Writ Petition No.28177\/2018 1
\nHIGH COURT OF MADHYA PRADESH: BENCH AT INDORE
\nD.B: HON’BLE SHRI JUSTICE S.C. SHARMA & HON’BLE SHRI JUSTICE
\nVIRENDER SINGH
\nWrit Petition No.28177\/2018
\nM\/s Etiam Emedia Limited
\nv\/s
\nIncome Tax Officer-2(2) & Another
\nShri P.M. Choudhary, learned senior counsel along with Shri Anand
\nPrabhawalkar, learned counsel for the petitioner.
\nMs. Veena Mandlik, learned counsel for the respondents.
\n__________________________________________________________________
\nO R D E R
\n( Passed on this 19 th day of December, 2018 )
\nPer : S.C. Sharma, Justice:
\nThe petitioner before this Court, which is a company
\nregistered under the Companies Act, 1956, has filed this present
\npetition being aggrieved by the notice dated 31.03.2018 and order
\ndated 22.11.2018 passed by the Income Tax Officer \u2013 2(2), Indore.
\n2. The petitioner’s contention is that the petitioner\/company is a
\nlimited company and was earlier known as ‘M\/s Quality Automation
\nLimited’, it was incorporated in the year 1995. In the year 2000, the
\nname of the company was changed as ‘M\/s Etiam Emedia Limited’
\nand the petitioner\/company is a regular assessee in respect of the
\nIncome Tax and is filing the return right from its incorporation. The
\npresent petition relates to assessment year 2011-12 and the
\npetitioner\/company is challenging the reassessment proceedings
\ninitiated by respondent No.1.
\n3. It has been stated that the petitioner\/company has filed its
\nreturn of income for the assessment year 2011-12 on 30.03.2012
\ndeclaring the income as nil. It has been stated that from the balanceWrit
\nPetition No.28177\/2018 2
\nsheet reflecting position as on 31.03.2011 in respect of the previous
\nyear 2010-11, reflects that the share capital of the
\npetitioner\/company was carried forward from its previous year
\nwithout any change or without any fresh share capital being issued
\nor subscribed.
\n4. It has further been stated that nothing was heard by the
\npetitioner\/company after filing of the return for the assessment year
\n2011-12 and even the prescribed limitation under Section 143 (2) of
\nthe Income Tax Act, 1961 for issuance of notice, expired, meaning
\nthereby, there was a deemed acceptance of the return.
\n5. It has further been contended that the respondent
\nNo.1\/Income Tax Officer \u2013 2(2) issued a notice under Section 148
\nof the Income Tax Act, 1961 on 31.03.2018 stating that the
\nAssessing Officer has reason to believe that the assessee’s income
\nchargeable for the assessment year 2011-12 and has escaped
\nassessment within the meaning of Section 147 of the Income Tax
\nAct, 1961, and therefore, it is proposed to assess such income for
\nthe relevant assessment year. The petitioner was required to deliver
\na return for the said assessment year within 30 days’ of the notice.
\n6. The petitioner\/company has further stated that the recorded
\nreason to believe as also the previous sanction from the Principal
\nCommissioner, Income Tax were not communicated to the
\npetitioner, nor appended to the notice. The petitioner has further
\nstated that in response to the notice, the petitioner\/company
\nsubmitted a reply on 23.04.2018 and requested the Income Tax
\nOfficer to treat the original return filed by the petitioner\/company
\non 30.03.2012 in compliance of the notice issued under Section 148
\nof the Income Tax Act, 1961.
\n7. The petitioner\/company, thereafter, on 25.05.2018, wrote a
\nWrit Petition No.28177\/2018 3
\nletter to respondent No.1 stating that compliance has been done by
\nthe petitioner in response to the notice under Section 148 of the
\nIncome Tax Act, 1961 and the reasons recorded for initiation of
\nproceedings be communicated to the petitioner.
\n8. The petitioner\/company has further stated that in spite of the
\nrequest to supply the reason for reopening of the assessment, the
\nnotice was issued under Section 142 (1) of the Income Tax Act,
\n1961 and the petitioner\/company again wrote a letter on 11.07.2018
\nto supply the reasons and to keep the proceedings in abeyance. The
\npetitioner has further stated that respondent No.1 finally supplied
\nthe reasons recorded by him for issuance of notice under Section
\n148 of the Income Tax Act, 1961 along with his notice dated
\n13.07.2018. The petitioner’s contention is that the reason, so
\nsupplied, reflected that the proceedings have been initiated against
\nthe petitioner on the basis of some pre and post search investigation
\nconsequent upon a search conducted by the Income Tax Department
\nat the premises of ‘M\/s Shreeji Polymers (India) Limited’ and on the
\nbasis of a vague allegation that the petitioner company is a dummy
\nconcern of Shri Anand Bangur, who allegedly uses dummy
\ncompanies for routing his unaccounted money through the group
\ncompanies. It also reflected that the petitioner\/company has bogus
\nshare application money to the extent of Rs.2,63,75,500\/-, which
\nhas escaped assessment for the assessment year 2011-12 in the
\nhands of the petitioner, and therefore, reopening of the assessment
\nin respect of escaped income was being done for the assessment
\nyear 2011-12.
\n9. Learned senior counsel for the petitioner has argued before
\nthis Court that the reasons recorded for reopening of the assessment
\nare patently vague and there is no substance in the reasons recorded
\nWrit Petition No.28177\/2018 4
\nin the matter. Learned counsel has also argued that the
\npetitioner\/company has not received any amount towards share
\napplication money in the year, which is under consideration and
\nwhatever share capital appears in the petitioner’s balance-sheet, is
\nbeing carried forward right from the year of its incorporation
\nwithout any fresh or new influx of the capital in the assessment year
\n2011-12.
\n10. The petitioner after receiving the reasons vide letter dated
\n29.09.2018, filed a detailed objection, and thereafter, preferred the
\npresent writ petition being aggrieved by the notice dated 31.03.2018
\nand the order rejecting the objection dated 22.11.2018.
\n11. Various grounds have been raised by the petitioner and it has
\nbeen contended that the impugned notice issued by the respondent
\nNo.1 u\/s 148 of the Income Tax Act, 1961 for initiation of
\nproceedings for reopening petitioner’s assessment for AY 2011-12
\nu\/s 147 of the Income Tax is illegal, bad in law and without
\njurisdiction for want of satisfaction of conditions of section 147 of
\nthe Act, which are condition precedent for assumption of
\njurisdiction under that section.
\n12. It has further been contended that the impugned order dated
\n22.11.2018 passed by respondent No.1 rejecting petitioner’s
\nobjection filed against the impugned reopening of assessment, is
\nbad in law, as it suffers from error apparent on the face of record in
\nso far as it fails to apply mind to the conditions of section 147 of the
\nIncome Tax Act without satisfaction of which, no proceedings can
\nbe validly initiated.
\n13. It has further been contended that the respondents failed to
\nsee that for reopening the assessment of an assessee u\/s 147, the
\nAssessing Officer must have reason to believe that any income
\nWrit Petition No.28177\/2018 5
\nchargeable to tax, has escaped assessment of any assessment year,
\nwhich can be assessed for the assessment year concerned in the
\nhands of the assessee. The escapement of any income chargeable to
\ntax is thus an essential condition for assumption of jurisdiction for
\nassessing such escaped income and for valid initiation of
\nproceedings for such assessments.
\n14. It has further been contended that the respondents failed to
\nsee that for valid assumption of jurisdiction for making assessment
\nof the escaped income, the condition precedent is existence of
\nreasons and formation of believe about escapement of income from
\ntax and without which no action u\/s 147 can be taken nor any notice
\nu\/s 148 can be issued.
\n15. It has further been stated that that the respondents also failed
\nto see that the existence of reason for formation of the requisite
\nbelief is thus essential for invoking the provisions of section 147
\nand the belief required to be formed is about the fact that any
\nincome chargeable to tax has escaped assessment of any assessment
\nyear, which is required to be assessed in the concerned assessment
\nyear.
\n16. It has further been stated that the respondents also failed to
\nsee that the income sought to be assessed u\/s 147 as escaped
\nincome must necessarily pertain to the assessment year for which
\nthe proceedings of assessment have been reopened and the belief
\nrequired to be formed on the basis of reasons must relate to such
\nincome and its escapement from assessment in the relevant
\nassessment year.
\n17. It has further been stated that the respondents failed to see
\nthat the reasons on the basis of which the petitioner’s assessment for
\nAY 2011-12 is sought to be reopened viz the alleged bogus share
\nWrit Petition No.28177\/2018 6
\ncapital\/share application money to the extent of Rs.2,63,75,500\/-
\nbeing a non-existent reason, no belief about escapement of such
\nincome from assessment could be formed.
\n18. It has further been contended that the respondents failed to
\nsee that since share capital, which is alleged to be bogus capital and
\nis sought to be assessed as assessed income for AY 2011-12, has not
\nbeen received by the petitioner in the said year but is merely the
\nbalance carried forward right from the year of incorporation of the
\npetitioner company and there was no such belief about escapement
\nof such amount from tax in the relevant assessment year i.e. 2011-
\n12.
\n19. It has further been contended that in absence of any fresh
\nshare capital\/share application money having been received by
\npetitioner in the relevant assessment year i.e. AY 2011-12, neither
\nthere could be any reasons nor there could be any formation of
\nbelief about escapement of any such income. In absence of the
\nexistence of valid reason and in absence of formation of requisite
\nbelief, the impugned proceedings for reopening petitioner’s
\nassessment are wholly without jurisdiction.
\n20. It has further been contended that the respondents failed to
\nsee that the word ‘reason’ connotes a statement of facts implied as
\nan argument to justify a conclusion and hence the reasons required
\nto be recorded in writing cannot be construed to mean any fact
\nwhatsoever to be recorded in writing. It must be understood as such
\nstatement of fact as would reasonably justify the conclusion. In the
\ninstant case in absence of any receipt of share capital which has
\nescaped assessment for AY 2011-12 cannot be said to be a reason as
\ncontemplated u\/s 147 which can form the basis of requisite belief
\nunder that section.
\nWrit Petition No.28177\/2018 7
\n21. It has further been contended that the respondent also failed to
\nsee that the expression ‘any assessment year’ for which any income
\nchargeable to tax has escaped assessment, in respect of which the
\nproceedings u\/s 147 read with section 148 are sought to be initiated
\nis referable to the relevant assessment year in which the income is
\nto be taxed and cannot mean any assessment whatsoever.
\n22. It has further been contended that the respondents also failed
\nto see that it is not only the existence of reason on the basis of
\nwhich the belief has to be formed but the reason on the basis of
\nwhich the belief as contemplated u\/s 147 is formed must have
\nrational connection or relevant bearing on the formation of belief
\ni.e. there must be a direct nexus or live link between the material
\ncoming into the notice of AO and the formation of belief about the
\nescapement of income.
\n23. It has further been contended that the existence of material in
\nthe shape of reasons on the basis of which the requisite belief is to
\nbe formed for purpose of section 147 is also necessary. In the
\ninstant case there is neither any material nor any reason on the basis
\nof which the belief about escapement of income from tax in the
\npresent assessment year could be formed.
\n24. It has further been contended that the alleged material in the
\nnature of report of DDIT, Indore can hardly be said to be the
\nmaterial which could warrant the formation be belief about the
\nescapement of share capital received in the year 1995 from tax in
\nAY 2011-12. The material sought to be relied upon by AO on the
\nbasis of which the belief is said to have been formed is absolutely
\nvague, indefinite, distant, remote and farfetched and no person of
\nreasonable prudence can form the belief as contemplated u\/s 147.
\n25. It has further been contended that in absence of reasons and
\nWrit Petition No.28177\/2018 8
\nconsequent belief as required by section 147, the conditions
\nprecedent for assumption of jurisdiction u\/s 147 remained nonsatisfied
\nwhich render the entire proceedings as illegal, bad in law
\nand without jurisdiction and no reassessment on the basis of such
\nproceedings can be validly made against the petitioner.
\n26. It has further been contended that the impugned initiation of
\nproceedings is bad in law and without jurisdiction as the same is
\nbarred by limitation prescribed u\/s 149(1)(b) for issuance of notice
\nu\/s 148 of the Income Tax Act, which is essential for making
\nassessment u\/s 147.
\n27. It has further been contended that no notice of assessment u\/s
\n148 in the present case could be issued beyond a period of six years
\nfrom the end of relevant assessment year i.e. six years from end of
\nAY 2011-12. Since in the instant case, the impugned notice dated
\n31.03.2018 has been actually served on 01.04.2018 i.e. after expiry
\nof limitation on 31.03.2018, the impugned notice as also
\nconsequent proceedings are barred by limitation and accordingly
\nwithout jurisdiction.
\n28. It has further been contended that even the reason that
\npetitioner is a dummy company is also equally non-existent reason
\nbecause the petitioner is a legal juristic entity created by law
\nincorporated in the year 1995 and assessed by department since
\nthen.
\n30. In support of the aforesaid grounds, learned senior counsel for
\nthe petitioner has placed reliance on several judgments i.e. in the
\ncases of GKN Driveshafts (India) Ltd. v\/s Income Tax Officer
\nreported in (2002) 125 Taxman 963 (SC), Calcutta Discount Co.
\nLtd. v\/s Income Tax Officer & Another reported in (1961) ITR 191
\n(SC), Jeans Knit (P.) Ltd. v\/s Deputy Commissioner of Income
\nWrit Petition No.28177\/2018 9
\nTax, Banglore reported in (2017) 77 taxmann. Com 176 (SC),
\nGarden Finance Ltd. v\/s Assistant Commissioner of Income Tax
\nreported in (2004) 268 ITR 48 (Gujarat), Commissioner of
\nIncome Tax v\/s Foramer France* reported in (2003) 264 ITR 566
\n(SC), JSRG Udyog Ltd. v\/s Income Tax Officer reported in (2009)
\n313 ITR 321 (Delhi), Tiwari Kanhaiya Lal v\/s Commissioner of
\nIncome Tax reported in (1985) 154 ITR 109 (Rajasthan),
\nGhanshyam K. Khabrani v\/s Assistant Commissioner of Income
\nTax Circle-1 reported in (2012) 346 ITR 443 (Bombay),
\nCommissioner of Income Tax Delhi-IV v\/s Gupta Abhushan (P.)
\nLtd reported in (2009) 312 ITR 166 (Delhi), SKY View
\nConsultants (P.) Ltd. v\/s Income Tax Officer, Ward 23(4) reported
\nin (2017) 397 ITR 673 (Delhi), Income Tax Officer v\/s
\nLakhamani Mewal Das reported in (1976) 103 ITR 437 (SC),
\nGanga Saran & Sons (P.) Ltd. v\/s Income Tax Officer reported in
\n(1981) 130 ITR 1 (SC), Amar Jewellers Ltd v\/s Deputy
\nCommissioner of Income Tax reported in (2018) 405 ITR 561
\n(Gujrat), Ardent Steel Ltd. v\/s Assistant Commissioner of Income
\nTax (Central)-2, Raipur reported in (2018) 405 ITR 422
\n(Chhatishgarh), Commissioner of Income Tax, Delhi v\/s
\nKelvinator of India Ltd. reported in (2010) 320 ITR 561 (SC),
\nSmt. Uma Devi Jhawar v\/s Income Tax Officer reported in (1996)
\n218 ITR 573 (Calcutta), Krown Agro Foods (P.) Ltd. v\/s Assistant
\nCommissioner of Income Tax, Circle 5(1), New Delhi reported in
\n(2015) 375 ITR 460 (Delhi), Arjun Singh v\/s Assistant Director of
\nIncome Tax reported in (2000) 246 ITR 363 (Madhya Pradesh),
\nCommissioner of Income Tax v\/s Bigabass Maheshwari Sewa
\nSamiti reported in (2008) 220 CTR 369 (Rajasthan) and United
\nElectrical Co. (P.) Ltd. v\/s Commissioner Income Tax reported in
\nWrit Petition No.28177\/2018 10
\n(2002) 258 ITR 317 (Delhi).
\n31. A detailed and exhaustive reply has been filed by the Income
\nTax Department and the respondents have admitted issuance of
\nnotice under Section 148 of the Income Tax Act, 1961, which was
\nsent by the speed post on 31.03.2018. It has been stated that the
\nproceedings were initiated under Section 147 of the Income Tax
\nAct, 1961 after consideration of specific information that too with
\ndue application of mind on the basis of prima facie belief.
\n32. The respondents have also stated that the objection of the
\npetitioner was disposed of by the Assessing Officer i.e. Income Tax
\nOfficer \u2013 2(2) vide order dated 22.11.2018. The respondents have
\nstated that the petitioner’s contention is that the share capital
\ncontinued to be carried forward, as it is from previous year, without
\nany change or without any fresh share capital being issued or
\nsubscribed, is not acceptable on face value.
\n33. The respondents have further stated that the petitioner had not
\nshown any business activity, and hence, had not filed audited
\naccounts. It has further been stated that the petitioner has filed only
\nits Income Tax Return, which only shows closing balance on the
\nsaid item, and therefore, changes made and squared off during the
\nyear and change in the composition of the shareholder without
\njustifying the closing figure, cannot be ascertained from the Income
\nTax Return for the relevant year.
\n34. The respondents have also stated that the balance-sheet and
\nthe profit & loss account, as annexed with the present petition, have
\nnot been delivered before the Income Tax Department by the
\npetitioner, at least till the time of initiation of the proceedings under
\nSection 147 of the Income Tax Act, 1961.
\n35. The respondents have also stated that the Assessing Officer
\nWrit Petition No.28177\/2018 11
\nhad reason to believe that the petitioner’s income has escaped
\nassessment within the meaning of Section 147 of the Act, and
\ntherefore, he has rightly issued the notice under Section 148 of the
\nIncome Tax Act, 1961 and there is no legal requirement to
\ncommunicate the reason to believe. It is communicated in due
\ncourse and the same was also done by the department. The
\nrespondents have also stated that the petitioner’s contention
\nregarding pre and post search investigation are baseless. The
\ndepartment conducted a very detailed and thorough investigation,
\nevidence was gathered, large number of persons were examined,
\nhuge amount of hard and soft data were looked into and after
\ninvestigating hundreds of man-hours, the department has arrived at
\na conclusion that opportunity to defend himself shall be available to
\nthe petitioner during the assessment proceedings, which are taking
\nplace.
\n36. The respondents have also stated that the petitioner has not
\nshown any business activity for the relevant year and has not filed
\nany audited account before the Income Tax Department, at least till
\nthe time of initiation of the proceedings under Section 147 of the
\nIncome Tax Act, 1961 and has filed only its Income Tax Return.
\nThe respondents have also stated that sufficiency or insufficiency of
\nthe material can not be looked into at the stage of notice under
\nSection 148 of the Income Tax Act, 1961.
\n37. The respondents have placed reliance upon a judgment
\ndelivered in the case of AGR Investment Ltd. v\/s Assistant
\nCommissioner of Income Tax & Another reported in (2011) 333
\nITR 146 (Delhi). Though, the respondents have given para-wise
\nreply to the writ petition, however, learned counsel for the
\nrespondents has argued before this Court that even though, the
\nWrit Petition No.28177\/2018 12
\npetitioner\/company is legally incorporated company, it doesn’t
\nmean that it cannot be a dummy company. It has been stated that
\nthe company was incorporated in the year 1995 and after very
\ndetailed and thorough investigation carried out in 2017, it was
\nprima facie established that the petitioner is a dummy company.
\n38. The respondents have stated that there are large number of
\ndummy\/bogus\/shell\/briefcase\/paper entities including the
\npetitioner\/company in the group, which is being managed and
\ncontrolled by Shri Anand Bangur for the purposes of routing
\nunaccounted money and the department with great difficulties and
\nafter examining huge evidence, has arrived at a conclusion to
\ninitiate the proceedings against the petitioner and it is not a case
\nwhere some unilateral action has been taken against the petitioner, it
\nis a case where petitioner will receive every opportunity to defend
\nhimself and the entire mechanism has been provided under the
\nIncome Tax Act, 1961 and the respondents have prayed for
\ndismissal of the writ petition.
\n39. Heard learned counsel for the parties at length and perused
\nthe record.
\n40. The petitioner before this Court is aggrieved by the notice
\ndated 31.03.2018 and order dated 22.11.2018 passed by the
\nrespondents. Undisputedly, the respondents have issued notice to
\nthe petitioner on 31.03.2018 under Section 148 of the Income Tax
\nAct, 1961 and the petitioner did submit a reply to the respondents.
\nThereafter, the petitioner demanded the reasons for reopening of the
\nassessment in respect of assessment year 2011-12 and the
\nrespondents have supplied the reasons also. The petitioner has
\nsubmitted objection in respect of reassessment on 29.09.2018, and
\nfinally, an order has been passed rejecting the objection of the
\nWrit Petition No.28177\/2018 13
\npetitioner.
\n41. Sections 147 and 148 of the Income Tax Act, 1961 reads as
\nunder:-
\n\u201c147. Income escaping assessment. – If the
\n77[Assessing] Officer [has reason to believe] that any income
\nchargeable to tax has escaped assessment for any assessment
\nyear, he may, subject to the provisions of sections 148 to 153,
\nassess or reassess such income and also any other income
\nchargeable to tax which has escaped assessment and which
\ncomes to his notice subsequently in the course of the
\nproceedings under this section, or recompute the loss or the
\ndepreciation allowance or any other allowance, as the case may
\nbe, for the assessment year concerned (hereafter in this section
\nand in sections 148 to 153 referred to as the relevant
\nassessment year) :
\nProvided that where an assessment under sub-section (3)
\nof section 143 or this section has been made for the relevant
\nassessment year, no action shall be taken under this section
\nafter the expiry of four years from the end of the relevant
\nassessment year80, unless any income chargeable to tax has
\nescaped assessment for such assessment year by reason of the
\nfailure80 on the part of the assessee to make a return under
\nsection 139 or in response to a notice issued under sub-section
\n(1) of section 142 or section 148 or to disclose fully and truly
\nall material facts80 necessary for his assessment, for that
\nassessment year:
\n[Provided [also] that the Assessing Officer may assess or
\nreassess such income, other than the income involving matters
\nwhich are the subject matters of any appeal, reference or
\nrevision, which is chargeable to tax and has escaped
\nassessment.]\u201d
\nExplanation 1.\u2014Production84 before the Assessing
\nOfficer of account books or other evidence from which
\nmaterial evidence could with due diligence have been
\ndiscovered by the Assessing Officer will not necessarily84
\namount to disclosure within the meaning of the foregoing
\nproviso.
\nExplanation 2.\u2014For the purposes of this section, the
\nfollowing shall also be deemed to be cases where income
\nchargeable to tax has escaped assessment, namely :\u2014
\n(a) where no return of income has been furnished by the
\nassessee although his total income or the total income of any
\nother person in respect of which he is assessable under this Act
\nduring the previous year exceeded the maximum amount which
\nis not chargeable to income-tax ;
\n(b) where a return of income has been furnished by the
\nassessee but no assessment has been made and it is noticed by
\nthe Assessing Officer that the assessee has understated the
\nWrit Petition No.28177\/2018 14
\nincome or has claimed excessive loss, deduction, allowance or
\nrelief in the return ;
\n(c) where an assessment has been made, but\u2014
\n(i) income chargeable to tax has been underassessed ; or
\n(i) such income has been assessed at too low a rate ; or
\n(iii) such income has been made the subject of excessive
\nrelief under this Act ; or
\n(iv) excessive loss or depreciation allowance or any
\nother allowance under this Act has been computed;]
\n[Explanation 3.\u2014For the purpose of assessment or
\nreassessment86 under this section, the Assessing Officer may
\nassess or reassess the income in respect of any issue, which has
\nescaped assessment, and such issue comes to his notice
\nsubsequently in the course of the proceedings under this
\nsection, notwithstanding that the reasons for such issue have
\nnot been included in the reasons recorded under sub-section (2)
\nof section 148.]
\n148. Issue of notice where income has escaped
\nassessment [ (1) ] Before making the assessment, reassessment
\nor recomputation under section 147, the Assessing Officer shall
\nserve on the assessee a notice requiring him to furnish within
\nsuch period, not being less than thirty days, as may be specified
\nin the notice, a return of his income or the income of any other
\nperson in respect of which he is assessable under this Act
\nduring the previous year corresponding to the relevant
\nassessment year, in the prescribed form and verified in the
\nprescribed manner and setting forth such other particulars as
\nmay be prescribed; and the provisions of this Act shall, so far
\nas may be, apply accordingly as if such return were a return
\nrequired to be furnished under section 139.]
\n[Provided that in a case –
\n(a) where a return has been furnished during the
\nperiod commencing on the 1st day of October, 1991 and ending
\non the 30th day of September, 2005 in response to a notice
\nserved under this section, and
\n(b) subsequently a notice has been served under subsection
\n(2) of section 143 after the expiry of twelve months
\nspecified in the proviso to sub-section (2) of section 143, as it
\nstood immediately before the amendment of said sub-section
\nby the Finance Act, 2002 (20 of 2002) but before the expirty of
\nthe time limit for making the assessment, reassessment for recomputation
\nas specified in sub-section (2) of section 153,
\nevery such notice referred to in this clause shall be deemed to
\nbe a valid notice:
\nProvided further that in a case –
\n(a) where a return has been furnished during the
\nperiod commencing the 1st day of October, 1991 and ending on
\nthe 30th day of September, 2005, in response to a notice served
\nunder this section, and
\n(b) subsequently a notice has been served under
\nclause (ii) of sub-section (2) of section 143 after the expiry of
\nWrit Petition No.28177\/2018 15
\ntwelve months specified in the proviso to clause (ii) of subsection
\n(2) of section 143, but before the expiry of the time
\nlimit for making the assessment, reassessment or recomputation
\nas specified in sub-section (2) of section 153,
\nevery such notice referred to in this clause shall be deemed to
\nbe a valid notice.
\nExplanation \u2013 For the removal of doubts, it is hereby
\ndeclared that nothing contained in the first proviso or the
\nsecond proviso shall apply to any return which has been
\nfurnished on or after the 1st day of October, 2005 in response to
\na notice served under this section.
\n(2) The Assessing Officer shall, before issuing any
\nnotice under this section, record his reasons for doing so.\u201d
\n42. The action has been initiated by the department against the
\npetitioner under the aforesaid statutory provision of law and by a
\ndetailed and speaking order, the objection raised by the petitioner
\nhas been rejected. The reasons recorded for issuance of notice under
\nSection 148 has been supplied to the petitioner and it is also on
\nrecord and the same reads as under:-
\n\u201c1. PLEASE REFER TO YOUR LETTER DATED
\n25.05.2018, THE REASONS FOR ISSUANCE OF NOTICE
\nU\/S 148 IS MENTIONED AS UNDER:
\nDuring the course of search proceedings in the Group
\ncases of Shriji Polymers (India) Ltd. hereinafter referred as
\nSPIL was conducted on 27.07.2017. During the course of
\nsearch & seizure action, various business premises of the
\nGroup were covered u\/s 133A of the Act, as per pre and post
\nsearch investigation, it has been established that the various
\nconcerns of the Group are dummy in nature; they are
\nbogus\/briefcase\/paper concern handled by the Shri Anand
\nBangur the promoter of SPIL.
\n2. During the post search investigation, Shri Anand Bangur
\nwas asked to submit the details of the investments made by
\nthese shell\/paper\/dummy companies for the period 2010-11 to
\n2016-17 but he ahs not cooperated with the department. Hence
\nDDIT (inv)-II, Indore has fetched the details of investments
\nmade by these shell companies from the return of income filed
\nby such companies and passed on the information to concerned
\nAOs to take the necessary action in respect of share
\napplication\/share premium, Investment, Loan & Advances
\nintroduced\/made by these shell companies.
\n3. On perusal of income tax return for A.Y. 2011-12 it is
\nfound that assessee company has shown share capital at
\nRs.26,378,500\/-.
\n4. The DDIT (Inv)-II, Indore reported that information
\nWrit Petition No.28177\/2018 16
\nscouted out from seized\/impounded material in the case of
\nSPIL Group of Ujjain described the facts in respect of M\/s
\nPatni Industries Limited as under:
\n5. The company is having its registered address at 244,
\nApollo Tower, M.G. Road, Indore \u2013 452001. As per ROC data,
\nits directors are Shri Avinash Parashram Mupuskar, Shri
\nKailash Garg, Smt. Chhaya Parmar and Shri Vinod Agrawal.
\n6. During the course of action, it was proposed to cover the
\noffice premises of M\/s Etiam Emedia Ltd and a team was
\nmoved with authorization on the above address. The team
\nreported that no office in the name M\/s Etiam Emedia Ltd is
\nrunning at the given address. It is pertinent to mention that the
\ndirectors of the company M\/s Etiam Emedia Ltd are Shri
\nKailash Gard, Shri Avinash Mapushka. In the statement
\nrecorded during the search action and post search investigation,
\nShri Kailash Garg and Smt. Chhaya Parmar have admitted that
\nthey work on the direction of the key person of the SPIL Group
\ni.e. Shri Anand Bangur and Shri Amrish Parmar, who is the
\nhusband of Smt. Chhaya Parmar submitted that he did not
\naware regarding his involvement in any company. The detailed
\ndiscussions on all three dummy directors have ben made supra.
\nAs per discussion\/findings, it can be concluded that M\/s Etiam
\nEmedia Ltd is a dummy concern of Shri Anand Bangur. Shri
\nBangur uses this company for routing its unaccounted money
\ninto other group of companies. It is also observed that M\/s
\nEtiam Emedia Ltd has no worth or business activity, it surely
\nacquired some assets but in this case, no substantial assets are
\navailable in the balance sheet, which is also one of the reasons
\nto confirm the findings that the company is only a shell\/paper
\ncompany. In the light of the above facts it is established that
\nM\/s Etiam Emedia Ltd is a paper company which runs on paper
\nand it engaged in the practice of providing accommodation
\nentry.
\n7. In view of above facts and statements recorded during
\nthe post search investigation of the director Shri Kailash Garg
\ncompany M\/s Etiam Emedia Ltd had bogus share application
\nmoney of Rs.2,63,75,500\/-. Therefore I am satisfied that share
\napplication money of Rs.2,63,75,500\/- remains unexplained for
\ntaxation for the A.Y. 2011-12 in the hands of assessee company.
\nLooking to the facts and circumstances of the case I have
\nreason to believe that income of Rs.2,63,75,500\/- has escaped
\nassessment within the meaning of Section 147 of the Income
\nTax Act. It is fit case to issue notice u\/s 148.\u201d
\n43. Learned senior counsel for the petitioner has placed reliance
\non various judgments and this Court has carefully gone through the
\naforesaid judgments.
\n44. In the considered opinion of this Court, sufficiency of reasons
\nWrit Petition No.28177\/2018 17
\ncannot be considered in a writ petition and the assessee has to
\nparticipate in the reassessment proceeding and to specify that
\nescapement of income has taken place. The Division Bench of
\nDelhi High Court in the case of AGR Investment Ltd. (supra), has
\ndealt with all important judgments on the subject. Paragraphs-9 to
\n21 of the aforesaid judgment reads as under:-
\n\u201c9. The High Court of Gujarat in Praful Chunilal Patel v.
\nAssistant Commission of Income Tax, [1999] 236 ITR 832 has
\nopined that in terms of the provision contained in Section 147,
\nthe Assessing Officer should have reason to believe that any
\nincome chargeable to tax has escaped assessment. The word
\n\u201ereason\u201f in the phrase \u201ereason to believe\u201f would mean cause or
\njustification. If the assessing officer has a cause or justification
\nto think or suppose that income has escaped assessment, he can
\nbe said to have a reason to believe that such income had
\nescaped assessment. The words \u201ereason to believe\u201f cannot
\nmean that the assessing officer should have finally ascertained
\nthe facts by legal evidence. They only mean that he forms a
\nbelief from the examination he makes and if he likes from any
\ninformation that he receives. If he discovers or finds or satisfies
\nhimself that the taxable income has escaped assessment, it
\nwould amount to saying that he had reason to believe that such
\nincome had escaped assessment. The justification for his belief
\nis not to be judged from the standards of proof required for
\ncoming to a final decision. A belief, though justified for the
\npurpose of initiation of the proceedings under Section 147, may
\nultimately stand altered after the hearing and while reaching the
\nfinal conclusion on the basis of the intervening enquiry. At the
\nstage where he finds a cause or justification to believe that such
\nincome has escaped assessment, the assessing officer is not
\nrequired to base his belief on any final adjudication of the
\nmatter.
\n10. In Ganga Saran & Sons P. Ltd. v. ITO & Ors., [1981]
\n130 ITR 1 (SC), it has been held thus:
\n“It is well settled as a result of several decisions of
\nthis Court that two distinct conditions must be
\nsatisfied before the ITO can assume jurisdiction to
\nissue notice under S. 147(a). First, he must have
\nreason to believe that the income of the assessee has
\nescaped assessment and, secondly, he must have
\nreason to believe that such escapement is by reason
\nof the omission or failure on the part of the assessee
\nto disclose fully and truly all material facts
\nnecessary for his assessment. If either of these
\nconditions is not fulfilled, the notice issued by the
\nITO would be without jurisdiction. The important
\nWrit Petition No.28177\/2018 18
\nwords under S.147(a) are “has reason to believe” and
\nthese words are stronger than the words “is
\nsatisfied”. The belief entertained by the ITO must
\nnot be arbitrary or irrational. It must be reasonable
\nor in other words it must be based on reasons which
\nare relevant and material. The Court, of course,
\ncannot investigate into the adequacy or sufficiency
\nof the reasons which have weighed with the ITO in
\ncoming to the belief, but the Court can certainly
\nexamine whether the reasons are relevant and have a
\nbearing on the matters in regard to which he is
\nrequired to entertain the belief before he can issue
\nnotice under S.147(a). It there is no rational and
\nintelligible nexus between the reasons and the belief,
\nso that, on such reasons, no one properly instructed
\non facts and law could reasonably entertain the
\nbelief, the conclusion would be inescapable that the
\nITO could not have reason to believe that any part of
\nthe income of the assessee had escaped assessment
\nand such escapement was by reason of the omission
\nor failure on the part of the assessee to disclose fully
\nand truly all material facts and the notice issued by
\nhim would be liable to be struck down as invalid.”
\n11. In Birla VXL Ltd. v. Assistant Commissioner of
\nIncome Tax, [1996] 217 ITR 1 (Guj.), a Division Bench of the
\nGujarat High Court has opined thus:
\n“Explanation 2 to Section 147 of the Act, as
\nappended to newly substituted section 147 makes
\ncertain provisions, where in certain circumstances,
\nthe income is deemed to have escaped assessment
\ngiving jurisdiction to the Assessing Officer to act
\nunder the said provision. Another requirement which
\nis necessary for assuming jurisdiction is that the
\nAssessing Officer shall record his reasons for issuing
\nnotice. This requirement necessarily postulates that
\nbefore the Assessing Officer is satisfied to act under
\nthe aforesaid provisions, he must put in writing as to
\nwhy in his opinion or why he holds belief that
\nincome has escaped assessment. “Why” for holding
\nsuch belief must be reflected from the record of
\nreasons made by the Assessing Officer. In a case
\nwhere Assessing Officer holds the opinion that
\nbecause of excessive loss or depreciation allowance
\nincome has escaped assessment, the reasons
\nrecorded by the Assessing Officer must disclose that
\nby what process of reasoning he holds such a belief
\nthat excessive loss or depreciation allowance has
\nbeen computed in the original assessment. Merely
\nsaying that excessive loss or depreciation allowance
\nWrit Petition No.28177\/2018 19
\nhas been computed without disclosing reasons which
\nled the assessing authority to hold such belief, in our
\nopinion, does not confer jurisdiction on the
\nAssessing Officer to take action under sections 147
\nand 148 of the Act. We are also of the opinion that,
\nhowsoever wide the scope of taking action under
\nsection 148 of the Act be, it does not confer
\njurisdiction on a change of opinion on the
\ninterpretation of a particular provision from that
\nearlier adopted by the assessing authority. For
\ncoming to the conclusion whether there has been
\nexcessive loss or depreciation allowance or there has
\nbeen underassessment at a lower rate or for applying
\nthe other provisions of Explanation 2, there must be
\nmaterial that have nexus to hold opinion contrary to
\nwhat has been expressed earlier. The scope of
\nsection 147 of the Act is not for reviewing its earlier
\norder suo motu irrespective of there being any
\nmaterial to come to a different conclusion apart from
\njust having second thoughts about the inferences
\ndrawn earlier. [Emphasis added]
\n12. In Sheo Narain Jaiswal & Ors. v. Income Tax Officer
\n& Ors., [1989] 176 ITR 352 (Patna), it was held that
\nreassessment proceedings can be initiated under Section 147(a)
\nof the Act if the Income-tax Officer has reason to believe that
\nthere has been escapement of income and that the said income
\nescaped assessment by reason of the omission or failure on the
\npart of the assessee to disclose fully and truly all material facts
\nnecessary for the assessment for that period or year. Both the
\nconditions are conditions precedent for the assumption of
\njurisdiction under Section 148 of the Act.
\n13. In Phool Chand Bajrang Lal & Anr. v. Income Tax
\nOfficer & Anr., [1993] 203 ITR 456 (SC), the Apex Court has
\nheld thus:
\n“From a combined review of the judgments of this
\nCourt, it follows that an Income-tax Officer acquires
\njurisdiction to reopen an assessment under Section
\n147(a) read with Section 148 of the Income-tax Act,
\n1961, only if on the basis of specific, reliable and
\nrelevant information coming to his possession
\nsubsequently, he has reasons, which he must record,
\nto believe that, by reason of omission or failure on
\nthe part of the assessee to make a true and full
\ndisclosure of all material facts necessary for his
\nassessment during the concluded assessment
\nproceedings, any part of his income, profits or gains
\nchargeable to income-tax has escaped assessment. He
\nmay start reassessment proceedings either because
\nsome fresh facts had come to light which were not
\nWrit Petition No.28177\/2018 20
\npreviously disclosed or some information with regard
\nto the facts previously disclosed comes into his
\npossession which tends to expose the untruthfulness
\nof those facts. In such situations, it is not a case of
\nmere change of opinion or the drawing of a different
\ninference from the same facts as were earlier
\navailable but acting on fresh information. Since the
\nbelief is that of the Income-tax Officer, the
\nsufficiency of reasons for forming the belief is not
\nfor the Court to judge but it is open to an assessee to
\nestablish that there in fact existed no belief or that the
\nbelief was not at all a bona fide one or was based on
\nvague, irrelevant and non-specific information. To
\nthat limited extent, the Court may look into the
\nconclusion arrived at by the Income-tax Officer and
\nexamine whether there was any material available on
\nthe record from which the requisite belief could be
\nformed by the Income-tax Officer and further
\nwhether that material had any rational connection or
\na live link for the formation of the requisite belief…”
\n[Emphasis supplied]
\nIn Anant Kumar Saharia v. Commissioner of Income Tax
\n& Ors., [1998] 232 ITR 533 (Gauhati), it was held as follows:
\n“The belief is that of the Assessing Officer and the
\nreliability or credibility or for that matter the weight
\nthat was attached to the materials naturally depends
\non the judgment of the Assessing Officer. This court
\nin exercise of power under Article 226 of the
\nConstitution of India cannot go into the sufficiency
\nor adequacy of the materials. After all the Assessing
\nOfficer alone is entrusted to administer the impugned
\nAct and if there is prima facie material at the disposal
\nof the Assessing Officer that the income chargeable
\nto income-tax escaped assessment this court in
\nexercise of power under Article 226 of the
\nConstitution of India should refrain from exercising
\nthe power. In the instant case, the case of the
\npetitioner was fairly considered and thereafter the
\nabove decision is taken.”
\n[Underlining is ours]
\nIn Bombay Pharma Products v. Income Tax Officer,
\n[1999] 237 ITR 614 (MP), it was held as follows:
\nIt is also established that the notice issued under
\nSection 148 of the Act should follow the reasons
\nrecorded by the Income-tax Officer for reopening of
\nthe assessment and such reasons must have a
\nWrit Petition No.28177\/2018 21
\nmaterial bearing on the question of escapement of
\nincome by the assessee from assessment because of
\nhis failure or omission to disclose fully and truly all
\nmaterial facts. Whether such reasons are sufficient or
\nnot, is not a matter to be decided by the court. But
\nthe existence of the belief is subject to scrutiny if the
\nassessee shows circumstances that there was no
\nmaterial before the Income-tax Officer to believe that
\nthe income had escaped assessment.”[Emphasis
\nadded]
\nIn H.A. Nanji & Co. v. Income Tax Officer, [1979] 120
\nITR 593 (Calcutta), it has been held that at the time of issue of
\nnotice of reassessment, it is not incumbent on the ITO to come
\nto a finding that income has escaped assessment by reason of
\nthe omission or failure of the assessee to disclose fully and
\ntruly all material facts necessary for assessment. It has been
\nfurther held that the belief which the ITO entertains at that
\nstage is a tentative belief on the basis of the materials before
\nhim which have to be examined and scrutinised on such
\nevidence as may be available in the proceedings for
\nreassessment. The Division Bench held that there must be some
\ngrounds for the reasonable belief that there has been a nondisclosure
\nor omission to file a true or correct return by the
\nassessee resulting in escapement of assessment or in underassessment.
\nSuch belief must be in good faith, and should not
\nbe a mere pretence or change of opinion on inferential facts or
\nfacts extraneous or irrelevant to the issue and the material on
\nwhich the belief is based must have a rational connection or
\nlive link or relevant bearing on the formation of the belief.
\n17. In N.D. Bhatt, Inspecting Assistant Commissioner,
\nIncome Tax & Another. v. I.B.M. World Trade Corporation,
\n[1995] 216 ITR 811(Bombay), it has been held thus:
\n“It is also well-settled that the reasons for reopening
\nare required to be recorded by the assessing authority
\nbefore issuing any notice under section 148 by virtue
\nof the provisions of section 148(2) at the relevant
\ntime. Only the reason so recorded can be looked at
\nfor sustaining or setting aside a notice issued under
\nsection 148.”
\n18. In Hindustan Lever Ltd. v. R.B. Wadkar, [2004] 268
\nITR 332 (Bom), a Division Bench has opined thus:-
\n“…. the reasons are required to be read as they were
\nrecorded by the Assessing Officer. No substitution or
\ndeletion is permissible. No additions can be made to
\nthose reasons. No inference can be allowed to be
\ndrawn based on reasons not recorded. It is for the
\nAssessing Officer to disclose and open his mind
\nWrit Petition No.28177\/2018 22
\nthrough reasons recorded by him. He has to speak
\nthrough his reasons. It is for the Assessing Officer to
\nreach to the conclusion as to whether there was
\nfailure on the part of the assessee to disclose fully
\nand truly all material facts necessary for his
\nassessment for the concerned assessment year. It is
\nfor the Assessing Officer to form his opinion. It is
\nfor him to put his opinion on record in black and
\nwhite. The reasons recorded should be clear and
\nunambiguous and should not suffer from any
\nvagueness. The reasons recorded must disclose his
\nmind. Reasons are the manifestation of mind of the
\nAssessing Officer. The reasons recorded should be
\nself-explanatory and should not keep the assessee
\nguessing for the reasons. Reasons provide the link
\nbetween conclusion and evidence. The reasons
\nrecorded must be based on evidence. The Assessing
\nOfficer, in the event of challenge to the reasons,
\nmust be able to justify the same based on material
\navailable on record. He must disclose in the reasons
\nas to which fact or material was not disclosed by the
\nassessee fully and truly necessary for assessment of
\nthat assessment year, so as to establish the vital link
\nbetween the reasons and evidence. That vital link is
\nthe safeguard against arbitrary reopening of the
\nconcluded assessment.” [underlining is ours]
\nIn Assistant Commissioner of Income Tax v. Rajesh
\nJhaveri Stock Brokers P. Ltd, [2007] 291 ITR 500 (SC), it has
\nbeen ruled thus:-
\n“Section 147 authorises and permits the Assessing
\nOfficer to assess or reassess income chargeable to
\ntax if he has reason to believe that income for any
\nassessment year has escaped assessment. The word
\n“reason” in the phrase “reason to believe” would
\nmean cause or justification. If the Assessing Officer
\nhas cause or justification to know or suppose that
\nincome had escaped assessment, it can be said to
\nhave reason to believe that an income had escaped
\nassessment. The expression cannot be read to mean
\nthat the Assessing Officer should have finally
\nascertained the fact by legal evidence or conclusion.
\nThe function of the Assessing Officer is to
\nadminister the statute with solicitude for the public
\nexchequer with an inbuilt idea of fairness to
\ntaxpayers. As observed by the Supreme Court in
\nCentral Provinces Manganese Ore Co. Ltd. v. ITO,
\n[1991] 191 ITR 662, for initiation of action under
\nSection 147(a) (as the provision stood at the relevant
\ntime) fulfillment of the two requisite conditions in
\nWrit Petition No.28177\/2018 23
\nthat regard is essential. At that stage, the final
\noutcome of the proceeding is not relevant. In other
\nwords, at the initiation stage, what is required is
\n“reason to believe”, but not the established fact of
\nescapement of income. At the stage of issue of
\nnotice, the only question is whether there was
\nrelevant material on which a reasonable person
\ncould have formed a requisite belief. Whether the
\nmaterials would conclusively prove the escapement
\nis not the concern at that stage. This is so because
\nthe formation of belief by the Assessing Officer is
\nwithin the realm of subjective satisfaction.”
\n[Emphasis supplied]
\nIn this context, we may refer with profit to a Division
\nBench decision of this Court in SFIL Stock Broking Ltd.
\n(supra), wherein the Bench was dealing with the validity of the
\nproceedings under Section 147 of the Act. The Bench
\nreproduced the initial issuance of notice and thereafter referred
\nto the reasons for issue of notice under Section 148 which was
\nprovided to the assessee. Thereafter, the Bench referred to the
\ndecisions in CIT v. Atul Jain, 299 ITR 383 (Del), Rajesh
\nJhaveri Stock Brokers Pvt. Ltd (supra), Jay Bharat Maruti Ltd.
\nv. CIT, 223 CTR 269 (Del) and CIT v. Batra Bhatta Company,
\n174 Taxman 444 (Del) and eventually held thus: –
\n“9. In the present case, we find that the first sentence
\nof the so-called reasons recorded by the Assessing
\nOfficer is mere information received from the
\nDeputy Director of Income Tax (Investigation). The
\nsecond sentence is a direction given by the very
\nsame Deputy Director of Income Tax (Investigation)
\nto issue a notice under Section 148 and the third
\nsentence again comprises of a direction given by the
\nAdditional Commissioner of Income Tax to initiate
\nproceedings under Section 148 in respect of cases
\npertaining to the relevant ward. These three sentence
\nare followed by the following sentence, which is the
\nconcluding portion of the so-called reasons:-
\n“Thus, I have sufficient information in my
\npossession to issue notice u\/s 148 in the case of M\/s
\nSFIL Stock Broking Ltd. on the basis of reasons
\nrecorded as above.”
\n10. From the above, it is clear that the Assessing
\nOfficer referred to the information and the two
\ndirections as \u201ereasons’ on the basis of which he was
\nproceeding to issue notice under Section 148. We are
\nafraid that these cannot be the reasons for
\nproceeding under Section 147\/148 of the said Act.
\nWrit Petition No.28177\/2018 24
\nThe first part is only an information and the second
\nand the third parts of the beginning paragraph of the
\nso-called reasons are mere directions. From the socalled
\nreasons, it is not at all discernible as to
\nwhether the Assessing Officer had applied his mind
\nto the information and independently arrived at a
\nbelief that, on the basis of the material which he had
\nbefore him, income had escaped assessment.
\nConsequently, we find that the Tribunal has arrived
\nat the correct conclusion on facts. The law is well
\nsettled. There is no substantial question of law which
\narises for our consideration.”
\n[Emphasis is ours]
\n21. At this juncture, it is profitable to refer to the
\nauthority in GNK Driveshafts (India) Ltd. v. Income Tax
\nOfficer and Others, (2003) 179 C54 (SC) 11 wherein their
\nLordships of the Apex Court have held thus:-
\n“5. We see no justifiable reason to interfere with the
\norder under challenge. However, we clarify that
\nwhen a notice under Section 148 of the Income Tax
\nAct is issued, the proper course of action for the
\nnotice is to file return and if he so desires, to seek
\nreasons for issuing notices. The assessing officer is
\nbound to furnish reasons within a reasonable time.
\nOn receipt of reasons, the notice is entitled to file
\nobjections to issuance of notice and the assessing
\nofficer is bound to dispose of the same by passing a
\nspeaking order. In the instant case, as the reasons
\nhave been disclosed in these proceedings, the
\nassessing officer has to dispose of the objections, if
\nfiled, by passing a speaking order, before
\nproceeding with the assessment in respect of the
\nabovesaid five assessment years.”
\nIn Sarthak Securities Co. Pvt. Ltd. v. ITO, Writ Petition
\nNo.6087\/2010, decided on 18th October, 2010, a Division
\nBench of this Court, after reproducing Section 147 of the Act
\nand relying on certain decisions in the field, expressed the
\nview as follows:
\n“23. `The obtaining factual matrix has to be tested
\non the anvil of the aforesaid pronouncement of law.
\nIn the case at hand, as is evincible, the assessing
\nofficer was aware of the existence of four
\ncompanies with whom the assessee had entered into
\ntransaction. Both the orders clearly exposit that the
\nassessing officer was made aware of the situation by
\nthe investigation wing and there is no mention that
\nWrit Petition No.28177\/2018 25
\nthese companies are fictitious companies. Neither
\nthe reasons in the initial notice nor the
\ncommunication providing reasons remotely indicate
\nindependent application of mind. True it is, at that
\nstage, it is not necessary to have the established fact
\nof escapement of income but what is necessary is
\nthat there is relevant material on which a reasonable
\nperson could have formed the requisite belief. To
\nelaborate, the conclusive proof is not germane at
\nthis stage but the formation of belief must be on the
\nbase or foundation or platform of prudence which a
\nreasonable person is required to apply. As is
\nmanifest from the perusal of the supply of reasons
\nand the order of rejection of objections, the names
\nof the companies were available with the authority.
\nTheir existence is not disputed. What is mentioned
\nis that these companies were used as conduits. In
\nthat view of the matter, the principle laid down in
\nLovely Exports (P) Ltd. (supra) gets squarely
\nattracted. The same has not been referred to while
\npassing the order of rejection. The assessee in his
\nobjections had clearly stated that the companies had
\nbank accounts and payments were made to the
\nassessee company through banking channel. The
\nidentity of the companies was not disputed. Under
\nthese circumstances, it would not be appropriate to
\nrequire the assessee to go through the entire gamut
\nof proceedings. It is totally unwarranted.”
\nThe present factual canvas has to be scrutinized on the
\ntouchstone of the aforesaid enunciation of law. It is worth
\nnoting that the learned counsel for the petitioner has submitted
\nwith immense vehemence that the petitioner had entered into
\ncorrespondence to have the documents but the assessing
\nofficer treated them as objections and made a communication.
\nHowever, on a scrutiny of the order, it is perceivable that the
\nauthority has passed the order dealing with the objections in a
\nvery careful and studied manner. He has taken note of the fact
\nthat transactions involving Rs.27 lakhs mentioned in the table
\nin Annexure P-2 constitute fresh information in respect of the
\nassessee as a beneficiary of bogus accommodation entries
\nprovided to it and represents the undisclosed income. The
\nassessing officer has referred to the subsequent information
\nand adverted to the concept of true and full disclosure of facts.
\nIt is also noticeable that there was specific information
\nreceived from the office of the DIT (INV-V) as regards the
\ntransactions entered into by the assessee company with number
\nof concerns which had made accommodation entries and they
\nwere not genuine transactions. As we perceive, it is neither a
\nchange of opinion nor does it convey a particular interpretation
\nof a specific provision which was done in a particular manner
\nWrit Petition No.28177\/2018 26
\nin the original assessment and sought to be done in a different
\nmanner in the proceeding under Section 147 of the Act. The
\nreason to believe has been appropriately understood by the
\nassessing officer and there is material on the basis of which the
\nnotice was issued. As has been held in Phool Chand Bajrang
\nLal (supra), Bombay Pharma Products (supra) and Anant
\nKumar Saharia (supra), the Court, in exercise of jurisdiction
\nunder Article 226 of the Constitution of India pertaining to
\nsufficiency of reasons for formation of the belief, cannot
\ninterfere. The same is not to be judged at that stage. In SFIL
\nStock Broking Ltd. (supra), the bench has interfered as it was
\nnot discernible whether the assessing officer had applied his
\nmind to the information and independently arrived at a belief
\non the basis of material which he had before him that the
\nincome had escaped assessment. In our considered opinion, the
\ndecision rendered therein is not applicable to the factual matrix
\nin the case at hand. In the case of Sarthak Securities Co. Pvt.
\nLtd. (supra), the Division Bench had noted that certain
\ncompanies were used as conduits but the assessee had, at the
\nstage of original assessment, furnished the names of the
\ncompanies with which it had entered into transactions and the
\nassessing officer was made aware of the situation and further
\nthe reason recorded does not indicate application of mind. That
\napart, the existence of the companies was not disputed and the
\ncompanies had bank accounts and payments were made to the
\nassessee company through the banking channel. Regard being
\nhad to the aforesaid fact situation, this Court had interfered.
\nThus, the said decision is also distinguishable on the factual
\nscore.
\nIn the case at hand, as we find, the petitioner is desirous
\nof an adjudication by the writ court with regard to the merits of
\nthe controversy. In fact, the petitioner requires this Court to
\nadjudge the sufficiency of the material and to make a roving
\nenquiry that the initiation of proceedings under Sections 147
\nand 148 of the Act is not tenable. The same does not come
\nwithin the ambit and sweep of exercise of power under Article
\n226 of the Constitution of India. It is open to the assessee to
\nparticipate in the re- assessment proceedings and put forth its
\nstand and stance in detail to satisfy the assessing officer that
\nthere was no escapement of taxable income. We may hasten to
\nclarify that any observation made in this order shall not work
\nto the detriment of the plea put forth by the assessee during the
\nre- assessment proceedings.\u201d
\n45. In the present case, the reasons recorded in the matter were
\ncertainly communicated to the petitioner. The objections of the
\npetitioner have been properly dealt and it is not a case of mere
\nsuspicion, it is a case, wherein the competent authority was having
\nWrit Petition No.28177\/2018 27
\nreason to believe to reopen the assessment. There was a specific
\ninformation available with the authorities. The reasons to believe
\nhad been properly understood by the authorities and there was
\nmaterial on the basis of which, notice was issued.
\n46. In exercise of the jurisdiction under Article 226 of the
\nConstitution of India, the sufficiency or insufficiency for the
\nformation of the reason to believe cannot be considered, as held by
\nthe Delhi High Court. It is certainly open to the assessee to
\nparticipate in the reassessment proceedings and to put forth its stand
\nin detail to satisfy the Assessing Officer that no escapement of
\nincome has taken place.
\nAt this stage, this Court does not find any reason to interfere
\nwith the notice as well as with the order passed by the respondents.
\nNo case for interference is made out in the matter.
\nAccordingly, the present writ petition stands dismissed.
\nCertified copy, as per rules.
\n(S.C. SHARMA) (VIRENDER SINGH)
\nJ U D G E J U D G E
\nRavi<\/p>\n","protected":false},"excerpt":{"rendered":"
The respondents have stated that there are large number of dummy\/bogus\/shell\/briefcase\/paper entities including the petitioner\/company in the group, which is being managed and controlled by Shri Anand Bangur for the purposes of routing unaccounted money and the department with great difficulties and after examining huge evidence, has arrived at a conclusion to initiate the proceedings against the petitioner and it is not a case where some unilateral action has been taken against the petitioner, it is a case where petitioner will receive every opportunity to defend himself and the entire mechanism has been provided under the Income Tax Act, 1961 and the respondents have prayed for dismissal of the writ petition.<\/p>\n