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Gujarat High Court

Yogendrakumar Gupta vs Income Tax Officer on 6 May, 2014

Author: Akil Kureshi

Bench: Akil Kureshi

        C/SCA/4299/2014                                     CAV JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               SPECIAL CIVIL APPLICATION NO. 4299 of 2014



FOR APPROVAL AND SIGNATURE:



HONOURABLE MR.JUSTICE AKIL KURESHI


and


HONOURABLE MS JUSTICE SONIA GOKANI

================================================================

1     Whether Reporters of Local Papers may be allowed to see
      the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy of the
      judgment ?

4     Whether this case involves a substantial question of law as
      to the interpretation of the Constitution of India, 1950 or any
      order made thereunder ?

5     Whether it is to be circulated to the civil judge ?

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                    YOGENDRAKUMAR GUPTA....Petitioner(s)
                                  Versus
                     INCOME TAX OFFICER....Respondent(s)
================================================================
Appearance:
MR MANISH J SHAH, ADVOCATE for the Petitioner(s) No. 1
MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1
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           CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
                  and


                                  Page 1 of 70
    C/SCA/4299/2014                               CAV JUDGMENT



                     HONOURABLE MS JUSTICE SONIA GOKANI

                           Date :    6/05/2014


                           CAV JUDGMENT

(PER : HONOURABLE MS JUSTICE SONIA GOKANI)

1. The   present   petition   has   been   preferred   under  Article   226   of   the   Constitution   of   India  challenging the notice of reopening issued under  section   148   of   the   Income­tax   Act,   1961  (hereinafter   referred   to   as   'the   Act')   in  connection   with   the   assessment   year   2006­07   in  the following factual background :

1.1 The petitioner for the said assessment year  submitted   a   return   of   income   reflecting   his  total income at Rs.64,65,144/­. A notice under  143(2)  of  the  Act  followed  by  a  notice  under  section 142(1) of the Act were issued on June  21, 2007 and September 19, 2008 respectively. 

In the said notices, details of unsecured loans  received by the petitioner were required to be  furnished.   Yet   another   notice   under   section  143(2) of the Act dated September 19, 2008 had  Page 2 of 70 C/SCA/4299/2014 CAV JUDGMENT followed.   All   the   details   as   directed   by   the  respondent   had   been   furnished,   which   included  the   details   of   unsecured   loans   vide  communication dated November 27, 2008. 1.2   Yet another notice dated December 03, 2008  called for genuineness and creditworthiness of  all   the   parties   whose   names   appeared   in   the  list   of   unsecured   loans   and   deposits,   which  were   required   to   be   furnished   along   with  complete address and PAN. The petitioner vide  communication dated December 15, 2008 provided  not only the addresses, PANs and details of the  amount with dates, but the confirmation letters  as   well.   After   the   entire   exercise,   scrutiny  assessment   under   section   143(3)   was   completed  on December 22, 2008 and the Assessing Officer  made disallowances under section 14A and 94(7)  of   the   Income­tax   Act,   1961   (hereinafter  referred   to   as   'the   Act').   The   petitioner  aggrieved   by   such   order   challenged   the   same  before   the   CIT   (Appeals)   and   the   same   is  pending before the CIT (Appeals).  Page 3 of 70 C/SCA/4299/2014 CAV JUDGMENT 1.3 In   the   meantime,   the   impugned   notice   under  section   148   of   the   Act   dated   March   28,   2013  came  to  be  issued,  beyond  the  period  of  four  years from the end of relevant assessment year  on the ground that the Assessing Officer had a  reason to believe that the income had escaped  the   assessment,   directing   the   petitioner   to  file the return within 30 days from the date of  receipt   of   the   notice   since   he   proposed   to  assess the escaped income.

1.4 A request was made vide communication dated  April  09,  2013  seeking   a copy  of  the  reasons  recorded. However, it was insisted on the part  of the respondent that the petitioner needs to  file his return in response to the notice under  section   148   of   the   Act   and   then   only   the  reasons   recorded   under   section   148(2)   of   the  Act   could   be   provided.   Accordingly,   the  petitioner declared that the original return of  income   filed   by   him   on   December   31,   2006   be  considered as return filed in response to such  Page 4 of 70 C/SCA/4299/2014 CAV JUDGMENT a notice. A notice under section 143(2) of the  Act came to be issued on January 17, 2014 and  the reasons were also furnished on February 18,  2014, which read as under :

"As per information contained in the report   of the DCIT, C.C., XXVIII, Kolkata forwarded   vide   letter   No.CIT(C)­Kol./CBI/12­13,   dated  04/03/2013,   it   is   noticed   that   assessee   company has obtained accommodation entry in   the  form of Loans and  Advances  from Basant   Marketing Pvt. Ltd. Kolkata.

  The   assessee   has   taken  accommodation   entry   of   Rs.8,71,00,000/­,   in   the  form of Loans and  advances  from Basant   Marketing   Pvt.   Ltd.   Kolkata.   Therefore   I   have   reason   to   believe   that   an   amount   of   Rs.8,71,00,000/­   has   escaped   the   assessment   within the meaning of section 147 of the IT   Act."

1.5   Yet another correspondence dated March 05,  2014   for   the   post   notice   period   deserves  reproduction   at   this   stage,   which   is   in   the  form   of   a  show   cause   notice,   which   reads   as  under :

Page 5 of 70 C/SCA/4299/2014 CAV JUDGMENT

"During   the   year   under   consideration   loans   and   advances   of   Rs.8,71,00,000/­   has   been   received   by   the   assessee   from   M/S   Basant   Marketing   Pvt.   Ltd.   As   per   the   information   received from DCIT (Central) XXVIII, Kolkata   dated   12.02.2013   M/s   Basant   Marketing   (P)   Ltd   has   provided   accommodation   entries   to   various   beneficiaries   during   the   year   and   the assessee is one of them. Further it has   been   stated   that   M/s   Basant   Marketing   (P)  Ltd. is a dummy company of Arun Dalmiya on   the   basis   of   substantial   material   found  during the search by CBI, Mumbai. Therefore  you are required to show cause as to why the   amount of Rs.8,71,00,000/­ received from M/s   Basant   Marketing   (P)   Ltd.   during   the   year  should not be treated as cash credit u/s 68   of the Income Tax Act, 1961."

1.6   The petitioner filed reply to the same by  stating that he intended to file writ petition  against the invalid notice. 

1.7 The   petitioner   vide   its   letter   dated   March  13, 2014 requested the respondent to supply a  copy   of   the   letter   received   from   the   DCIT,  Kolkata, on the basis of which she had formed  Page 6 of 70 C/SCA/4299/2014 CAV JUDGMENT the reason to believe. However, soon thereafter  on   March   14,   2014,   the   objections   have   been  filed   to   the   reasons   recorded   essentially  challenging   such   notice   on   the   ground   that  there   was   nothing   to   indicate   that   the  petitioner   had   not   fully   and   truly   disclosed  all   the   material   facts   necessary   for  assessment.   It   was   the   say   of   the   petitioner  that   the   original   assessment   got   completed  after scrutiny, where alleging the genuineness  of   the   transactions,   no   additions   have   been  made in respect of unsecured loans. It was also  the say of the petitioner that the confirmation  letters   furnished   pursuant   to   the   notices  issued along with substantiating documents also  take  away  the  very  basis  of  such  notice.   The  sworn   affidavit   of   the   Director   of   Basant  Marketing   Pvt.   Ltd.   also   specifically   stated  that all the transactions of loans given to the  petitioner   were   genuine   and   given   through  banking channels. We notice that there was no  statement of CIT (Appeals) that the loans given  to Basant Marketing Pvt. Ltd. are true and all  Page 7 of 70 C/SCA/4299/2014 CAV JUDGMENT loans given by   Basant Marketing Pvt. Ltd. to  the present petitioner are genuine.  1.8   It   is   averred   by   the   petitioner   that  despite   such   eloquent   objections   backed   by  documentary   evidence,   the   objections   were  disposed of by holding that the same were not  tenable and, therefore, the present petition.

2. On   issuance   of   notice,   the   respondent   appeared  and filed an affidavit­in­reply inter alia urging  that   the   alternative   efficacious   remedy   is  available   by   way   of   an   appeal   to   the   CIT  (Appeals)   and   thereafter,   to   the   Tribunal   and,  therefore,   the   present   petition   may   not   be  entertained.

2.1 On merits, the fact is not controverted that  after   scrutiny,   the   return   of   the   petitioner  was   finalised   on   December   22,   2008,   where  disallowances were made under section 14A and  94(7) of the Act.

Page 8 of 70 C/SCA/4299/2014 CAV JUDGMENT 2.2 It is, however, contended that on receipt of  information   by   way   of   report   of   the   DCIT  (Central),   XXVIII,   Kolkata,   on   having   found  that   the   assessee   had   taken   accommodation  entries of Rs.8.71 crore in the form of loans  and advances from Basant Marketing Pvt. Ltd.,  which   was   a   dummy   company   engaged   in   money  laundering   business   and,   therefore,   the  Assessing Officer held that the income of the  assessee   chargeable   to   tax   had   escaped   the  assessment.

2.3 It   is   the   say   of   the   respondent   that   the  Assessing   Officer   was   in   receipt   of   the  information   contained   in   the   report   of   the  DCIT, Kolkata dated March 04, 2014, which was  in the nature of the tangible material and on  the   basis   of   such   information,   after   due  application   of   mind,   the   Assessing   Officer  recorded reasons for reopening the assessment.  It   is   alleged   that   there   is   an   omission   or  failure on the part of the assessee to disclose  fully and truly all material facts, which were  Page 9 of 70 C/SCA/4299/2014 CAV JUDGMENT necessary for the assessment. On definite and  reliable information, the Assessing Officer has  formed   an   opinion   and   reasonable   belief.  However, no response was made to the subsequent  show   cause   notice  dated   March   05,   2014.  Accordingly, it is urged that the petition may  not be entertained.

3. The learned counsel Shri J.P. Shah appearing with  the   learned   counsel   Mr.M.J.   Shah   for   the  petitioner,   fervently   argued   that   all   the   facts  have been fully inquired at the time of original  assessment   as   the   same   was   scrutiny   assessment.  All receipts admittedly are by cheques. Not only  the names of the parties, but their PAN and other  details   confirmed   the   genuineness   of   the  transactions.   In   absence   of   any   omission   or  failure on the part of the petitioner to furnish  any   material   particulars,   the   very   notice   must  fail.   He   further   urged   that     the   information  passed over to the Assessing Officer is in pre­ inquiry stage. There was no case of accommodation  entry   at   all.   Therefore,   it   was   incumbent   upon  Page 10 of 70 C/SCA/4299/2014 CAV JUDGMENT the Assessing Officer to make preliminary inquiry  before issuance of the notice. The entire issue  has   remained   in   realm   of   suspicion.   Since   no  authority has gone beyond the reason to suspect,  the   Court   must   intervene.   He   urged   that   the  object of the Apex Court in directing the Revenue  Authority to provide the reasons recorded and to  dispose   of   the   same   cannot   be   perceived   as   an  empty formality. Relying on the decision of the  Supreme   Court   in   the   case   of  GKN  Driveshafts   (India)   Ltd   vs.   Income   tax   officer  and   others   reported   in   259   ITR   19   (SC),   he   further   urged  that   the   availability   of   the   efficacious   remedy  is no ground in the instant case where there is  nothing to indicate that the petitioner did not  disclose fully and truly all material facts and,  therefore, the very assumption of jurisdiction on  the part of the Assessing Officer  is erroneous.  The   petitioner   is   not   required   to   undergo   the  entire   ordeal.   He   has   sought   to   rely   on   the  following decisions :

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(1) CIT  v. Kamdhenu  Steel  & Alloys  Ltd.  &   ors.,   reported   in   (2012)   206   TAXMAN   254   (Delhi).

(2) Patel Alloy Steel (P) Ltd. v. Assistant   Commissioner   of   Income­tax   (OSD)   Circle­5,   Ahmedabad,   reported   in   (2013)   35   taxmann.com 353 (Gujarat).

(3) Commissioner of Income­tax v. Shardaben   K. Modi, reported  in (2013) 35 taxmann.com   264 (Gujarat).

4. Mr.Manish   M.   Bhatt,   learned   Senior   Counsel  appearing   with   the   learned   counsel   Mrs.Mauna  Bhatt for the Revenue, submitted that this is a  case of the petitioner not furnishing truly and  fully all material facts and, therefore, even if  the   original   assessment   has   been   concluded   on  scrutiny,   the   notice   of   reopening   cannot   be  hampered at this stage. He further urged that on  the   basis   of   the   information   contained   in  communication   of   the   DCIT,   Kolkata,   indicating  that the petitioner obtained accommodation entry  in   the   form   of   loans   and   advances   from   Basant  Marketing   Pvt.   Ltd.,   Kolkata,   the   Assessing  Page 12 of 70 C/SCA/4299/2014 CAV JUDGMENT Officer   on   having   reason   to   believe   that   the  income   chargeable   to   tax   has   escaped   the  assessment,   the   Court   need   not   interfere.  Reliance is placed on the following decisions :

(1) Dishman   Pharmaceuticals   and   Chemicals   Ltd.   v.   Deputy   Commissioner   of   Income­tax   (OSD),   Ahmedabad,   reported   in   (2012)   346   ITR 228 (Guj.).

(2) Phul   Chand   Bajrang   Lal   and   another   v.  

Income­tax Officer and another, reported in   203 ITR 456.

5. We   have,   thus,   heard   both   the   sides   and   also  undertaken the exercise of closely examining the  material on record. At this stage, it is needed  to be noted that we deemed it necessary to call  for   the   original   file   with   regard   to   the  satisfaction of the Assessing Officer in forming  the   belief   that   the   income   chargeable   to   tax  escaped the assessment, reference to which shall  be made at an appropriate stage in this judgment. Page 13 of 70 C/SCA/4299/2014 CAV JUDGMENT

6. This   being   a   challenge   to   the   reopening   notice  issued under section 148 of the Act, having been  issued on completion of period of four years from  the end of relevant assessment year, the law on  the subject requires reproduction at this stage.

7. Section 147(1) of the Act reads as under :

"Income Escaping Assessment.

147(a) If the Income­tax Officer has reason   to believe that by reason of the omission or   failure on the part of an assessee to make a   return under S. 139 for any assessment year   to   the   Income­tax   Officer   or   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 the part of the assessee, the Income­tax   Officer 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 the   provisions   of   Ss.   148   to   153,   assess   or   reassess   such   income   or   recompute   the   loss   Page 14 of 70 C/SCA/4299/2014 CAV JUDGMENT or   the   depreciation   allowance,   as   the   case   may   be   for   the   assessment   year   concerned   (hereafter in Ss. 148 to 153 referred to as   the relevant assessment year)."

8. Section 147, thus, permits the reopening of the  assessment   to   the   Assessing   Officer   on   his  forming   a   belief   that   the   income   chargeable   to  tax has escaped the assessment. For the Assessing  Officer to be authorised to reopen any assessment  beyond the period of four years, he could so do  it if the assessee fails to make a return under  section 139 of the Act or in respect of a notice  under sub­section (1) of section 142 or he fails  to   disclose   fully   and   truly   all   the   material  facts   necessary   for   such   assessment.   We   are  concerned,   in   the   present   case,   with   the  reopening of the assessment beyond the period of  four   years   from   the   end   of   relevant   assessment  year,   where   it   is   averred   that   a   notice   under  section   148   of   the   Act   was   the   result   of   the  assessee not having disclosed fully and truly all  the   material   facts.   In   the   original   assessment,  if   the   assessment   is   framed   after   the   scrutiny  Page 15 of 70 C/SCA/4299/2014 CAV JUDGMENT under section 143(3) of the Act, the reassessment  would be permissible under the law on completion  of four years of period from the end of relevant  assessment year, for any income chargeable to tax  having escaped the assessment only on account of  failure on the part of the assessee to disclose  fully and truly all the material facts necessary  for   assessment.   Of   course,   the   satisfaction   of  the Assessing Officer is a must that such income  had   escaped   the   assessment   by   reason   of   any  failure   on   the   part   of   the   assessee,   otherwise  the assumption of the jurisdiction under section  147 of the Act would be invalid. The Apex Court  in   the   case   of  Fulchand   Bajranglal   (supra)   was  considering   the   question   of   reassessment   beyond  the   period   of   four   years   in   the   case   of   an  assessee   firm   which   had   parted   such   an   amount  from Kolkata based company. The assessee also had  filed confirmatory letters from the said company  in   support   of   its   loan   transactions.   Interest  paid to the Kolkata company by the assessee was  permitted   by   the   Assessing   Officer   for   nearly  five   years.   However,   on   the   basis   of   some  Page 16 of 70 C/SCA/4299/2014 CAV JUDGMENT communication   received   from   the   Income­tax  Officer based on Kolkata, the genuineness of the  loan   transactions   had   been   questioned.   The  Managing Director of the Kolkata company admitted  that  the  company  was  a  mere  name  lender  and  no  amount   had   been   advanced   during   last   three  assessment   years.   Such   transactions   being   bogus  on   the   basis   of   these   information,   reassessment  proceedings were initiated. When such notice was  challenged   before   the   Apex   Court,   it   held   that  this   was   not   a   case   of   the   Income­tax   Officer  drawing any fresh inference which she could have  framed at the time of original assessment on the  basis   of   the   material   placed   before   her   by   the  assessee   relating   to   the   loan   by   the   Kolkata  company.   It   was   the   case   of   acquiring   fresh  information   specific   in   nature   and   reliable,  relating to the concluded assessment, which went  to falsify the statement made by the assessee at  the   time   of   original   assessment   and,   therefore,  he would be permitted under the law to draw fresh  inference from such facts and material. The Court  also went to an extent of saying that there are  Page 17 of 70 C/SCA/4299/2014 CAV JUDGMENT two   distinct   and   different   situations   where   the  transaction   itself   on   the   basis   of   subsequent  information is found to be bogus transaction and  in such event, mere disclosure of the transaction  cannot be said to be true and full disclosure and  the Income­tax Officer would have jurisdiction to  reopen   the   concluded   assessment.   The   subsequent  information on the basis of which the Income­tax  Officer acquired the reason to believe that the  income chargeable to tax had escaped on account  of omission on the part of the assessee to fully  and   truly   disclose   primary   facts   when   was  reliable, specific and relevant and not vague or  unspecific, the reopening was permitted. It would  be   apt   to   quote   some   observations   of   the   Apex  Court   in   the   case   of  Phul   Chand   Bajrang   Lal   (supra), which read as under :

"...   one   has   to   look   to   the   purpose   and   intent   of   the   provisions.   One   of   the   purposes   of   Section   147   apperas   to   be   to   ensure   that   a   party   cannot   get   away   by   willfully making a false or untrue statement   at the time of original assessment and when   that falsity comes to notice to turn around   Page 18 of 70 C/SCA/4299/2014 CAV JUDGMENT and say 'you accepted my lie, now your hands   are tied and you can do nothing'. It would,   be travesty of justice to allow the assessee   that latitude."

9. In   the   case   of  Dishman   Pharmaceuticals   and   Chemicals   Ltd.   (supra),   this   Court   was   dealing  with   reopening   of   the   assessment   beyond   the  period   of   four   years   from   the   end   of   relevant  assessment year, where this Court has upheld the  reassessment proceedings by holding and observing  that   the   Assessing   Officer   must   have   reason   to  believe   that   the   income   chargeable   to   tax   had  escaped   the   assessment   and   that   the   same  occasioned   on   account   of   either   failure   on   the  part of the assessee to make return of his income  or   disclose   fully   and   truly   all   the   material  facts.   Both   these   conditions   are   conditions  precedent   and   must   be   satisfied   simultaneously  before   the   Income­tax   Officer   can   assume  jurisdiction to reopen the assessment at the end  of   relevant   assessment   year.   If   the   reasons  recorded   do   not   disclose   the   satisfaction   of  these two conditions, reopening notice must fail.  Page 19 of 70 C/SCA/4299/2014 CAV JUDGMENT However, it was further held that there is no set  format in which such reasons must be recorded. It  is not the language but the contents that assume  importance.   It   also   further   states   that   such  reasons must emerge from the reasons recorded and  cannot   be   supplied   through   an   affidavit   filed  before the Court. 

10. What   amounts   to   subjective   satisfaction   on  the part of the Assessing Officer when he holds  the   reason   to   believe,   has   been   discussed   at  length in various judicial pronouncements.  10.1   In   the   case   of  Central   Provinces   Manganese Ore Co. Ltd. v. Income­tax Officer,   Nagpur, reported in 191 ITR 662, the assessee  was a non­resident company, whose head office  was in London and one office was in India. The  proceedings   of   reassessment   under   section   148  had been initiated. The customs authority came  to know that the assessee had declared very low  prices   in   respect   of   all   the   consignments   of  manganese   ore     exported   by   it.   On   due  Page 20 of 70 C/SCA/4299/2014 CAV JUDGMENT investigation,   it   found   that   the   assessee  systematically under­invoiced the same. In the  challenge to reopening assessment, the Supreme  Court sustained such notice on the ground that  the appellant had not produced their books of  accounts   kept   at   London   or   the   original  contracts of sale entered into with the buyers  and   no   reasons   were   given   for   supply   of  manganese ore at a rate lower than the market  rate   and,   therefore,   the   charge   of   under­ invoiced   was   found  per   se  to   have   been  satisfied   leading   to   satisfying   the   second  condition under section 147(a) of the Act that  there was failure on the part of the assessee  to   disclose   fully   and   truly   all   the   material  facts at the time of original assessment. 10.2     The Apex  Court  in  the case  of  Assistant   Commissioner   of   Income­tax   v.   Rajesh   Jhaveri   Stock Brokers P. Ltd., reported in (2007) 291   ITR   500   (SC),   has   held   that   at   the   stage   of  issuance of notice of reopening, the Assessing  Officer must have a reason to believe and not  Page 21 of 70 C/SCA/4299/2014 CAV JUDGMENT the established fact of escapement of income in  the following manner :

"The   expression   "reason   to   believe"   in  section   147   would   mean   cause   or   justification. If the Assessing Officer has   cause or  If the Assessing Officer has cause  or   justification   to   know   or   suppose   that  income   had   escaped   assessment,   it   can   be   said   to   have   reason   to   believe   that   an   income   had   escaped   assessment.   The  expression   cannot  be  read   to   mean   that  the   Assessing   Officer   should   have   finally  ascertained   the   fact   by   legal   evidence   or   conclusion.   What   is   required   is   "reason   to   believe"   but   not   the   established   fact   of   escapement of income. At the stage of issue   of   notice,   the   only   question   is   whether   there   was   relevant   material   on   which   a   reasonable   person   could   have   formed   a   requisite   belief.   Whether   the   materials   would   conclusively   prove   the   escapement   is  not   the   concern   at   that   stage.   This   is   so   because   the   formation   of   belief   is   within   the realm of subjective satisfaction of the   Assessing Officer."

10.3  In the case of Raymond Woolen Mills Ltd. v.   Income­tax Officer and others, reported in 236   Page 22 of 70 C/SCA/4299/2014 CAV JUDGMENT ITR   34,   the   Court   held   that   in   determining  whether   commencement   of   reassessment  proceedings was valid, it has only to be seen  whether there was prima facie some material on  the basis of which the Department could reopen  the case. The sufficiency or correctness of the  material   is   not   a   thing   to   be   considered   at  such stage.

10.4  Reference also needs to be made of decision  of   Andhra   Pradesh   High   Court   rendered   in   the  case   of  GVK   Gautami   Power   Ltd.   v.   Assistant   Commissioner of Income­tax (OSD) and  another,   reported   in   336   ITR   451,   wherein   the   Andhra  Pradesh   High   Court   has   held   and   observed   as  under :

"17.  All   that   is   necessary   to   give   special   jurisdiction   is   that   the   ITO   had,   when   he   assumed   jurisdiction,   some   prima   facie   grounds   for   believing   that   there   had   been some non­disclosure of material facts.   Whether   these   grounds   are   adequate   or   not,   for   arriving   at   the   conclusion   that   there   was non­disclosure of material facts, would   Page 23 of 70 C/SCA/4299/2014 CAV JUDGMENT not   be   open   for   the   court's   investigation.   (Calcutta Discount Co. Ltd.1). At the stage   of   examining   the   validity   of   the   notice   under   Section   148/147,   the   enquiry   is   only   to see whether there are reasonable grounds   for the ITO to believe, and not whether the   omission/failure   and   the   escapement   of  income   is   established.   It   is   necessary   to   keep this distinction in mind. (Sri Krishna   Pvt. Ltd. [1996] 221 ITR 538 (SC))."

10.5     Delhi   High   Court   in   the   case   of  Acorus   Unitech   Wireless   (P.)   Ltd.   v.   Assistant   Commissioner of Income­tax, reported in (2014)   43   taxmann.com   62   (Delhi),   was   examining   the  reassessment notices issued and the proceedings  conducted   under   section   148   of   the   Act.   The  writ   petitioner,   a   company   incorporated   under  the Companies Act, was served with a notice of  reopening.   It  requested   for   a   copy   of   the  reasons which led to the reopening. Reasons had  been supplied after a gap of about nine months.  It was by way of a letter that the reasons to  believe that the income chargeable to tax had  escaped   assessment,   were   provided.   A   request  was made by the company to provide a copy of  Page 24 of 70 C/SCA/4299/2014 CAV JUDGMENT the   report   prepared   by   the   DIT   (Inv.)   in  respect of the 2G spectrum cases. However, the  Revenue contended that the material relied on  by   the   Revenue   in   respect   of   2G   spectrum   is  confidential   and   cannot   be   disclosed   and   the  Revenue   asked   the   petitioner   to   file   its  objection to the reasons recorded and supplied  reasons   to   the   petitioner   by   way   of   a  communication.   In   such   a   challenge,   the   High  Court   upheld   the   claim   of   the   Revenue   for  privilege/   confidentiality   of   the   2G   spectrum  by   holding   that   the   law   requires   that   the  information   upon   which   the   Assessing   Officer  records   his   satisfaction   that   income   has  escaped assessment, if is communicated to the  assessee,   without   the   disclosure   of   any  specific   documents,   the   proceedings   initiated  under section 147 would not be rendered void.  In the words of Delhi High Court :

"22.  In this context, the Court will now  turn   to   the   question   of   whether   the   disclosure   of   the   2G   Spectrum   Report   is   mandatory, and whether the failure to supply   Page 25 of 70 C/SCA/4299/2014 CAV JUDGMENT it is fatal to the present proceedings. The   law   only   requires   that   the   information   or   material on which the AO records his or her   satisfaction   is   communicated   to   the   asseseee,   without   mandating   the   disclosure  of   any   specific   document.   While   the   2G   Spectrum   Report   has   not   been   supplied   in  this case on grounds of confidentiality, the   reasons recorded have been communicated and   do  provide  -  independent of the 2G Report  -  details of the new and  tangible information  that   support   the   AO's   opinion.   These   facts  are  capable   of   justifying   the   satisfaction  recorded  on   their   own   terms,   as   discussed  above.   In   this   context,   there   is   no   legal   proposition that mandates the disclosure of   any additional document. This is not the say   that   the   AO   may   in   all   cases   refuse   to   disclose   documents   relied   upon   by   him   on  account of confidentiality, but rather, that  fact must be judged on the basis of whether   other   tangible   and   specific   information   is   available   so   as   to   justify   the   conclusion   irrespective of the contents of the document   sought   to   be   kept   confidential.   In   cases   such   as   the   present,   however,   where   the   information and facts communicated by the AO   are   themselves   in   accordance   with   the   minimum   requirement   under   Section   147/148,  the petitioner cannot compel the disclosure   Page 26 of 70 C/SCA/4299/2014 CAV JUDGMENT of   other   documents   that   the   assessee   may   have also relied upon."

10.6   Delhi   High   Court   in   the   case   of  Kamdhenu   Steel   and   Alloys   Ltd.   (supra),   was   dealing  with   the   case   of   additions   made   by   the  Assessing Officer under section 68 of the Act  on   account   of   unexplained   share   applicable  money,   where   it   has   taken   into   account   the  decision rendered by the very Bench in the case  of  CIT   v.   Oasis   Hospitalities   (P)   Ltd.,   reported in (2011) 333 ITR 119 (Del.), wherein  it is held that the initial burden of proving  the genuineness is upon the assessee, however,  once   he   proves   the   identity   of   credits/share  applications by either furnishing PAN or copies  of the bank accounts and shows the genuineness  of   the   transaction   by   showing   money   in   the  banks,   is   by   account   payee   cheques   or   draft,  etc.   then   the   onus   to   prove   the   same   would  shift   to   the   Revenue;   and   then   the   question  which   assumes   importance   at   this   stage   is   to  what the Revenue is supposed to do to dislodge  the initial burden discharged by the assessee.  Page 27 of 70 C/SCA/4299/2014 CAV JUDGMENT In   a   matter   before   the   Delhi   High   Court,  registered   letters   written   to   the   Company  returned undelivered and the Assessing Officer  believed that these companies were not existing  at   the   given   address.   Thereafter,   no   attempt  was made to found out from the office of the  Registrar   of   Companies   the   address   of   those  companies   from   where   the   registered   letters  were received back undelivered. No effort was  made to examine as to whether those companies  were   filing   IT   return   and   if   yes,   then   what  kind   of   returns   were   filed.   From   the   bank  statement filed by the assessee, the Assessing  Officer  could have found out the addresses of  the applicant­companies in the bank, who opened  the bank accounts and their signatories. Such  kind of inquiries were absent. The Court held  that mere failure on the part of the creditors  to   respond   to   the   department's   notice   could  never be a basis to conclude that the assessee  had undisclosed income and initiate proceedings  under section 68 of the Act on the ground that  the   Assessing   Officer   failed   to   carry   his  Page 28 of 70 C/SCA/4299/2014 CAV JUDGMENT suspicion   to   logical   conclusion   by   further  investigation   and   more   steps   could   have   been  taken   by   the   Revenue   in   order   to   find   out  causal connection between the cash deposited in  the   bank   accounts   of   the   applicant   companies  and   the   assessee,   the   Court   held   that   very  important link was missing and, therefore, the  additions were deleted. 

  We   must   notice   at   this   stage   that   the  assessee   had   approached   the   High   Court   being  aggrieved   by   the   additions   made   by   the  Assessing   Officer   after   their   having   failed  before   the   Tribunal   by   way   of   appeals   and,  therefore,   the   Court   noticed   absence   of   any  efforts on the part of the Assessing Officer to  establish not only link but also having wrongly  concluded   in   absence   of   any   sufficiency   of  material that the transactions were bogus due  to non­existence of the company. This Court is  dealing   with   the   case   of   reopening   of   the  assessment at the stage where the objections of  the   assessee   have   been  disposed   of   and   the  Page 29 of 70 C/SCA/4299/2014 CAV JUDGMENT Assessing   Officer   had   formed   the   belief   of  income   chargeable   to   tax   having   escaped   the  assessment   on   the   basis   of   material   made  available by DCIT, Kolkata, on investigation.  10.7  This Court in the case of Patel Alloy Steel   (P.) Ltd. (supra) was dealing with the notice  issued beyond a period of four years  from the  end of relevant assessment year, where also the  question was with regard to failure on the part  of the assessee to disclose fully and truly all  the   material   facts.   The   Court   quashed   the  notice   on   the   ground   that   there   was   no  allegation   on   the   part   of   the   Revenue   that  there   was   any   failure   on   the   part   of   the  assessee   to   disclose   fully   and   truly   all   the  material   facts.   The   Assessing   Officer   noted  that   the   assessee   had   paid   interest   to   IDBI.  The copy of the ledger account of interest paid  was also with the Assessing Officer and these  details of borrowings of interest were part of  the  assessment   proceedings.   The   Court   noticed  that on verification of records, the Assessing  Page 30 of 70 C/SCA/4299/2014 CAV JUDGMENT Officer had based his reasons, which were the  part   of   original   assessment.   In   absence   of  anything to indicate that there was failure on  the part of the  assessee to disclose fully and  truly all the material facts, such notice was  quashed.  

10.8   The   same   was   the   case   in   the   case   of  Shardaben   K.   Modi   (supra).  There   was   no  independent material and the statement recorded  of the some of the assessee, was made the basis  of reopening. The Court held that in absence of  any evidentiary value of the statement recorded  under   section   133A   of   the   Act,   use   of   such  statement   cannot   be   permitted   without   any  corroborative   evidence   and   the   only   piece   of  document   was   such   statement.   Accordingly,   the  notice issued under section 148 of the Act was  not permitted to be proceeded.

11. At this stage, we may record that this Court  had an occasion to deal with identical question,  which   culminated   into   the   judgment   rendered   on  Page 31 of 70 C/SCA/4299/2014 CAV JUDGMENT March 25, 2014 in the case of Lalita Ashwin Jain   v. Income­tax Officer while dealing with Special   Civil   Application   Nos.1626   and   1627   of   2014.  Various judicial pronouncements on the very issue  were regarded and, therefore, it would be apt to  borrow   the   relevant   aspects   from   the   said  judgment   without   once   again   discussing   the   very  law :

"11.2   In   case   of  Phoolchand   Bajrang  Limited v. I.T.O [Supra], the Apex Court was  dealing with a case of reassessment. In the   original   assessment,   the   assessee   firm  claimed that it had borrowed certain amount  from   a   Calcutta   based   company.   The   I.T.O   directed   the   assessee   to   file   a   copy   of   account   of   the   said   Calcutta   Company   to   support   the   loan   transaction   and   in   reply  thereto,   assessee   produced   a   confirmatory  letter   from   the   said   company   confirming   payment of loan to the assessee. For nearly   five  years  ie.,  A.Y 199394  to  196869, such   deduction   of   interest,   as   claimed   by   the   assessee   having   been   paid   to   the   Calcutta  company,   continued   to   be   allowed   by   the   I.T.O.   Later   on,   I.T.O   entertained   some  doubts   about   genuineness   of   loan  transaction,   and   therefore,   a   communication   Page 32 of 70 C/SCA/4299/2014 CAV JUDGMENT was sent to I.T.O stationed at Calcutta. It   was   realized   that   the   Managing   Director   of   the said Calcutta company had confessed that   he   was   only   a   namelender   and   had   not   advanced   any   loan   to   any   party   during   the   three   assessment   years.   Thus,   these  transactions  were found to be bogus on the   basis of subsequent information received. In  light   of   these   facts,   the   Apex   Court   held   and observed thus,  "15.   In   the   present   case,   as   already   noticed, the I.T.O. Azamgarh, subsequent to   completion   of   the   original   assessment  proceedings,   on   making   an   enquiry   from   the   jurisdictional   I.T.O.   at   Calcutta,   learnt  that   the   Calcutta   Company   from   whom   the   assessee   claimed   to   have   borrowed   the   loan   of Rs. 50,000 in cash, had not really lent   any money but only its name, to cover up a   bogus   transaction   and   after   recording   this   satisfaction   as   required   by   the   provisions   of Section 147 of the Act proposed to reopen   the assessment proceedings. The present is,   thus,   not   a   case   where   the   Income   Tax   Officer sought to draw any fresh inference,  which could have been raised at  the time of  original   assessment   on   the   basis   of   the   material   placed   before   him   by   the   assessee   relating   to   the   loan   from   the   Calcutta   Company and which he failed to draw at that   Page 33 of 70 C/SCA/4299/2014 CAV JUDGMENT time.   Acquiring   fresh   information,   specific   in   nature   and   reliable   in   character,  relating   to   the   concluded   assessment   which   goes to expose the falsity of the statement   made by the assessee at the time of original   assessment is different from drawing a fresh   inference   from   the   some   facts   and   material   which was  available which the I.T.O. at the   time of original assessment proceedings. The   two   situations   are   distinct   and   different.   Thus,   where   the   transaction   itself   on   the  basis of subsequent information, is found to   be a bogus transaction, the mere disclosure  of that transaction at the time of original   assessment proceedings, cannot be said to be   disclosure of the "true" and "full" facts in   the   case   and   the   I.T.O.   would   have   the   jurisdiction   to   reopen   the   concluded   assessment   in   such   a   case.   It   is   correct   that   the   assessing   authority   could   have   deferred   the   completion   of   the   original   assessment   proceedings   for   further   enquiry   and   investigation   into   the   genuineness   to   the loan transaction but in our opinion his   failure  to  do  so  and complete the  original   assessment  proceedings   would   not   take   away  his jurisdiction to act under Section 147 of   the   Act,   on   receipt   of   the   information   subsequently.   The   subsequent   information   on   the   basis   of   which   the   I.T.O.   acquired   reasons to believe that income chargeable to   Page 34 of 70 C/SCA/4299/2014 CAV JUDGMENT tax had escaped assessment on account of the   omission of the assessee to make a full and   true   disclosure   of   the   primary   facts   was   relevant, reliable and specific. It was not  at all vague or nonspecific. 

Xx xx 

19. Again, in A.LA. Firm v. CIT, 189 (1991)   ITR 285, a three Judges bench of this Court,   to which one of us (S.C. Agrawal, J.,) was a  party, after an elaborate discussion of the  subject opined that the jurisdiction of the  Income Tax Officer to reassess income arises   if   he   has   in   consequence   of   specific   and   relevant   information   coming   into   his   possession   subsequent   to   the   previous  concluded   assessment,   reason   to   believe,   that   income   chargeable   to   tax   and   had   escaped assessment. It was held that even if   the  information  be  such that  it  could  have   been   obtained   by   the   I.T.O.   during   the   previous   assessment   proceedings   by  conducting   an   investigation   or   an   enquiry   but   was   not   in   fact   so   obtained,   it   would   not   affect   the   jurisdiction   of   the   Income  Tax   Officer   to  initiate   reassessment  proceedings,   if   the   twin   conditions  prescribed under Section 147 of the Act are   satisfied.

20. From a combined review of the judgments   of this Court, it follows that an Income tax   Page 35 of 70 C/SCA/4299/2014 CAV JUDGMENT Officer   acquires   jurisdiction   to   reopen   assessment   under   Section   147(a)   read   with   Section 148 of the Income Tax 1961 only if   on   the   basis   of   specific,   reliable   and   relevant   information   coming   to   his  possession   subsequently,   he   has   reasons   which   he   must   record,   to   believe   that   by   reason of omission or failure on the part of   the   assessee   to   make   a   true   and   full  disclosure   of   all   material   facts   necessary   for   his   assessment   during   the   concluded   assessment   proceedings,   any   part   of   his   income, profit or gains chargeable to income   tax   has   escaped   assessment.   He   may   start   reassessment proceedings either because some  fresh   facts   come   to   light   which   where   not   previously   disclosed   or   some   information   with   regard   to   the   facts   previously   disclosed   comes   into   his   possession   which   tends to expose the untruthfulness of those  facts. In such situations, it is not a case   of mere change of opinion or the drawing of   a different inference from the same facts as   were   earlier   available   but   acting   on   fresh   information.   Since,   the   belief   is   that   of  the   Income   tax   Officer,   the   sufficiency   of   reasons  for forming  the belief,  is  not for   the   Court   to   judge   but   it   is   open   to   an   assessee   to   establish   that   there   in   fact   existed no belief or that the belief was not   at   all   a  bona   fide  one   or   was   based   on  Page 36 of 70 C/SCA/4299/2014 CAV JUDGMENT vague,   irrelevant   and   nonspecific  information.   To   that   limited   extent,   the   Court   may   look   into   the   conclusion   arrived   at   by   the   Income   tax   Officer   and   examine   whether there was any material available on  the   record   from   which   the   requisite   belief   could   be   formed   by   the   Income   tax   Officer   and   further   whether   that   material   had   any  rational connection  or  a live link  for the   formation of the requisite belief. It would  be immaterial whether the Income tax Officer   at   the   time   of   making   the   original  assessment could or, could not have found by   further   enquiry   or   investigation,   whether  the  transaction  was  genuine  or  not, if one   the   basis   of   subsequent   information,   the   Income tax  Officer arrives at a conclusion,   after   satisfying   the   twin   conditions   prescribed   in   Section   147(a)   of   the   Act,   that   the   assessee   had   not   made   a   full   and   true disclosure of the material facts at the   time   of   original   assessment   and   therefore   income   chargeable   to   tax   had   escaped   assessment.   The   High   Courts   which  have  interpreted  Burlop Dealer's  case (Supra) as  laying   down   law   to   the   contrary   fell   in   error and  did  not appreciate  the import  of   that judgment correctly. 

21.   We   are   not   persuaded   to   accept   the   argument   of   Mr.   Sharma   that   the   question   Page 37 of 70 C/SCA/4299/2014 CAV JUDGMENT regarding   truthfulness   or   falsehood   of   the   transactions   reflected   in   the   return   can   only   be   examined   during   the   original  assessment proceedings and not at any stage  subsequent   thereto.   The   argument   is   too   broad   and   general   in   nature   and   does   violence   to   the   plain   phraseology   of   Sections   147(a)   and   148   of   the   Act   and   is   against   the   settled   law   by   this   Court.   We   have   to   look   to   the   purpose   and   intent   of   the   provisions.   One   of   the   purposes   of   Section 147, appears to us to be, to ensure   that   a   party   cannot   get   away   by   wilfully   making a    false or untrue statement at the   time   of   original   assessment   and   when   that  falsity comes to notice, to turn around and   say "you accepted my lie, now your hands are   tied   and   you   can   do   nothing".   It   would   be   travesty   of   justice   to   allow   the   assessee  that latitude. 

22. In our opinion, therefore, in the facts   of the present case the Income tax Officer,   Azamgarh   rightly   initiated   the   reassessment   proceedings   on   the   basis   of   subsequent   information, which was specific relevant and   reliable,   and   after   recording   the   reasons   for formation of his own belief that in the   original   assessment   proceedings,   the  assessee   had   not   disclosed   the   material   facts   truly   and   fully   and   therefore   income   Page 38 of 70 C/SCA/4299/2014 CAV JUDGMENT chargeable   to   tax   had   escaped   assessment.   He,   therefore,   correctly   invoked   the   provisions of Sections 147(a) and 148 of the   Act.   The   High   Court   was,   thus,   perfectly   justified  in   dismissing   the   writ   petition.  There is no merit in this appeal which fails   and   is   dismissed   but   with   no   order   as   to   costs."

11.3  In case of  P. Manirathnam Chetty & P.  Satyanarayana Chetty v. Income tax  Officer,   C Ward,  Chittoor & Anr., reported in [1975]  101 ITR 385 [A.P], the Income tax Officer in   a  proceedings  under  Section  147  of  the Act   accepted   the   book   results   of   the   assessee  firm. However, later on,  from the  order  of   the   Sales   Tax   authorities,   the   Assessing   Officer noticed that the assessee had failed   to   disclose   fully   and   truly   all   material   facts as the turnover of the assessee was at   much   higher   figure   and   penalty   also   was   levied by the Sales Tax authorities for such   suppression   of   turnover   and   therefore,   the   proceedings  under Section 147 of the Income  Tax   Act   were   initiated.   The   Commissioner   also   granted   sanction   by   saying   "yes".   The  Court   held   that   this   was   not   a   case   where   the   I.T.O   thought   that   it   was   a   case   for   investigation nor was there any documentary   evidence   to   support   his   report.   Merely   because the Commissioner said 'yes' against  Page 39 of 70 C/SCA/4299/2014 CAV JUDGMENT the   question   as   to   whether   such   was   a   fit   case   for   issuance   of   the   notice   under   Section 148, he was alleged of having acted   mechanically. The Court, therefore, observed  and   held   that   in   order   to   obviate   such   impression and to infuse more confidence in  the assessee, the Commissioner ought to have  atleast briefly stated the reasons as to why   the   sanction   was   accorded   for   proceedings   under section 147 of the Act. 

11.4  In case of  K.C.P Limited v. Income tax  Officer  [Supra],   the   assessee   had   sold   certain   machinery   and   had   shown   three   fourths   of   sale   price   as   profits.   The   assessment   was   accordingly   finalized.   Depreciation also was allowed at the time of   original proceedings. However, later on, it   was realized that the same was in excess due   to assessee's failure to disclose availment   of   initial   depreciation.   Therefore,   the   reassessment   proceedings  were   initiated   for  withdrawing   excess   depreciation.   The   Court   held that the assessee's contention that it   was   under   no   obligation   to   disclose   the   factum  of availment of initial depreciation   since the  form of return  prescribed at the   relevant   time   did   not   contain   any   column   requiring   the   assessee   to   furnish   such   information   could   not   be   accepted.   Every   assessee is expected to know the law that it   Page 40 of 70 C/SCA/4299/2014 CAV JUDGMENT was   not   entitled   to   claim   normal   depreciation   above   the   prescribed   ceiling.   If that was done and if that had crossed the   ceiling   by   availing   the   depreciation,   he   could be said to have omitted or failed to   disclose fully  and truly all material facts  necessary for the purpose of assessment.

xxx xxx xxx 12.4 The   Apex   Court   in   case   of  Income   tax  Officer   v.   Lakhmani   Mewal   Das  [Supra]   held  that   in   case   of   reassessment   proceedings,   the   reasons   recorded   for   formation   of   belief,   as   contemplated   under   Section   147  

(a)   must   have   rational   connection   with   or  relevant bearing on the formation of belief  and   rational   connection   postulates   that   there   must   be   direct   nexus   or   live   link   between   material   coming   to   Income   tax   Officer's notice and formation of his belief   that there has been escapement of assessee's  income from assessment in a particular year  because of his failure to disclose fully and   truly all material facts.

12.5  In   a   case   before   the   Apex   Court,   the   Income   tax   Officer   had   completed   original   assessment by allowing deduction of interest   paid to certain creditors. However, when one   of the  creditors  had confessed  that he was   doing   only   name   lending   and   that   other   Page 41 of 70 C/SCA/4299/2014 CAV JUDGMENT creditors   were   only  name   lenders,   the  reopening   proceedings   were   initiated.   There   was absence of any material to indicate that   the confession  made by the creditor related  to the loan to the assessee and not to some   one   else.   In   absence   of   such   confession   related   to   the   period   which   was   subject   matter   of   assessment,   the   Court   found   absence of live link or close nexus with the   material   and   the   belief   of   the   Income   tax   Officer,   and   therefore,   the   Apex   Court   quashed   the   order   of   the   High   Court   by   holding   that   such   material   could   not   have  led  to  formation  of  belief that  the income   of   the   assessee   had   escaped   assessment   on  account of assessee's failure or omission to   disclose fully and truly all material facts.  12.6   Delhi   High   Court   in   case   of   Signature   Hotels   (P)   Limited   v.   Income   tax   Officer  [Supra]   was   concerned   with   the   reassessment   proceedings   where   information  was   given   by   the   Director   of   Income   tax   (Investigation) that the amount received by   assessee from other company was nothing but  accommodation   entry   and   assessee   was   beneficiary.   In   absence   of   any   application   of mind on the part of the Assessing Officer   for   his   having   formed   a   belief   that   the   income   chargeable   to   tax   has   escaped   assessment which is a mandatory requirement,  Page 42 of 70 C/SCA/4299/2014 CAV JUDGMENT the Court held that the jurisdiction assumed   by the Assessing Officer for the purpose of   reassessment  proceeding   was   invalid.   The  Court   also   held   that,   "..The   'reasons   to  believe'   would   mean   cause   or   justification   of the Assessing Officer to believe that the   income   has   escaped   assessment   and   does   not   mean that the Assessing Officer should have  finally   ascertained   the   said   fact   by   legal   evidence or reached a conclusion, as this is   determined   and   decided   in   the   assessment   order,  which  is  the  final  stage  before the   Assessing Officer." 

12.7   Delhi High Court in case of Central  India   Electric   Supply   Company   Limited   v.   Income   tax   Officer,   Company  Circle   X,   New  Delhi  [Supra]   was   dealing   with   a   case   of   reopening.   Such   reassessment   proceedings  were   initiated   alleging   that   there   was   nondisclosure   of   primary   facts   on   the   part   of the assessee company which was engaged in   generation   and   supply   of   electricity   from   its   unit.   Its   unit   were   acquired   by   the   State   Government   in   1964   and   compensation   thereof   was   paid   in   the   same   year.   The   assessee   had   made   claim   for   higher   compensation   and   the   matter   was   finally   settled by the Supreme Court nearly after 10   years   and   the   enhanced  compensation     was  availed   to   the   assessee   in   the   assessment  Page 43 of 70 C/SCA/4299/2014 CAV JUDGMENT year 1979­80. 12.8 The Assessing Officer was  of   the   belief   that  since   the   income   had  accrued   to   the   assessee   under   the   head   of   Longterm   capital   gain   given   on   transfer   of   assets   in   respect   of   its   two   units,   such   income   was   to   be   taxed   in   the   very   assessment year  ie., 1964 when the transfer  took   place.   Considering   the   fact   that   the  Supreme Court pronounced its judgment which   settled   the   dispute   of   enhanced  compensation, the Delhi High Court held that   there was no lack of disclosure by assessee   with   respect   to   enhanced   compensation   and   therefore,   reopening   of   assessment   for   the   relevant   assessment   year   was   held   without   jurisdiction.

xxx xxx xxx

13.   In   light   of   the   discussion   held   hereinabove,   the   twin   conditions  required  for   the   satisfaction   of   the   Income   tax   Officer,   in   the   event   of   reopening   of   assessment   beyond   the   period   of   four   years   is   that   [i]   there   must   be   a   reason   to   believe   that   income   chargeable   to   tax   had  escaped   assessment;   and   [ii]   he   also   must  have reason to believe that such escapement  of   income   is   on   account   of   omission   or   failure   on   the   part   of   the   assessee   to   disclose fully and truly all material facts  for assessment of the income of the assessee   for the year under consideration.  Page 44 of 70 C/SCA/4299/2014 CAV JUDGMENT

14.   Once   the   Assessing   Officer   has   a   reason   to   believe   that   such   income   has   escaped   assessment,   the   same   as   per   the   statutory   requirement   under   Section   147(1)

(b) has to be more than rupees one lakh or   should   likely   to   be   more   than   rupees   one   lakh.   And   on   having   formed   such   belief,   sanction   of   the   Commissioner   for   reopening   needs to be obtained under Section  151 (2)   of   the   Act,   who   also   is   required   to   apply   his   mind   to   such   proposal   before   according   sanction,   rather   than   acting   mechanically.   For   examining   the   application   of   these   statutory   provisions,   in   the   present   case,   it   is   necessary   to   revert   to   the   facts.   Admittedly, the assessee had made disclosure   in respect  of  the investment  made  in  three   companies   and   the   assessment   was   completed   under   Section   143   (3)   on   1st   July   2008,   after scrutiny. In the reasons recorded for  reopening assessment under Section 147, the   Assessing   Officer   has   noted   the   fact   that  the return of the assessee for the A.Y 2006­ 07 was filed on 6th December 2006 where he   declared   his   come   at   Rs.   1,46,710/=,   such  return   was   processed   under   Section   143   (1)   and   her   case   was   selected   for   scrutiny   through CASS and accordingly, the assessment   order was passed on 1st July 2008 assessing   her   income   at   Rs.   1,51,890/=.   From   the   Page 45 of 70 C/SCA/4299/2014 CAV JUDGMENT sources of investment, the Assessing Officer   is   of   the   belief   that   the   companies   who   funded   the   investment   were   found   to   be   bogus. The investments were not found to be   recorded   in   the   books   of   account   of   the   assessee as they were squared off during the   financial   year   itself   and   the   explanation   offered by the assessee was not found to be   satisfactory,   in   as   much   as,   the   statement   recorded   under   Section   131   (1)(a)   of   Shri  Ashwin C. Jain husband of the petitioner on   8th   February   2013   wherein   he   admitted   that   such   name   sake   transactions   had   been  undertaken   by   him   were   in   the   name   of   his   family   members.   With   regard   to   the   three   companies  viz.,   New   Generation   Finvest  Private   Limited;   SRS   Vijay   Sales   Private   Limited   and   M/s.   Ami   Securities,   he   stated   inter alia  that he was in contact with one   Shri   Rajesh   Jain   of   Delhi   and   one   Shri   Amrutlal of Mumbai who introduced him to the   said companies for the purpose of providing  him   with   margin   funding   for   I.P.O  applications.   However,   he   had   no   clue   with   regard   to   the   whereabouts   of   both   these   persons.   He   also   failed   to   furnish   details   of loan amounts, refunds and profit extended   by the said parties to him. The Income tax   Officer on the basis of these details formed   his   belief   that   the   assessee's   income   had   escaped   assessment   within   the   meaning   of   Page 46 of 70 C/SCA/4299/2014 CAV JUDGMENT Section 147 of the Act. This was thus a case   where   there   were   no   full   and   true   disclosures by the assessee.

xxx xxx xxx 17.5 Considering   the   main   ground   of  challenge   whether   in   the  circumstances  reflected in the reasons recorded would lead   this   Court   to   hold   that   there   was   no   suppression on the  part of the  assessee  in   disclosing   fully   and   truly   all   material   facts. This aspect has two limbs -  firstly,  whether   in   fact   there   was   a   full   and   true   disclosure on the part of the assessee, and   secondly,   whether   from   the   material   the   Assessing  Officer had  with him,  he  in  fact   had   formed   a   reason   to   believe   that   the   income   chargeable   to   tax   had   escaped   the   assessment.

17.6   The   assessee   at   the   time   of  original   assessment   in   a   scrutiny   provided   details  of  all the  three  companies. And  as   per   the   reasons   recorded,   the   investment   made   by   the   assessee   were   funded   by   the   companies   which   were   found   to   be   bogus.   These   details   were   culled   out   from   the   statement   on   oath   given   by   the   husband   of   the   petitioner   under   Section   131(1)(a)   on   8th   February   2013.   The   assessment   as   noted   hereinabove was concluded on scrutiny on 1st  July   2008.   Undoubtedly,   the   assessee   Page 47 of 70 C/SCA/4299/2014 CAV JUDGMENT provided   details   of   companies   since   the   investment   was   funded   by   such   companies   at   the   time   of   assessment.   However,   later   on   very existence of the companies was in doubt   in as much as one Shri Rajesh Jain of Delhi   and Shri Amrutlal of Mumbai were the persons   through   whom   the   husband   of   the   petitioner   was   introduced   to   such   companies   and   when  whereabouts   of   these   two   persons   were   inquired,   he   had   pleaded   ignorance.   The   Assessing Officer, therefore, noted that the   source   of   investment   in   such   circumstances   remained   unexplained   as   the   companies   are   found   to   be   bogus   and   in   the   books   of   account   of   the   assessee,   such   investments   were  not found and  were squared  off during   the financial year itself. 

17.7 To such last portion of reasons recored   ie.,   absence   of   reflection   of   such   investment  in  the books of account  and the   same   having   been   squared   off   during   the   finance   year   itself   has   been   rigorously   challenged   by   the   petitioner.   It   as   contended that this is completely bereft of  facts,   and   therefore   assumption   of  jurisdiction should be held invalid.  17.8   In our mind, even if the assessee   is   in   a   position   to   point   out   that   such   investments   were   part   of   his   books   of   Page 48 of 70 C/SCA/4299/2014 CAV JUDGMENT account   and   were   not   squared   off   in   the   years   itself,   the   far   more   vital   in   the   reasons   recorded   is   the   aspect   of   the   companies   from   whose   fund   investments   were   made   in   the   Assessing   Officer's   belief   are  bogus, such details had been culled out from   the   statement   recored   by   none   other   than   husband   of   the   petitioner   who   also   had   stated   that   he   had   carried   out   the   transactions   in   the   name   of   his   family   members.   It   is   not   being   disputed   by   the   petitioner   that   her   husband   Mr.Ashwin   Jain   who  gave his  statement  was not  truthful  in   so contending. 

17.9   As   held   by   the   Apex   Court   in  Phool  Chand   Bajrang   Lal   v.   Income   tax   Officer   [Supra]   where   transaction   itself   on   the   basis of subsequent information is found to  be a bogus transaction, the Court held that   mere   disclosure   of   such   transaction   at   the   time   of   original   assessment   proceedings,   cannot be said to be a disclosure of 'full'  and   'true'   facts   and   the   Assessing   Officer   surely   would   have   jurisdiction   to   reopen   concluded   assessment   in   such   a   case.   The   Apex   Court   also   had   observed   in   the   said   case   that   the   Assessing   Officer   may   start  reassessment proceedings either because some  fresh   facts   come   to   light     which   were   not   previously   disclosed,   or   some   information  Page 49 of 70 C/SCA/4299/2014 CAV JUDGMENT with   regard   to   the   facts   previously   disclosed   comes   into   his   possession   which   tends to expose the untruthfulness of those  facts. In such situations, it is not a case   of   mere   change   of   opinion   or   drawing   of   a   different   inference   from   the   same   facts   as   were   earlier   available   but   acting   on   fresh   information. Since the belief is that of the   Income   tax   Officer,   the   sufficiency   of   reasons  for forming  the belief,  is  not for   the   Court   to   judge   but   is   is   open   to   an   assessee   to   establish   that   there   in   fact   existed no belief or that the belief was not   at   all   a   bona   fide   one   or   was   based   on   vague,   irrelevant   and   nonspecific  information.   To   that   limited   extent,   the   Court may look the conclusion arrived at by   the   Income   tax   Officer   and   examine   whether   there   was   any   material   available   on   the   record from which the requisite belief could   be   formed   by   him   and   further   whether   that   material   had   any   rational   connection   or   a  live   link   with   the   formation   of   the   requisite belief.

xxx xxx xxx

18.  In   the   instant   case   also,   these   observations   and   findings   would   have   a   direct   bearing.   The   Assessing   Officer,   at   the   time   of   making   original   assessment   though made an enquiry, could not have found   by further inquiry or investigation whether   Page 50 of 70 C/SCA/4299/2014 CAV JUDGMENT such   transactions   were   genuine   or   not.   However,   on   the   basis   of   subsequent   informations, he arrived at such conclusion   after   satisfying   both   the   conditions   prescribed   under   Section   147   that   the   assessee failed to disclose fully and truly  all  material  facts  at  the  time  of  original   assessment   and   therefore,   the   income   chargeable   to   tax   had   escaped   assessment.   The Assessing Officer certainly would assume   jurisdiction under Section 147. 

19.   The   contention   raised   before   us  that   the   Assessing   Officer   had   all   the   powers   to   further   probe   into   the   controversies   of   the   transactions   as   reflected   in   the   return   at   the   time   of   original   assessment   proceedings   also   need  not   be   gone   into   at   this   stage.   As   again   held   by   the   Court   in   case   of  Phool   Chand  Bajrang  Lal  [Supra], "..one  has to look  to  the   purpose   and   intent   of   the   provisions.  One  of  the  purposes  of  Section  147  apperas   to be to ensure that a party cannot get away   by   willfully   making   a   false   or   untrue   statement at the time of original assessment   and   when   that   falsity   comes   to   notice   to   turn   around   and   say   'you   accepted   my   lie,   now   your   hands   are   tied   and   you   can  do  nothing'.   It   would,   be   travesty   of   justice  to allow the assessee that latitude."  Page 51 of 70 C/SCA/4299/2014 CAV JUDGMENT 19.1   In   the   instant   case   also,   we   noticed   that   the   Assessing   Officer   on   the  basis   of   material   provided   by   the   investigating   wing;   particularly   the  statement recorded under section 131 (1)(a)   notices the falsehood in the disclosure made   by   the   assessee   at   the   time   of   original   assessment. Assuming that the dealing of the   petitioner was only with one company and not   all of the three companies. In wake of the   information   received   by   the   Assessing  Officer,   when   formed   a   belief   that   the   investment   made   from   the   funding   of   such   companies   which   are   bogus,   the   Assessing   Officer had rightly assumed the jurisdiction   of   initiating   the   reassessment   proceedings.   Assessing   Officer,   on   the   basis   of   information subsequently having come to his   knowledge,   recognized   untruthfulness   of   the   facts furnished earlier, he surely cannot be   said to have changed his opinion on the same   facts. The Apex Court also, while analyzing  what amounts to 'full'  and 'true'  facts in  the  case of  Sri  Krishna Private  Limited  v.   Income  Tax  Officer  & Ors., reported in 221   ITR 538 has held the Income tax Officer can   issue notice under section 148 of the Income   tax   Act,   1961,   proposing   to   reopen   an   assessment   only   where   he   has   reason   to   believe   that   on   account   of   either   the   Page 52 of 70 C/SCA/4299/2014 CAV JUDGMENT omission   or   failure   on   the   part   of   the   assessee to file the return or on account of   the omission or failure on the part of the   assessee   to   disclose   fully   and   truly   all   material facts necessary for his assessment   for   that   year,   income   has   escaped  assessment.   The   existence   of   the   reason   to   believe   is   intended   to   be   a   check,   a  limitation,   upon   his   power   to   reopen   the   assessment.   Section   148   (2)   imposes   a   further check upon the said power  viz., the  requirement of recording of reasons for such   reopening by the Income tax Officer. Section   151 imposes yet another check upon the said   power  viz.,   the   Commissioner   or   the   Board,   as the case may be, has to be satisfied, on   the   basis   of   the   reasons   recorded   by   the   Income tax   Officer, that it is a fit case   for   issuance   of   such   notice.   The   power   conferred   upon   the   Income   tax   Officer   by   sections   147   and   148   is   thus   not   an  unbridled one. It is hedged in with several   safeguards   conceived   in   the   interest   of   eliminating room for abuse of this power by   the Assessing Officers. The idea was to save   the assessee from harassment resulting from   mechanical reopening of assessments but this   protection avails only to those assesses who   disclose all material facts truly and fully.   The   Apex   Court,   while   referring   to   the   decision   of   the   Constitution   Bench   in   Page 53 of 70 C/SCA/4299/2014 CAV JUDGMENT Calcutta Discount Co. Limited v. Income tax  Officer [1961] 41 ITR 191 (SC), observed and   held thus  ".. In that case, the alleged nondisclosure   of material facts fully and truly - to put  in the words of the Court - was the failure   of   the   assessee   to   disclose   "the   true  intention   behind   the   sale   of   the   shares".  The   assessee   had   stated   during   the   assessment   proceedings   that   the   sale   of  shares during the relevant assessment years   was   a   casual   transaction   in   the   nature   of   mere   change   of   investment.   The   Income   tax  Officer   found   later   that   those   sales   were  really   in   the   nature   of   trading   transactions.   The   case   of   the   Revenue   was  that the assessee ought to have stated that   they were trading transactions and that his  assertion   that   they   were   casual  transactions,   in   the   nature   of   change   of   investment, amounted to "omission or failure  to   disclose   fully   and   truly   all   material   facts necessary for his assessment for that  year" within the meaning of section 34. This   contention   of   the   Revenue   was   rejected   holding   that   the   true   nature   of   the   transaction,   being   a   matter   capable   of   different   opinions,   is   not   a   material   or   primary  fact  but  a matter  of  inference and   hence, it cannot be said that there was an   Page 54 of 70 C/SCA/4299/2014 CAV JUDGMENT omission   or   failure   of   the   nature   contemplated   by   section   34   on   the   part   of   the   assessee.   Now,   what   needs   to   be   emphasized   is   that   the   obligation   on   the   assessee to disclose the material facts - or   what   are   called,   primary   facts   -   is   not   a  mere   disclosure   but   a   disclosure   which   is  full and true. A false disclosure is not a   true   disclosure.   The   disclosure   must   not   only   be   true   but   must   be   full   "fully   and  truly". A false assertion, or statement, of   material   fact,   therefore,   attracts   the  jurisdiction of the Income tax Officer under   section   34/147.   Take   this   very   case   :   the   Income tax Officer says that on the basis of   investigation and enquiries made during the   assessment   proceedings   relating   to   the  subsequent assessment year, he has come into   possession   of   material,   on   the   basis   of   which,   he   has   reasons   to   believe   that   the   assessee   had   put   forward   certain   bogus   and   false   unsecured   hundi   loans   said   to   have   been taken by him from non0existent persons  or his dummies, as the case may be, and that   on that account income chargeable to tax has   escaped assessment . According to him, this  was   a   false   assertion   to   the   knowledge   of   the   assessee.   The   Income   tax   Officer   says  that   during   the   assessment   relating   to   the   subsequent   assessment   year,   similar   loans  from  some  of  these  very persons  were  found   Page 55 of 70 C/SCA/4299/2014 CAV JUDGMENT to   be   bogus.   On   that   basis,   he   seeks   to   reopen   the   assessment.   It   is   necessary   to  remember   that   we   are   at   the   stage   of   reopening only. The question is whether, in  the   above   circumstances,   the   assessee   can   say,   with   any   justification,   that   he   had   fully and truly disclosed the material facts   necessary for his assessment for that year.  Having created and recorded bogus entries of   loans,  with what  face  can  the assessee say   that   he   had   truly   and   fully   disclosed   all   material facts necessary for his assessment   for   that   year.   True   it   is   that   the   Income   tax   Officer   could   have   investigated   the   truth   of   the   said   assertion   -   which   he   actually   did   in   the   subsequent   assessment   year   -   but   that   does   not   relieve   the   assessee of his obligation, placed upon him  by the statute, to disclose fully and truly   all   material facts. Indubitably, whether a  loan,   alleged   to   have   been   taken   by   the   assessee,   is   true   or   false,   is   a   material   fact   -   and   not   an   inference,   factual   or  legal, to be drawn from given facts. In this   case,   it   is   shown   to   us   that   ten   persons   [who are  alleged to  have  advanced  loans  to  the  assessee  in  a total sum  of  Rs.3,80,000   out   of   the   total   hundi   loans   of   Rs. 

8,53,298]   were   established   to   be   bogus   persons   or   mere   name   lenders   in   the   assessment   proceedings   relating   to  Page 56 of 70 C/SCA/4299/2014 CAV JUDGMENT subsequent   assessment   year.   Does   it   not   furnish   a   reasonable   ground   for   the   Income   tax   Officer   to   believe   that   on   account   of   the failure - indeed not a mere failure but   a   positive   design   to   mislead   -   of   the   assessee   to   disclose   all   material   facts,   fully   and   truly,   necessary   for   the   assessment for that year, income had escaped   assessment ? We are of the firm opinion that   it does. It is necessary  to  reiterate  that   we are now at the stage of the validity of   the   notice   under   section   148/147.   The   enquiry   at   this   stage   of   the   only   to   see   whether there are reasonable grounds for the   Income   tax   Officer   to   believe   and   not   whether   omission/failure   and   the   escapement   of income is established. It is necessary to   keep this distinction in mind."

12. In view of the discussion held hereinabove,  adverting to the facts, in the present case, the  scrutiny   of   return   of   income   filed   for   the  assessment   year   2006­07   was   undertaken.   The  notice   under   section   143(2)   of   the   Act   was  issued.   Due   to   change   in   incumbency,   the  Assessing   Officer   also   issued   notice   under  section 143(2) of the Act on September 19, 2008  along   with   notice   under   section   143(1)   of   the  Page 57 of 70 C/SCA/4299/2014 CAV JUDGMENT Act, calling for certain information. It was also  noted during such scrutiny that the assessee was  engaged   in   the   business   of   trading   in   shares,  securities   and   future   option.   The   assessee   also  showed   income   from   other   sources   i.e.   from  dividend. In respect of unsecured loans, various  queries   were   raised   and   they   have   been   also  answered.   Information   was   called   for   in   respect  of   unsecured   loans   along   with   confirmation   of  accounts   for   all   transactions   above   Rs.20,000/­  as could be noticed  from the communication dated  September   19,   2008.   The   details   of   all   sundry  creditors   with   PANs   and   addresses   have   been  furnished.   It   also   reflects   that   no   loans   or  advances were taken, except of a sum of more than  Rs.20,000/­,   otherwise   than   by   way   of   account  payee   cheque   or   bank   draft   as   per   reply   dated  November   27,   2008.   The   details   furnished   qua  unsecured loans are exhaustive. Relevant part of  further communication dated December 03, 2008 by  which   additional   details   were   called   for,   which  reads as under :

Page 58 of 70 C/SCA/4299/2014 CAV JUDGMENT

"(1)  Please   furnish   details   as   to   how   secured   loans   has   acquired,   mode   of   acquisition,   details   of   assets   pledged  against   such   secured   loans   given   on   security.   Name   and   complete   address   of   banks/ institution from whom loans received  and detail narration of year wise receipt of   loan.

                    xxx           xxx      xxx


         (3)        Please   furnish   genuineness   and 

creditworthiness   of   all   the   parties  mentioned in the list of unsecured loans and   deposits with complete address and PAN other   wise   such   loans   will   be   considered   as  unexplained   and   introduced   form   you  unexplained source and  will be added to he   total income."

13. This   was   replied   to   on   December   15,   2008,  the relevant part of which reads as under :

"(5)  As   stated   in   our   earlier   letter   dt.8­12­2008   vide   para   5,   we   are   enclosing  herewith   the   confirmation   letters   from   the  remaining   loan   accounts.   We   have   already   filed confirmation letters obtained from the  5 parties mentioned in para 5 of our letter   dt.8­12­2008.

Page 59 of 70 C/SCA/4299/2014 CAV JUDGMENT

a) Ashok Finstock Limited 

b) Basant Marketing Pvt. Ltd.

c) Dum Duma Comm Pvt. Ltd.

d) Enrich Industries Ltd.

e) N.K. Kheshkani & Co.

f) Narendra Kheshkani

g) Neela N. Bhatt

e) S.K. Kar

f) Shivalik Buildwell P. Ltd.

g) Suvomita Kar

h) Zen Yarns"

14. The   confirmation   of   amount   from   April   01,  2005 to March 31, 2006 for a sum of Rs.8.71 crore  was also furnished by Basant Marketing Pvt. Ltd.  vide   communication   dated   April   01,   2008.   This  further   reflects   various   dates   on   which   the  amount had been credited in the bank along with  necessary details.

15. In the wake of these facts and material, the  scrutiny   assessment   was   finalised   and   that   the  demand   was   made   under   section   14A   and   94(7)   of  the Act. 

Page 60 of 70 C/SCA/4299/2014 CAV JUDGMENT

16. Ostensibly,   thus,   there   was   disclosure   and  the occasion would not arise to term this as the  assessee not having disclosed fully and truly all  the   material   facts   necessary   for   assessment.  However,   in   essence,   if   the   unsecured   loans  obtained from Basant Marketing Pvt. Ltd. from the  material   supplied   by   them,   the   DCIT,   Kolkata  reveals   that   the   same   was   as   a   result   of  accommodation   entry   in   the   form   of   loans   and  advances from Basant Marketing Pvt. Ltd. to the  tune of Rs.8.71 crore, the case of the assessee  would surely be covered under the said provision  of law as it would not amount to full and true  disclosure on the part of the assessee.   At   this   stage,   the   reasons   recorded  shall have to be regarded, which have been based  on the information contained in the report of the  DCIT, Kolkata, dated March 24, 2013, wherein it  had   been   noticed   that   the   assessee   company  obtained accommodation entry in the form of loans  and advances from Basant Marketing Pvt. Ltd. and,  therefore, the Assessing Officer based his reason  Page 61 of 70 C/SCA/4299/2014 CAV JUDGMENT to believe that the income chargeable to tax had  escaped the assessment. 

17. In   the   post   notice   correspondence   dated  March   05,   2014,   it   has   been   stated   by   the  Assessing Officer that Basant Marketing Pvt. Ltd.  provided   accommodation   entry   to   various  companies, where assessee company is one of them.  Basant Marketing Pvt. Ltd. is a dummy company of  one Shri Arun Dalmia and substantial material is  found   to   base   such   reasons   recorded   during   the  search   by   CBI,   Mumbai   and,   therefore,   the  Assessing Officer issued a notice to  show cause  as   to   why   the   said   amount   of   Rs.8.71   crore  received   from   Basant   Marketing   Pvt.   Ltd.   should  not be treated as cash credit under section 68 of  the Act.

18. As mentioned hereinabove, we had called for  the original file, which had revealed new, valid  and   tangible   information   supporting   Assessing  Officer's   opinion   received   from   DCIT,   Kolkata,  based on the material found during the search by  Page 62 of 70 C/SCA/4299/2014 CAV JUDGMENT the CBI, where Basant Marketing Pvt. Ltd. is said  to be a dummy company of one Shri Arun Dalmia.    What has been emphasised by the learned  Senior   Counsel   appearing   for   the   petitioner   is  that the Assessing Officer had attempted to fill  in   the   gap   by   terming   the   amount   received   from  Basant   Marketing   Pvt.   Ltd.   as   "accommodation  entry",   which   she   could   not   have   done   without  further   inquiry/   verification.   Yet   another  contention   emphasised   by   the   learned   Senior  Counsel   is   that   the   post   notice   correspondence  made   after   the   reasons   recorded   could   not   have  added anything which was lacking in the reasons  themselves.   He   urged   that   in   absence   of   any  statement   given   by   any   Director   of   Basant  Marketing   Pvt.   Ltd.   stating   that   the   assessee  received and obtained accommodation entry in the  form   of   loans   and   advances,   the   reasons   lack  basis. The Director Mr.Dalmia of Basant Marketing  Pvt.   Ltd.   as   contended   also   does   not   reveal  anywhere and, therefore, it is premature on the  part   of   the   Assessing   Officer   to   so   record   the  Page 63 of 70 C/SCA/4299/2014 CAV JUDGMENT reasons. It is further urged that the affidavit  of Rishabh Dalmia stating on oath that the loan  transactions with the petitioner are genuine for  having   been   carried   out   only   through   cheques,  prima   facie  vindicates   that   the   entire   exercise  is   based   on   suspicion.   The   entire   thrust,  therefore, is that issuance of notice is nothing  but a fishing inquiry.

19. As   discussed   at   length   while   adverting   to  the law, that sufficiency of reasons recorded by  the   Assessing   Officer   need   not   be   gone   into   by  this Court. Of course, the Assessing Officer when  forms his belief on the basis of subsequent new  and   specific   information   that   the   income  chargeable   to   tax   has   escaped   assessment   on  account of omission on the part of the assessee  to   make   full   and   true   disclosure   of   primary  facts,   he   may   start   reassessment   proceedings   as  fresh facts revealed  the non­disclosure full and  true. Such facts were not previously disclosed or  it can be said that if previously disclosed, they  expose untruthfulness of facts revealed. Page 64 of 70 C/SCA/4299/2014 CAV JUDGMENT

20. The   Assessing   Officer   required   jurisdiction  to reopen under section 147 read with section 148  of   the   Act,   where   the   information   must   be  specific and reliable. As held by the Apex Court  in the case of Phul Chand Bajrang (supra), since  the belief is that of the Income­tax Officer, the  sufficiency of reasons for forming the belief, is  not   for   the   Court   to   judge   but   is   open   to   an  assessee to establish that there exists no belief  or that the belief is not at all a bona fide one  or   based   on   vague,   irrelevant   and   non­specific  information.   To   that   limited   extent,   the   Court  may   look   at   the   view   taken   by   the   Income­tax  Officer and can examine whether any material is  available   on   record   from   which   the   requisite  belief could be formed by the Assessing Officer  and   whether   that   material   has   any   rational  connection or a live link with the formation of  the requisite belief. It is also immaterial that  at   the   time   of   making   original   assessment,   the  Assessing   Officer   could   have   found   by   further  inquiry   or   investigation   as   to   whether   the  Page 65 of 70 C/SCA/4299/2014 CAV JUDGMENT transactions were genuine or not. If on the basis  of   subsequent   valid   information,   the   Assessing  Officer forms a reason to believe on satisfying  twin   conditions   prescribed   under   section   147   of  the Act that no full and true disclosure of facts  was made by the assessee at the time of original  assessment and, therefore, the income chargeable  to tax had escaped assessment, his belief and the  notice   of   reassessment   based   on   such   belief/  opinion needs no interference.

  In   the   present   case,   since   both   the  necessary   conditions   have   been   duly   fulfilled,  sufficiency of the reasons is not to be gone into  by this Court. The information furnished at the  time   of   original   assessment,   when   by   subsequent  information   received   from   the   DCIT,   Kolkata,  itself found to be controverted, the objection to  the notice of reassessment under section 147 of  the Act must fail. At the costs of ingemination,  it   needs   to   be   mentioned   that   at   the   time   of  scrutiny assessment, a specific query was raised  with   regard   to   unsecured   loans   and   advances  received   from   the   said   company   namely,   Basant  Page 66 of 70 C/SCA/4299/2014 CAV JUDGMENT Marketing Pvt. Ltd. based at Kolkata. These being  the transactions through the cheques and drafts,  there would arise no question of   the Assessing  Officer   not   accepting   such   version   of   the  assessee and not treating them as genuine loans  and   advances.   Furnishing   the   details   of   names,  addresses,   PANs,   etc.   also   would   lose   its  relevance if subsequently furnished information,  which has been made basis for issuance of notice  impugned,   concludes   that   Basant   Marketing   Pvt.  Ltd. is merely a dummy company of one Shri Arun  Dalmia, which provided the accommodation entries  to various beneficiaries.

21. This   Court   has   examined   the   belief   of   the  Assessing Officer to a limited extent to inquiry  as   to   whether   there   was   sufficient   material  available on record for the Assessing Officer to  form a requisite belief whether there was a live  link   existing   of   the   material   and   the   income  chargeable   to   tax   that   escaped   assessment.   This  does   not   appear   to   be   the   case   where   the  Assessing   Officer   on   vague   or   unspecific  information   initiated   the   proceedings   of  Page 67 of 70 C/SCA/4299/2014 CAV JUDGMENT reassessment,   without   bothering   to   form   his   own  belief   in   respect   of   such   material.   We   need   to  notice   that   the   Joint   Director,   CBI,   Mumbai,  intimated   to   the   DIT   (Investigation),   Mumbai.   A  case is registered against Mr.Arun Dalmia, Harsh  Dalmia and during the search at their residence  and   office   premises,   the   substantial   material  indicated   that   20   dummy   companies   of   Mr.Arun  Dalmia were engaged in money laundering and the  income­tax   evasion.   The   said   entities   included  Basant   Marketing   Pvt.   Ltd.   also.   From   the  analysis   of   details   furnished   and   the  beneficiaries reflected, which are spread across  the   country,   the   CIT,   Koklata,   suspected   the  accommodation   entry   related   to   the   assessment  year 2006­07 as well, this information has been  provided   to   Director   General   of   Income­tax,  Kolkata, who in turn, communicated to the Chief  Commissioner   of   Income­tax,   Ahmedabad.   Further  revelation   of   investigation   as   could   be   noticed  from   the   record   examined   (file)   deserves   no  reflection   in   this   petition.   Insistence   on   the  part   of   the   petitioner   to   provide   any   further  Page 68 of 70 C/SCA/4299/2014 CAV JUDGMENT material   forming   the   part   of   investigation  carried   out   against   Dalmias   also   needs   to   meet  with   negation,   as   the   law   requires   supply   of  information   on   which   Assessing   Officer   recorded  her satisfaction, without necessitating supply of  any specific documents. The proceedings initiated  under   section   147   of   the   Act   would   not     be  rendered void on non­supply of such document for  which   confidentiality   is   claimed   at   this   stage,  following the decision of the Delhi High Court in  case   of  Acorus   Unitech   Wireless   (P.)   Ltd.   (supra).  Assumption   of   jurisdiction   on   the  part  of the Assessing Officer is since based on fresh  information, specific and reliable and otherwise  sustainable   under   the   law,   challenge   to  reassessment proceedings warrant no interference.

22. Resultantly,   the   petition   is   dismissed.  Notice is discharged. There shall be, however, no  order as to costs.

(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Page 69 of 70 C/SCA/4299/2014 CAV JUDGMENT Aakar Page 70 of 70