TaxTMI 
TaxTMI 
2016 (8) TMI 281
X X X X Extracts X X X X
X X X X Extracts X X X X
....s also 3(c)(d) along with audited financial statement. Then, petitioner company received a notice under Section 148 of the Act dated 31.3.2015, interalia, stating that the authority has reason to believe that income chargeable to tax had escaped assessment and thereby, directed the petitioner Company to submit return in the prescribed form within a period of 30 days. In response to the same, on 25.4.2015 the petitioner company informed the respondent authority that return of the company had been processed under Section 143(1) of the Act and requested to inform the reasons for issuance of notice under Section 148 of the Act so as to see that it could file his return of income and submit the effective reply. 3. The petitioner, in response to the said notice of reassessment, submitted the return on 28.4.2015 and later on, the company received copy of reasons which have been recorded for issuance of notice under Section 148 of the Act under the communication dated 10.8.2015. Simultaneously, the petitioner was served with the notice under Section 143(2) and 142(1) of the Act. Upon receipt of the said reasons along with the notice stated above, under a letter dated 24.8.2015 the petit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lects a sheer non-application of mind on the part of authority and there is no valid reason assigned to arrive at a decision or to form an opinion that the income has been escaped from assessment. Learned counsel submitted that fishy inquiry without independent material is impermissible or not a valid ground to reopen the assessment beyond the period of 4 years. Learned counsel thereby submitted that the impugned notice as such deserves to be set aside. 5. Learned counsel for the petitioner further submitted that in the absence of any new material or information against the petitioner, the authority is not expected to blindly relied upon the information received from DGIT (Investigation), Ahmedabad and just for the sake of making fishy inquiry or reassuring, the reopening is not to be resorted to. Learned counsel submitted that the Apex Court in case of 259 ITR 19, has propounded that adequate information must be parted with to a person concerned so as to enable him to deal with the objections to be submitted and thereby, learned counsel submitted that at the relevant point of time the reasons recorded have not been provided and therefore, in the background of said fact, the ope....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble belief is formed, the authority may not be allowed to be intercepted in exercise of its statutory function and thereby learned counsel for the Revenue submitted that no interference be made in exercise of writ jurisdiction. 7. Having heard learned counsel appearing for the respective parties, before dealing with the submissions made before the Court, first and foremost consideration to deal with is as to whether a reasonable belief formed by the authority is based upon some material or not. To deal with this, we may reproduce the reasons which are recorded by the authority while issuing notice under Section 148 of the Act. Relevant extract of the said reasons read as under : "3. The assessee is engaged in the business of manufacturing of textile machinery and spare parts. The assessee has filed his return of income on 26.9.2008 declaring total income at Rs. 4,64,28,090/-. The case was processed u/s.143(1) by accepting return of income. 4. In this case, information has been received by DGIT (Investigation), Ahmedabad vide No.DGIT(Inv.) /AHD/VAT/Bogus Purchase/2014-15 dated 26.3.2015. It is stated in the letter that two surveys were carried out by the I/o. Pr.DIT (Inv.) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Constitution of India. 10. In the background of aforesaid circumstance available and reflected on record, it appears to this Court that the authority has applied its mind and has rightly relied upon the information available before it while exercising the power to reopen the assessment. We may recall the proposition of law on the issue in question in a well known decision of Apex Court in case of Assistant Commissioner of Income-Tax V/s. Rajesh Jhaveri Stock Brokers Pvt. Ltd., reported in 2007 (291) ITR 500. The Apex Court, dealing with the said case, has dealt with statutory provisions prior to amendment as well as post amendment and after analyzing the provisions of Sections 147 and 148 of the Act, the Apex Court has opined that Section 147 authorizes and permits the Assessing Officer to assess or re-assess the income chargeable to tax if he has reason to believe that income for any assessment year as escaped the assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification and after considering and analyzing the provision, it has been propounded that the expression cannot be read to mean that Assessing Officer should have finally ascertain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceeding is not relevant. In other words, at the initiation stage, 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 by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)] ; Raymond Wollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contended that the information provided by a different Investigating Team may not be ipso facto utilized to re open the assessment which has become final by the Income-tax authority. It was also contended by the assessee of that case that there was no independent application of mind on the part of Assessing Officer and just based upon said information provided by the Excise Department, the authority resorted to Section 148 of the Act to reopen the assessment. This issue in extenso dealt with by the Division Bench of this Court and by a detailed judgment, came to conclusion that the Assessing Officer has merely relied upon the show cause notice issued by the Excise Department and has not concluded finally and therefore, there is no illegality or irregularity in arriving at a belief that assessment deserves to be reopen. Relying upon the decision delivered by the Apex Court, it is held that action of reopening of assessment was found to be justified. Relevant Paragraph Nos.9, 10, 11, 12, 13 and 16 of the said decision worth to be taken note of and therefore, reproduced hereinbelow : "9. It can thus be seen that the entire material collected by the DGCEI during the search, which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... but it can be a valid reason to believe that the chargeable income has been under assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied.' 11. In case of Income Tax Officer vs Purushottam Das Bangur (supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e officers of the Mining Department in the presence of the representatives of the assessee and according to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had in....