M/S Etiam Emedia Limited v. Income Tax Officer-2(2) & Another

HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE D.B: HON'BLE SHRI JUSTICE S.C. SHARMA & HON'BLE SHRI JUSTICEVIRENDER SINGH Writ Petition No.28177/2018 M/s Etiam Emedia Limited v/s Income Tax Officer-2(2) & Another Shri P.M. Choudhary, learned senior counsel along with Shri Anand Prabhawalkar, learned counsel for the petitioner. Ms. Veena Mandlik, learned counsel for the respondents. __________________________________________________________________ O R D E R th day of December, 2018 ) ( Passed on this 19 Per : S.C. Sharma, Justice: The petitioner before this Court, which is a companyregistered under the Companies Act, 1956, has filed this presentpetition being aggrieved by the notice dated 31.03.2018 and orderdated 22.11.2018 passed by the Income Tax Officer – 2(2), Indore. 2.The petitioner's contention is that the petitioner/company is alimited company and was earlier known as 'M/s Quality AutomationLimited', it was incorporated in the year 1995. In the year 2000, thename of the company was changed as 'M/s Etiam Emedia Limited'and the petitioner/company is a regular assessee in respect of theIncome Tax and is filing the return right from its incorporation. Thepresent petition relates to assessment year 2011-12 and thepetitioner/company is challenging the reassessment proceedingsinitiated by respondent No.1. 3.It has been stated that the petitioner/company has filed itsreturn of income for the assessment year 2011-12 on 30.03.2012declaring the income as nil. It has been stated that from the balance- sheet reflecting position as on 31.03.2011 in respect of the previousyear 2010-11, reflects that the share capital of thepetitioner/company was carried forward from its previous yearwithout any change or without any fresh share capital being issuedor subscribed. 4.It has further been stated that nothing was heard by thepetitioner/company after filing of the return for the assessment year2011-12 and even the prescribed limitation under Section 143 (2) ofthe Income Tax Act, 1961 for issuance of notice, expired, meaningthereby, there was a deemed acceptance of the return. 5.It has further been contended that the respondentNo.1/Income Tax Officer – 2(2) issued a notice under Section 148of the Income Tax Act, 1961 on 31.03.2018 stating that theAssessing Officer has reason to believe that the assessee's incomechargeable for the assessment year 2011-12 and has escapedassessment within the meaning of Section 147 of the Income TaxAct, 1961, and therefore, it is proposed to assess such income forthe relevant assessment year. The petitioner was required to delivera return for the said assessment year within 30 days' of the notice. 6.The petitioner/company has further stated that the recordedreason to believe as also the previous sanction from the PrincipalCommissioner, Income Tax were not communicated to thepetitioner, nor appended to the notice. The petitioner has furtherstated that in response to the notice, the petitioner/companysubmitted a reply on 23.04.2018 and requested the Income TaxOfficer to treat the original return filed by the petitioner/companyon 30.03.2012 in compliance of the notice issued under Section 148of the Income Tax Act, 1961. 7.The petitioner/company, thereafter, on 25.05.2018, wrote a letter to respondent No.1 stating that compliance has been done bythe petitioner in response to the notice under Section 148 of theIncome Tax Act, 1961 and the reasons recorded for initiation ofproceedings be communicated to the petitioner. 7.The petitioner/company, thereafter, on 25.05.2018, wrote a letter to respondent No.1 stating that compliance has been done bythe petitioner in response to the notice under Section 148 of theIncome Tax Act, 1961 and the reasons recorded for initiation ofproceedings be communicated to the petitioner. 8.The petitioner/company has further stated that in spite of therequest to supply the reason for reopening of the assessment, thenotice was issued under Section 142 (1) of the Income Tax Act,1961 and the petitioner/company again wrote a letter on 11.07.2018to supply the reasons and to keep the proceedings in abeyance. Thepetitioner has further stated that respondent No.1 finally suppliedthe reasons recorded by him for issuance of notice under Section148 of the Income Tax Act, 1961 along with his notice dated13.07.2018. The petitioner's contention is that the reason, sosupplied, reflected that the proceedings have been initiated againstthe petitioner on the basis of some pre and post search investigationconsequent upon a search conducted by the Income Tax Departmentat the premises of 'M/s Shreeji Polymers (India) Limited' and on thebasis of a vague allegation that the petitioner company is a dummyconcern of Shri Anand Bangur, who allegedly uses dummycompanies for routing his unaccounted money through the groupcompanies. It also reflected that the petitioner/company has bogusshare application money to the extent of Rs.2,63,75,500/-, whichhas escaped assessment for the assessment year 2011-12 in thehands of the petitioner, and therefore, reopening of the assessmentin respect of escaped income was being done for the assessmentyear 2011-12. 9.Learned senior counsel for the petitioner has argued beforethis Court that the reasons recorded for reopening of the assessmentare patently vague and there is no substance in the reasons recorded Writ Petition No.28177/2018 in the matter. Learned counsel has also argued that thepetitioner/company has not received any amount towards shareapplication money in the year, which is under consideration andwhatever share capital appears in the petitioner's balance-sheet, isbeing carried forward right from the year of its incorporationwithout any fresh or new influx of the capital in the assessment year2011-12. 10.The petitioner after receiving the reasons vide letter dated29.09.2018, filed a detailed objection, and thereafter, preferred thepresent writ petition being aggrieved by the notice dated 31.03.2018and the order rejecting the objection dated 22.11.2018. 11.Various grounds have been raised by the petitioner and it hasbeen contended that the impugned notice issued by the respondentNo.1 u/s 148 of the Income Tax Act, 1961 for initiation ofproceedings for reopening petitioner's assessment for AY 2011-12u/s 147 of the Income Tax is illegal, bad in law and withoutjurisdiction for want of satisfaction of conditions of section 147 ofthe Act, which are condition precedent for assumption ofjurisdiction under that section. 12.It has further been contended that the impugned order dated22.11.2018 passed by respondent No.1 rejecting petitioner'sobjection filed against the impugned reopening of assessment, isbad in law, as it suffers from error apparent on the face of record inso far as it fails to apply mind to the conditions of section 147 of theIncome Tax Act without satisfaction of which, no proceedings canbe validly initiated. 13.It has further been contended that the respondents failed tosee that for reopening the assessment of an assessee u/s 147, theAssessing Officer must have reason to believe that any income chargeable to tax, has escaped assessment of any assessment year,which can be assessed for the assessment year concerned in thehands of the assessee. The escapement of any income chargeable totax is thus an essential condition for assumption of jurisdiction forassessing such escaped income and for valid initiation ofproceedings for such assessments. 13.It has further been contended that the respondents failed tosee that for reopening the assessment of an assessee u/s 147, theAssessing Officer must have reason to believe that any income chargeable to tax, has escaped assessment of any assessment year,which can be assessed for the assessment year concerned in thehands of the assessee. The escapement of any income chargeable totax is thus an essential condition for assumption of jurisdiction forassessing such escaped income and for valid initiation ofproceedings for such assessments. 14.It has further been contended that the respondents failed tosee that for valid assumption of jurisdiction for making assessmentof the escaped income, the condition precedent is existence ofreasons and formation of believe about escapement of income fromtax and without which no action u/s 147 can be taken nor any noticeu/s 148 can be issued. 15.It has further been stated that that the respondents also failedto see that the existence of reason for formation of the requisitebelief is thus essential for invoking the provisions of section 147and the belief required to be formed is about the fact that anyincome chargeable to tax has escaped assessment of any assessmentyear, which is required to be assessed in the concerned assessmentyear. 16.It has further been stated that the respondents also failed tosee that the income sought to be assessed u/s 147 as escapedincome must necessarily pertain to the assessment year for whichthe proceedings of assessment have been reopened and the beliefrequired to be formed on the basis of reasons must relate to suchincome and its escapement from assessment in the relevantassessment year. 17.It has further been stated that the respondents failed to seethat the reasons on the basis of which the petitioner's assessment forAY 2011-12 is sought to be reopened viz the alleged bogus share capital/share application money to the extent of Rs.2,63,75,500/-being a non-existent reason, no belief about escapement of suchincome from assessment could be formed. 18.It has further been contended that the respondents failed tosee that since share capital, which is alleged to be bogus capital andis sought to be assessed as assessed income for AY 2011-12, has notbeen received by the petitioner in the said year but is merely thebalance carried forward right from the year of incorporation of thepetitioner company and there was no such belief about escapementof such amount from tax in the relevant assessment year i.e. 2011-12. 19.It has further been contended that in absence of any freshshare capital/share application money having been received bypetitioner in the relevant assessment year i.e. AY 2011-12, neitherthere could be any reasons nor there could be any formation ofbelief about escapement of any such income. In absence of theexistence of valid reason and in absence of formation of requisitebelief, the impugned proceedings for reopening petitioner'sassessment are wholly without jurisdiction. 20.It has further been contended that the respondents failed tosee that the word 'reason' connotes a statement of facts implied asan argument to justify a conclusion and hence the reasons requiredto be recorded in writing cannot be construed to mean any factwhatsoever to be recorded in writing. It must be understood as suchstatement of fact as would reasonably justify the conclusion. In theinstant case in absence of any receipt of share capital which hasescaped assessment for AY 2011-12 cannot be said to be a reason ascontemplated u/s 147 which can form the basis of requisite beliefunder that section. 21.It has further been contended that the respondent also failed tosee that the expression 'any assessment year' for which any incomechargeable to tax has escaped assessment, in respect of which theproceedings u/s 147 read with section 148 are sought to be initiatedis referable to the relevant assessment year in which the income isto be taxed and cannot mean any assessment whatsoever. 21.It has further been contended that the respondent also failed tosee that the expression 'any assessment year' for which any incomechargeable to tax has escaped assessment, in respect of which theproceedings u/s 147 read with section 148 are sought to be initiatedis referable to the relevant assessment year in which the income isto be taxed and cannot mean any assessment whatsoever. 22.It has further been contended that the respondents also failedto see that it is not only the existence of reason on the basis ofwhich the belief has to be formed but the reason on the basis ofwhich the belief as contemplated u/s 147 is formed must haverational connection or relevant bearing on the formation of beliefi.e. there must be a direct nexus or live link between the materialcoming into the notice of AO and the formation of belief about theescapement of income. 23.It has further been contended that the existence of material inthe shape of reasons on the basis of which the requisite belief is tobe formed for purpose of section 147 is also necessary. In theinstant case there is neither any material nor any reason on the basisof which the belief about escapement of income from tax in thepresent assessment year could be formed. 24.It has further been contended that the alleged material in thenature of report of DDIT, Indore can hardly be said to be thematerial which could warrant the formation be belief about theescapement of share capital received in the year 1995 from tax inAY 2011-12. The material sought to be relied upon by AO on thebasis of which the belief is said to have been formed is absolutelyvague, indefinite, distant, remote and farfetched and no person ofreasonable prudence can form the belief as contemplated u/s 147. 25.It has further been contended that in absence of reasons and Writ Petition No.28177/2018 consequent belief as required by section 147, the conditionsprecedent for assumption of jurisdiction u/s 147 remained non-satisfied which render the entire proceedings as illegal, bad in lawand without jurisdiction and no reassessment on the basis of suchproceedings can be validly made against the petitioner. 26.It has further been contended that the impugned initiation ofproceedings is bad in law and without jurisdiction as the same isbarred by limitation prescribed u/s 149(1)(b) for issuance of noticeu/s 148 of the Income Tax Act, which is essential for makingassessment u/s 147. 27.It has further been contended that no notice of assessment u/s148 in the present case could be issued beyond a period of six yearsfrom the end of relevant assessment year i.e. six years from end ofAY 2011-12. Since in the instant case, the impugned notice dated31.03.2018 has been actually served on 01.04.2018 i.e. after expiryof limitation on 31.03.2018, the impugned notice as alsoconsequent proceedings are barred by limitation and accordinglywithout jurisdiction. 28.It has further been contended that even the reason thatpetitioner is a dummy company is also equally non-existent reasonbecause the petitioner is a legal juristic entity created by lawincorporated in the year 1995 and assessed by department sincethen. 30.In support of the aforesaid grounds, learned senior counsel forthe petitioner has placed reliance on several judgments i.e. in thecases of GKN Driveshafts (India) Ltd. v/s Income Tax Officerreported in (2002) 125 Taxman 963 (SC), Calcutta Discount Co.Ltd. v/s Income Tax Officer & Another reported in (1961) ITR 191(SC), Jeans Knit (P.) Ltd. v/s Deputy Commissioner of Income 28.It has further been contended that even the reason thatpetitioner is a dummy company is also equally non-existent reasonbecause the petitioner is a legal juristic entity created by lawincorporated in the year 1995 and assessed by department sincethen. 30.In support of the aforesaid grounds, learned senior counsel forthe petitioner has placed reliance on several judgments i.e. in thecases of GKN Driveshafts (India) Ltd. v/s Income Tax Officerreported in (2002) 125 Taxman 963 (SC), Calcutta Discount Co.Ltd. v/s Income Tax Officer & Another reported in (1961) ITR 191(SC), Jeans Knit (P.) Ltd. v/s Deputy Commissioner of Income Tax, Banglore reported in (2017) 77 taxmann. Com 176 (SC),Garden Finance Ltd. v/s Assistant Commissioner of Income Taxreported in (2004) 268 ITR 48 (Gujarat), Commissioner ofIncome Tax v/s Foramer France* reported in (2003) 264 ITR 566(SC), JSRG Udyog Ltd. v/s Income Tax Officer reported in (2009)313 ITR 321 (Delhi), Tiwari Kanhaiya Lal v/s Commissioner ofIncome Tax reported in (1985) 154 ITR 109 (Rajasthan),Ghanshyam K. Khabrani v/s Assistant Commissioner of IncomeTax Circle-1 reported in (2012) 346 ITR 443 (Bombay),Commissioner of Income Tax Delhi-IV v/s Gupta Abhushan (P.)Ltd reported in (2009) 312 ITR 166 (Delhi), SKY ViewConsultants (P.) Ltd. v/s Income Tax Officer, Ward 23(4) reportedin (2017) 397 ITR 673 (Delhi), Income Tax Officer v/sLakhamani Mewal Das reported in (1976) 103 ITR 437 (SC),Ganga Saran & Sons (P.) Ltd. v/s Income Tax Officer reported in(1981) 130 ITR 1 (SC), Amar Jewellers Ltd v/s DeputyCommissioner of Income Tax reported in (2018) 405 ITR 561(Gujrat), Ardent Steel Ltd. v/s Assistant Commissioner of IncomeTax (Central)-2, Raipur reported in (2018) 405 ITR 422(Chhatishgarh), Commissioner of Income Tax, Delhi v/sKelvinator of India Ltd. reported in (2010) 320 ITR 561 (SC),Smt. Uma Devi Jhawar v/s Income Tax Officer reported in (1996)218 ITR 573 (Calcutta), Krown Agro Foods (P.) Ltd. v/s AssistantCommissioner of Income Tax, Circle 5(1), New Delhi reported in(2015) 375 ITR 460 (Delhi), Arjun Singh v/s Assistant Director ofIncome Tax reported in (2000) 246 ITR 363 (Madhya Pradesh),Commissioner of Income Tax v/s Bigabass Maheshwari SewaSamiti reported in (2008) 220 CTR 369 (Rajasthan) and UnitedElectrical Co. (P.) Ltd. v/s Commissioner Income Tax reported in (2002) 258 ITR 317 (Delhi). 31.A detailed and exhaustive reply has been filed by the IncomeTax Department and the respondents have admitted issuance ofnotice under Section 148 of the Income Tax Act, 1961, which wassent by the speed post on 31.03.2018. It has been stated that theproceedings were initiated under Section 147 of the Income TaxAct, 1961 after consideration of specific information that too withdue application of mind on the basis of prima facie belief. 32.The respondents have also stated that the objection of thepetitioner was disposed of by the Assessing Officer i.e. Income TaxOfficer – 2(2) vide order dated 22.11.2018. The respondents havestated that the petitioner's contention is that the share capitalcontinued to be carried forward, as it is from previous year, withoutany change or without any fresh share capital being issued orsubscribed, is not acceptable on face value. 33.The respondents have further stated that the petitioner had notshown any business activity, and hence, had not filed auditedaccounts. It has further been stated that the petitioner has filed onlyits Income Tax Return, which only shows closing balance on thesaid item, and therefore, changes made and squared off during theyear and change in the composition of the shareholder withoutjustifying the closing figure, cannot be ascertained from the IncomeTax Return for the relevant year. 33.The respondents have further stated that the petitioner had notshown any business activity, and hence, had not filed auditedaccounts. It has further been stated that the petitioner has filed onlyits Income Tax Return, which only shows closing balance on thesaid item, and therefore, changes made and squared off during theyear and change in the composition of the shareholder withoutjustifying the closing figure, cannot be ascertained from the IncomeTax Return for the relevant year. 34.The respondents have also stated that the balance-sheet andthe profit & loss account, as annexed with the present petition, havenot been delivered before the Income Tax Department by thepetitioner, at least till the time of initiation of the proceedings underSection 147 of the Income Tax Act, 1961. 35.The respondents have also stated that the Assessing Officer had reason to believe that the petitioner's income has escapedassessment within the meaning of Section 147 of the Act, andtherefore, he has rightly issued the notice under Section 148 of theIncome Tax Act, 1961 and there is no legal requirement tocommunicate the reason to believe. It is communicated in duecourse and the same was also done by the department. Therespondents have also stated that the petitioner's contentionregarding pre and post search investigation are baseless. Thedepartment conducted a very detailed and thorough investigation,evidence was gathered, large number of persons were examined,huge amount of hard and soft data were looked into and afterinvestigating hundreds of man-hours, the department has arrived ata conclusion that opportunity to defend himself shall be available tothe petitioner during the assessment proceedings, which are takingplace. 36.The respondents have also stated that the petitioner has notshown any business activity for the relevant year and has not filedany audited account before the Income Tax Department, at least tillthe time of initiation of the proceedings under Section 147 of theIncome Tax Act, 1961 and has filed only its Income Tax Return.The respondents have also stated that sufficiency or insufficiency ofthe material can not be looked into at the stage of notice underSection 148 of the Income Tax Act, 1961. 37.The respondents have placed reliance upon a judgmentdelivered in the case of AGR Investment Ltd. v/s AssistantCommissioner of Income Tax & Another reported in (2011) 333ITR 146 (Delhi). Though, the respondents have given para-wisereply to the writ petition, however, learned counsel for therespondents has argued before this Court that even though, the petitioner/company is legally incorporated company, it doesn'tmean that it cannot be a dummy company. It has been stated thatthe company was incorporated in the year 1995 and after verydetailed and thorough investigation carried out in 2017, it wasprima facie established that the petitioner is a dummy company. 38.The respondents have stated that there are large number ofdummy/bogus/shell/briefcase/paper entities including thepetitioner/company in the group, which is being managed andcontrolled by Shri Anand Bangur for the purposes of routingunaccounted money and the department with great difficulties andafter examining huge evidence, has arrived at a conclusion toinitiate the proceedings against the petitioner and it is not a casewhere some unilateral action has been taken against the petitioner, itis a case where petitioner will receive every opportunity to defendhimself and the entire mechanism has been provided under theIncome Tax Act, 1961 and the respondents have prayed fordismissal of the writ petition. 39.Heard learned counsel for the parties at length and perusedthe record. 39.Heard learned counsel for the parties at length and perusedthe record. 40.The petitioner before this Court is aggrieved by the noticedated 31.03.2018 and order dated 22.11.2018 passed by therespondents. Undisputedly, the respondents have issued notice tothe petitioner on 31.03.2018 under Section 148 of the Income TaxAct, 1961 and the petitioner did submit a reply to the respondents.Thereafter, the petitioner demanded the reasons for reopening of theassessment in respect of assessment year 2011-12 and therespondents have supplied the reasons also. The petitioner hassubmitted objection in respect of reassessment on 29.09.2018, andfinally, an order has been passed rejecting the objection of the petitioner. 41.Sections 147 and 148 of the Income Tax Act, 1961 reads as under:- “147. Income escaping assessment. -If the77[Assessing] Officer [has reason to believe] that any incomechargeable to tax has escaped assessment for any assessmentyear, he may, subject to the provisions of sections 148 to 153,assess or reassess such income and also any other incomechargeable to tax which has escaped assessment and whichcomes to his notice subsequently in the course of theproceedings under this section, or recompute the loss or thedepreciation allowance or any other allowance, as the case maybe, for the assessment year concerned (hereafter in this sectionand in sections 148 to 153 referred to as the relevantassessment year) : Providedthat where an assessment under sub-section (3)of section 143 or this section has been made for the relevantassessment year, no action shall be taken under this sectionafter the expiry of four years from the end of the relevantassessment year80, unless any income chargeable to tax hasescaped assessment for such assessment year by reason of thefailure80 on the part of the assessee to make a return undersection 139 or in response to a notice issued under sub-section(1) of section 142 or section 148 or to disclose fully and trulyall material facts80 necessary for his assessment, for thatassessment year: [Provided [also] that the Assessing Officer may assess orreassess such income, other than the income involving matterswhich are the subject matters of any appeal, reference orrevision, which is chargeable to tax and has escapedassessment.]” Explanation 1.—Production84 before the AssessingOfficer of account books or other evidence from whichmaterial evidence could with due diligence have beendiscovered by the Assessing Officer will not necessarily84amount to disclosure within the meaning of the foregoingproviso. Explanation 2.—For the purposes of this section, thefollowing shall also be deemed to be cases where incomechargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by theassessee although his total income or the total income of anyother person in respect of which he is assessable under this Actduring the previous year exceeded the maximum amount whichis not chargeable to income-tax ; (b) where a return of income has been furnished by theassessee but no assessment has been made and it is noticed bythe Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance orrelief in the return ; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (i) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessiverelief under this Act ; or (iv) excessive loss or depreciation allowance or anyother allowance under this Act has been computed;] (b) where a return of income has been furnished by theassessee but no assessment has been made and it is noticed bythe Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance orrelief in the return ; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (i) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessiverelief under this Act ; or (iv) excessive loss or depreciation allowance or anyother allowance under this Act has been computed;] [Explanation 3.—For the purpose of assessment orreassessment86 under this section, the Assessing Officer mayassess or reassess the income in respect of any issue, which hasescaped assessment, and such issue comes to his noticesubsequently in the course of the proceedings under thissection, notwithstanding that the reasons for such issue havenot been included in the reasons recorded under sub-section (2)of section 148.] 148. Issue of notice where income has escapedassessment [ (1) ] Before making the assessment, reassessmentor recomputation under section 147, the Assessing Officer shallserve on the assessee a notice requiring him to furnish withinsuch period, not being less than thirty days, as may be specifiedin the notice, a return of his income or the income of any otherperson in respect of which he is assessable under this Actduring the previous year corresponding to the relevantassessment year, in the prescribed form and verified in theprescribed manner and setting forth such other particulars asmay be prescribed; and the provisions of this Act shall, so faras may be, apply accordingly as if such return were a returnrequired to be furnished under section 139.] [Provided that in a case - (a)where a return has been furnished during theperiod commencing on the 1[st] day of October, 1991 and endingon the 30[th] day of September, 2005 in response to a noticeserved under this section, and (b)subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve monthsspecified in the proviso to sub-section (2) of section 143, as itstood immediately before the amendment of said sub-sectionby the Finance Act, 2002 (20 of 2002) but before the expirty ofthe time limit for making the assessment, reassessment for re-computation as specified in sub-section (2) of section 153,every such notice referred to in this clause shall be deemed tobe a valid notice: Provided further that in a case - (a)where a return has been furnished during theperiod commencing the 1[st] day of October, 1991 and ending onthe 30[th] day of September, 2005, in response to a notice servedunder this section, and (b)subsequently a notice has been served underclause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the timelimit for making the assessment, reassessment or re-computation as specified in sub-section (2) of section 153,every such notice referred to in this clause shall be deemed tobe a valid notice. Explanation – For the removal of doubts, it is herebydeclared that nothing contained in the first proviso or thesecond proviso shall apply to any return which has beenfurnished on or after the 1[st] day of October, 2005 in response toa notice served under this section. (2)The Assessing Officer shall, before issuing anynotice under this section, record his reasons for doing so.” 42.The action has been initiated by the department against thepetitioner under the aforesaid statutory provision of law and by adetailed and speaking order, the objection raised by the petitionerhas been rejected. The reasons recorded for issuance of notice underSection 148 has been supplied to the petitioner and it is also onrecord and the same reads as under:- Explanation – For the removal of doubts, it is herebydeclared that nothing contained in the first proviso or thesecond proviso shall apply to any return which has beenfurnished on or after the 1[st] day of October, 2005 in response toa notice served under this section. (2)The Assessing Officer shall, before issuing anynotice under this section, record his reasons for doing so.” 42.The action has been initiated by the department against thepetitioner under the aforesaid statutory provision of law and by adetailed and speaking order, the objection raised by the petitionerhas been rejected. The reasons recorded for issuance of notice underSection 148 has been supplied to the petitioner and it is also onrecord and the same reads as under:- “1.PLEASE REFER TO YOUR LETTER DATED25.05.2018, THE REASONS FOR ISSUANCE OF NOTICEU/S 148 IS MENTIONED AS UNDER: During the course of search proceedings in the Groupcases of Shriji Polymers (India) Ltd. hereinafter referred asSPIL was conducted on 27.07.2017. During the course ofsearch & seizure action, various business premises of theGroup were covered u/s 133A of the Act, as per pre and postsearch investigation, it has been established that the variousconcerns of the Group are dummy in nature; they arebogus/briefcase/paper concern handled by the Shri AnandBangur the promoter of SPIL. 2.During the post search investigation, Shri Anand Bangurwas asked to submit the details of the investments made bythese shell/paper/dummy companies for the period 2010-11 to2016-17 but he ahs not cooperated with the department. HenceDDIT (inv)-II, Indore has fetched the details of investmentsmade by these shell companies from the return of income filedby such companies and passed on the information to concernedAOs to take the necessary action in respect of shareapplication/share premium, Investment, Loan & Advancesintroduced/made by these shell companies. 3.On perusal of income tax return for A.Y. 2011-12 it isfound that assessee company has shown share capital atRs.26,378,500/-. 4.The DDIT (Inv)-II, Indore reported that information scouted out from seized/impounded material in the case ofSPIL Group of Ujjain described the facts in respect of M/sPatni Industries Limited as under: 5.The company is having its registered address at 244,Apollo Tower, M.G. Road, Indore – 452001. As per ROC data,its directors are Shri Avinash Parashram Mupuskar, ShriKailash Garg, Smt. Chhaya Parmar and Shri Vinod Agrawal. 6.During the course of action, it was proposed to cover theoffice premises of M/s Etiam Emedia Ltd and a team wasmoved with authorization on the above address. The teamreported that no office in the name M/s Etiam Emedia Ltd isrunning at the given address. It is pertinent to mention that thedirectors of the company M/s Etiam Emedia Ltd are ShriKailash Gard, Shri Avinash Mapushka. In the statementrecorded during the search action and post search investigation,Shri Kailash Garg and Smt. Chhaya Parmar have admitted thatthey work on the direction of the key person of the SPIL Groupi.e. Shri Anand Bangur and Shri Amrish Parmar, who is thehusband of Smt. Chhaya Parmar submitted that he did notaware regarding his involvement in any company. The detaileddiscussions on all three dummy directors have ben made supra.As per discussion/findings, it can be concluded that M/s EtiamEmedia Ltd is a dummy concern of Shri Anand Bangur. ShriBangur uses this company for routing its unaccounted moneyinto other group of companies. It is also observed that M/sEtiam Emedia Ltd has no worth or business activity, it surelyacquired some assets but in this case, no substantial assets areavailable in the balance sheet, which is also one of the reasonsto confirm the findings that the company is only a shell/papercompany. In the light of the above facts it is established thatM/s Etiam Emedia Ltd is a paper company which runs on paperand it engaged in the practice of providing accommodationentry. 7.In view of above facts and statements recorded duringthe post search investigation of the director Shri Kailash Gargcompany M/s Etiam Emedia Ltd had bogus share applicationmoney of Rs.2,63,75,500/-. Therefore I am satisfied that shareapplication money of Rs.2,63,75,500/- remains unexplained fortaxation for the A.Y. 2011-12 in the hands of assessee company.Looking to the facts and circumstances of the case I havereason to believe that income of Rs.2,63,75,500/- has escapedassessment within the meaning of Section 147 of the IncomeTax Act. It is fit case to issue notice u/s 148.” 43.Learned senior counsel for the petitioner has placed relianceon various judgments and this Court has carefully gone through theaforesaid judgments. 44.In the considered opinion of this Court, sufficiency of reasons cannot be considered in a writ petition and the assessee has toparticipate in the reassessment proceeding and to specify thatescapement of income has taken place. The Division Bench ofDelhi High Court in the case of AGR Investment Ltd. (supra), hasdealt with all important judgments on the subject. Paragraphs-9 to 21 of the aforesaid judgment reads as under:- “9. The High Court of Gujarat in Praful Chunilal Patel v.Assistant Commission of Income Tax, [1999] 236 ITR 832 hasopined that in terms of the provision contained in Section 147,the Assessing Officer should have reason to believe that anyincome chargeable to tax has escaped assessment. The word„reason‟ in the phrase „reason to believe‟ would mean cause orjustification. If the assessing officer has a cause or justificationto think or suppose that income has escaped assessment, he canbe said to have a reason to believe that such income hadescaped assessment. The words „reason to believe‟ cannotmean that the assessing officer should have finally ascertainedthe facts by legal evidence. They only mean that he forms abelief from the examination he makes and if he likes from anyinformation that he receives. If he discovers or finds or satisfieshimself that the taxable income has escaped assessment, itwould amount to saying that he had reason to believe that suchincome had escaped assessment. The justification for his beliefis not to be judged from the standards of proof required forcoming to a final decision. A belief, though justified for thepurpose of initiation of the proceedings under Section 147, mayultimately stand altered after the hearing and while reaching thefinal conclusion on the basis of the intervening enquiry. At thestage where he finds a cause or justification to believe that suchincome has escaped assessment, the assessing officer is notrequired to base his belief on any final adjudication of thematter. 10. In Ganga Saran & Sons P. Ltd. v. ITO & Ors., [1981]130 ITR 1 (SC), it has been held thus: "It is well settled as a result of several decisions ofthis Court that two distinct conditions must besatisfied before the ITO can assume jurisdiction toissue notice under S. 147(a). First, he must havereason to believe that the income of the assessee hasescaped assessment and, secondly, he must havereason to believe that such escapement is by reasonof the omission or failure on the part of the assesseeto disclose fully and truly all material factsnecessary for his assessment. If either of theseconditions is not fulfilled, the notice issued by theITO would be without jurisdiction. The important 10. In Ganga Saran & Sons P. Ltd. v. ITO & Ors., [1981]130 ITR 1 (SC), it has been held thus: "It is well settled as a result of several decisions ofthis Court that two distinct conditions must besatisfied before the ITO can assume jurisdiction toissue notice under S. 147(a). First, he must havereason to believe that the income of the assessee hasescaped assessment and, secondly, he must havereason to believe that such escapement is by reasonof the omission or failure on the part of the assesseeto disclose fully and truly all material factsnecessary for his assessment. If either of theseconditions is not fulfilled, the notice issued by theITO would be without jurisdiction. The important words under S.147(a) are "has reason to believe" andthese words are stronger than the words "issatisfied". The belief entertained by the ITO mustnot be arbitrary or irrational. It must be reasonableor in other words it must be based on reasons whichare relevant and material. The Court, of course,cannot investigate into the adequacy or sufficiencyof the reasons which have weighed with the ITO incoming to the belief, but the Court can certainlyexamine whether the reasons are relevant and have abearing on the matters in regard to which he isrequired to entertain the belief before he can issuenotice under S.147(a). It there is no rational andintelligible nexus between the reasons and the belief,so that, on such reasons, no one properly instructedon facts and law could reasonably entertain thebelief, the conclusion would be inescapable that theITO could not have reason to believe that any part ofthe income of the assessee had escaped assessmentand such escapement was by reason of the omissionor failure on the part of the assessee to disclose fullyand truly all material facts and the notice issued byhim would be liable to be struck down as invalid." 11. In Birla VXL Ltd. v. Assistant Commissioner ofIncome Tax, [1996] 217 ITR 1 (Guj.), a Division Bench of theGujarat High Court has opined thus: "Explanation 2 to Section 147of the Act, asappended to newly substituted section 147makescertain provisions, where in certain circumstances,the income is deemed to have escaped assessmentgiving jurisdiction to the Assessing Officer to actunder the said provision. Another requirement whichis necessary for assuming jurisdiction is that theAssessing Officer shall record his reasons for issuingnotice. This requirement necessarily postulates thatbefore the Assessing Officer is satisfied to act underthe aforesaid provisions, he must put in writing as towhy in his opinion or why he holds belief thatincome has escaped assessment. "Why" for holdingsuch belief must be reflected from the record ofreasons made by the Assessing Officer. In a casewhere Assessing Officer holds the opinion thatbecause of excessive loss or depreciation allowanceincome has escaped assessment, the reasonsrecorded by the Assessing Officer must disclose thatby what process of reasoning he holds such a beliefthat excessive loss or depreciation allowance hasbeen computed in the original assessment. Merelysaying that excessive loss or depreciation allowance has been computed without disclosing reasons whichled the assessing authority to hold such belief, in ouropinion, does not confer jurisdiction on theAssessing Officer to take action under sections 147and148of the Act. We are also of the opinion that,howsoever wide the scope of taking action undersection 148of the Act be, it does not conferjurisdiction on a change of opinion on theinterpretation of a particular provision from thatearlier adopted by the assessing authority. Forcoming to the conclusion whether there has beenexcessive loss or depreciation allowance or there hasbeen underassessment at a lower rate or for applyingthe other provisions of Explanation 2, there must bematerial that have nexus to hold opinion contrary towhat has been expressed earlier. The scope ofsection 147of the Act is not for reviewing its earlierorder suo motu irrespective of there being anymaterial to come to a different conclusion apart fromjust having second thoughts about the inferencesdrawn earlier. [Emphasis added] 12. In Sheo Narain Jaiswal & Ors. v. Income Tax Officer& Ors., [1989] 176 ITR 352 (Patna), it was held thatreassessment proceedings can be initiated under Section 147(a)of the Act if the Income-tax Officer has reason to believe thatthere has been escapement of income and that the said incomeescaped assessment by reason of the omission or failure on thepart of the assessee to disclose fully and truly all material factsnecessary for the assessment for that period or year. Both theconditions are conditions precedent for the assumption ofjurisdiction under Section 148 of the Act. 13. In Phool Chand Bajrang Lal & Anr. v. Income TaxOfficer & Anr., [1993] 203 ITR 456 (SC), the Apex Court hasheld thus: "From a combined review of the judgments of thisCourt, it follows that an Income-tax Officer acquiresjurisdiction to reopen an assessment under Section147(a)read with Section 148of the Income-tax Act,1961, only if on the basis of specific, reliable andrelevant information coming to his possessionsubsequently, he has reasons, which he must record,to believe that, by reason of omission or failure onthe part of the assessee to make a true and fulldisclosure of all material facts necessary for hisassessment during the concluded assessmentproceedings, any part of his income, profits or gainschargeable to income-tax has escaped assessment. Hemay start reassessment proceedings either becausesome fresh facts had come to light which were not previously disclosed or some information with regardto the facts previously disclosed comes into hispossession which tends to expose the untruthfulnessof those facts. In such situations, it is not a case ofmere change of opinion or the drawing of a differentinference from the same facts as were earlieravailable but acting on fresh information. Since thebelief is that of the Income-tax Officer, thesufficiency of reasons for forming the belief is notfor the Court to judge but it is open to an assessee toestablish that there in fact existed no belief or that thebelief was not at all a bona fide one or was based onvague, irrelevant and non-specific information. Tothat limited extent, the Court may look into theconclusion arrived at by the Income-tax Officer andexamine whether there was any material available onthe record from which the requisite belief could beformed by the Income-tax Officer and furtherwhether that material had any rational connection ora live link for the formation of the requisite belief..."[Emphasis supplied] In Anant Kumar Saharia v. Commissioner of Income Tax& Ors., [1998] 232 ITR 533 (Gauhati), it was held as follows: In Anant Kumar Saharia v. Commissioner of Income Tax& Ors., [1998] 232 ITR 533 (Gauhati), it was held as follows: "The belief is that of the Assessing Officer and thereliability or credibility or for that matter the weightthat was attached to the materials naturally dependson the judgment of the Assessing Officer. This courtin exercise of power under Article 226of theConstitution of India cannot go into the sufficiencyor adequacy of the materials. After all the AssessingOfficer alone is entrusted to administer the impugnedAct and if there is prima facie material at the disposalof the Assessing Officer that the income chargeableto income-tax escaped assessment this court inexercise of power under Article 226of theConstitution of India sho