Priya Blue Industries Private Limited v. The Assistant Commissioner Of Income Tax =======================================Appearance

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19564 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE BELA M. TRIVEDIandHONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI======================================= Whether Reporters of Local Papers may be allowed1 NOto see the judgment ?to see the judgment ?2 To be referred to the Reporter or not ?YESWhether their Lordships wish to see the fair copy ofWhether their Lordships wish to see the fair copy of3 NOthe judgment ?Whether this case involves a substantial questionthe judgment ?Whether this case involves a substantial question4 of law as to the interpretation of the Constitution ofNOIndia or any order made thereunder ?India or any order made thereunder ? ======================================= PRIYA BLUE INDUSTRIES PRIVATE LIMITED Versus THE ASSISTANT COMMISSIONER OF INCOME TAX =======================================Appearance: MR TUSHAR HEMANI, SR. ADVOCATE for MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1======================================= CORAM: HONOURABLE MS. JUSTICE BELA M. TRIVEDIand HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI Date : 09/08/2021 CAV JUDGMENT (PER : HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI) 1.This petition, under Article 226 of the Constitution of India, is filed by the petitioner – Priya Blue Industries Private Limited –assessee seeking to quash and set aside the Notice dated30.03.2019 issued by the respondent authority under section 148of the Income Tax Act, 1967 (herein after referred to as “theAct”) for the Assessment Year 2012-13, as it has reason tobelieve that the income chargeable to tax for the assessmentyear under consideration has escaped assessment within themeaning of section 147 of the Act. 2.The facts in nutshell of the case of the petitioner are thatthe petitioner is a Company incorporated under the CompaniesAct, 1956 and engaged in the business of ship breaking. Duringthe Financial Year 2011-12, relevant to Assessment Year 2012-13(i.e. the year under consideration), the petitioner made totalsales of Rs.26,266.19 lakh, which included the sales made to M/s.Harsh Enterprise also for which, the entire sales proceeds werereceived during the year under consideration. The same wasduly reflected in the Audited Annual Accounts. The case of thepetitioner for the year under consideration was selected forscrutiny assessment and various details were called by the thenAssessing Officer, which were furnished by the petitioner. Thethen Assessing Officer also called for various details pertaining toTCS vide notice dated 07.03.2014, against which the petitioner,vide communication dated 23.08.2014 supplied the detailsincluding acknowledgment of E-TCS quarter-wise returns alongwith transaction register which duly included details as to salesmade to M/s. Harsh Enterprise during the year underconsideration. That, while framing assessment under section143(3) of the Act vide order dated 05.03.2015, though after dueexamination, the Assessing Officer had not disturbed the salesdeclared by the petitioner, the respondent authority issued notice dated 30.03.2019 under section 148 of the Act seeking to reopenthe case of the petitioner for the year under consideration. Inresponse to the said notice, the petitioner company filed its RoIon 24.04.2019 and also requested to supply the reasons forreopening, which were supplied vide letter dated 15.08.2019. Aperusal of the same revealed that the case of the petitioner wasreopened on the count that the petitioner is the beneficiary of theaccommodation entries to the tune of Rs.1,06,16,632/-. The caseof the respondent was that, cash was deposited in the bankaccount of M/s. Kiran Trading (a third party), which in turn, wasfollowed by transfers to the account of M/s. Harsh Enterprise (alsoa third party) and subsequently, funds were transferred by M/s.Harsh Enterprise to various other parties. Accordingly, thedepartment presumed that M/s. Harsh Enterprise was engaged inproviding accommodation entries and since, the petitioner hadreceived Rs.1,06,16,632/- from M/s. Harsh Enterprise, thedepartment presumed the said transaction to be accommodationentries and hence, the department had reason to believe thatsuch income at the hands of the petitioner company had escapedassessment. Against the reasons accorded, the petitioner, videletter dated 20.09.2019, raised objections against reopening onvarious factual as well as the legal grounds, however, therespondent authority disposed of the said objections vide orderdated 15.10.2019 inter alia holding that the reopening wasjustified and valid in the eyes of law. Being aggrieved, thepetitioner is before this Court by way of this petition. 3.We have heard, learned senior advocate Mr. Tushar Hemanifor learned advocate Ms. Vaibhavi Parikh for the petitioner andlearned advocate Mrs. Mauna M. Bhatt, learned senior standingcounsel for the respondent. 3.1The learned senior advocate for the petitioner hasvehemently and fervently argued that the case on hand is apeculiar type of case, wherein, the revenue / respondentauthority is calling a person who was already taxed and who hadalready offered for tax, however, the proceedings under section148 of the Act are sought to be initiated. It is further urged thatwhatever the transactions made by M/s. Harsh Enterprise maybe, but the present assessee has not availed any benefit fromM/s. Harsh Enterprise. Not only that, but all the receipts, sales,purchases, profit etc. were shown to the Assessing Officer whileframing assessment under section 143(3) of the Act and all thedetails necessary for the assessment had been truly and fullydisclosed by the petitioner and hence, there is neither question offorming belief that the income chargeable to tax has escapedassessment nor there is a question of reopening of assessmentfor the year under consideration. 3.2The learned senior advocate for the petitioner further urgedthat the sales of Rs.1,06,16,632/- made to M/s. Harsh Enterprisewas duly reflected in the Audited Annual Accounts. Further, thepetitioner, vide letter dated 23.08.2014, furnished various detailsincluding the acknowledgment of E-TCS returns (quarter-wise)along with transaction register which included details as to salesmade to M/s. Harsh Enterprise and after threadbare examination,the Assessing Officer consciously chose not to disturb the salesdeclared by the petitioner while framing assessment undersection 143(3) of the Act and hence, the impugned notice beingnothing but a mere change of opinion, requires to be set aside. 3.3Further, the learned senior advocate for the petitioner,while drawing our attention to section 68 of the Act regarding 3.3Further, the learned senior advocate for the petitioner,while drawing our attention to section 68 of the Act regarding cash credit, reiterated that all the entries viz. receipts, sales,purchase, etc. had been made and shown in the RoI and thedetails have been fully and truly disclosed by the petitioner at thetime of original assessment and accordingly, it cannot be saidthat there is reason to believe that the income chargeable to taxhas escaped assessment and the petitioner cannot be re-taxedby the department. He submitted that thus, the department isnot justified in proposing to reopen the case of the petitioner onsuch false pretext and and on borrowed satisfaction. 3.4The learned senior advocate for the petitioner furthersubmitted that the reopening is based on mere change of opinionof the Assessing Officer inasmuch as the notice under section 148of the Act can be issued only if an Assessing Officer has reason tobelieve that any income chargeable to tax has escapedassessment and for such formation of belief, there should besome tangible material and act, which are lacking in the case onhand. He submitted that the case of the petitioner was selectedfor scrutiny assessment and the issue on hand was examinedthreadbare at the original assessment and accordingly, merelybecause the Assessing Officer happens to change his opinion,action under section 147 of the Act cannot be taken. It iscontended and argued by the learned senior advocate for thepetitioner that the original assessment was found to be properand the same was accepted by the Assessing Officer andtherefore, if creditworthiness is found in the transactions andwhen the Assessing Officer had the knowledge about such saletransaction with M/s. Harsh Enterprise to the tune ofRs.1,06,16,632/-, the impugned reopening, is illegal and bad inlaw and it cannot be said that the petitioner has failed to disclosefully and truly all material facts necessary for the assessment. 3.5It is further submitted that the sanction, which is requiredto be taken for issuance of notice under section 148 of the Act interms of section 151 of the said Act, has not been obtained in thetrue and correct prospective inasmuch as, in case of reopeningbeyond a period of four years, it is mandatory on the part of theAssessing Officer to obtain sanction from the Principal ChiefCommissioner or Chief Commissioner or Principal Commissioneror Commissioner, and such a sanction should not be mechanicalin nature and the Commissioner concerned must record hissatisfaction in detail. However, in the present case, thereappears no proper application of mind by the Commissionerconcerned while sanctioning the issuance of notice under section148 of the Act. 3.6Making above submissions, it is urged by the learned senioradvocate for the petitioner to allow the present petition and toquash and set aside the impugned notice. 3.7In support of his submissions, the learned senior advocatefor the petitioner has relied upon following decisions: i)Alliance Filaments Ltd. v. The Assistant Commissionerof Income Tax, passed in Special Civil Application No.16586 of 2019 dated 19.02.2021; ii)Prashant S. Joshi v. Income-Tax Officer, Ward 19(2)(4), [2010] 189 Taxman 1 (Bombay); (iii)Gujarat Lease Financing Ltd. v. Deputy Commissionerof Income-Tax, Circle-4, Ahmedabad, [2013] 36Taxmann.com 359 (Gujarat); (iv)Krishna Metal Industries v. H. M. Algotar, [1997] 225ITR 853 (Guj.); (v)N. D. Bhatt, Inspecting Assistant Commissioner ofIncome-Tax v. L.B.M. World Trade Corpn., [1995] 216 ITR 811; (vi)Hindustan Lever Ltd. v. R. B. Wadkar, [2004] 137Taxman 479 (Bombay); (vii)Sajani Jewels v. DCIT, [2016] 71 Taxmann.com 90(Guj.); (viii) CIT v. Vishal Exports Overseas Ltd., passed in TaxAppeal Nos. 2471 of 2009 and Others (Gujarat); (ix)CIT v. Kailash Jewellary House, ITA 613/2010 (Delhi) (x)Kantibhai Dharamshibhai Narola v. ACIT, [2021] 125Taxmann.com 348 (Gujarat). ii)Prashant S. Joshi v. Income-Tax Officer, Ward 19(2)(4), [2010] 189 Taxman 1 (Bombay); (iii)Gujarat Lease Financing Ltd. v. Deputy Commissionerof Income-Tax, Circle-4, Ahmedabad, [2013] 36Taxmann.com 359 (Gujarat); (iv)Krishna Metal Industries v. H. M. Algotar, [1997] 225ITR 853 (Guj.); (v)N. D. Bhatt, Inspecting Assistant Commissioner ofIncome-Tax v. L.B.M. World Trade Corpn., [1995] 216 ITR 811; (vi)Hindustan Lever Ltd. v. R. B. Wadkar, [2004] 137Taxman 479 (Bombay); (vii)Sajani Jewels v. DCIT, [2016] 71 Taxmann.com 90(Guj.); (viii) CIT v. Vishal Exports Overseas Ltd., passed in TaxAppeal Nos. 2471 of 2009 and Others (Gujarat); (ix)CIT v. Kailash Jewellary House, ITA 613/2010 (Delhi) (x)Kantibhai Dharamshibhai Narola v. ACIT, [2021] 125Taxmann.com 348 (Gujarat). 4.Per contra, learned senior standing counsel Mrs. Mauna M.Bhatt for the respondent authority, while opposing the presentpetition, drew our attention to the reasons recorded for reopeningof assessment dated 15.08.2019, and submitted that the petitionis not tenable in law as after due inquiry, it was found thatM/s. Harsh Enterprise was engaged in providing accommodationentries by booking bogus purchases/sales to various beneficiariesas per its requirements, in connivance with M/s. Kiran Tradingand others. Huge transactions were shown without any businessrelation between M/s. Harsh Enterprise and its associatedconcerns M/s. Kiran Trading , M/s. Shoryaraj Enterprise, M/s. LeelaTrading Co., etc. It was further found on verification of theaccounts that the petitioner had also received accommodationentries of Rs.1,06,16,632/- and this issue was not dealt with inthe scrutiny assessment. Thus, the petitioner being failed to fullyand truly disclose all material facts necessary for assessment andthat, there is escapement of income chargeable to tax, thedepartment has rightly sought to reopen the assessment for theyear under consideration qua the petitioner assessee. 4.1The learned senior standing counsel for the respondent further submitted that the reasons for reopening the case wererecorded after due consideration of the information received fromthe Investigation Wing and the case records available with theoffice of the respondent. The Investigation Wing had providedseveral opportunities to M/s. Harsh Enterprise to provegenuineness of its business but it failed to furnish requisitedocuments. Further, proprietor of other proprietorship hadadmitted in his statement under section 131 of the Act that hewas not carrying out any genuine business and was involved inproviding accommodation entries. Such firm had transferredcash deposited in its account to M/s. Harsh Enterprise. Thepetitioner was one of the beneficiaries of such entries byM/s. Harsh Enterprise. Thus, the case was reopened after dueconsideration. 4.2So far as the filing of E-TCS returns along with transactionregister by the petitioner is concerned, the learned seniorstanding counsel for the respondent submitted that perusal of thesame could justify the transactions were carried out byM/s. Harsh Enterprise but the genuineness of the same anddelivery of material could not be established from the same andtherefore, there is no change of opinion at end of the AssessingOfficer. Further, the impugned notice under section 148 of theAct was issued after prior and proper approval of the competentauthorityi.e.Principal Commissioner of Income-Tax andtherefore, the petitioner’s contention that the assessment wasreopened merely on the basis of borrowed satisfaction is nottenable in law. It is further submitted that there is no procedurallapse and/or deviation from procedure prescribed in reopeningand the reasons recorded do not lack validity as all theprocedures, laid down under the Act, have been duly followedand necessary approvals from the competent authority are received. received. 4.3So far as the contention of the learned senior advocate forthe petitioner to the effect that merely on the basis of change ofopinion, assessment for the year under consideration is sought tobe reopened, the learned advocate for the respondent submittedthat the case of the petitioner is sought to be reopened on thebasis of some tangible material available on record and all therelevant information available with the department at the time ofrecording the reasons for reopening have been duly discussed inthe reasons. 4.4So far as the contention of the petitioner that the case isreopened beyond a period of four years from the end of therelevant assessment year is concerned, the learned advocate forthe respondent submitted that all the requirements under section147 of the Act to initiate the proceedings are fulfilled. Further,the case of the petitioner was reopened on account ofinformation received from the Investigation Wing and from theinformation disseminated by the Investigation Wing, it is evidentthat the assessee had failed to furnish fully and truly, all materialfacts necessary for the assessment before the Assessing Officer. 4.5Making above submissions, it is urged that the Court maynot interfere with the impugned notice and requested to dismissthe petition. 5.Having regard to the submissions advanced by the learnedadvocates for the respective parties and having perused thematerial placed on record, it appears to us that the learned senioradvocate for the petitioner has challenged the impugned noticemainly on the ground that when jurisdictional facts are not established, the department cannot assume the jurisdiction andreopen the assessment. The basis for such submission is that,according to the learned senior advocate for the petitioner, thecase of the petitioner was selected for the scrutiny assessmentand at the relevant time, the petitioner had disclosed fully andtruly, all material facts, necessary for the assessment and hence,merely, on the basis of change of opinion, the impugned notice isissued. 5.1At this juncture, it would be apt to refer to the observationsmade by us with regard to the scope and ambit of section 147 ofthe Act in paragraphs 7, 8, 9 and 10 of CAV Judgment dated05.07.2021 rendered in Special Civil Application No. 19821 of2019, which are as under: “7.At the outset, it may be noted that as per the settledlegal position, two conditions have to be satisfied beforethe Assessing Officer invokes his jurisdiction to reopen theassessment under section 147 of the said Act after theexpiry of four years from the end of the relevantassessment year – firstly, that the Assessing Officer musthave reason to believe that the income chargeable to taxhas escaped assessment for the concerned assessmentyear, and secondly, such escapement of assessment wasby reason of failure on the part of the assessee to make thereturn under section 139, or in response to a notice issuedunder Sub-section (1) of Section 142 or Section 148 or todisclose fully and truly all the material facts necessary forhis assessment for that assessment year. So far as thecase of the present petitioner is concerned, the assessmentfor the A.Y. 2012-13 is sought to be reopened by theAssessing Officer under section 147/148 of the said Act, onhis having arrived at a satisfaction that the income for thesaid assessment year had escaped assessment by reasonof the failure on the part of the assessee to disclose fullyand truly all material facts necessary for his assessment. 8.It is pertinent to note that as held by the SupremeCourt in catena of decisions, the formation of belief by theAssessing Officer at the stage of initiation of action under 8.It is pertinent to note that as held by the SupremeCourt in catena of decisions, the formation of belief by theAssessing Officer at the stage of initiation of action under section 147 of the Act is within the realm of subjectivesatisfaction. The Supreme Court in the case of AssistantCommissioner of Income Tax versus Rajesh JhaveriStock Brokers P. Ltd. reported in (2007) 291 ITR500(SC), had an occasion to deal with the scope and effectof section 147 as substituted w.e.f. April 1[st], 1989, in whichthe Court has observed as under : - “Section 147 authorises and permits the AssessingOfficer to assess or reassess income chargeable totax if he has reason to believe that income for anyassessment year has escaped assessment. The word“reason” in the phrase “reason to believe” wouldmean cause or justification. If the Assessing Officerhas cause or justification to know or suppose thatincome had escaped assessment, it can be said tohave reason to believe that an income had escapedassessment. The expression cannot be read to meanthat the Assessing Officer should have finallyascertained the fact by legal evidence or conclusion.The function of the Assessing Officer is to administerthe statute with solicitude for the public exchequerwith an inbuilt idea of fairness to taxpayers. Asobserved by the Supreme Court in Central ProvincesManganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662,for initiation of action under section 147(a) (as theprovision stood at the relevant time) fulfillment of thetwo requisite conditions in that regard is essential. Atthat stage, the final outcome of the proceeding is notrelevant. In other words, at the initiation stage, whatis required is “reason to believe”, but not theestablished fact of escapement of income. At thestage of issue of notice, the only question is whetherthere was relevant material on which a reasonableperson could have formed a requisite belief. Whetherthe materials would conclusively prove theescapement is not the concern at that stage. This isso because the formation of belief by the AssessingOfficer is within the realm of subjective satisfaction(see ITO v. Selected Dalurband Coal P. Ltd.[1996] 217 ITR 597 (SC)]; Raymond WoollenMills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substitutedwith effect from April 1, 1989, as also sections 148 to152 are substantially different from the provisions asthey stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and(b) laid down the circumstances under which incomeescaping assessment for the past assessment yearscould be assessed or reassessed. To conferjurisdiction under section 147(a) two conditions wererequired to be satisfied : firstly the Assessing Officermust have reason to believe that income, profits orgains chargeable to income tax have escapedassessment, and secondly he must also have reasonto believe that such escapement has occurred byreason of either omission or failure on the part of theassessee to disclose fully or truly all material factsnecessary for his assessment of that year. Both theseconditions were conditions precedent to be satisfiedbefore the Assessing Officer could have jurisdiction toissue notice under section 148 read with section147(a). But under the substituted section 147existence of only the first condition suffices. In otherwords if the Assessing Officer for whatever reasonhas reason to believe that income has escapedassessment it confers jurisdiction to reopen theassessment. It is, however, to be noted that both theconditions must be fulfilled if the case falls within theambit of the proviso to section 147.” 9.In the case of Raymond Woollen Mills Ltd.Versus Income-Tax Officer and others reported in1999 236 ITR 34(SC), the Supreme Court observedthat the Court has only to see whether there wasprima facie some material on the basis of which theDepartment could reopen the case. The sufficiency orcorrectness of the material is not a thing to beconsidered at this stage. 10.It is very pertinent to note that in the case ofPhool Chand Bajrang Lal versus Income-TaxOfficer reported in 203 ITR 456 (SC), it wasobserved that the acquiring fresh information,specific in nature and reliable in character, relating tothe concluded assessment, which went to expose thefalsity of the statement made by the assessee at thetime of original assessment was different fromdrawing fresh inference from the same facts andmaterial which was available with the Income-TaxOfficer at the time of the original assessmentproceedings. Where the transaction itself on the basisof the subsequent information was found to be a bogus transaction, the mere disclosure of thattransaction at the time of original proceedings couldnot be said to be disclosure of the true and full facts,and the Officer would have the jurisdiction to reopenthe concluded assessment in such a case. Theprecise observation made by the Supreme Court inthe said case may be reproduced as under : - “In the present case as already noticed, the Income-Tax Officer, Azamgarh, subsequent to the completionof the original assessment proceedings, on making anenquiry from the jurisdictional Income-Tax Officer atCalcutta, learnt that the Calcutta company fromwhom the assessee claimed to have borrowed theloan of Rs. 50,000/- in cash had not really lent anymoney but only its name to cover up a bogustransaction and, after recording his satisfaction asrequired by the provisions of section 147 of the Act,proposed to reopen the assessment proceedings.The present is thus not a case where the Income-TaxOfficer sought to draw any fresh inference whichcould have been raised at the time of the originalassessment on the basis of the material placedbefore him by the assessee relating to the loan fromthe Calcutta company and which he failed to draw atthat time. Acquiring fresh information, specific innature and reliable in character, relating to theconcluded assessment, which goes to expose thefalsity of the statement made by the assessee at thetime of the original assessment is different fromdrawing fresh inference from the same facts andmaterial which were available with the Income-TaxOfficer at the time of the original assessmentproceedings. The two situations are distinct anddifferent. Thus, where the transaction itself, on thebasis of subsequent information, is found to be abogus transaction, the mere disclosure of thattransaction at the time of original assessmentproceedings cannot be said to be a disclosure of the“true” and “full” facts in the case and the Income-TaxOfficer would have the jurisdiction to reopen theconcluded assessment in such a case.” 5.2At this juncture, it would also be worthwhile to refer to theobservations made by us in the CAV Judgment dated 06.08.2021Special Civil Application No. 22613 of 2019, which read as under: 5.2At this juncture, it would also be worthwhile to refer to theobservations made by us in the CAV Judgment dated 06.08.2021Special Civil Application No. 22613 of 2019, which read as under: “7.As stated hereinabove, the often posed question as towhether the Assessing Officer could have assumed thejurisdiction under Section 147/148 of the said Act on thebasis of the information / material received from theinvestigating wings unearthing the bogus transactions oraccommodation entries involving the assessee, has beenagain posed before this Court. Before adverting thesubmissions made by the learned advocates for the parties,it may be noted that the words “accommodation entries”have not been defined anywhere in the Act, however, incatena of decisions, the Courts have dealt with the issue of“accommodation entries”. It cannot be gainsaid that thetax-evaders in order to bring back their unaccountedincome to their books of accounts without paying any taxthereon, use numerous methods and techniques. Forrouting the unaccounted income, the taxevaders under theguise of loan entries or share capital entries or othercamouflage entries create an appearance of legitimatetransactions in their books of accounts. Such wellrecognized rackets are controlled and conducted by thepersons known as “accommodation entry providers”, andthe “accommodation entries” are provided by them to thepersons who are the taxevaders. The entries on paperapparently may appear to be of routine nature, but the trailof money transited through the layers would besubsequently unearthed during the search and seizureoperations conducted either at the assessee’s premises orhis associate’s premises or at the premises of some thirdparty, who may be an accommodation entry provider.Under the circumstances, when the material is brought tothe notice of the Assessing Officer, which would prima faciediscredit or impeach the genuineness of the particularsfurnished by the assessee at the time of originalassessment, and when it prima facie establishes the linkbetween the assessee and the third party who is anaccommodation entry provider, the Assessing Officer isempowered rather duty bound to make further inquiry /investigation to unearth such camouflage or wrong orillegal dealings of the assessee. As observed by theSupreme Court in the case of Sumati Dayal vsCommissioner Of Income-Tax reported in AIR 1995 SC2109, apparent must be considered as real until it is shownthat there are reasons to believe that apparent is not real,and that the Taxing Officers are entitled to look into thesurrounding circumstances to find out the reality, and thematter has to be considered by applying the test of humanprobabilities.” 5.3Further, the term “reason to believe”, however, is notdefined in the Act but it can be gathered and available from theinformation, leading the Assessing Officer to reopen theassessment. The term itself is suggestive of its prima faciecharacteristics and not established or conclusive facts orinformation. Meaning thereby, it is the Assessing Officer’s primafacie belief, of course, derived from the some material /information, etc. leading him to reopen the assessment. 5.3Further, the term “reason to believe”, however, is notdefined in the Act but it can be gathered and available from theinformation, leading the Assessing Officer to reopen theassessment. The term itself is suggestive of its prima faciecharacteristics and not established or conclusive facts orinformation. Meaning thereby, it is the Assessing Officer’s primafacie belief, of course, derived from the some material /information, etc. leading him to reopen the assessment. 5.4The ambit and import of the term “reason to believe” hasbeen examined in numerous cases, notably in ITO v. LakhmaniMewal Das [(1976) 103 ITR 437: 1976 (3) SCC 757].TheApex Court held that, “the reason must be held in good faith. Itcannot be merely a pretence. It is open to the Court to examinewhether the reasons for the formation of the belief have arational connection with or a relevant bearing on the formation ofthe belief and are not extraneous or irrelevant for the purpose ofthe section. To this limited extent, the action of the Income TaxOfficer in starting proceedings in respect of income escapingassessment is open to challenge in a Court of law. Rationalconnection postulates that there must be a direct nexus or livelink between the material coming to the notice of the Income TaxOfficer and the formation of his belief that there has beenescapement of the income of the assessee from assessment inthe particular year because of his failure to disclose fully andtruly all material facts. It is no doubt true that the Court cannotgo into the sufficiency or adequacy of the material and substituteits own opinion for that of the Income Tax Officer on the point asto whether action should be initiated for reopening assessment.At the same time we have to bear in mind that it is not any andevery material, howsoever vague and indefinite or distant,remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee fromassessment”. 5.5Further, in the case of Ess Kay Engineering Co. (P) Ltd.v. Commissioner of Income Tax, 247 ITR 818 (SC), also ithas been observed that the Assessing Officer is not precludedfrom reopening the assessment of an earlier year on the basis offresh material discovered subsequently during the course ofassessment of next assessment year. 6.In the aforesaid backdrop, if the facts of the case areadverted to, as referred to herein above, it is the case of thepetitioner that the petitioner received the amount ofRs.1,06,16,632/- from M/s. Harsh Enterprise against sales madeto the said party and such sales was duly credited to the books ofaccount of the petitioner. Thus, the income element in thetransaction was duly offered to tax and that, there is no tangiblematerial, even otherwise in the hands of the respondent tosubstantiate that the income chargeable to tax has escapedassessment qua the assessee. The department has filedaffidavit-in-reply as also the reasons recorded for reopening areon record, which go to the root of the matter. According to therespondent, upon due verification of the case records, it wasnoticed that the assessee had received accommodation entries ofRs.1,06,16,632/-. The transactions were not genuine transactionsand the said aspect was not examined during the originalassessment and therefore, the subject matter and the scope ofreassessment are different from that of regular assessment. It isfurther the case of the respondent that the notice under section148 of the Act is issued as there was reason to believe that theincome chargeable to tax has escaped assessment on account offailure on the part of the assessee to disclose the correct facts. It was found that M/s. Harsh Enterprise was engaged in providingaccommodation entries by booking bogus sales/purchases tovarious beneficiaries. The sale of Rs.1,06,16,632/- disclosed byassessee M/s. Harsh Enterprise was not genuine but merely theaccommodation entries and the petitioner was the beneficiary ofsuch entry. Since, the income offered pertained to theaccommodation entries and not the genuine businesstransactions, the sales quantum was also believed to untrue. 6.1It has further come on record that after due verification ofthe information received from the Investigation Wing after inquiryunder section 131 of the Act and the case record available withthe respondent, reasons for reopening of assessment had beenrecorded. It is submitted that during investigation, dueopportunity was given to M/s. Harsh Enterprise to prove thegenuineness of its business transactions, however, it failed tofurnish the requisite documents. It was noticed that the cash wasrouted through various proprietorship firms to M/s. HarshEnterprise and thereby, many entities. Further, the proprietor ofother proprietorship had admitted in his statement under section131 of the Act that he was not carrying out any genuine businessand was involved in providing accommodation entries. Such firmhad transferred the cash deposited in its account to M/s. HarshEnterprise. Thus, the case of the petitioner was reopened afterdue consideration of facts. 6.2Indisputably, the petitioner has furnished E-TCS returnsalong with the transaction register during the regularassessment, however, case of the respondent that the same donot establish the genuineness of the transaction and delivery ofactual material, appears to be flawless and that, it cannot be saidthat by such, the onus under section 68 of the Act is discharged by the assessee – the petitioner. 6.3The learned senior advocate for the petitioner hassubmitted that the sale transaction stood verified and acceptedin the scrutiny assessment proceeding carried out under section143(3) of the Act and the petitioner had submitted all the detailsrelevant for the assessment and thus, discharged the onus undersection 68 of the Act, however, it appears that the AssessingOfficer has found that the petitioner company has not fully andtruly disclosed all material facts necessary for assessment for thereason that the petitioner has concealed the facts to channelizethe unaccounted funds into assessee company. Therefore, thereis clear failure on the part of the assessee to fully and trulydisclose all the facts necessary for assessment proceeding undersection 143(3) of the Act. 6.4Thus, considering the aforesaid facts and circumstances ofthe case, we are of the considered view that it cannot be saidthat there is no reason to believe that the income chargeable totax has escaped assessment because such exercise of reopeninghas been made only after due inquiries and recording ofstatements of concerned persons, as referred to herein above,and on having found prima facie material, impugned notice isissued to the petitioner. 6.5In Peass Industrial Engineers (P.) Ltd. v. DeputyCommissioner of Income Tax, [2016] 76 Taxmann.com 106(Gujarat), this Court has observed as under: “9.On the basis of aforesaid proposition laid by series ofdecisions, we are of the opinion that when the Authority isarmed with the tangible material in the form of specificinformation received by the Investigation Wing, 6.5In Peass Industrial Engineers (P.) Ltd. v. DeputyCommissioner of Income Tax, [2016] 76 Taxmann.com 106(Gujarat), this Court has observed as under: “9.On the basis of aforesaid proposition laid by series ofdecisions, we are of the opinion that when the Authority isarmed with the tangible material in the form of specificinformation received by the Investigation Wing, Ahmedabad is thoroughly justified in issuing a notice forreassessment. It is revealed from the said additionalmaterial available on hand a reasonable belief is formed bythe Assessing Authority that income of the petitioner hasescaped assessment and therefore, once the reasonablebelief is formulated by the Authority on the basis of cogenttangible material, the Authority is not expected to concludeat this stage the issue finally or to ascertain the fact byevidence or conclusion, we are of the opinion thatfunction of the assessing authority at this stage is toadminister the statute and what is required at thisstage is a reason to believe and not establish fact ofescapement of income and therefore, looking to thescope of Section 147 as also Sections 148 to 152 ofthe Act, even if scrutiny assessment has beenundertaken, if substantial new material is found inthe form of information on the basis of which theassessing authority can form a belief that theincome of the petitioner has escaped assessment, itis always open for the assessing authority to reopenassessment. From the reasons which are recorded, itclearly emerges that the petitioner is the beneficiary ofthose entries by Kayan brothers, who are well known entryoperators across the country and this fact has beenunearthed on account of the information received by DGITInvestigation Branch and therefore, it cannot be said in anyway that even if four years have been passed, it is not openfor the Authority to reopen the assessment. In the presentcase, there was independent application of mind on behalfof the assessing authority in arriving at the conclusion thatincome had escaped assessment and therefore, thecontentions raised by the petitioner are devoid of merits.Dealing with the contentions of the petitioner that theinformation received from DGIT, Investigation Branch,Ahmedabad, can never be said to be additionalinformation. We are of the opinion that the informationwhich has been received is on 26.3.2015 from the DGIT,Investigation Branch, Ahmedabad, whereby it has beenrevealed that present petitioner is also the beneficiaries ofthose Kayan brothers, who are in the activity of entryoperation throughout the country and therefore, it cannotbe said that this is not justifiable material to form a reasonto belief by the Authority and therefore, this being a case,the Authority is justified in issuing notice under Section 148of the Act to reopen the assessment and therefore, thechallenge contained in the petition being devoid of merits,same deserves to be dismissed. As we found that for the exercise of power of reopening of assessment after aperiod of 4 years, a proper procedure is observed by theAuthority, specific approval has been obtained from thecompetent Authority and upon perusal of original file, wehave satisfied ourselves that the approval has beenaccorded in a proper manner by the competent Authorityand since the notice is issued based upon substantialcompliance of statutory provision, the Authority has actedwell within the bounds of his powers and the Authority hasissued notice. We found that the order which has beenpassed of rejecting the objections raised by the petitioner isalso a well reasoned order passed after due exercise ofjurisdiction and therefore, same is not, therefore, requiredto be interfered with.” exercise of power of reopening of assessment after aperiod of 4 years, a proper procedure is observed by theAuthority, specific approval has been obtained from thecompetent Authority and upon perusal of original file, wehave satisfied ourselves that the approval has beenaccorded in a proper manner by the competent Authorityand since the notice is issued based upon substantialcompliance of statutory provision, the Authority has actedwell within the bounds of his powers and the Authority hasissued notice. We found that the order which has beenpassed of rejecting the objections raised by the petitioner isalso a well reasoned order passed after due exercise ofjurisdiction and therefore, same is not, therefore, requiredto be interfered with.” 6.6Thus, the function of the assessing authority at this stage isto administer the statute and what is required is a reason tobelieve and not to establish fact of escapement of income andtherefore, looking to the scope of Section 147 as also sections148 to 152 of the Act, even if scrutiny assessment has beenundertaken, if substantial new material is found in the form ofinformation on the basis of which the assessing authority canform a belief that the income of the petitioner has escapedassessment, it is always open for the assessing authority toreopen the assessment. 6.7Further, in the decision in Aaspas Multimedia Ltd. v.Deputy Commissioner of Income Tax, Circle 1(1), [2017]83 Taxmann.com 82 (Gujarat), it is observed as under: “…In the present case the reassessment proceedings havebeen initiated by the Assessing Officer on the basis ofmaterial provided by the Principal Director (Investigation).It is also required to be noted that the genuineness of thevarious companies who made share applications aredoubted. The assessee is alleged to have been engaged inbogus share applications from various bogus concernsoperated by PKJ. The assessee is the beneficiary of thesaid transactions of share application by those bogus concerns. In the wake of information received by theAssessing Officer, when the Assessing Officer formed abelief that the investment made from the funding of suchcompanies which are bogus, the Assessing Officer hasrightly assumed jurisdiction of initiating the reassessmentproceedings. The Assessing Officer, on the basis ofinformation subsequently having come to his knowledge,recognized untruthfulness of the facts furnished earlier. Inthe present case, since both the necessary conditions toreopen the assessment have been duly fulfilled, sufficiencyof the reasons is not to be gone into by this Court.Information furnished at the time of original assessment,when by subsequent information received from thePrincipal Director (Investigation), itself found to becontroverted, the objection to the notice of reassessmentunder section 147 must fail.” 6.8In the case on hand also, the Assessing Officer has reasonto believe that the income chargeable to tax has escapedassessment and the basis for formation of such belief is severalinquiries and the investigation by the Investigation Wing. Thereasons for the formation of the belief by the Assessing Officer inthe instant case, appear to have a rational connection with orrelevant bearing on the formation of belief that there has beenescapement of the income of the assessee from assessment inthe particular year because of his failure to disclose fully andtruly all material facts. Accordingly, no interference is called forat the hands of this Court in this petition under Article 226 of theConstitution of India. 6.8In the case on hand also, the Assessing Officer has reasonto believe that the income chargeable to tax has escapedassessment and the basis for formation of such belief is severalinquiries and the investigation by the Investigation Wing. Thereasons for the formation of the belief by the Assessing Officer inthe instant case, appear to have a rational connection with orrelevant bearing on the formation of belief that there has beenescapement of the income of the assessee from assessment inthe particular year because of his failure to disclose fully andtruly all material facts. Accordingly, no interference is called forat the hands of this Court in this petition under Article 226 of theConstitution of India. 6.9We may reiterate the observation made by the Apex Courtin Raymond Woollen Mills Ltd. (supra) that, at the time ofrecording the reason for satisfaction of AO, there should be primafacie some material on the basis of which, the department couldreopen the case. The sufficiency or correctness of the material isnot a thing to be considered at this stage. It will be open to theassessee to prove that the assumption of fact made in the notice was erroneous at the time of assessment proceedings. 6.10 So far as the decisions relied by the learned senioradvocate for the petitioner are concerned, inAllianceFilaments Ltd. (supra)it is observed by the Court that theAssessing Officer has acted mechanically based on theinformation received from the Investigation Wing, Surat for thepurpose of reopening of the assessment and any independents