A firm was established in 1954 between the assessee’s late father and one W. The firm was reconstituted from time to time and under the last partnership deed, the assessee with her late father and brothers were the partners. The assessee was entitled to a share of 20 per cent. in the profits or losses made by the firm. The assessee’s father expired on November 24, 1997 leaving a will bequeathing to her a further share of 5 per cent. in the profits and losses of the firm. Accordingly, the assessee became entitled to a 25 per cent. share in the firm. In 2005, the assessee came to know that the firm had been reconstituted on November 25, 1997 and the assessee was treated as having retired from the firm. The assessee and the continuing partners of the firm referred the matter to arbitration. In the previous year relevant to the assessment year 2010-11, i. e., on September 17, 2009, consent terms were reached between the assessee, her brother and other members of the family, pursuant to which, an arbitration award dated September 25, 2009 was passed in terms of the consent terms, and the assessee became entitled thereunder to receive an amount of Rs. 28 crores in full and final settlement of all disputes and claims raised by her against her brother and the other family members and the firm and any claims in respect of the bequest made under the will of her late father. The amount of Rs. 28 crores was assessed to tax in reassessment proceedings which were upheld in appeal by both the Commissioner (Appeals) and the Tribunal. On appeal  allowing the appeal,the Court held  that the jurisdictional preconditions for reopening the assessment for the assessment year 2010-11 had not been fulfilled. The reasons did not mention whether and how the amount received under the arbitration award was in the nature of income. The belief formed by the Deputy Commissioner without any statement on whether and how the receipt was of an income nature would render the reasons vague and incomplete thereby making the reassessment proceedings initiated under section 147 bad in law. The justification given by the Deputy Commissioner in his order for taxability of the receipt as not relating to the assessee’s retirement from the firm was contrary to the information or material available with him. There was no material whatsoever available with him at that point of time to show that the receipt of Rs. 7 crores by the assessee as referred to in the reasons did not relate to her retirement from the firm. The reassessment proceedings initiated under section 147 were bad in law. For the assessment year 2008-09 also the assessee had received similar amounts from the firm. After scrutinising the character of such receipt, it was held by the predecessor Assessing Officer that the receipt was not taxable in nature. Therefore, the formation of the belief that the amount received for the assessment year 2010-11 was taxable, amounted to a change of opinion which was not permissible. One of the reasons given in the order disposing of the objections of the assessee was that a copy of the arbitration award, the will of the assessee’s father, calculation of how she was awarded Rs. 28 crores as per the arbitration award and conclusive proof that the amount received was not a capital receipt had not been provided by her or did not form part of the record. Such a reason for justification of the validity of assumption of jurisdiction under section 147 indicated that the reassessment proceedings had been initiated only with a view to make enquiries or investigate into the facts of assessee’s case. That none of the circumstances stated in the order disposing of the objections to justify the taxability of Rs. 7 crores in the hands of the assessee were mentioned in the reasons recorded for reopening the assessment. Therefore, even at the stage of disposing of the objections the Assessing Officer was not clear on the basis why the assessee’s income chargeable to tax had escaped assessment.  The jurisdictional preconditions for reopening assessments under section 147 of the Income-tax Act, 1961 after a period of four years are that, (a) the assessee’s income chargeable to tax has escaped assessment, (b) the Assessing Officer must have formed a belief that the assessee’s income chargeable to tax has escaped assessment, (c) the belief formed by the Assessing Officer that the assessee’s income chargeable to tax has escaped assessment must not be based on a change of opinion, and (d) his belief must not be based on same material as was available with him in the original assessment but some fresh tangible material has come to his notice subsequent to the original assessment and the belief has to be based on the information or material available with him at the time of formation of the belief. The Assessing Officer cannot initiate reassessment proceedings with a view to make further enquiries or investigation into the facts without forming the belief that the assessee’s income chargeable to tax has escaped assessment, have not been fulfilled. For the purposes of adjudicating the validity of assumption of jurisdiction under section 147 the reasons recorded by the Assessing Officer before reopening the assessment cannot be supplemented or improved subsequently.Reassessment proceedings could be initiated by the Assessing Officer if he had reason to believe that the assessee’s income chargeable to tax had escaped assessment but not with a view to enquire or investigate on the aspect of whether any income chargeable to tax had escaped assessment. A receipt on capital account cannot be assessed as income unless it is specifically brought within the scope of the definition of the term “income” in section 2(24). No concept of “special income” exists either in the Act or in the jurisprudence. That the amount of Rs. 28 crores was receivable by the assessee in terms of the arbitration award. As per the award, the assessee had relinquished all her claims against the firm and its partners. The claim based on her father’s will mainly related to the additional five per cent. share of the firm. The consent terms were arrived at between the parties with a view to settle the dispute related to the termination of the assessee’s partnership interest in the firm. The rights and claims in the firm were settled by the consent terms and the arbitration award. The settlement amount was receivable by the assessee for relinquishment of her rights and claims as a partner of the firm. Though there might be no mention of her retirement from the firm in the consent terms or the arbitration award, the only inference possible would be that she no longer continued as a partner of the firm after such settlement. Therefore, the arbitration award was receivable by the assessee in respect of her retirement from the firm. The fact that there was no positive balance in the assessee’s capital account with the firm, was an irrelevant factor and the assessee had produced a valuation report of the immovable assets of the firm which disclosed that the value of the immovable properties was more than Rs.100 crores. The fact that the partners agreed to a payment of Rs. 28 crores fit in with this value. The firm had also transferred its business on a going concern basis to a private limited company in the financial year 1992-93. The balance sheet of the company as on March 31, 2006 revealed that there were substantial reserves which showed that the business of the firm was extremely profitable. Therefore, the Tribunal was not correct in holding that the amount of arbitration award was not relatable to the assessee’s retirement as partner from the firm.  That the amount of arbitration award also related to the settlement of the inheritance rights which the assessee was entitled to under her father’s will. An amount received in satisfaction of the inheritance rights also cannot be regarded as of an income nature chargeable to tax under the Act.  That when the rights between the parties inter se were settled, it was also agreed that the assessee would transfer the shares to her brother’s group. It was an overall family settlement which had been arrived at. Even if the assessee had received the amount of Rs. 28 crores under the arbitration award for transfer of a composite bundle of rights, the entire amount of the award could not be assessed as income from other sources. The dominant component in the settlement was the assessee’s separation from the firm. That the amount received as a partner upon retirement from the firm was not chargeable to tax. That section 45(4), as initially introduced and as in force in the concerned assessment year 2010-11 would not result in imposing any tax liability on the assessee since there was no distribution of capital assets but receipt of a monetary amount. In any event, the liability to pay tax, if any, under this provision would be on the firm and not the retiring partner. Even if the portion of the arbitration award related to the inheritance by the assessee under her father’s will or otherwise, in the absence of estate duty or a similar tax, no tax was chargeable in respect thereof since it would be on the estate and not on a legatee. Even the provisions of section 56(2)(vii) which sought to tax an amount received without consideration specifically excluded from its ambit any amount received pursuant to a bequest. That even if the receipt was relatable to a family arrangement, it would still not be chargeable to tax since it was an agreement between the members of the same family for the benefit of the family either by compromising doubtful or disputed rights or for preserving the peace, honour, security and property of the family by avoiding litigation and the amounts so received were not exigible to tax. The letter filed by the assessee before the Assessing Officer during the reassessment proceedings under section 147, wherein, it was alternatively contended that the payment would not be chargeable to tax since it was received pursuant to a family arrangement. Therefore, it was not an afterthought and the relevant facts formed part of the record.   That alternatively, even if the amount received or receivable under the arbitration award was regarded as damages, the nature of the dispute which was settled was with respect to disputes pertaining to the partnership or inheritance and, hence, the receipt should be capital in nature. The amount received as damages also could not be brought to tax as capital gains. That the burden to show that a particular receipt was of an income nature was on the Department which it had not discharged. The mere rejection of an assessee’s explanation without any positive finding as to the true character of the receipt could not justify a conclusion being reached by an Assessing Officer that the amount was of an income nature. That after the demise of assessee’s father, the firm was reconstituted by the assessee’s brothers as continuing partners, and the assessee being shown as retired from the firm. Hence, the firm was not dissolved but had continued to exist. The partnership deed also clarified that death of a partner should not dissolve the firm. Further, after the death of one brother of the assessee, his children were inducted as partners, and were partners at the time when the consent terms were arrived at. At no point of time was there only a single person left as partner. The principle as applicable to non-taxability of the amount received by a retiring partner would equally apply to the amount received upon dissolution. Even assuming that there was a distribution of capital assets upon dissolution of the firm, in terms of section 45(4) it was the firm and not the partner who was liable to tax. That whether the receipt was for retirement from the partnership firm or in lieu of inheritance or pursuant to the family arrangement or as damages, it shall not be chargeable to tax under the Act. Section 56(1) provides income of every kind which is not to be excluded from the total income under the Act is to be charged to tax under the head income from other sources if it is not chargeable under any other heads. Hence, the receipt has to be first of an income nature for it to be assessed as under the residual head. Mere reference to the receipt, as a special income would also not by itself make the receipt as taxable in nature. There is no such concept of special income which is defined in section 2(24). The Department had not established as to how the receipt of Rs. 28 crores fell either within any of the sub-clauses thereof or under the general connotation of income as being a return for either capital or labour.    That according to the reliefs sought in the statement of claim filed before the arbitral tribunal and the consent terms entered into between the parties, which formed part of the arbitral award, the receipts of the assessee were for retirement from the partnership of the firm and under a family settlement and not chargeable to tax. If the receipt was relatable to a family arrangement it would still not be chargeable to tax as such arrangement was an agreement between the members of the same family for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family peace, honour, security and property of the family by avoiding litigation and amounts so received are not exigible to tax.  CIT v. D. P. Sandu Bros. Chembur P. L td.(2005) 273 ITR 1,  (SC)  CIT (ADDL.) v. Mohanbhai Pamabhai(1987) 165 ITR 166 (SC), Tribhuvandas G. PPatel v. CIT (1999) 236 ITR 515 (SC),   Prashant S. Joshi v. ITO (2010) 324 ITR 154 (Bom)(HC).    (AY.2010-11)