in that case, AO had not recorded reasons before issue of notice. He had recorded reasons after notices had been issued and served on assessee b y antedating same. There is no such charge made against AO. reasons have been recorded before issuing notice under s. 148 and this is clear from forwarding letter sent to Dy. CIT, Central, which is dt. 9th/17th Feb., 1998. approval was accorded by Dy. CIT, Central, on 20th Feb., 1998 and notice under s. 148 was issued on 26th Feb., 1998. These facts are not disputed before us by assessee. Therefore, judgment of Hon ble Rajasthan High Court in aforesaid case is not applicable to facts of present case. next plea of learned Authorised Representative is that Dy. CIT, Central, has given approval in mechanical way under s. 151 of Act. Therefore, such action of Dy. CIT is illegal and bad in law. He has relied on judgment of Hon ble Punjab & Haryana High Court in case of Mohinder Singh Malik vs. Chief CIT (supra). facts before Hon ble Punjab & Haryana High Court were that in reasons recorded for reopening assessment, AO had referred that claim of deduction of Rs. 87,746 from incentive bonus received from LIC was not allowable. AO did not refer to any other items of escaped income in reasons recorded by him. Hon ble High Court observed that validity of notice issued under s. 148 had to be examined only on basis of reasons recorded by AO. Now AO as per provisions of Act could issue notice after expiry of four years from relevant assessment year only if escaped assessment was likely to be more than Rs. 1 lakh. But in case before Hon ble Punjab & Haryana High Court, income escaping assessment was found to be less than Rs. 1 lakh and, therefore, reopening of assessment was held to be bad in law and without jurisdiction. In this context, approval granted by superior officer without looking into relevant provisions of Act was held to be bad in law. In present case, reopening of assessment is not being challenged on ground that AO had initiated proceedings though income specified in reasons was below limit laid down in Act for initiating such reassessment proceedings. On contrary, there is specific reference to difference in balance sheet and even amount has been specified in reasons recorded. Therefore, it cannot be said that Dy. CIT, Central, has accorded approval in mechanical manner though he failed to notice mention of s. 147(b) in proforma and reference to balance sheet for asst. yr. 1991-92 onwards. Sec. 292B will take care of such defect. But same would not vitiate action of AO for initiating reassessment proceedings. Thus, objection raised in this regard is also untenable. last plea of assessee on which action for initiating reassessment proceedings is challenged is that AO has made additions other than ground on which assessment has been reopened and, therefore, such action of AO is illegal and bad in law. case of assessee is that AO initiated reassessment proceedings by relying on p. 53 of Annex. A-9 seized during search on ground that there was difference in balance sheet amounting to Rs. 3,16,800 i.e. excess of assets over liabilities. However, addition of Rs. 2,55,179 was made on basis of entry of profit of Rs. 3,15,000 shown on p. 53 of aforesaid seized document after reducing therefrom profit of Rs. 59,821 declared in regular return filed by assessee. assessee has contended that since addition has not been made on basis for which assessment was reopened, all other additions made by AO are illegal and bad in law. We have referred to p. 53 of Annex. A-9 (copy placed at p. 8 of DPB). This is balance sheet for financial year 1989-90 relevant to asst. yr. 1990-91. same shows total of assets side at Rs. 20,19,500 and liabilities side at Rs. 17,02,700. exact difference between credit and debit side worked out to Rs. 3,16,800. As mentioned earlier assets side of balance sheet can be greater than liabilities side if assessee had not accounted for entire profit in regular books of account or certain other credits or balance in capital account of partner has not been correctly shown. It could also be due to difference in actual liabilities and those shown in books of account. p. 8 of same paper book i.e. same seized document further shows profit of Rs. 3,15,000. Admittedly, in return of income filed, assessee had shown profit from business at Rs.59,821. Thus, difference in balance sheet to extent of Rs. 2,55,179 is traced to suppression of profit shown in regular books of account and AO has made addition of this amount. AO has also made separate additions on account of difference in sundry creditors, deposit in name of Sh. Yash Pal, Delhi, old stock credit difference, sundry debtors, cash in hand etc. basis of such additions is same balance sheet. Thus, difference in balance sheet to extent of suppressed profit is directly related to entry of profit found recorded on same page relied upon by AO for purpose of initiating reassessment proceedings. AO could have not made addition twice i.e. one amounting to Rs. 3,16,800 and another of Rs. 2,55,179 when difference to extent of Rs. 2,55,179 in balance sheet is directly covered by this entry. Thus, it is not correct on part of assessee to contend that no addition was made in respect of difference in balance sheet referred to by AO for purpose of initiating reassessment proceedings. Therefore, to this extent, submission of assessee is also without any merit. Now question that requires to be considered is whether AO could make additions except one for which assessment was reopened under s. 147. Sec. 147 has been amended by Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989. Prior to amendment, s. 147 stood as under: "If (a) AO has reason to believe that, by reason of omission or failure on part of assessee to make return under s. 139 for any assessment year to AO to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in cl. (a) on part of assessee, AO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to provisions of ss. 148 to 153, assess or reassess such income or recompute loss or depreciation allowance, as case may be, for assessment year concerned (hereafter in ss. 148 to 153 referred to as relevant assessment year)." Thus, pre-amended provisions contained two sub-sections for reopening assessment i.e. under sub-s. (a) of s. 147 and sub-s. (b) of s. 147. Further, power of AO in case of reopened assessment was confined to assess or reassess such income or recompute loss or depreciation allowance as case may be for assessment year concerned. various Courts have interpreted expression such income means income for which assessment has been reopened. judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Atlas Cycle Industries (supra) and judgment of Hon ble Supreme Court in case of CIT vs. Sun Engineering Works (P) Ltd. (supra) relate to pre-amended provisions. However, there could be more than one reopening of assessment provided conditions precedent for initiating such action exist. There is material change in amended provisions of s. 147. amended s. 147 reads as under: "147. If AO has reason to believe that any income chargeable to tax h s escaped assessment for any assessment year, he may, subject to provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section or recompute loss or depreciation allowance or any other allowance, as case may be, for assessment year concerned (hereafter in this section and in ss. 148 to 153 referred to as relevant assessment year). Provided that where assessment under sub-s. (3) of s. 143 or this section has been made for relevant assessment year, no action shall be taken under this section after expiry of four years from end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under s. 139 or in response to notice issued under sub-s. (1) of s. 142 or s. 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year." (Emphasis, italicised in print, supplied is ours) bare reading of aforesaid section shows that if AO has initiated reassessment proceedings in respect of income that has escaped assessment, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section. This means that apart from issue on which assessment has been reopened, if AO comes to know that some other income has also escaped assessment, he can reassess such income during course of completion of already reopened assessment provided conditions precedent i.e. escapement of income exists. For this purpose, AO is not required to initiate separate reassessment proceedings in order to bring to tax escaped income not covered in reasons recorded for initiating action under s. 147. But, what is necessary is, that issue for which assessment was reopened must result in addition before other escaped income could be brought to tax. If issue on which assessment was reopened does not result in any addition, no other addition can be made. In case of Vipan Khanna vs. CIT (supra), Hon ble High Court by referring to judgment of Hon ble Supreme Court in case of CIT vs. Sun Engineering Works (P) Ltd. (supra) has held that when proceedings under s. 147 of Act are initiated, proceedings are open only qua items of underassessment. finality of assessment proceedings on other issues remains undisturbed. Hon ble High Court has held that AO cannot rope in issues for making fishing and roving enquiries. Even in case of Amrinder Singh Dhiman vs. ITO (supra), Hon ble Punjab & Haryana High Court has held that when proceedings under s. 147 of Act are initiated, proceedings are open only qua items of underassessment. High Court observed that AO cannot seek material unconnected with reasons for reassessing income. Now issue whether addition made by AO represents escaped income or addition has been made on basis of mere suspicion or by making roving enquiry needs to be examined by looking into merits of each addition after hearing both parties. As regards reliance of learned Authorised Representative on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Atlas Cycle Industries (supra), same is applicable to old provisions of Act, which existed prior to 1st April, 1989. Thus, even on this score, we do not find any merit in submissions of assessee and assessment could not be quashed on this ground itself. However, this is subject to finding to be recorded on merits of additions after hearing both parties. Before parting with this issue, we wish to mention that assessment for asst. yr. 1991-92 was reopened by issue of notice under s. 148 on basis of seized material found during course of search. said assessment was quashed by CIT(A) on ground that reasons recorded by AO regarding escapement of income did not pertain to income sought to be assessed. Pending appeal by Department to Tribunal, AO issued second notice under s. 148 dt. 9th Feb., 1999 on basis of undisclosed capital arrived t by comparison of balance sheet seized during search along with its return. assessee filed writ petition challenging second notice for reassessment on ground that AO had recorded satisfaction about escapement of income of Rs. 3,20,900 which was same income which had been included in reassessment framed pursuant to first notice and that fresh proceedings under s. 147 could not be initiated during pendency of Department s appeal before Tribunal. Hon ble Punjab & Haryana High Court dismissed writ petition vide order dt. 15th Feb., 2002 reported as R. Kakkar Glass & Crockery House vs. CIT (2002) 173 CTR (P&H) 503: (2002) 254 ITR 273 (P&H) and held that second reassessment notice was valid because first notice was vacated on technical ground and position of second notice was entirely different. Hon ble High Court further observed that no anomalous situation would arise if Department succeeded in its appeal before Tribunal. If earlier assessment was to be restored, second assessment in respect of same addition would stand automatically vacated as in that event fresh reassessment proceedings under s. 147 would be rendered infructuous. Thus, reopening of assessment by issue of second notice under s. 148 was upheld. subsequent second reopened assessment for asst. yr. 1991-92 and also for asst. yrs. 1992-93 and 1993-94 on basis of seized material came up in appeals before CIT(A). assessee challenged action of AO for these assessment years before CIT(A). learned CIT(A) quashed reassessments completed by AO for these assessment CIT(A) quashed reassessments completed by AO for these assessment years. While doing so, learned CIT(A) did not decide grounds relating to specific additions made by AO on merits. Revenue filed appeals against orders of CIT(A) before Tribunal for quashing reopened assessments. assessee also filed cross-objections against orders of CIT(A) for not deciding grounds on merits. Tribunal, Amritsar (SMC) Bench vide its consolidated order dt. 27th Feb., 2004 set aside orders of CIT(A) for quashing reassessments and restored that of AO. appeals were restored to CIT(A) for deciding grounds relating to additions made by AO on merits. relevant findings recorded by Tribunal in ITA Nos. 570 to 572/Asr/1998 for asst. yrs. 1991-92 to 1993-94 and corresponding CO Nos. 45 to 47/Asr/1998 are as under: "8. After considering entirety of facts and circumstances and in absence of any valid argument by learned counsel for assessee even in written submissions, I am of view that learned CIT(A) is not justified in quashing assessments by holding that no valid reasons are recorded. To my mind, there was definite opinion and valid reasons were very much there, therefore, while applying ratio of decision of Hon ble Supreme Court in case of Phool Chand Bajrang Lal & Anr. vs. ITO (1993) 203 ITR 456 (SC), order of learned CIT(A) cannot be held to be proper order. As such, same is vacated. Since learned CIT(A) has not considered case on merits and in COs, assessees have not only supported orders of CIT(A) but also taken specific plea of not deciding cases on merits, so I, while accepting COs of assessees for all years, set aside orders of learned CIT(A) and restore matter back on his file with direction to redecide appeals on merits." However, assessee filed appeal under s. 260A against order of Tribunal passed in ITA No. 570/Asr/1998 for asst. yr. 1991-92 before Hon ble Punjab & Haryana High Court. appeals against order of Tribunal for asst. yrs. 1992-93 and 1993-94 were not filed. Hon ble Punjab & Haryana High Court vide its order dt. 1st May, 2006 in IT Appeal No. 274 of 2004 observed that present appeal was arising out of order passed by Tribunal in pursuance of first notice to assessee under s. 148 of Act. However, proceedings for that assessment year had attained finality with passing of order by Tribunal on 15th Sept., 2003 which was not challenged further by Revenue. effect of this has not been examined by Tribunal while passing order dt. 27th Feb., 2004. Therefore, matter has been restored to Tribunal for deciding same afresh. From these facts, it emerges that Hon ble Punjab & Haryana High Court has upheld reopening of assessment by issue of second notice dt. 9th Feb., 2004 for asst. yr. 1991-92 as reported in (2002) 173 CTR (P&H) 503: (2002) 254 ITR 273 (P&H) (supra) where assessment was reopened by referring to same seized material where difference in balance sheet seized during course of search was Rs. 3,20,900. Further, order of Tribunal for asst. yrs. 1992-93 and 1993-94 on issue of reopening assessments has not even been challenged by assessee also support case of Revenue on issue of reopening assessment for asst. yr. 1990-91. Thus, in light of these facts and circumstances of case and legal position discussed above, we are of opinion that learned CIT(A) was justified in sustaining action of AO for reopening assessment. We do not find any justification to interfere with order of CIT(A). same is upheld and these grounds of appeal are dismissed. Now both appeals i.e. of assessee and of Revenue are fixed for hearing on 29th Jan., 2007 for deciding grounds relating to specific additions made by AO at time of completing reassessment for which separate notices are being issued. We order accordingly. In result, grounds of appeal of assessee relating to validity of reopening of assessment are decided against assessee and in favour of Revenue. *** R. KAKKAR GLASS & CROCKERY HOUSE v. DEPUTY COMMISSIONER OF INCOME TAX