Experion Developers Pvt Ltd v. Assistant Commissioner Of Income Tax & Ors

* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 30.10.2019Pronounced on: 13.02.2020 + W.P.(C) 11302/2019, CM APPL. 46536/2019, CM APPL. 46537/2019& CM APPL. 46538/2019 46537/2019& CM APPL. 46538/2019 EXPERION DEVELOPERS PVT LTD. ..... Petitioner Through: Mr. Ajay Vohra, Senior Advocate with Ms. Kavita Jha and Mr. Vaibhav Kulkarni Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX & ORS. ..... Respondents Through: Mr. Ruchir Bhatia, Senior Standing Counsel. + W.P.(C) 11303/2019, CM APPL. 46539/2019, 46540/2019, CM APPL. 46541/2019 & CM APPL. 46542/2019 46540/2019, CM APPL. 46541/2019 & CM APPL. 46542/2019 CM APPL. EXPERION HOSPITALITY PVT LTD ..... Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Ms.Kavita Jha and Mr. Vaibhav Kulkarni Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX & ORS. ..... Respondents Through: Mr. Ruchir Bhatia, Sr. Standing counsel for Revenue. CORAM: JUSTICE VIPIN SANGHI JUSTICE SANJEEV NARULA SANJEEV NARULA, J J U D G M E N T Brief Factual Background 1. The present petitions under Article 226 /227 of the Constitution of India are directed against two separate notices both dated 31.03.2019 issued by respondent No.1 under Section 148 of the Income Tax Act (hereinafter referred to as “the Act”), for the assessment year (AY) 2012-13 and the orders dated 25.09.2019 disposing of the objections filed by the respective petitioners and also the proceedings emanating therefrom. The grounds for reopening assessment in both cases are a result of the very same investigation and inquiry carried out by the DIT (Intell. & Cr. Inv.), New Delhi. The reasons recorded for reopening the assessment in respect of both the petitioners are also similar, except for certain distinguishing facts. Besides, the petitioners raise similar grounds of challenge, and therefore it is considered appropriate to dispose of both the petitions by way of a common judgment. 2. For the purpose of disposal of present petitions, the facts in W.P.(C)11302/2019 are being noted extensively. The essential differences are noted separately. W.P.(C) 11302/2019 3. Petitioner is a private limited company engaged in the business of construction-development projects. Pursuant to a scheme of amalgamation approved by this Court vide order dated 20.12.2012, M/s. Experion Developers International Pvt. Ltd [hereinafter referred to as „EDIPL‟, the erstwhile assessee], amalgamated with M/s. Experion Developers Pvt. Ltd. [hereinafter referred to as „EDPL‟, the successor-in-interest and Petitioner herein] with effect from 01.04.2012. During the financial year relevant to the assessment year under consideration i.e. AY 2012-13, (FY 2011-12) the Petitioner and the erstwhile-assessee, EDIPL, were separate/independently assessable assessees. For the assessment year under consideration, i.e., AY 2012-13, as Petitioner (EDPL) was the only surviving entity, it alone filed return of income declaring loss of Rs.7,82,95,075/-. The return of income was selected for scrutiny and after making certain disallowances, the total income was assessed at Rs. 90,15,239/- and assessment order dated 19.03.2015 was passed under Section 143(3) of the Act. The said order is presently subject matter of a pending appeal. herein] with effect from 01.04.2012. During the financial year relevant to the assessment year under consideration i.e. AY 2012-13, (FY 2011-12) the Petitioner and the erstwhile-assessee, EDIPL, were separate/independently assessable assessees. For the assessment year under consideration, i.e., AY 2012-13, as Petitioner (EDPL) was the only surviving entity, it alone filed return of income declaring loss of Rs.7,82,95,075/-. The return of income was selected for scrutiny and after making certain disallowances, the total income was assessed at Rs. 90,15,239/- and assessment order dated 19.03.2015 was passed under Section 143(3) of the Act. The said order is presently subject matter of a pending appeal. 4. Subsequently, Respondent No.1 issued the impugned notice dated 31.03.2019 under section 148 of the Act along with a copy of the reasons recorded, proposing to reassess the income of the Petitioner for the assessment year 2012-13. In response to the aforesaid notice, the Petitioner filed the letter dated 29.04.2019 submitting copy of return e-filed on 25.04.2019 declaring loss of Rs.7,82,95,075/-. The recorded reasons are primarily based on the ground that the investing / parent company, M/s. Gold Hotels & Resort Pte. Ltd. (also referred to as “GoldSingapore”), had made investment of Rs.36.91 crores in the Petitioner Company (EDPL) and Rs.183 crores in erstwhile EDIPL, though the said investing company did not appear to be carrying out any regular business activities in Singapore and has been floated to act as a conduit to funnel funds into Indian companies. The source of investment in the assessee company raises serious doubts and suspicion regarding the genuineness of investments. The assessee is a beneficiary of these credits and has failed to disclose material facts earlier. Therefore, there are “reasons to believe” that the Petitioner‟sincome has escaped assessment. 5. Petitioner vide letter dated 10.05.2019 filed legal objections to initiation of the impugned reassessment proceedings, that were rejected vide the impugned order dated 25.09.2019 (received on 25.09.2019). W.P.(C)-11303/2019 6. The petitioner in this case (Experion Hospitality Pvt Ltd, hereinafter, “EHPL”), also a private limited company engaged in the business of construction/development projects, filed return of income declaring loss of Rs.3,93,181,429/-, for the assessment year under consideration (AY-2012-13). The case was selected for scrutiny and assessment order dated 19.03.2015 was framed under Section 143 (3) of the Act. After making certain disallowances, the total income was assessed as Rs.23,60,539/- and the said order is also presently subject matter of a pending appeal. In this case as well, respondent no. 1 has issued notice dated 31.03.2019 under section 148 of the Act, assuming jurisdiction to reopen the assessment, which forms the subject matter of challenge in the petition. Reasons for reopening 7. Along with the notice issued under Section 148 of the Act, the respondent also furnished copy of the recorded reasons which disclose that an information has been received from DIT (Intell. & Cr. Inv.), New Delhi on 30.03.2015 regarding funds received by the assessee from a foreign entity. The DIT (Intell. & Cr. Inv.), New Delhi has carried out the investigation and detailed inquiry regarding the funds received by the Experion Group Company in India from it‟s parent company which did not have sufficient funds of its own to make such investments. The recorded reasons for –reopening the assessment inW.P.(C) 11303/2019 are as under; “1. Brief Details Reasons for reopening 7. Along with the notice issued under Section 148 of the Act, the respondent also furnished copy of the recorded reasons which disclose that an information has been received from DIT (Intell. & Cr. Inv.), New Delhi on 30.03.2015 regarding funds received by the assessee from a foreign entity. The DIT (Intell. & Cr. Inv.), New Delhi has carried out the investigation and detailed inquiry regarding the funds received by the Experion Group Company in India from it‟s parent company which did not have sufficient funds of its own to make such investments. The recorded reasons for –reopening the assessment inW.P.(C) 11303/2019 are as under; “1. Brief Details Inv), New, Delhi on 30.03.2015 regarding funds received by the assessee from foreign entities The DIT has carried out investigation and detailed enquiry regarding funds received by, Experion Group companies in India, From their parent company, which did not have sufficient funds of its own to make such investments. These inquiries were conducted after commercial intelligence was received by Jt. secy. (Ft & TR)- II, CBDT from The First Secretary (Economic) in High commission of India, at Singapore, vide letter dated 31/10/2011, that an entity M/s Gold Hotels & Resort Pte. Ltd, a Singapore based company, had made large investments in Indian entity namely, M/s. Experion Developers Pvt. Ltd. and M/s. Experion Developers International Pvt. Ltd. (formerly known as Gold Developers International .Pvt. Ltd.)(Now merged with M/s. Experion Developers Pvt. Ltd.) According to the report, it was observed that: 1. During the year under consideration, the company M/s Gold Hotels & Resort Pte. Ltd , hereinafter referred as Gold Singapore has made an alleged investment of Rs. 36.910 crores in the assessee company EDPL and Rs. 183 crores in the company that has amalgamated into this company namely, EDIPL. 2. As per the information, Gold Singapore is owned by only one share holder M/s Gemwood lnvest Holdings Ltd. having address in British Virgin Island. 3. The Directors of Gold Singapore include the following: NameNationalityAddress 4. The equity of the investing company i.e. M/s Gold Hotels & Resort Pte Ltd., Singapore is around 50,00,000 USD as against the investment made by it of about 180 Million USD over many years, in Indian companies namely Gold Developers Pvt. Ltd (now known as M/s. Experion Developers Pvt. Ltd), Gold Resorts & Hotels Pvt. Ltd (Now known as M/s. Experion Hospitality Pvt. Ltd) and GoldDevelopers International Ltd (Earlier known as M/s. Experion Developers International Pvt Ltd & Now merged with M/s Experion Developers Pvt Ltd). The equity of the company is very small compared to the amount invested. 5. Gold Singapore does not have sufficient funds or creditworthiness to make such investments and its business premises consisted of just one room which vas found closed most of the times. 6. It is stated in the information that the amounts may have been shown as credits. / loans/ share application money raised from other countries mostly tax heavens to form a circuitous route, and on analysis by the Assessing officer, it is actually found that over a period of time, the credits into the books of accounts of the investing entity have been made as share application money or advances and the fact that the share application money remains outstanding over a long time itself is not how a genuine investment is normally made, because shares are normally issued after the application is made, or theamount is refunded back. On the basis of enquiries conducted by DIT (Intell. & Cr. Inv.), New Delhi, the observations are as follows:- 1. The movement in share capital in Gold Singapore shows that in the initial years, the funding came from Darley Investment Service Inc, (Darley) and Merix International Ventures Limited. Darley and Merix. Subsequently transferred their share in Gold Singapore through a complex series of financial arrangments involving many entities finally to M/s. Gemwood Invest Holdings Ltd. On the basis of enquiries conducted by DIT (Intell. & Cr. Inv.), New Delhi, the observations are as follows:- 1. The movement in share capital in Gold Singapore shows that in the initial years, the funding came from Darley Investment Service Inc, (Darley) and Merix International Ventures Limited. Darley and Merix. Subsequently transferred their share in Gold Singapore through a complex series of financial arrangments involving many entities finally to M/s. Gemwood Invest Holdings Ltd. 2. When the Directorate issued summons to Sh. Arvind Tikoo the Director and the main person behind the group, the reply was evasive in most of his replies, on the plea that he is an NRI, the foreign assets were not disclosed. His PAN No. is and he had not filed any return of income in India. On the analysis of the report received, it can be noted that the Singapore Company (Gold Singapore) apparently does not appear to be carrying out any regular business activities in Singapore and has been floated to act as a conduit to funnel funds into Indian Companies. Therefore, the source of investment into the assessee company (which is wholly owned subsidiaries of Gold Singapore) raises serious doubts and suspicion on the genuineness of these invtesments. A series of transactions have been undertaken through a complex legal arrangements among entities spread across various jurisdictions to fund investments made in India. The origin of fund in the hands of companies located in tax heavens with dubious antecedents and background of shareholders / promoters needs to be further investigated. Moreover, the assessee company is the beneficiary of these credits which have been made in their books of accounts. From the above detailed and specific information, pertaining to the assessee company, and independent examination of the entire material available on the record and application of mind, I have reason to believe that an amount at least of Rs.31.834 Crores has escaped assessment in case the of M/s. Experion Developers Pvt. Ltd. (formerly known as Gold Developers Private Ltd) and amount of Rs.183 crores has escaped assessment in case the of M/s. Experion Developers International Pvt. Ltd. (formerly known as Gold Developers International Private Ltd) (Now merged with M/s. Experion Developers Pvt. Ltd.) for the AY 2012-13 within the meaning of section 147/148 of Income Tax Act, 1961. This information is new material which has been brought on record. As per data on ITD the case of the assessee company was assessed u/s 143(3) of the Act for the A.Y. 2012-13. Since the then assessing officer was not aware of the fact that the investments into the assessee companies has been made from an entity which does not have funds of its own to invest such huge amounts, and that the investing entity has only been used as a conduit to route funds through complex transactions via low tax jurisdiction like Dutch Antilles, British Virgin Islands, Luxemburg etc., the income has escaped assessment due to the failure of the assessee to disclose fully and truly all the material facts necessary for its assessment. Thus, this specific condition for reopening is hereby fulfilled in the instant has failed to disclose such material facts on its own earlier. The case is square & covered under provisions of section 147 of income tax Act, 1961. It is also stated that the reassessment proceedings are proposed to be initiated in the case of Experion Developers Private Limited, for funds received by it as an independent entity as well as the successor in interest of amalgamated company Experion Developers International Private Limited, which in AY 2012-13 was a separate entity. In this case, since more than four years have elapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice under section 148 of the act is being obtained separately from Pr. Commissioner of Income Tax, Delhi-”03, New Delhi as per the provisions of section 151 of the Act. (Emphasis supplied) In this case, since more than four years have elapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice under section 148 of the act is being obtained separately from Pr. Commissioner of Income Tax, Delhi-”03, New Delhi as per the provisions of section 151 of the Act. (Emphasis supplied) 8. The recorded reasons in respect of W.P.(C) 11303/2019 are identical, except for the differences noted hereinbelow: “1. During the year under consideration, the company M/s Gold Hotels & Resort Pte. Ltd, hereinafter referred as Gold Singapore has made an alleged investment of Rs. 5.75 crores in the assesse company M/s Experion Hospitality Pvt Ltd. 2. As per the information, Gold Singapore is owned by only one share holder M/s Gemwood lnvest Holdings Ltd. having address in British Virgin Island. On the analysis of the report received, it can be noted that the Singapore Company (Gold Singapore) apparently does not appear to be carrying out any regular business activities in Singapore and has been floated to act as a conduit to funnel funds into Indian Companies. Therefore, the source of investment into the assessee company (which is wholly owned subsidiaries of Gold Singapore) raises serious doubts and suspicion on the genuineness of these investments. A series of transactions have been undertaken through a complex legal arrangements among entities spread across various jurisdictions to fund investments made in India. The origin of fund in the hands of companies located in tax heavens with dubious antecedents and background of shareholders/promoters needs to be further investigated. Moreover, the assessee company is the beneficiary of these credits which have been made in their books of accounts. xxxxxxxxxxx From the above detailed and specific information, pertaining to the assessee company, and independent examination of the entire material available on the record and application of mind, I have reason to believe that an amount at least of Rs.5.75 Crores has escaped assessment in case the of M/s. Experion Hospitality Pvt. Ltd. (formerly known as Gold Resorts & Hotels Private Ltd for the AY 2012-13 within the meaning of section 147/148 of Income Tax Act, 1961. This information is new material which has been brought on record. As per data on ITD the case or the assessee company was assessed u/s 143(3) of the Act for the A.Y. 2012-13. Since the then assessing officer was not aware of the fact that the investments into the assessee companies has been made from an entity which does not have funds of its own to invest such huge amounts, and that the investing entity has only been used as a conduit to route funds through complex transactions via low tax jurisdiction like Dutch Antilles, British Virgin Islands, Luxemburg etc., the income has escaped assessment due to the failure of the assessee to disclose fully and truly all the material facts necessary for its assessment. Thus, this specific condition for reopening is hereby fulfilled in the instant has failed to disclose such material facts on its own earlier. The case is square & covered under provisions of section I47 of income tax Act, 1961. In this case, since more than four years have elapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice under section 148 of the act is being obtained separately from Pr. Commissioner of Income Tax, Delhi-03, New Delhi as per the provisions of section 151 of the Act.” Common submissions of the Petitioners in W.P.(C) 11302/2019 &11303/2019 In this case, since more than four years have elapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice under section 148 of the act is being obtained separately from Pr. Commissioner of Income Tax, Delhi-03, New Delhi as per the provisions of section 151 of the Act.” Common submissions of the Petitioners in W.P.(C) 11302/2019 &11303/2019 9. Petitioners contend that reassessment proceedings have been initiated on the basis of “reasons to believe” that are invalid, without reference to any fresh tangible material and are shorn of independent application of mind. Under the scheme of the Act, the assessing officer can initiate proceedings under section 147 of the Act only if he has “reason to believe” that any income of the assessee has escaped assessment. Such belief has to be arrived at by the assessing officer on the basis of tangible/ reliable information in the possession of the assessing officer. In terms of section 148 of the Act, the assessing officer is required to record the reasons on the basis of which proceedings under section 147 of the Act are initiated. The reasons recorded must, therefore, show application of mind by the assessing officer. It has been alleged that Respondent No.1 proceeded solely on the sketchy, vague, unsubstantiated information received from the Intelligence Wing, ignoring the response received from the Singapore Tax Authority and without gathering any further tangible material/information and/ or applying his mind to the information received and/ or carrying out any independent investigation/ enquiry of facts, before forming the belief that income of the Petitioner had escaped assessment. Reliance has been placed on the case in G.S. Engineering & Construction Corporation v DDIT 357 ITR 335 (Del), Chhugamal Rajpal v SP Chaliha 79 ITR 603 (SC). 10. It is further the case of the petitioners that the present reassessment proceedings are merely a change of opinion and an attempt by respondent no.1 to reappraise the material which was already on record and in respect whereto, after due examination, an opinion was formed in the course of the original proceedings, which is now sought to be substituted. It is alleged that the issue of share application money received from Gold Singapore was not only duly disclosed, but was specifically examined/ gone into by Respondent No.1 during the original assessment proceedings. 11. It is also submitted that reassessment proceedings initiated beyond four years from the end of the relevant assessment year are invalid in terms of the proviso to section 147 of the Act as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Reliance was placed on the decision in NuPower Renewables (P.) Ltd. vs. ACIT: 264 Taxman 27, wherein the High Court has held that when during the course of original assessment under section 14(3) of the Act, the assessee had duly supplied certificate of foreign inward remittance 11. It is also submitted that reassessment proceedings initiated beyond four years from the end of the relevant assessment year are invalid in terms of the proviso to section 147 of the Act as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Reliance was placed on the decision in NuPower Renewables (P.) Ltd. vs. ACIT: 264 Taxman 27, wherein the High Court has held that when during the course of original assessment under section 14(3) of the Act, the assessee had duly supplied certificate of foreign inward remittance of funds, tax residence certificate of foreign company, copy of ledger account showing share application money being credited in bank account and source thereof, then initiation of reassessment proceedings to bring to tax the share application money received by the assessee company is liable to be quashed. It is submitted that in respect of EDPL, erstwhile EDIPL as well as EHPL, share application money received from Gold Singapore and subscription to share capital by Gold Singapore is fully disclosed in the audited financial statement and the income tax return form of the relevant financial year. Further, relying on the decision of the Supreme Court in CIT vs Kelvinator of India Ltd: 320 ITR 561 (SC), it is argued by the petitioner that there can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of power. There was no fresh/ tangible material with the AO and for the said reason, too, the assumption of jurisdiction by Respondent No.1 to reopen proceedings for assessment year 2012-13 is invalid and unsustainable. 12. Furthermore, it was submitted that in the present case, sanction has been obtained from „Additional Commissioner of Income Tax‟, i.e. respondent no. 2, which is not as per the mandate of section 151 of the Act. In this regard, it was submitted that obtaining sanction from an officer who does not have jurisdiction over the matter is not justified and thus vitiates the legality of the proceedings. Further, the sanction was granted mechanically, without any application of mind, and hence, cannot be regarded as valid sanction as required to be obtained under section 151 and, therefore, proceedings initiated under section 147 of the Act are without jurisdiction, illegal and bad in law. Reliance was placed on decision of this Court in the case of United Electrical Co.Pvt. Ltd: 258 ITR 317 wherein it has been held as under: “What disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said V. K. Jain, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. As highlighted above, the Legislature has provided certain safeguards to prevent arbitrary exercise of powers by an Assessing Officer, particularly after a lapse of substantial time from completion of assessment. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval. For the foregoing reasons, we allow the petition and quash the impugned notice dated April 30, 2002.” Additional submission of the Petitioner in W.P.(C) 11302/2019 For the foregoing reasons, we allow the petition and quash the impugned notice dated April 30, 2002.” Additional submission of the Petitioner in W.P.(C) 11302/2019 13. The grounds of challenge and submissions of the petitioner in both the petitions, as noted above are exactly the same. However additional grounds are urged in W.P.(C) 11302/2019 to the effect that the impugned notice for reopening of assessment proceedings is bad in law as a common notice has been issued in respect of both EDPL as well as EDIPL, in the name of “Experion Developers Pvt. Ltd”, when during the relevant assessment year, the two existed as unamalgamated/separate entities. It has been argued that for the assessment year 2012-13, (financial year 2011-12), the two entities were separate and distinct having different Permanent Account Numbers (PAN) and had filed separate returns of income and were assessed separately, and thus issuance of a single notice is a jurisdictional error. In the reasons recorded, the name of the assessee is recorded as “M/s. Experion Developers Pvt. Ltd. (Earlier known as Gold Developers Pvt. Ltd.), including its role as successor in interest of Experion Developers (International) Pvt. Ltd. which has amalgamated into M/s Experion Developers Pvt. Ltd.” It was argued that pursuant to amalgamation, if the amalgamating company and amalgamated company both are intended to be assessed by the Revenue then, in such case, as per the provisions of section 170(2) of the Act, separate notices are required to be issued viz. one in the name of amalgamated company in its independent capacity and another in the name of amalgamated company as successor in interest of the amalgamating company, so that the same culminate into separate assessment orders, qua the income of amalgamated company and amalgamating company. In this regard, reliance has been placed on the decision of this Court in PCIT v Maruti Suzuki India Ltd. 397 ITR 681 (Del) and CIT v K Adinarayana Murty 65 ITR 607 (SC). Contentions of the Respondent 14. Per contra, learned counsel for the Respondent submitted that if new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of “change of opinion” will not apply and factual information or material which was incorrect or was not available with the AO at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. [Commissioner of Income Tax v Usha International Ltd [2012] 348 ITR 485 (Delhi)]. Reliance was also placed upon OPG Metals & Finsec Ltd v Commissioner of Income Tax [2014] 41 taxmann.com 21 (Delhi) to contend that where information regarding all transactions, including undisclosed investments, was not subject matter of earlier reassessment proceedings and there was fresh material for AO, it would not be a case of change of opinion. He further argued that the onus to establish the creditworthiness of investor companies is on the assessee and the same is not discharged merely because assessee company has filed all primary evidence. [Reliance has been placed on Principal Commissioner of Income Tax (Central) -1 v NRA Iron & Steel (P) Ltd. [2019] 103 taxmann.com 48 (SC)]. Countering the argument relating to the issue of one notice in respect of reassessment proceedings pertaining to EDPL and EDIPL (now amalgamated into EDPL), he placed reliance on Marshall Sons & Co. (India) Ltd. v Income-Tax Officer [1997] 223 ITR 809 (SC), to argue that where the court does not prescribe any specific date but merely sanctions the scheme presented to it, the date of amalgamation/date of transfer is the date specified in the scheme as “the transfer date”, and not the date of the court order. The plea of requirement of separate notices is misconceived, as on the date of issuance of notice, the only surviving entity was the Petitioner- EDPL. Analysis & Findings 15. The crucial questions that arise for our consideration are: (a). Whether the re-assessment proceedings have been initiated without any valid “reasons to believe”, without reference to any fresh tangible material and without any independent application of mind. (b) Whether initiation of re-assessment proceedings is merely on the basis of change of opinion which is impermissible in law. (c) Whether initiation of re-assessment proceedings is barred by limitation, as prescribed in proviso to Section 147 of the Act. (d) Whether proper sanction as required under Section 151 of the Act was obtained or not. 16. In addition to the aforesaid questions, in W.P. (C) 11302/2019, an additional question (e) that arises for our consideration is as to whether the common reassessment notice issued in the name of EDPL for reopening of assessment proceedings in respect of both EDPL and EDIPL is bad in law, in as much as whether separate notices were required to be issued in the name of (i) EDPL in its individual capacity and, (ii) EDPL, as successor-in-interest of EDIPL . 17. Having summed up the grounds of challenge, we now proceed to deal with each of them comprehensively. (a).WHETHER THE RE-ASSESSMENT PROCEEDINGS HAVE BEEN INITIATEDWITHOUT ANY VALID “REASONS TO BELIEVE”; WITHOUT REFERENCE TO ANYFRESH TANGIBLE MATERIAL, AND; WITHOUT ANY INDEPENDENT APPLICATIONOF MIND 18. We have perused the reasons recorded by the Revenue to re-open the assessment for the assessment year 2012-13; the objections to reopening filed by the assessee/petitioner to the notice for reopening assessment, as well as the order dated 25.09.2019 disposing of the said objections preferred by the petitioner, and also carefully considered the respective submissions of the counsels and the decisions relied upon by them. 19. Section 147 of the Act empowers the AO to initiate the proceedings under the said provision to assess or re-assess any income of the assessee that may have escaped assessment. The power to initiate the proceedings under the said provision is not unfettered and unrestricted and the law mandates the AO to comply with the provisions of Sections 148 to 153 of the Act. Identifying and recording of “reasons to believe” is a pre-requisite for the AO to assume jurisdiction under Section 147 of the Act, as per the scheme of the Act. For harboring a belief that there are cogent reasons to reopen the assessment, the AO is necessarily required to have some basis in the nature of tangible/reliable information in his possession. This is ensured by the language of Section 148 of the Act which obligates the AO to record the reasons on the basis whereof the proceedings under Section 147 of the Act are initiated. This is a safeguard mechanism to ensure that the discretion exercised by the AO is not fanciful or without a reasonable cause, and is not based merely on suspicion, conjectures and surmises. The recording of reasons must show application of mind to the relevant and germane facts, on the basis whereof the action initiated under Section 147 of the Act is to be adjudged. The question as to whether it is fair and just to nip the reassessment proceedings at this stage, arises before us every now and then. There is aversion to reassessment, and that is predictable. No assessee would want the tax authority to reopen what has been closed. Even the Court would not countenance casual, mindless and unjustified original reopening, lest the original assessment proceedings lose their conclusiveness and certainty. Reopening of assessment is time consuming and burdensome for the assessee. Since discretionary power is vested with the AO, the assesees are entitled to challenge the reopening by way of a writ petition. This is a safety measure, to warrant that exercise of power is done with circumspect and with comprehension of facts. This is the precise reason that there is a plethora of judgments on this issue that are cited by both the parties, and we have to repeatedly navigate through the various views expressed by the court. 20. In light of the above judicial principles, the crux lies in the recorded reasons which shed light on the mind of the AO and having perused the same in the instant case, we are not persuaded with Mr. Vohra‟s submission that the observations of the AO are based purely on conjunctures and surmises, without reference to any tangible material. At this stage, we may refer to our decisions in Vedanta Ltd v. Assistant Commissioner of Income Tax in W.P. (C) 13036/2019 decided on 20.12.2019 and also in RDS Project Ltd. in W.P. (C) 11274/2019 decided on 23.10.2019 wherein we have extensively examined the case law on this issue. 21. In the above judgments, we have noted the views of the Supreme Court in Assistant CIT v. Rajesh Jhaveri Stock Broker Pvt. Ltd. (2008) 14 SSC 208, wherein it has been held that the expression “reason” in Section 147 of the Act means a “cause” or “justification”. The Assessing Officer can be said to have reason to believe that income has escaped assessment, if he has a cause or justification to know, or suppose, that income has escaped assessment. 22. It is also apposite to note the observations of the Supreme Court in Sri Krishna Pvt. Ltd v. Income Tax Officer[1996] 221 ITR 538 wherein, it was emphasized that at this stage, the test is not as to whether there has been any escapement of income, but whether there exist “reasons to believe” that the income chargeable to tax has escaped assessment. 23. There are several judgments of the Supreme Courts and of the High Courts which have extensively deliberated on the construction of the expression “reason to believe” [Ref: G.S. Engineering & Construction Corporation v Deputy Director Of Income-tax (International Taxation), Circle -1(2) [2013] 38 taxmann.com 29 (Delhi)]. The scope of judicial review under Article 226 of the Constitution of India has also now been well recognized. In a nutshell, the Courts have applied the test of reasonableness, holding that the recorded reasons to believe must suggest and disclose that the belief is that of an honest and reasonable person, based on reasonable grounds. The discretion vested under the scheme of the Act has also prompted Courts to put a cautionary note in several judgments that while exercising judicial review, although the Court can examine whether the “reasons to believe” satisfy the conditions, however, the declaration or sufficiency of the “reasons to believe” cannot be investigated. 24. Undoubtedly, there has to be sufficient tangible material on record which justifies the prima facie belief of the AO regarding the escapement of taxable income. However, in the facts of the present case, we cannot agree with Mr. Vohra, that there was no basis or material for respondent No.1 to come to this conclusion. Mr. Vohra has argued that there was no evidence/material placed on record to allege that the share application money received from “GoldSingapore” represents money emanating from the coffers of the petitioners, which in turn represents undisclosed income taxable in India. He also emphasized that respondent No.1 has not mentioned in the recorded reasons, any specific provisions of the Act that have been violated by the petitioner. In our opinion, the tangible material in the present case is information received by the AO from DIT (Intell. & Cr. Inv.). It would thus be apposite to refer to the said referred report which has been placed on record. The relevant portion of the said report is extracted herein:- “2. In the report, the First Secretary (Economic) observed that the investment made by the Singapore entity needed to be examined for the following reasons: (i) The equity of the.87 million USD which is very small in comparison to the investment investing company M/s Gold Hotels & Resort Pte. Ltd., hereinafter referred as Gold Singapore is 5 million USD as against the above investment of 163. (ii) Gold Singapore is owned by on share holder M/s Gemwood Invest Holdings Limited having address in British Virgin Island. (iii) The Directors of Gold Singapore are (iv) Mr. Arvind Tiku is the key person who managed the investments. (v) It is possible that the amounts may have been shown all credits/ loans raised from other countries mostly tax havens to form a circuitous route. (vi) Gold had not filed the annual accounts and its business premises consisted of just one room which was found closed most of the times. (vii) The details of the Indian companies which received investment from Gold Singapore are: (viii) It is learnt that the Gold group of companies in India are engaged in the development of real estate including land acquisition construction, trading and other developmental activities having its projects located at Gurgaon, Lucknow, Jaipur, Amritsar, Sonepat,. The group also has interest in hotels & resorts with projects in Hyderabad and other places. xxxxxxx 4. A reply was received from the Inland Revenue Authority (IRA) of the Govt. of Singapore, through the Jt. Secy. (FT&TR), dated 16th March, 2012, wherein they forwarded copies of financial statements from 29th March 2009 till 31st March 2010 and the company profile as per ACRA, Singapore. They also enclosed details of remittances to India in the bank account of Gold Resort & Hotels Pvt. Ltd., maintained in the ING Vysya Bank, Delhi. The information shared by IRA Singapore are summarized as under: (i) As per the report of IRA Singapore the summary of movement in share capital in Gold Singapore shows that the funding came from Dailey Investment Service Inc. (Darley) and Merix International Ventures Limited. Darley and Merix subsequently transferred their shares in Gold Singapore through a complex series of financial arrangements involving many entitle: finally to M/S Gemwood Invest Holdings Ltd. A chronological summary of movement of funds starting from incorporation of Gold Singapore on 29.03.2006- till the final transfer of its shareholding to M/s Gemwood Holding on 31.01.2010 has been given by IRA Singapore in their detailed report which is enclosed at Annxure-2. (ii) IRA Singapore expressed its inability to enquire further into the sources of funding of Gold Singapore since both Darley and M/s Gemwood Invest Holdings were located outside Singapore. (iii) The IRA Singapore has mentioned in its report that a search of the internet showed that Darely is/ was controlled by Kazakhstan billionaire Timur Kulibayev. However, they were unable to comment further upon him since he was not a Singapore entity. (ii) IRA Singapore expressed its inability to enquire further into the sources of funding of Gold Singapore since both Darley and M/s Gemwood Invest Holdings were located outside Singapore. (iii) The IRA Singapore has mentioned in its report that a search of the internet showed that Darely is/ was controlled by Kazakhstan billionaire Timur Kulibayev. However, they were unable to comment further upon him since he was not a Singapore entity. (iv) The IRA Singapore has also given details of remittances made to M/s Gold Resorts & Hotels Pvt. Ltd. For acquisition of its shares as on 31.03.2011 in a statement which is enclosed as per Annexure-3 of this report. (v) The IRA Singapore has forwarded Financial statements of Gold Singapore from 29.03.2006 (date of Incorporation) to 31.03.2007 and for the year ended on 31.03.2008, 31.03,2009 & 31.03.2010, As per the statement, Gold Singapore has following subsidiaries in India: (vi) The following companies in India are wholly owned subsidiaries of Gold Resorts and Hotels Pvt. Ltd. (vii) The following companies in India are wholly owned subs diaries of Gold Developers Private Limited. 5. Since the information received from the Inland Revenue Authority of the Govt, of Singapore showed that Gold Singapore had received its funds from sources other than Singapore and Sri Arvind Tiku was reported as the key person behind all the transactions leading investment in Indian companies, a notice u/s 131 of Income Tax Act, 1961 was issued to Sri Tiku on 27.07.2012 seeking relevant details regarding source of investment of Gold Singapore in the Indian companies. xxxxxxxx 12. In view of the details gathered, the Singapore company (Gold Singapore) apparently does not appear to be carrying out regular business activities in Singapore and has been floated to act as a conduit to funnel investments into Indian companies. Therefore, the source of investment into the three Indian entities (which are wholly owned subsidiaries of Gold Singapore) raises serious doubts and suspicion on the genuineness of these investments. A series of transactions have been undertaken through a complex legal arrangements among entities spread across various jurisdictions to fund investments made in India. The origin of fund in the hands of companies located in tax havens with dubious antecedents and background of shareholders/promoters needs to be further investigated. The assessment in all the three companies namely 1) M/s Experion Hospitality Pvt. Ltd. (formerly, M/s Gold Resorts & Hotels Pvt. Ltd.) 2) M/ s Experion Developers International Pvt. Ltd. (formerly, M/s Gold Developers International Pvt. Ltd.) 3) M/s Experion Developers Pvt. Ltd. (formerly, M/s Gold Developers Pvt. Ltd.) which have received funds needs to be reopened under section 147 read with section 149(1)(c) of the Income Tax Act, 1961 to investigate the genuineness of such funds and the creditworthiness of the investing entities. The year wise details of investments received by the Indian entities in whose hands the cases are required to be ”re-opened are given in Annexure-8. (Emphasis supplied) 25. This report, whereby it is revealed that “GoldSingapore” does not appear to be carrying out regular business activities in Singapore and the series of transactions undertaken through complex legal arrangements among entities spread across various jurisdictions to fund investments made in India, justifies the AO to form a “reason to believe” to investigate the genuineness of the funds and creditworthiness of the investing entities. The year-wise details of investments received by the Indian entities whose cases are required to be re-opened are given in the report and the same read as under: “Annexure-8 Year wise details of investment/ capital received by Indian Companies to be considered for reopening of case u/s 147 read with 149(1)(c) In the report, it has been noted that Mr. Arvind Tiku, is the key person behind the transactions and notice under Section 131 of the Act was issued under: “Annexure-8 Year wise details of investment/ capital received by Indian Companies to be considered for reopening of case u/s 147 read with 149(1)(c) In the report, it has been noted that Mr. Arvind Tiku, is the key person behind the transactions and notice under Section 131 of the Act was issued to him. The DIT (Intell. & Cr. Inv.) has also taken note of the fact that Mr. Arvind Tiku has been evasive in his replies to the said notice. Further, in the report, it has been noticed that the office of Attorney General of Switzerland has opened a criminal investigation in September, 2010 on allegations of money laundering against Mr. Arvind Tiku and Ors. We may also note that Mr. Vohra has argued that the allegations against Mr. Arvind Tiku are contrary to the reasons to be recorded by the respondent No.1, inasmuch as the re-assessment proceedings initiated against him were dropped by Income Tax Department and that the proceedings against him were dismissed by the authority in Switzerland on 27.11.2013. It has been argued that closure happened in 2013 and the department is relying on a report of 2015. However, we are of the opinion that all these aspects ought not be examined at this stage and for us the relevant question is as to whether there is indeed some tangible material having a live link to the “reasons to believe” for arriving at a prima facie opinion that the income has escaped assessment. The facts noted above clearly demonstrate that there are indeed such reasons and the test of tangible material is met. The genuineness of the transaction, as also the creditwort