Navnidhi Dyeing And Printiing Mills Pvt. Ltd. Thru. Directormayank Maheshkumar Malpani v. Asst. Commissioner Of Income Tax, Circle 1(1)(2

C/SCA/17786/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17786 of 2018 FOR APPROVAL AND SIGNATURE: ================================================================NAVNIDHI DYEING AND PRINTIING MILLS PVT. LTD. THRU. DIRECTORMAYANK MAHESHKUMAR MALPANI Versus ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(2) ================================================================Appearance:MR DARSHAN R PATEL(8486) for the Petitioner(s) No. 1MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MR. JUSTICE ILESH J. VORA Date : 16/03/2021ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.By this writ-application under Article 226 of theConstitution of India, the writ-application has prayed for thefollowing reliefs : “(A)Issue a writ of certiorari and/or a writ of mandamusand/or any other writ, direction or order to quash and setaside the impugned notice dated 30.3.2018 under section148 of the Income-tax Act, 1961 annexed hereto atAnnexure-B along with preliminary order dated 23.10.2018annexed hereto at Annexure-F for proceeding andcompleting reassessment proceedings. (B)Pending admission, hearing and disposal of thispetition, ad-interim relief be granted and the respondent beordered to restrain from enforcing compliance of theimpugned notice dated 30.3.2018 at Annexure-B and/ortaking any other steps in this regard includingreassessment order or implementation of preliminary orderdated 23.10.2018 at Annexure-F and further notices issuedfor purpose of reassessment. (B1)Your Lordships may be pleased to issue a writ ofcertiorari or a writ in the nature of certiorari or any otherappropriate writ, order or direction for quashing and settingaside the impugned assessment order dated 24.12.2018under section 143(3) r.w.s. 147 of the Income Tax Act, 1961at Annexure-G collectively. (B2)Pending admission, hearing and final disposal of thepresent petition, be pleased to stay the implementation,operation and execution of the impugned assessment orderdated 24.12.2018 under section 143(3) r.w.s. 147 of theIncome Tax Act, 1961 at Annexure-G collectively. (C)Award the cost of this petition. (D)Grant such other and further reliefs as this Hon'bleCourt deems fit.” 2.The subject matter of challenge in the present litigation isto the notice of re-opening issued under Section 148 of theIncome Tax Act, 1961 (for short, 'the Act') for the AssessmentYear 2011-12 in a case where the return of income wasprocessed for the relevant year under Section 143(1) of the Act.Otherwise, the re-opening is beyond the period of four years. Thereasons assigned by the Assessing Officer for re-opening are asunder : “The assessee company filed its return of income for A.Y.2011-12 on 26.09.2011 declaring total income ofRs.19,38,960/-. In this case, there is no assessment asstipulated u/s.2(40) of the Act was made and the return ofincome was only processed u/s.143(1) of the Act. 2.In this case, during the year under consideration,there was a huge increase in share capital & premium of theassessee company. As per the details available, theassessee has received share capital and share premiumfrom the following Kolkata based companies which wereproved shell companies by income tax department duringthe various survey/search proceedings. Thus, the assessee company has received total sharecapital money of Rs.40,00,000/- from Kolkata based shellcompanies during the year under consideration. C/SCA/17786/2018 JUDGMENT 2.In this case, during the year under consideration,there was a huge increase in share capital & premium of theassessee company. As per the details available, theassessee has received share capital and share premiumfrom the following Kolkata based companies which wereproved shell companies by income tax department duringthe various survey/search proceedings. Thus, the assessee company has received total sharecapital money of Rs.40,00,000/- from Kolkata based shellcompanies during the year under consideration. C/SCA/17786/2018 JUDGMENT Sr.Name of theNumberShareShareTotalNo.Investorof EquityCapitalPremiumShareCompanyShare(In Rs.)(In Rs.)CapitalMoney(In Rs.)1Prima 200002,00,00018,00,00020,00,000Vyapaar Pvt.Ltd.2Asha 200002,00,00018,00,00020,00,000Apartments Pvt. Ltd.Total40,00,000 3.In the recent past, it is noticed that many companiesall over India has introduced share capital and sharepremium in their books of accounts from the various entities,which proven to be bogus and was engaged in the providingof accommodation entries. In such connection, in recentyear, through various search & seizure operations/ surveyoperations/ investigations/ inquiries/ other related actionon shell companies operated throughout India by theIncome-tax department as well as other Governmentagencies (via Enforcement Directorate/ CBI/ SFIO etc.)based on which data base of such shell companies areprepared from time to time. Further in course of such actionstatement of many shell company operators/ dummydirectors/ either related person have been recorded whichadmitted, confirmed the modus operandi implied in all theseshell companies for rotation of funds for providing ofaccommodation entries of share capital/ loan/ purchased &sale bill etc. to the various beneficiaries as per theirrequirement. 4.The above mentioned company has invested amountas per above – table towards the share capital and premiumthereupon in the assessee company during the year underconsideration. It has been noticed that the aforesaidcompany is managed and controlled by one Kolkata basedaccommodation entry provider namely Shri ManoharlalNangalia. A statement on oath of Shri Manoharlal Nangaliahas been recorded on oath by the DDIT (Inv.), Kolkata inwhich he has categorically accepted the fact that his mainbusiness is providing accommodation entries through“Jama-Khaarchi/Shell” companies to various beneficiariesin lieu of commission and also describe/ accepted themodus operandi implied in providing of entry of funds. 5.On such observation & facts and looking toconsiderable increase in the shareholders fund in the handof the assessee in the year under consideration in this case,necessary permission has been taken from the Pr. CIT-1,Surat to issue letter u/s.133(6) of the I.T. Act. After receivingof permission, to provide an opportunity to the assessee toexplain the above transactions, a letter u/s.133(6) of the I.T.Act was issued to the assessee on 12.03.2018 with arequest to furnish the reply/ details in respect ofshareholders fund received during the year. In response tothe said letter, the assessee has not filed any reply/explanation in the above matter. The above information/details as well as details of list of shell companies from theavailable database prepared from time to time available inthis office have been perused. From the details, it is seenthat the assessee has received shareholders funds fromabove mentioned Kolkata based shell companies. 6.In view of the above findings, the credentials ofinvestor companies is also got cross verified from theavailable details/records. As per database of such shellcompanies prepared from time to time through varioussearch & seizures operations/ survey operations/investigations/ inquiries/ other related action on shellcompanies operated throughout India by the Income-taxdepartment as well as other Government agencies (viaEnforcement Directorate/ CBI/ SFIO etc.), in which name ofinvestore company M/s Prime Vyapaar Pvt. Ltd. And M/sAsha Apartments Pvt. Ltd. Have been found, which hasbeen investigated by the Income-tax department and provedto be one of the bogus concerns of Kolkata based entryoperator Shri Manoharlal Nangalia. The said entry providerhas categorically accepted the fact that his main business isproviding accommodation entries through “Jama-Khaarchi/Shell” companies to various beneficiaries in lieu ofcommission. In view of these facts, the investment madefrom the said concern in the assessee company cannot beheld as genuine as being routed through shell companies ofthe entry provider. From above discussed facts of the case, it can concludedthat the fund received in the nature of shareholders fundsby the assessee company in the year under considerationare nothing but in the nature of accommodation entriesbeing layered through various shell companies operated byentry operators based in Kolkata, though these investorcompany have no financial credentials on its own. Meremoney routed through banking channel and filing of return may not be sufficient when surrounding and attending factspredicate a cover up. These facts indicate and reflect properpaper work of documentation but genuineness,creditworthiness, identity are deeper and obtrusive andsuch basic ingredients could not found explained in thiscase in connection with receiving of shareholders fund bythe assessee company. 7.In view of above facts/ material available on recordand further analyzing the same, I have reasons to believethat income of the assessee to the extent of Rs.40,00,000/-has escaped assessment for A.Y. 2011-12 within themeaning of section 147 of the I.T. Act. 8.In this case a return of income was filed for the yearunder consideration but no scrutiny assessment u/s.143(3)of the Act was made. Accordingly, in this case, the onlyrequirement to initiate proceedings u/s.147 is reason tobelieve which has been recorded above refer paragraphs 2to 7) It is pertinent to mention here that in this case the assesseehas filed return of income for the year under considerationbut no assessment as stipulated u/s.2(40) of the Act wasmade and the return of income was only processedu/s.143(1) of the Act. In view of the above, provisions ofclause (b) of explanation-2 to section 147 are applicable tofacts of this case and the assessment year underconsideration is deemed to be a case where incomechargeable to tax has escaped assessment.” 3.To the aforesaid reasons, the writ-applicant lodged hisobjections in details. The objections are as under : “(1)Our case has been re-opened by recording the reasonsthat we have received share capital and share premiumfrom 1) Prime Vyapaar Pvt. Ltd. (Rs.20,00,000/-), and 2)Asha Apartments Pvt. Ltd. (Rs.20,00,000/-) [totalRs.40,00,000/-] during the year under consideration, which,as per the reasons recorded, are Kolkata based shellcompanies and the sums received from them areaccommodation entries, which has escaped assessment forA.Y. 2011-12. In this regard, we humbly beg to submit thatwe have not received any amount from above mentionedcompanies during the year under consideration. Thus, thevery basis/reason for re-opening of our case is factuallyincorrect. We have not received any amount from abovementioned companies during the year under considerationi.e. F.Y. 2010-11 (A.Y. 2011-12). We have received share application money from abovenamed companies in last year i.e. F.Y. 2009-10 (A.Y. 2010-11) as under : i)PRIME VYAPAAR PVT. LTD.ii)ASHA APARTMENTS PVT. LTD. Rs.10,00,000/-Rs.10,00,000/- Thus, we have not received any amount from abovecompanies during the year under consideration (i.e. A.Y.2011-12). Further, amount of share application moneyreceived from them in the last year i.e. F.Y. 2009-10 was Rs.10,00,000/- each (total Rs.20,00,000/- from bothcompanies) and not Rs.20,00,000/- each (totalRs.40,00,000/- from both) as mentioned in the reasonsrecorded. We enclose herewith copies of the shareapplications and A/c confirmations received from them forboth years proving the above fact. We also enclose herewithcopy of relevant extract of our Bank statement evidencingthat the sums were received from them in last year and notin the year under consideration. Thus, the sums werereceived from them in last year against which allotment wasmade in this year. But no amount was received from them inthe year under consideration. Thus, the very basic reasonand consequent belief of escapement of income arrived at isfactually incorrect. Further, we may also mention that our last year's (A.Y.2010-11) case was scrutiny assessment u/s 143(3) and theshare application money received from above companieshas been accepted as genuine after due verification inscrutiny assessment of last year (i.e. A.Y. 2010-11), inwhich these amounts were received. We enclose herewithcopy of scrutiny assessment order of A.Y. 2010-11. 2.Further, Your Honour has not provided us copies of thematerial relied in the reasons recorded such asbasis/reasons for inclusion of above companies in databaseof shell companies, report of the DDIT (Inv), Kolkata, andstatement of so-called entry provider namely ManoharlalNangalia. It is simply mentioned that the names of abovementioned companies are there in the database of shellcompanies. However, in the absence of relevant material for terming them as shell companies, we are unable to know asto for what reasons/basis and when their names wereincluded in this database, as they are very old companies.We, therefore, request Your Honour to kindly provide uscopies of all such material on the basis of which reasonshave been recorded and our case has been re-openedincluding copy of the report of DDIT (Inv), Kolkata, andstatement of so-called entry provider Manoharlal Nangalia.We also request Your Honour to kindly provide usopportunity of his cross examination. We may mention thatas per our information he was neither director norshareholder of above companies. It is, therefore, not clear asto how his statement is relevant in our case. We reserve ourright to make further objections after receipt of abovematerial and opportunity. 3.Further and without prejudice to above, we humblybeg to point out that both these companies are 'very oldcompanies' 'regularly assessed under the income tax sincetheir incorporation' and having 'active' status as per R.O.C.Both of them are registered as NBFC with the RBI and aresubject to constant monitoring and supervision by RBI. Thisis evident from following chart : NameDate ofPANNBFC Regn. No.Incorporationwith RBIPrime Vyapaar10.12.1993AABCP5505FB.05.04669Pvt. Ltd.Dt.28.11.2001Asha Apartment22.12.1995AACCA2027JB.05.04309 Pvt. Ltd.Dt.27.08.2001 3.Further and without prejudice to above, we humblybeg to point out that both these companies are 'very oldcompanies' 'regularly assessed under the income tax sincetheir incorporation' and having 'active' status as per R.O.C.Both of them are registered as NBFC with the RBI and aresubject to constant monitoring and supervision by RBI. Thisis evident from following chart : NameDate ofPANNBFC Regn. No.Incorporationwith RBIPrime Vyapaar10.12.1993AABCP5505FB.05.04669Pvt. Ltd.Dt.28.11.2001Asha Apartment22.12.1995AACCA2027JB.05.04309 Pvt. Ltd.Dt.27.08.2001 We enclose herewith copies of their R.O.C. Master Data.Both are very old companies, having 'active status' as perROC. Both have been regularly assessed under the incometax since their incorporation. There is no mention of anyadverse finding by their AOs about their genuineness orgenuineness of their business/activities. In such a situation,to say them as shell companies is not correct. On whatbasis, they have been termed as shell company is notmentioned in the reasons. On above facts, the reasonsrecorded and consequent belief of escapement of incomearrived at are not only incorrect but are also invalid andcontrary to the law laid down by Hon'ble jurisdictional HighCourt in the case of RANCHHOD JIVABHAI NAKHWA, 208Taxmann 35 (Guj). 4.Further and without prejudice to above, our case hasbeen re-opened just on the basis of generalized databaseand statement of a third person (who is not relevant person)without independent verification, inquiries and satisfactionby our Ld. AO himself. Thus, this is a case of 'borrowedsatisfaction' and not satisfaction of our Ld. AO. The very factthat we have not received any amount from abovementioned companies during the year proves this fact.Further, the reasons recorded by Ld. AO are not 'reasons tobelieve' but are mere 'reasons to suspect' and whole of theproceeding is merely based on suspicion.” 4.The aforesaid objections came to be disposed of by theAssessing Officer vide communication dated 23[rd] October 2018as under : “8.The contention raised by the assessee that there is noissue of share on premium to above mentioned companiesand has not received any share premium amount ofRs.20,00,000/- from each Prime Vyapaar Pvt. Ltd. and AshaApartment Pvt. Ltd. Company. The data submitted by theassessee in support of his contention does not substantiate.Here it should be noted that the assessee has accepted tohave received amount of Rs.10,00,000/- each from PrimeVyapaar Pvt. Ltd. and Asha Apartment Pvt. Ltd. in F.Y.2009-10 the companies which have been seem as bogusKolkata based companies. This has been further verified bythis office from report of Kolkata I.T.O. (Inv.) office. This hasclearly indicated that the said company is not performingany genuine business and is shell company. Thus, thetransaction done by issuing share to any such companyrequired to be verified in depth. Here it should be noted thatprovision of section 147 clearly indicated that when there isreason to believe that there is escapement of income by theassessee the AO can very well reopen the case. 9.Further the other contention of the assessee that theamount has been received during F.Y. 2009-10 and notduring F.Y. 2010-11 does not stand valid as it has beenfound from the website of MCA that the allotment of sharehas been done during the F.Y. 2010-11 to companies PrimeVyapaar Pvt. Ltd. and Asha Apartment Pvt. Ltd. which areseem as shell companies. The amount could have beenreceived during F.Y. 2009-10 but the actual purpose oftransaction is revealed in A.Y. 2010-11 when amount wastransferred for allotment of share. However, here it isnecessary to be mentioned that merely reopening the case should not be considered as the final outcome, here itshould be noted that the sufficient opportunity under thelaw will be available to the assessee to prove themselves.Keeping in view of the above the objection of the assesseeare disposed off. should not be considered as the final outcome, here itshould be noted that the sufficient opportunity under thelaw will be available to the assessee to prove themselves.Keeping in view of the above the objection of the assesseeare disposed off. 10.Hence, in view of the above facts involved for re-opening, it is clear that this is a matter to be examined withreference to the books of accounts and banking transactionsof the assessee and therefore as per provisions of the Actand in the nature of justice, an opportunity of being heard isnecessary in your case. So it is necessary to pass an orderin this year after you being heard. Till then, it is not open tochallenge the re-opening merely on the ground that theassessee has shown all full and true details in his ITR ofrespective year and there is no escapement of income.” 5.Being dissatisfied with the aforesaid, the writ-applicant ishere before this Court with the present writ-application. SUBMISSIONS ON BEHALF OF THE WRIT-APPLICANT : 6.Mr.Darshan Patel, the learned counsel appearing for theassessee, vehemently submitted that there is no material tocome to the conclusion that the income in the case of theassessee has escaped assessment. He would further submit thatthe Assessing Officer has proceeded entirely on the basis of thevarious search and seizure operations undertaken by thedepartment with respect to the shell companies alleged to beoperating across the country. Based on the same, the Assessing Officer has come to the conclusion that the assessee herein hasreceived shareholders' funds from the Kolkata based shellcompanies. According to Mr.Patel, the Assessing Officer has justproceeded on the borrowed satisfaction. Mr.Patel would submitthat the Assessing Officer wishes to make a fishing inquiry. 7.In the last, Mr.Patel submitted that while accordingsanction under Section 151 of the Act for the purpose of issue ofnotice under Section 148 of the Act, the sanctioning authorityhas, without any proper application of mind, recorded amechanical satisfaction for the purpose of permitting theAssessing Officer to proceed with the re-opening of theassessment. 8.In such circumstances referred to above, Mr.Patel praysthat there being merit in his writ-application, the same beallowed and the impugned notice along with the final order ofassessment passed under Section 143(3) of the Act be quashedand set-aside. SUBMISSIONS ON BEHALF OF THE RESPONDENT : 9.On the other hand, this writ-application has beenvehemently opposed by Mrs.Kalpana K.Raval, the learned seniorstanding counsel appearing for the Revenue. Mrs.Raval wouldsubmit that the return filed by the assessee was acceptedwithout scrutiny. Since there was no scrutiny assessment, theAssessing Officer had no occasion to form any opinion on any ofthe issues arising out of the return filed by the assessee.Mrs.Raval would submit that the concept of change of opinionwould, therefore, have no application in the present case. It is also submitted that at the stage of re-opening of the assessment,the Court may not minutely examine the possible additionswhich the Assessing Officer wishes to make. It is also arguedthat the scrutiny at that stage would be limited to examinewhether the Assessing Officer had formed a valid belief on thebasis of the materials available with him that the incomechargeable to tax had escaped assessment. 10.In such circumstances referred to above, the learnedstanding counsel prays that there being no merit in this writ-application, the same be rejected. ANALYSIS : 11.Having heard the learned counsel appearing for the partiesand having gone through the materials on record, the onlyquestion that falls for our consideration is, whether the notice ofre-opening issued under Section 148 of the Act should bequashed and set-aside. 10.In such circumstances referred to above, the learnedstanding counsel prays that there being no merit in this writ-application, the same be rejected. ANALYSIS : 11.Having heard the learned counsel appearing for the partiesand having gone through the materials on record, the onlyquestion that falls for our consideration is, whether the notice ofre-opening issued under Section 148 of the Act should bequashed and set-aside. 12.At the time of issuing the notice, a Coordinate Bench ofthis Court passed the following order dated 27[th] November 2018 : “1.Mr. Darshan Patel, learned advocate for the petitionerinvited attention to the reasons recorded for reopening theassessment to submit that the assessment for the year2011-12 is sought to be reopened on the ground that theassessee has received total share capital of Rs.40,00,000/-from two Kolkata based shell companies viz. Prime VyaparPrivate Limited and Asha Apartment Private Limited. It waspointed out that, in the objections against the reasons recorded, the petitioner has specifically stated that it hasnot received any amount from the aforesaid two companiesin the year under consideration and that they had receivedshare capital money from the said companies in the lastyear, that is, financial year 2009-10 corresponding toassessment year 2010-11. It is further pointed out that theamounts received from both the companies wasRs.10,00,000/- each and not Rs.20,00,000/-. It was alsopointed out that in assessment year 2010-11 there wasscrutiny assessment under section 143 (3) of the Income TaxAct, 1961 and the share application money received fromthe said companies has been accepted as genuine after dueverification in scrutiny assessment of the year in whichthese amounts were received. It was submitted thattherefore the assessing officer has proceeded on a factuallyincorrect premise and that on the basis of the reasonsrecorded, the assessing officer could not have formed therequisite belief that income chargeable to the tax hasescaped assessment for the year under consideration. Itwas submitted that therefore, in the absence of theassessing officer having formed a requisite belief, theassumption of jurisdiction under section 147 of the Act iswithout authority of law. 2.Having regard to the submissions advanced by thelearned advocate for the petitioner, issue NOTICE returnableon 7.1.2019. By way of ad-interim relief, the respondent ispermitted to proceed further pursuant to the impugnednotice; he, however, shall not pass the final order withoutthe permission of this Court.” 13.It appears that after the aforesaid order came to be passed,the final order of assessment under Section 143(3) of the Actcame to be passed by the Assessing Officer. In suchcircumstances, the writ-applicant brought a draft amendmentwhich was allowed vide order dated 9[th] January 2019. By way ofa draft amendment, the writ-applicant also seeks to challengethe legality and validity of the final assessment order passed bythe Assessing Officer pursuant to the impugned notice. 14.In such circumstances referred to above, vide order dated17[th] January 2019, a Coordinate Bench of this Court, by way ofan ad-interim relief, restrained the Revenue from making anycoercive recovery pursuant to the impugned assessment order. 15.We shall confine our adjudication only so far as the legalityand validity of the notice of re-opening is concerned. 14.In such circumstances referred to above, vide order dated17[th] January 2019, a Coordinate Bench of this Court, by way ofan ad-interim relief, restrained the Revenue from making anycoercive recovery pursuant to the impugned assessment order. 15.We shall confine our adjudication only so far as the legalityand validity of the notice of re-opening is concerned. 16.The return filed by the assessee was accepted withoutscrutiny. Since there was no scrutiny assessment, the AssessingOfficer had no occasion to form any opinion on any of the issuesarising out of the return filed by assessee. The concept of changeof opinion would, therefore, have no application. It is equally wellsettled that at the stage of reopening of the assessment, thecourt would not minutely examine the possible additions whichthe Assessing Officer wishes to make. The scrutiny at that stagewould be limited to examine whether the Assessing Officer hadformed a valid belief, on the basis of the materials available withhim, that the income chargeable to tax had escaped assessment.Both these aspects have been examined by the Supreme Courtin Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. [(2007) 291 ITR 500 (SC)] of whichfollowing observations may be noted: “13. One thing further to be noticed is that intimation undersection 143(1)(a) is given without prejudice to the provisionsof section 143(2). Though technically the intimation issuedwas deemed to be a demand notice issued under section156, that did not per se preclude the right of the AssessingOfficer to proceed under section 143(2). That right ispreserved and is not taken away. Between the period fromApril 1, 1989 to March 31, 1998, the second proviso tosection 143(1)(a), required that where adjustments weremade under the first proviso to section 143(1)(a), anintimation had to be sent to the assessee notwithstandingthat no tax or refund was due from him after making suchadjustments. With effect from April 1, 1998, the secondproviso to section 143(1)(a) was substituted by the FinanceAct, 1997, which was operative till June 1, 1999. Therequirement was that an intimation was to be sent to theassessee whether or not any adjustment had been madeunder the first proviso to section 143(1) and notwithstandingthat no tax or interest was found due from the assesseeconcerned. Between April 1, 1998 and May 31, 1999,sending of an intimation under section 143(1)(a) wasmandatory. Thus, the legislative intent is very clear from theuse of the word intimation as substituted for assessmentthat two different concepts emerged. While making anassessment, the Assessing Officer is free to make anyaddition after grant of opportunity to the assessee. Bymaking adjustments under the first proviso to section 143(1) (a), no addition which is impermissible by the informationgiven in the return could be made by the Assessing Officer.The reason is that under section 143(1)(a) no opportunity isgranted to the assessee and the Assessing Officer proceedson his opinion on the basis of the return filed by theassessee. The very fact that no opportunity of being heard isgiven under section 143(1)(a) indicates that the AssessingOfficer has to proceed accepting the return and making thepermissible adjustments only. As a result of insertion of theExplanation to section 143 by the Finance (No. 2) Act of1991 with effect from October 1, 1991, and subsequentlywith effect from June 1, 1994, by the Finance Act, 1994,and ultimately omitted with effect from June 1, 1999, bythe Explanation as introduced by the Finance (No. 2) Act of1991 an intimation sent to the assessee under section143(1) (a) was deemed to be an order for the purposes ofsection 246 between June 1, 1994, to May 31, 1999, andunder section 264 between October 1, 1991, and May 31,1999. It is to be noted that the expressions intimation andassessment order have been used at different places. Thecontextual difference between the two expressions has to beunderstood in the context the expressions are used.Assessment is used as meaning sometimes the computationof income, sometimes the determination of the amount of taxpayable and sometimes the whole procedure laid down inthe Act for imposing liability upon the tax payer. In thescheme of things, as noted above, the intimation undersection 143(1)(a) cannot be treated to be an order ofassessment. The distinction is also well brought out by thestatutory provisions as they stood at different points of time. Under section 143(1)(a) as it stood prior to April 1, 1989, theAssessing Officer had to pass an assessment order if hedecided to accept the return, but under the amendedprovision, the requirement of passing of an assessmentorder has been dispensed with and instead an intimation isrequired to be sent. Various circulars sent by the CentralBoard of Direct Taxes spell out the intent of the Legislature,i.e., to minimize the departmental work to scrutinize eachand every return and to concentrate on selective scrutiny ofreturns. These aspects were highlighted by one of us (D. K.Jain J) in Apogee International Limited v. Union of India[(1996) 220 ITR 248]. It may be noted above that under thefirst proviso to the newly substituted section 143(1), witheffect from June 1, 1999, except as provided in the provisionitself, the acknowledgment of the return shall be deemed tobe an intimation under section 143(1) where (a) either nosum is payable by the assessee, or (b) no refund is due tohim. It is significant that the acknowledgment is not done byany Assessing Officer, but mostly by ministerial staff. Can itbe said that any assessment is done by them? The reply isan emphatic no. The intimation under section 143(1)(a) wasdeemed to be a notice of demand under section 156, for theapparent purpose of making machinery provisions relatingto recovery of tax applicable. By such application onlyrecovery indicated to be payable in the intimation becamepermissible. And nothing more can be inferred from thedeeming provision. Therefore, there being no assessmentunder section 143(1)(a), the question of change of opinion, ascontended, does not arise. 16.Section 147 authorises and permits the AssessingOfficer to assess or reassess income chargeable to tax if hehas reason to believe that income for any assessment yearhas escaped assessment. The word reason in the phrasereason to believe would mean cause or justification. If theAssessing Officer has cause or justification to know orsuppose that income had escaped assessment, it can besaid to have reason to believe that an income had escapedassessment. The expression cannot be read to mean thatthe Assessing Officer should have finally ascertained thefact by legal evidence or conclusion. The function of theAssessing Officer is to administer the statute with solicitudefor the public exchequer with an inbuilt idea of fairness totaxpayers. As observed by the Delhi High Court in CentralProvinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR662], for initiation of action under section 147(a) (as theprovision stood at the relevant time) fulfillment of the tworequisite conditions in that regard is essential. At that stage,the final outcome of the proceeding is not relevant. In otherwords, at the initiation stage, what is required is reason tobelieve, but not the established fact of escapement ofincome. At the stage of issue of notice, the only question iswhether there was relevant material on which a reasonableperson could have formed a requisite belief. Whether thematerials would conclusively prove the escapement is notthe concern at that stage. This is so because the formation ofbelief by the Assessing Officer is within the realm ofsubjective satisfaction (see ITO v. Selected Dalurband CoalPvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woolen MillsLtd. v. ITO [1999 (236) ITR 34 (SC)].” 17.The aforesaid aspects have also been reiterated by theSupreme Court in the later judgment in the case of DeputyCommissioner of Income Tax and another vs. Zuari EstateDevelopment and Investment Company Limited [(2015) 373ITR 661 (SC)]. 18.In the present case, the Assessing Officer has consideredthe materials on record which would, prima facie, suggest thatduring the year under consideration there was a huge hike in theamount of the share capital and share premium of the assesseecompany. The assessee received the amount of share capital andshare premium from the Kolkata based shell companies, namely,Prime Vyapaar Pvt. Ltd. and Asha Apartments Pvt. Ltd.respectively. The Assessing Officer, prima facie found, based onthe materials on record and the information received, that totalshare capital of Rs.40 lakh was received during the year underconsideration. On verification of the details of the investorscompanies, it was found, prima facie, that the same wascontrolled by one Kolkata based accommodation entry provider,namely Manoharlal Nangalia. In a statement recorded by thedepartment, Manoharlal Nangalia is said to have admitted to thefact that his main business is to provide accommodation entriesthrough shell companies to various beneficiaries in lieu ofcommission. 19.In the judgment in the case of Principal Commissioner ofIncome Tax, Rajkot-3 vs. Gokul Ceramics [Taxman Vol. 241(2016) 241], the Division Bench of this Court had examined thecontention of the Assessing Officer proceeded on the basis of the information supplied by the department, and after referring tothe several judgments, made the following observations in para 9which read thus: 19.In the judgment in the case of Principal Commissioner ofIncome Tax, Rajkot-3 vs. Gokul Ceramics [Taxman Vol. 241(2016) 241], the Division Bench of this Court had examined thecontention of the Assessing Officer proceeded on the basis of the information supplied by the department, and after referring tothe several judgments, made the following observations in para 9which read thus: “It can thus be seen that the entire material collected by theDGCEI during the search, which included incriminatingdocuments and other such relevant materials, was alongwith report and show cause notice placed at the disposal ofthe Assessing Officer. These materials prima faciesuggested suppression of sale consideration of the tilesmanufactured by the assessee to evade excise duty. On thebasis of such material, the Assessing Officer also formed abelief that income chargeable to tax had also escapedassessment. When thus the Assessing Officer had suchmaterial available with him which he perused, considered,applied his mind and recorded the finding of belief thatincome chargeable to tax had escaped assessment, thereopening could not and should not have been declared asinvalid, on the ground that he proceeded on the show-causenotice issued by the Excise Department which had yet notculminated into final order. At this stage the AssessingOfficer was not required to hold conclusively that additionsinvariably be made. He truly had to form a bona fide beliefthat income had escaped assessment. In this context, wemay refer to various decisions cited by the counsel for theRevenue.” 20.The case on hand is not a case where the Income TaxOfficer seeks to draw any fresh inference which could have beenraised at the time of the original assessment on the basis of thematerials placed before him by the assessee as regards the receipt of the share capital and share premium from the twoKolkata based shell companies referred to above. Acquiring freshinformation, specific in nature and reliable in character, relatingto the concluded assessment, which goes to accept the falsity ofthe statement made by the assessee at the time of originalassessment, is different from drawing a fresh inference from thesame facts and materials which were available with the IncomeTax Officer at the time of original assessment proceedings. Thus,where the transaction itself, on the basis of the subsequentinformation, is found to be bogus transaction, the meredisclosure of that transaction at the time of original assessmentproceedings cannot be said to be disclosure of the 'true' and 'full'facts in the case and the Income Tax Officer would have thejurisdiction to re-open the concluded assessment in such a case.It is correct that the Assessing Officer could have deferred thecompletion of the original assessment proceedings for furtherinquiry and investigation into the genuineness to thetransaction, but, in our opinion, his failure to do so andcomplete the original assessment proceedings would not takeaway his jurisdiction to act under Section 147 of the Act, onreceipt of the information subsequently. The subsequentinformation, on the basis of which the Income Tax Officeracquired reasons to believe that the income chargeable to taxhad escaped assessment on account of the omission of theassessee to make a full and true disclosure of the primary facts,was relevant, reliable and specific. It was not at all vague or non-specific. 21.We are conscious of the fact that it is well-settled throughseries of judgments of this Court that re-assessment, even in acase where the return was not scrutinized before acceptance 21.We are conscious of the fact that it is well-settled throughseries of judgments of this Court that re-assessment, even in acase where the return was not scrutinized before acceptance originally cannot be resorted to unless the Assessing Officer hasa reason to believe that the income chargeable to tax hadescaped assessment. In other words, for mere verification or for afishing inquiry re-opening of the assessment is not permissible.However, such is not the case on hand. It cannot be said to be afishing inquiry. There is some tangible material as on date in thehands of the Assessing Officer, and the Assessing Officer, afterdue application of mind, has recorded a satisfaction of his ownthat the income has escaped the assessment. 22.From the various judicial pronouncement on the subject,over a period of time, the following principles can be culled out: To confer jurisdiction to the Assessing Officer to reopen theassessment under Section 147 of the Income Tax Actbeyond four years from the end of an Assessment Year, thefollowing two conditions must be satisfied: [a]that the Assessing Officer must have reason tobelieve that the income chargeable to tax has escapedassessment; and that [b]the same occasioned, on account of eitherfailure on the part of the assessee to make a return ofhis income for that Assessment Year, or to disclosefully and truly all material facts necessary for theassessment of that year. 23.As held by the Supreme Court in Phool Chand BajrangLal vs. Income-tax Officer, reported in 203 ITR 456 (SC), where transaction itself, on the basis of subsequent information, isfound to be a bogus transaction, the Court held that meredisclosure of such transaction at the time of original assessmentproceedings cannot be said to be a disclosure of ‘full’ and ‘true’facts and the Assessing Officer surely would have thejurisdiction to re-open a concluded assessment in such a case.The Supreme Court had also observed in the said case that theAssessing Officer may start reassessment proceedings eitherbecause some fresh facts come to light which were not previouslydisclosed, or some information with regard to the factspreviously disclosed comes into his possession which tends toexpose the untruthfulness of those facts. In such situations, it isnot a case of mere change of opinion or drawing of a differentinference from the same facts as were earlier available but actingon fresh information. Since the belief is that of the Income TaxOfficer, the sufficiency of reasons for forming the belief is not forthe Court to judge but it is open to an assessee to establish thatthere, in fact, existed no belief or that the belief was not at all abona fide one or was based on vague, irrelevant and non-specificinformation. To that limited extent, the Court may look theconclusion arrived at by the Income Tax Officer and examinewhether there was any material available on the record fromwhich the requisite belief could be formed by him and furtherwhether that material had any rational connection or a live linkwith the formation of the requisite belief. 24.The issue of sanction under Section 151 of the Act raisedby the writ-applicant is without any foundation. This aspect hasbeen dealt with by the Revenue in the affidavit-in-reply, moreparticularly, in paragraph-11. 25.In the overall view of the matter, we are convinced that weshould not interfere with the impugned notice. 26.In the result, this writ-application fails and is herebyrejected. However, so far as the final order of assessment isconcerned, it shall be open for the writ-applicant to challenge thesame by filing an appeal before the CIT(A), in accordance withlaw. 27.We have not gone into the merits of the impugnedassessment order. If any appeal is preferred by the writ-applicant, then the appellate authority shall decide the same onits own merits without being influenced in any manner by any ofthe observations made by this Court. 25.In the overall view of the matter, we are convinced that weshould not interfere with the impugned notice. 26.In the result, this writ-application fails and is herebyrejected. However, so far as the final order of assessment isconcerned, it shall be open for the writ-applicant to challenge thesame by filing an appeal before the CIT(A), in accordance withlaw. 27.We have not gone into the merits of the impugnedassessment order. If any appeal is preferred by the writ-applicant, then the appellate authority shall decide the same onits own merits without being influenced in any manner by any ofthe observations made by this Court. 28.Notice stands discharged. Ad-interim relief earlier grantedstands vacated. (J. B. PARDIWALA, J.) /MOINUDDIN (ILESH J. VORA, J.)