Bharatkumar Kalubhai Ghadiya v. Assistant Commissioner Of Income Tax, Central Circle 2(3

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 7743 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE BELA M. TRIVEDI andHONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI ========================================================== 1Whether Reporters of Local Papers may be allowedNoto see the judgment ?to see the judgment ? 2To be referred to the Reporter or not ?Yes 3Whether their Lordships wish to see the fair copyNoof the judgment ?of the judgment ? 4Whether this case involves a substantial questionNoof law as to the interpretation of the Constitutionof India or any order made thereunder ?of law as to the interpretation of the Constitutionof India or any order made thereunder ? ==========================================================BHARATKUMAR KALUBHAI GHADIYA Versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3) ========================================================== Appearance: MR KETAN H SHAH(2705) for the Petitioner(s) No. 1MR. AMAN K SHAH(9992) for the Petitioner(s) No. 1MR. M.R.BHATT, SENIOR ADVOCATE for MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI Date : 19/08/2021 ORAL JUDGMENT (PER : HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI) 1.This petition, under Article 226 of the Constitution of India,is filed by the petitioner – assessee seeking to quash and setis filed by the petitioner – assessee seeking to quash and set aside the Notice dated 18.03.2020 issued by the respondentauthority under section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2013-14,as it has reason to believe that the income chargeable to tax forthe assessment year under consideration has escapedassessment within the meaning of section 147 of the Act. 2.The facts in brief of the case of the petitioner are that thepetitioner, who is an individual, had, filed Return of Income (RoI)on 17.03.2021 at net taxable income of Rs.23,30,760/-. Theassessment under section 143(3) r/w. section 153A of the Act wasfinalized on 31.12.2015. However, thereafter, the impugnednotice under section 148 of the Act had been issued to thepetitioner. The RoI for the Assessing Officer 2013-14 was filed on21.03.2014 earlier, and there was submission dated 23.12.2015,filed before the Assessing Officer. The petitioner also furnishedthe information as was asked for. Thereafter, the assessmentunder section 143(3), r/w. section 153A of the Act was framedvide Assessment Order dated 31.12.2015. After filing RoI on17.03.2021, based on proceedings under section 148 of the Act,the Assessing Officer supplied the reasons for reopening videcommunication dated 24.03.2021. The notice under section142(1) of the Act was issued on 08.04.2021. Against the reasonsaccorded, the petitioner, vide letter dated 22.04.2021, raisedobjections against reopening on factual as well as the legalgrounds and certain submissions along with accompanimentsthereto, were also filed vide communication dated 03.05.2021,however, the respondent authority disposed of the saidobjections raised by the petitioner vide order dated 10.05.2021inter alia holding that the reopening is justified and valid in theeye of law. Thereafter, a show-cause notice dated 25.05.2021 was issued against the petitioner fixing the date of hearing on31.05.2021, which were replied by the petitioner bycommunication dated 26.05.2021 raising some contentions withregard to the identical matter etc. and grant of interim relief bythis Court. Accordingly, the petitioner is before this Court by wayof this petition. was issued against the petitioner fixing the date of hearing on31.05.2021, which were replied by the petitioner bycommunication dated 26.05.2021 raising some contentions withregard to the identical matter etc. and grant of interim relief bythis Court. Accordingly, the petitioner is before this Court by wayof this petition. 3.We have heard, learned advocate Mr. Ketan Shah for thepetitioner and learned senior advocate Mr. M. R. Bhatt for learnedadvocate Mrs. Mauna M. Bhatt for the respondent. 3.1The learned advocate for the petitioner has vehemently andfervently argued that in the present case, the assessee hasneither contacted, nor has remote contact with Shri Jignesh Shahas mentioned in the so-called list and therefore, the notice undersection 148 of the Act is bad in law. It is submitted that there isno application of mind by the Assessing Officer and hence, theimpugned notice deserves to be set aside. 3.2It is further contended by the learned advocate for thepetitioner that even the list filed by Shri Jignesh Shah does notcontain the name of the petitioner herein. The learned advocatefor the petitioner further drew our attention to the letter dated18.12.2014, and submitted that it was noticed by CBDT that theassessee were coerced to admit undisclosed income duringsearches/surveys conducted by the department and therefore,such practice was deprecated by the CBDT. He submitted everycitizen has right to transact in share and make purchase and salethe same in the market, and thereby, there is nothing wrong inavailing the benefit/profit from the same. Further, it is submittedthat whatever Shri Jignesh Shah has done, cannot be taken as accommodation entry by the assessee and therefore, theimpugned notice under section 148 of the Act is bad in law. 3.3The learned advocate for the petitioner further submittedthat in the case on hand, the reopening is based on mere changeof opinion as it is reopened on the basis of the so-calledinformation dated 24.03.2019, which is after passing of theassessment order dated 31.12.2015, however, in the orderdisposing of the objections raised by the petitioner, therespondent had admitted that there was no name of thepetitioner herein mentioned by the person namely Sanjay Shahand others whose premises had been searched on 11.09.2018. 3.4The learned advocate for the petitioner submitted that inthe order dated 10.05.2021, disposing of the objections raised bythe petitioner, there was a reference of statement under section131 of the Act dated 16.11.2018 made by Shri Jignesh Shah,wherein, he had admitted that he had provided theaccommodation entry to various companies including Safal HerbLtd. (earlier known as, Parikh Herbal Ltd.), however, such fact isincorrect for the reason that the petitioner is not provided withany such accommodation entry. Therefore, the reasons recordedare based on vague information and on conjectures andsurmises. He submitted that this amounts to ‘reason to suspect’and not ‘reason to believe’. It is submitted that the veryfoundation to exercise jurisdiction under section 148 of the Act isbased on information in the case of Shri Jignesh Shah and thestatements made by him. However, since he has denied that hehad not given the name of the petitioner and that, the petitionerwas not a beneficiary, the question of proceeding further by wayof impugned notice, does not arise. 3.5In support, the learned advocate for the petitioner hasrelied upon following decisions: i)United Electrical Company (P) Ltd. v.Commissioner of Income-Tax, [2002] 125 Taxman775 (Delhi) : 258 ITR 317 ; ii)S.P. Agarwalla @ Sukhdeo v. Income-TaxOfficer, [1981] 5 Taxman 299 (Cal.); iii)ITO v. Lakhmani Mewal Das [(1976) 103 ITR437: 1976 (3) SCC 757]; 3.5In support, the learned advocate for the petitioner hasrelied upon following decisions: i)United Electrical Company (P) Ltd. v.Commissioner of Income-Tax, [2002] 125 Taxman775 (Delhi) : 258 ITR 317 ; ii)S.P. Agarwalla @ Sukhdeo v. Income-TaxOfficer, [1981] 5 Taxman 299 (Cal.); iii)ITO v. Lakhmani Mewal Das [(1976) 103 ITR437: 1976 (3) SCC 757]; 3.6The learned advocate for the petitioner submitted that evenotherwise, the statement of a tainted party cannot be consideredas tangible material so as to have reason to believe that theincome chargeable to tax has escaped assessment. Hesubmitted that the reopening is based on mere change of opinionof the Assessing Officer inasmuch as notice under section 148 ofthe Act can be issued only if an Assessing Officer has reason tobelieve that any income chargeable to tax has escapedassessment and for such formation of belief, there should besome tangible material and act, which is lacking in the case onhand. He submitted that the case of the petitioner was selectedfor scrutiny assessment and the issue on hand was examinedthreadbare at the original assessment and accordingly, merelybecause the Assessing Officer happens to change his opinion,action under section 147 of the Act cannot be taken. It iscontended and argued by the learned advocate for the petitionerthat the assessment for the year under consideration was foundto be proper and the same was admitted by the Assessing Officerand therefore, if creditworthiness was found in the transactions,the impugned reopening, merely relying upon the informationreceived from the DDIT (Inv.), Unit 1(3), Ahmedabad, sans any independent satisfaction of the Assessing Officer, only onborrowed satisfaction, is illegal and bad in law and it cannot besaid that the petitioner has failed to disclose fully and truly allmaterial facts relevant for the assessment. 3.7The learned advocate for the petitioner further submittedthat there is no statement on record to show that theaccommodation entry has been provided to the petitioner andonly on the basis of generalize information, the case of thepetitioner cannot be reopened. There is also no material onrecord to show that the name of the petitioner was disclosed byeither Shri Sanjay Shah or Shri Jignesh Shah in his statementunder section 131 / 132(4). He further submitted that unless anysupportive material is there, even such a statement has noevidentiary value. It is submitted that even if it is presumed thatthere is an accommodation entry in respect of sell of scrip of M/s.Parikh Herbals, there is no documentary evidence or informationreceived, has been confronted or brought on record. 3.8The learned advocate for the petitioner further submittedthat there is no approval under section 151 of the Act on recordand therefore also, the proceedings are bad in law. 3.9Making above submissions, it is urged by the learnedadvocate for the petitioner to allow the present petition and toquash and set aside the impugned notice. 4.Per contra, learned senior advocate Mr. M. R. Bhatt for therespondent authority, while opposing the present petition, drewour attention to the reasons recorded for reopening ofassessment dated 24.03.2021, and submitted that how the 3.8The learned advocate for the petitioner further submittedthat there is no approval under section 151 of the Act on recordand therefore also, the proceedings are bad in law. 3.9Making above submissions, it is urged by the learnedadvocate for the petitioner to allow the present petition and toquash and set aside the impugned notice. 4.Per contra, learned senior advocate Mr. M. R. Bhatt for therespondent authority, while opposing the present petition, drewour attention to the reasons recorded for reopening ofassessment dated 24.03.2021, and submitted that how the petitioner is involved is very clear. He submitted that in thereasons recorded, it was mentioned that some commonfacts/patterns such as Cyclic Rise & Fall of price without anychange in market and/or fundamentals of the company and largevolume and trades occurred in very small time window wereobserved by the DDIT (inv.), Unit 1(3), Ahmedabad in almost allscrip analysis, which indicates that the scrips are used for bogusLTCG (Long Term Capital Gain). Further, in the identical case ofM/s. Zaveri & Co., the petitioner had purchased the share ofRe.1/- and sold at Rs.1/20 and ultimately, availed the profit ofRs.57 lakh, which is also doubtful. It is submitted that earlier itwas Parikh Herbals Ltd. and now it is Safal Herbs Ltd. Hesubmitted that since the petitioner had purchased the share fromso-called Safal Herbs Ltd., which is not in existence and therefore,there is live link between the petitioner – assessee and so-calledShri Jignesh Shah (Safal Herbs Ltd.). He submitted that in thereasons recorded, it is clearly stated that, “on verification ofshare trading details of the assessee, it is found that theassessee has also purchased and sold the shares of M/s. SafalHerbs Ltd. and has earned long term capital gain which has beenclaimed exempt in the return of income filed for AY 2013-14. Theassessee had purchased 51900 shares of M/s. Parikh Herbals Ltd.(now known as M/s. Safal Herbs Ltd.) at rate of Rs.1 per share on01.04.2011 through broker M/s. Vijay Bhagwandas and Co. Thesaid purchase was through offline mode without STT andpayment of Rs.51900/- was made in cash. On 12.05.2012, theassessee got these shares converted to demat form through M/s.Prudent Broking Services Ltd. After gap of one year, theassessee sold 14000 shares in May 2012 for aggregate amountof Rs.48,31,835/-, making a profit of Rs.48,17,835/-.Subsequently, there was share split of shares of M/s. Safal Herbs Ltd. in ratio of 1:10 which resulted in increase of remaining37900 shares to 379000 (37900*10) in assessee account.Further, on 08.03.2013, the assessee sold 2800 shares forRs.8,88,386/-, making profit of Rs.8,85,586/-. Hence, from aninvestment of Rs.14,280/-, the assessee made unmatched profitof Rs.57,03,421/- The said profit has been claimed exempt undersection 10(38) of the Act”. 4.1The learned senior advocate for the respondent furthersubmitted that, in the reasons recorded, it is further averred that,“Considering the above facts and on the basis of tangiblematerial in the form of information received from theinvestigation wing in consequence to search action in the case ofJignesh Shah and Sanjay Shah group (JSSS hereinafter),intimating claim of bogus exempt share profit from shares of M/s.Safal Herbs Ltd. by the assessee, the case for AY 2013-14 wasreopened for reassessment. 4.1The learned senior advocate for the respondent furthersubmitted that, in the reasons recorded, it is further averred that,“Considering the above facts and on the basis of tangiblematerial in the form of information received from theinvestigation wing in consequence to search action in the case ofJignesh Shah and Sanjay Shah group (JSSS hereinafter),intimating claim of bogus exempt share profit from shares of M/s.Safal Herbs Ltd. by the assessee, the case for AY 2013-14 wasreopened for reassessment. 4.2The learned senior advocate for the respondent furtherdrew the attention to the reasons recorded to submit that, ShriJignesh Shah, in his statement recorded under section 131 of theAct on 16.11.2018 has accepted that he facilitatedaccommodation entries on long term capital gains through SanjayShah and Tushar Shah in companies such as Safal Herbs Ltd.(earlier Parikh Herbals Ltd.), Citizen Yarns Ltd., Noble PolymersLtd., Dhyana Finstock Ltd., etc. The relevant part of statement ofJignesh Shah was also reproduced with the reasons recorded. 4.3So far as the reliance placed by the learned advocate forthe petitioner on the decision in United Electrical Company(P) Ltd./258 ITR 317 (supra), the learned senior advocate for the respondent submitted that the same is not applicable in thecase on hand for the reason that the same is prior to theamendment. Eventually, he submitted that it was found from thedetailed investigation report, based on documentary evidenceand statements under sections 131 / 132(4) of the Act of theentry providers, recorded during the course of search/ survey/enquiry action, the petitioner was found to be beneficiary of theaccommodation entry, which clearly shows that the incomechargeable to tax has escaped assessment. Accordingly, thenotice under section 148 of the Act has been rightly issued andthat, it cannot be said that merely, on the basis of change ofopinion, the same is issued. He submitted that the case of thepetitioner is sought to be reopened on the basis of some tangiblematerial available and on the established fact the transactionswere bogus in nature, and all the relevant information availablewith the department at the time of recording the reasons forreopening have been duly discussed in the reasons. 4.4It is further submitted by the learned senior advocate forthe respondent that thorough inquiry was carried out by theInvestigation Wing, Ahmedabad and after verifying all theaspects regarding the incriminating documents unearthed duringthe course of search action, it declared the transactions wereaccommodation entries provided by the bogus companies andthus, there is tangible material on record. 4.5It is further submitted that there is no procedural lapse and/or deviation from procedure prescribed in reopening and thereasons recorded do not lack validity as all the procedures, laiddown under the Act, have been duly followed and necessaryapprovals from the competent authority are received. 4.6So far as the contention of the petitioner that the case isreopened beyond a period of four years from the end of therelevant assessment year is concerned, the learned advocate forthe respondent submitted that all the requirements under section147 of the Act to initiate the proceedings are fulfilled. Further,the case of the petitioner was reopened on account ofinformation received from the Investigation Wing, Ahmedabad, asreferred to herein above and from the information disseminatedby the Investigation Wing, Ahmedabad, it is evident that theassessee has failed to furnish fully and truly, all material factsbefore the Assessing Officer. 4.7Making above submissions, it is urged that the Court maynot interfere in the impugned notice and requested to dismiss thepetition. 4.6So far as the contention of the petitioner that the case isreopened beyond a period of four years from the end of therelevant assessment year is concerned, the learned advocate forthe respondent submitted that all the requirements under section147 of the Act to initiate the proceedings are fulfilled. Further,the case of the petitioner was reopened on account ofinformation received from the Investigation Wing, Ahmedabad, asreferred to herein above and from the information disseminatedby the Investigation Wing, Ahmedabad, it is evident that theassessee has failed to furnish fully and truly, all material factsbefore the Assessing Officer. 4.7Making above submissions, it is urged that the Court maynot interfere in the impugned notice and requested to dismiss thepetition. 5.We have heard the learned advocates for the respectiveparties and perused the material placed on record. The issuecentered in the present petition is the issuance of the impugnednotice under section 148 of the Act seeking to reopen theassessment of the petitioner for the year under consideration i.e.Assessment Year 2013-14. The challenge to the said action onthe part of the department by the petitioner is on the count thatwhen jurisdictional facts are not established, the departmentcannot assume the jurisdiction and reopen the assessment.According to the petitioner, at the relevant time, the petitionerhad disclosed fully and truly, all material facts, relevant for theassessment and hence, merely, on the basis of change of opinion,the impugned notice is issued, which is not tenable in the eye oflaw. 5.1At this juncture, it would be apt to refer to the observationsmade by us with regard to the scope and ambit of section 147 ofthe Act in paragraphs 7, 8, 9 and 10 of CAV Judgement dated05.07.2021 rendered in Special Civil Application No. 19821 of2019, which are as under: “7.At the outset, it may be noted that as per the settledlegal position, two conditions have to be satisfied beforethe Assessing Officer invokes his jurisdiction to reopen theassessment under section 147 of the said Act after theexpiry of four years from the end of the relevantassessment year – firstly, that the Assessing Officer musthave reason to believe that the income chargeable to taxhas escaped assessment for the concerned assessmentyear, and secondly, such escapement of assessment wasby reason of failure on the part of the assessee to make thereturn under section 139, or in response to a notice issuedunder Sub-section (1) of Section 142 or Section 148 or todisclose fully and truly all the material facts necessary forhis assessment for that assessment year. So far as thecase of the present petitioner is concerned, the assessmentfor the A.Y. 2012-13 is sought to be reopened by theAssessing Officer under section 147/148 of the said Act, onhis having arrived at a satisfaction that the income for thesaid assessment year had escaped assessment by reasonof the failure on the part of the assessee to disclose fullyand truly all material facts necessary for his assessment. 8.It is pertinent to note that as held by the SupremeCourt in catena of decisions, the formation of belief by theAssessing Officer at the stage of initiation of action undersection 147 of the Act is within the realm of subjectivesatisfaction. The Supreme Court in the case of AssistantCommissioner of Income Tax versus Rajesh JhaveriStock Brokers P. Ltd. reported in (2007) 291 ITR500(SC), had an occasion to deal with the scope and effectof section 147 as substituted w.e.f. April 1[st], 1989, in whichthe Court has observed as under : - “Section 147 authorises and permits the AssessingOfficer to assess or reassess income chargeable totax if he has reason to believe that income for anyassessment year has escaped assessment. The word“reason” in the phrase “reason to believe” would 8.It is pertinent to note that as held by the SupremeCourt in catena of decisions, the formation of belief by theAssessing Officer at the stage of initiation of action undersection 147 of the Act is within the realm of subjectivesatisfaction. The Supreme Court in the case of AssistantCommissioner of Income Tax versus Rajesh JhaveriStock Brokers P. Ltd. reported in (2007) 291 ITR500(SC), had an occasion to deal with the scope and effectof section 147 as substituted w.e.f. April 1[st], 1989, in whichthe Court has observed as under : - “Section 147 authorises and permits the AssessingOfficer to assess or reassess income chargeable totax if he has reason to believe that income for anyassessment year has escaped assessment. The word“reason” in the phrase “reason to believe” would mean cause or justification. If the Assessing Officerhas cause or justification to know or suppose thatincome had escaped assessment, it can be said tohave reason to believe that an income had escapedassessment. The expression cannot be read to meanthat the Assessing Officer should have finallyascertained the fact by legal evidence or conclusion.The function of the Assessing Officer is to administerthe statute with solicitude for the public exchequerwith an inbuilt idea of fairness to taxpayers. Asobserved by the Supreme Court in Central ProvincesManganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662,for initiation of action under section 147(a) (as theprovision stood at the relevant time) fulfillment of thetwo requisite conditions in that regard is essential. Atthat stage, the final outcome of the proceeding is notrelevant. In other words, at the initiation stage, whatis required is “reason to believe”, but not theestablished fact of escapement of income. At thestage of issue of notice, the only question is whetherthere was relevant material on which a reasonableperson could have formed a requisite belief. Whetherthe materials would conclusively prove theescapement is not the concern at that stage. This isso because the formation of belief by the AssessingOfficer is within the realm of subjective satisfaction(see ITO v. Selected Dalurband Coal P. Ltd.[1996] 217 ITR 597 (SC)]; Raymond WoollenMills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substitutedwith effect from April 1, 1989, as also sections 148 to152 are substantially different from the provisions asthey stood prior to such substitution. Under the oldprovisions of section 147, separate clauses (a) and(b) laid down the circumstances under which incomeescaping assessment for the past assessment yearscould be assessed or reassessed. To conferjurisdiction under section 147(a) two conditions wererequired to be satisfied : firstly the Assessing Officermust have reason to believe that income, profits orgains chargeable to income tax have escapedassessment, and secondly he must also have reasonto believe that such escapement has occurred byreason of either omission or failure on the part of theassessee to disclose fully or truly all material factsnecessary for his assessment of that year. Both these conditions were conditions precedent to be satisfiedbefore the Assessing Officer could have jurisdiction toissue notice under section 148 read with section147(a). But under the substituted section 147existence of only the first condition suffices. In otherwords if the Assessing Officer for whatever reasonhas reason to believe that income has escapedassessment it confers jurisdiction to reopen theassessment. It is, however, to be noted that both theconditions must be fulfilled if the case falls within theambit of the proviso to section 147.” conditions were conditions precedent to be satisfiedbefore the Assessing Officer could have jurisdiction toissue notice under section 148 read with section147(a). But under the substituted section 147existence of only the first condition suffices. In otherwords if the Assessing Officer for whatever reasonhas reason to believe that income has escapedassessment it confers jurisdiction to reopen theassessment. It is, however, to be noted that both theconditions must be fulfilled if the case falls within theambit of the proviso to section 147.” 9.In the case of Raymond Woollen Mills Ltd.Versus Income-Tax Officer and others reported in1999 236 ITR 34(SC), the Supreme Court observedthat the Court has only to see whether there wasprima facie some material on the basis of which theDepartment could reopen the case. The sufficiency orcorrectness of the material is not a thing to beconsidered at this stage. 10.It is very pertinent to note that in the case ofPhool Chand Bajrang Lal versus Income-TaxOfficer reported in 203 ITR 456 (SC), it wasobserved that the acquiring fresh information,specific in nature and reliable in character, relating tothe concluded assessment, which went to expose thefalsity of the statement made by the assessee at thetime of original assessment was different fromdrawing fresh inference from the same facts andmaterial which was available with the Income-TaxOfficer at the time of the original assessmentproceedings. Where the transaction itself on the basisof the subsequent information was found to be abogus transaction, the mere disclosure of thattransaction at the time of original proceedings couldnot be said to be disclosure of the true and full facts,and the Officer would have the jurisdiction to reopenthe concluded assessment in such a case. Theprecise observation made by the Supreme Court inthe said case may be reproduced as under : - “In the present case as already noticed, the Income-Tax Officer, Azamgarh, subsequent to the completionof the original assessment proceedings, on making anenquiry from the jurisdictional Income-Tax Officer atCalcutta, learnt that the Calcutta company fromwhom the assessee claimed to have borrowed the loan of Rs. 50,000/- in cash had not really lent anymoney but only its name to cover up a bogustransaction and, after recording his satisfaction asrequired 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-TaxOfficer sought to draw any fresh inference whichcould have been raised at the time of the originalassessment on the basis of the material placedbefore him by the assessee relating to the loan fromthe Calcutta company and which he failed to draw atthat time. Acquiring fresh information, specific innature and reliable in character, relating to theconcluded assessment, which goes to expose thefalsity of the statement made by the assessee at thetime of the original assessment is different fromdrawing fresh inference from the same facts andmaterial which were available with the Income-TaxOfficer at the time of the original assessmentproceedings. The two situations are distinct anddifferent. Thus, where the transaction itself, on thebasis of subsequent information, is found to be abogus transaction, the mere disclosure of thattransaction at the time of original assessmentproceedings cannot be said to be a disclosure of the“true” and “full” facts in the case and the Income-TaxOfficer would have the jurisdiction to reopen theconcluded assessment in such a case.” 5.2Further, the term “reason to believe”, however, is notdefined in the Act but it can be gathered and available from theinformation, leading the Assessing Officer to reopen theassessment. The term itself is suggestive of its prima faciecharacteristics and not established or conclusive facts orinformation. Meaning thereby, it is the Assessing Officer’s primafacie belief, of course, derived from the some material /information, etc. leading him to reopen the assessment. 5.3The ambit and import of the term “reason to believe” hasbeen examined in numerous cases, notably in ITO v. LakhmaniMewal Das [(1976) 103 ITR 437: 1976 (3) SCC 757].The Apex Court held that, “the reason must be held in good faith. Itcannot be merely a pretence. It is open to the Court to examinewhether the reasons for the formation of the belief have arational connection with or a relevant bearing on the formation ofthe belief and are not extraneous or irrelevant for the purpose ofthe section. To this limited extent, the action of the Income TaxOfficer in starting proceedings in respect of income escapingassessment is open to challenge in a Court of law. Rationalconnection postulates that there must be a direct nexus or livelink between the material coming to the notice of the Income TaxOfficer and the formation of his belief that there has beenescapement of the income of the assessee from assessment inthe particular year because of his failure to disclose fully andtruly all material facts. It is no doubt true that the Court cannotgo into the sufficiency or adequacy of the material and substituteits own opinion for that of the Income Tax Officer on the point asto whether action should be initiated for reopening assessment.At the same time we have to bear in mind that it is not any andevery material, howsoever vague and indefinite or distant,remote and far-fetched, which would warrant the formation of thebelief relating to escapement of the income of the assessee fromassessment”. 5.4It would also be worthwhile to refer to the observationsmade by us in the CAV Judgment dated 06.08.2021 Special CivilApplication No. 22613 of 2019, which read as under: “7.As stated hereinabove, the often posed question as towhether the Assessing Officer could have assumed thejurisdiction under Section 147/148 of the said Act on thebasis of the information / material received from theinvestigating wings unearthing the bogus transactions oraccommodation entries involving the assessee, has beenagain posed before this Court. Before adverting the 5.4It would also be worthwhile to refer to the observationsmade by us in the CAV Judgment dated 06.08.2021 Special CivilApplication No. 22613 of 2019, which read as under: “7.As stated hereinabove, the often posed question as towhether the Assessing Officer could have assumed thejurisdiction under Section 147/148 of the said Act on thebasis of the information / material received from theinvestigating wings unearthing the bogus transactions oraccommodation entries involving the assessee, has beenagain posed before this Court. Before adverting the submissions made by the learned advocates for the parties,it may be noted that the words “accommodation entries”have not been defined anywhere in the Act, however, incatena of decisions, the Courts have dealt with the issue of“accommodation entries”. It cannot be gainsaid that thetax-evaders in order to bring back their unaccountedincome to their books of accounts without paying any taxthereon, use numerous methods and techniques. Forrouting the unaccounted income, the taxevaders under theguise of loan entries or share capital entries or othercamouflage entries create an appearance of legitimatetransactions in their books of accounts. Such wellrecognized rackets are controlled and conducted by thepersons known as “accommodation entry providers”, andthe “accommodation entries” are provided by them to thepersons who are the taxevaders. The entries on paperapparently may appear to be of routine nature, but the trailof money transited through the layers would besubsequently unearthed during the search and seizureoperations conducted either at the assessee’s premises orhis associate’s premises or at the premises of some thirdparty, who may be an accommodation entry provider.Under the circumstances, when the material is brought tothe notice of the Assessing Officer, which would prima faciediscredit or impeach the genuineness of the particularsfurnished by the assessee at the time of originalassessment, and when it prima facie establishes the linkbetween the assessee and the third party who is anaccommodation entry provider, the Assessing Officer isempowered rather duty bound to make further inquiry /investigation to unearth such camouflage or wrong orillegal dealings of the assessee. As observed by theSupreme Court in the case of Sumati Dayal vsCommissioner Of Income-Tax reported in AIR 1995 SC2109, apparent must be considered as real until it is shownthat there are reasons to believe that apparent is not real,and that the Taxing Officers are entitled to look into thesurrounding circumstances to find out the reality, and thematter has to be considered by applying the test of humanprobabilities.” 6.In the aforesaid prelude, if the facts of the case are dealtwith, the respondent has sought to reopen the assessment of thepetitioner mainly on the basis of the information received fromthe DDIT (Inv.), Unit 1(3), Ahmedabad, while carrying out search on 11.09.2018 in the case of Shri Sanjay Shah and Shri JigneshShah and that, as per the information, they had providedaccommodation entries to petitioner, which was admitted bythem in statements under section 131 of the Act. 6.In the aforesaid prelude, if the facts of the case are dealtwith, the respondent has sought to reopen the assessment of thepetitioner mainly on the basis of the information received fromthe DDIT (Inv.), Unit 1(3), Ahmedabad, while carrying out search on 11.09.2018 in the case of Shri Sanjay Shah and Shri JigneshShah and that, as per the information, they had providedaccommodation entries to petitioner, which was admitted bythem in statements under section 131 of the Act. 6.1In this regard, if the material placed on record is seen, moreparticularly, the reasons recorded for reopening, it is statedtherein that, “Furthermore, information from the O/o. The DDIT-(Inv.), Unit-1(3), Ahmedabad was received on 24-03-2019 onwebmail. As per the information, search u/s. 132 was launchedon 11.09.2018 in case of Sanjay Shah and Jignesh Shah ofAhmedabad (JSSS hereinafter). The search resulted into seizureof unaccounted cash of 19.37 Crores (related to accommodationentries and commission earned thereon) along with incriminatingdigital as well as documentary evidences. Clandestine record ofunaccounted cash, synchronized trading, proving bogus LTCG invarious BSE listed scrips and transport of such cash throughangadiyas was found to be maintained in secret Tally Data filewith company name “123”. In this secret file, againsttransactions of shares on BSE platform, movement (angadiya)and delivery (recd) of cash is recorded. Furthermore, the receiptof commission in cash is also recorded under the head “LTGCommission”. The evidence manifest that this is the record ofaccommodation entries of LTCG against receipt of cash. Theevidences demonstrate that accommodation entry provider duohas resorted to synchronized trading in shares of various listedcompanies because it is only through synchronized trading thatthe sellers are ensured accommodation entry of bogus LTCGagainst cash and the buyers are ensured delivery of cash againstsuch pre-determined purchase of shares. The buy and sellparties are well planned in this transaction, as only in suchscenario, the cash is assured to the buyer and sale proceeds of share are assured in the bank account linked with demat accountof seller. This is conclusive evidence of bogus LTCG andsynchronized trading. Furthermore, other kind of Digital Dataincluding incriminating MS Excel files, incriminating Word Files,Whatsapp Chats/Images and documents including Khata Bahiswere also found and duly analysed. Stamps and bank account ofvarious persons were also found in possession of accommodationentry provider duo. During recording of their statements and byfiling affidavits, various dummy directors admitted that they weremerely signing documents on directions of operators. Theyadmitted of being involved in providing accommodation entriesof LTCG, Loss, Unsecured Loans etc. Data analysis coupled withcircumstantial evidences led to discovery that 15 BSE listedscrips have been used for generating bogus LTCG and contrivedlosses. During investigation, sample trail of funds was alsoestablished wherein the infrastructure of shroffs and angadiyaswas used by the duo for flouting unaccounted funds ofbeneficiaries. The duo also admitted being involved in providingaccommodation entries including bogus LTCG and contrivedlosses. Based on reference to various scrips in the seized andimpounded material, statements of various persons, BSE tradedata and order data analysis of 15 scrips was carried out. Somecommon facts/patterns such as Cyclic Rise and Fall of Pricewithout any change in market and/or Fundamentals of thecompany and large volume and trades occurred in very small-time window were observed by the DDIT (Inv.), Unit-1(3),Ahmedabad in almost all scrips analysis which indicates that thescrips are used for bogus LTCG.….”. The reasons leading tofinding that scrip is used for bogus LTCG and contrived losses inrespect of scrips Safal Herbs Ltd. were given, which are as under: lacks identity as well as genuineness; ii) Evidences of exchange of cash againstaccommodation entries of bogus LTCG are found andimpounded in the search case of JSSS, in respect of certainpersons; iii) Cyclic Rise and Fall of Price without any change inMarket and/or Fundamentals of the company indicatesfabricated trading; iv) Incoherent Volume vs. Trades and their ratio. Ithappened in case of price manipulation; v) Very high Delivery based Volume which indicatesdeliveries are deliberately taken for purpose of generatingfake LTCG; vi) Trades at Same Price during the day on many tradingdays. It indicates fabricated trades; vii)time Different Analysis lead to finding that largevolume and trades occurred in very small-time window i.e.Time difference between passive order and trade. Itindicates synchronized trading; viii)Meagre Order vs. Trade ratio indicates synchronizedtrading; ix)Selected group of clients making high trade volume inlast 30 minutes indicates close price of the scrip wasmanipulated to move in a particular direction; x)Small group of clients mainly responsible for intra-dayprice movement – both Higher side and/or Lower side; xi)Many beneficiaries have traded in the scrip andcontributed turnover of more than 100 Crores; xii)SEBI has passed adverse orders w.r.t. shareholding ofthe scrip, which shows that its shareholding has beenrigged to provide bogus LTCG and contrived losses; xiii)Jignesh Shah and Umang Shah (accountant of SanjayShah) have admitted that the scrip has been used forproviding accommodation entries of bogus LTCG againstcash from beneficiaries. 6.2It is further observed in the reasons recorded that thebeneficiary was identified from the trade data made on BSEPlatform. On verification of the said data, it was found that theassessee Shri Bharatbhai K. Gadhiya, the petitioner herein, hadmade the transaction of shares in respect of scrip Safal HerbsLtd. (Parikh Herbals Ltd.) during the F.Y. 2012-13 relevant to A.Y.2013-14. The details of the transactions are as under: xii)SEBI has passed adverse orders w.r.t. shareholding ofthe scrip, which shows that its shareholding has beenrigged to provide bogus LTCG and contrived losses; xiii)Jignesh Shah and Umang Shah (accountant of SanjayShah) have admitted that the scrip has been used forproviding accommodation entries of bogus LTCG againstcash from beneficiaries. 6.2It is further observed in the reasons recorded that thebeneficiary was identified from the trade data made on BSEPlatform. On verification of the said data, it was found that theassessee Shri Bharatbhai K. Gadhiya, the petitioner herein, hadmade the transaction of shares in respect of scrip Safal HerbsLtd. (Parikh Herbals Ltd.) during the F.Y. 2012-13 relevant to A.Y.2013-14. The details of the transactions are as under: 6.3In view of the above, the Assessing Officer opined that theassessee, the petitioner herein, had taken accommodation entryfor claiming bogus capital gain. Further, on perusal of the RoI forA.Y. 2013-14, it was seen that the assessee, the petitioner herein,had taken accommodation entry of Rs.57,34,400/- in respect ofhis unaccounted income. Hence, there was an escapement of income of Rs.57,34,400/-. The Assessing Officer was of the viewthat the petitioner – assessee had not disclosed, fully and truly,all material facts necessary for his assessment and from theaforesaid, he opined that the income chargeable to tax hasescaped assessment. 6.4As stated earlier, thorough inquiry was carried out by theInvestigation Wing, Ahmedabad and after being verifying all theaspects regarding the incriminating documents unearthed duringthe course of search action, it was declared that the transactionswere accommodation entries provided by the bogus companiesand tangible material appears to have been there on record.Thus, the contention of the learned advocate for the petitionerthat merely on the basis of change of opinion, reopening issought, stands nugatory. 6.5It was submitted that during scrutiny assessmentproceeding carried out under section 143(3) of the Act, thepetitioner had submitted all the details relevant for theassessment and thus, discharged the onus under section 68 ofthe Act, however, it appears that the Assessing Officer has foundthat the petitioner has not fully and truly disclosed all materialfacts necessary for assessment for the reason that the petitionerwas found to be the beneficiary of the accommodation entry.Therefore, there is clear failure on the part of the assessee tofully and truly disclose all the facts necessary for assessmentproceeding under section 143(3) of the Act. 6.6Thus, considering the aforesaid facts and circumstances ofthe case, we are of the considered view that it cannot be saidthat there is no reason to believe that the income chargeable totax has escaped assessment because such exercise of reopening has been made only after due inquiries and recording ofstatements of concerned persons, as referred to herein above,and on having found prima facie material, impugned notice isissued to the petitioner. It further appears that, no procedurallapse and/or deviation from procedure prescribed in reopeningand the reasons recorded do not lack validity as necessaryapprovals from the competent authority appears to have beenreceived. 6.7In Peass Industrial Engineers (P.) Ltd. v. DeputyCommissioner of Income Tax, [2016] 76 Taxmann.com 106(Guj