S.b. Civil Writ Petition v. Dy. Commissioner Of Income Tax, Jodhpur& Anr

[1] IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR**** :: O R D E R :: 1. S.B. CIVIL WRIT PETITION NO.1140/2014MUKESH MODI VS. DY. COMMISSIONER OF INCOME TAX, JODHPUR& ANR. 2. S.B. CIVIL WRIT PETITION NO.1017/14NAKODA LAND DEVELOPERS VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. 3. S.B. CIVIL WRIT PETITION NO.1018/14, NAKODA LAND DEVELOPERS VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. 4. S.B. CIVIL WRIT PETITION NO.1030/14PRAKESH BEVERAGES VS. DY. COMMISSIONER OF INCOME TAX,JODHPUR & ANR. 5. S.B. CIVIL WRIT PETITION NO.1032/14PRAKESH BEVERAGES VS. DY. COMMISSIONER OF INCOME TAX,JODHPUR & ANR. 6. S.B. CIVIL WRIT PETITION NO.1043/14DAKSHA KUMARI JAIN VS. DY. COMMISSIONER OF INCOME TAX,JODHPUR & ANR. 7. S.B. CIVIL WRIT PETITION NO.1141/14PRAKASH BEVERAGES VS. DY. COMMISSIONER OF INCOME TAX,JODHPUR & ANR. 8. S.B. CIVIL WRIT PETITION NO.1145/14NAKODA LAND DEVELOPERS VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. 9. S.B. CIVIL WRIT PETITION NO.1168/14 BHARAT DAS VAISHNAV VS. DY. COMMISSIONER OF INCOME TAX,JODHPUR & ANR. 10.S.B. CIVIL WRIT PETITION NO.1170/14 KRISHNA DAIRY PRODUCT VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. 11.S.B. CIVIL WRIT PETITION NO.1250/14SAMBHAV ENERGY LIMITED VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. 12. S.B. CIVIL WRIT PETITION NO.1248/14 SAMBHAV ENERGY LIMITED VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. 13. S.B. CIVIL WRIT PETITION NO.1496/14 SAMBHAV ENERGY LIMITED VS. DY. COMMISSIONER OF INCOMETAX, JODHPUR & ANR. UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA DATE OF ORDER:: April 11, 2014 P R E S E N T HON'BLE MR. JUSTICE P.K. LOHRA Mr. Prakul Khurana, Mr. Sanjay Nahar and Mr. Manish Singh Lakhawat,for the petitioners. Mr. K.K. Bissa, Senior Standing Counsel, Income Tax Department, withMr. Hargovind Chanda, for the respondents. Reportable BY THE COURT: Challenge in the instant petition (Civil Writ Petition No.1140/2014) and 9 other conjoined petitions at the threshold waslaid by the assessees against the impugned action of therespondent Revenue in initiation of re-assessment proceedingsunder Section 147/148 of the Income Tax Act 1961 (for short,‘Act’). In the original petition, the petitioners have also questionedthe order passed by the first respondent rejecting their preliminaryobjections against initiation of re-assessment proceedings. Duringpendency of these petitions the petitioners made attempt to bringchanged fact scenario vis-à-vis all these assessees and placed onrecord the ex-parte assessment orders passed by Assessing Officer(AO) on 3[rd] February 2014 for the assessment year 2010-11.Taking note of the ex-parte re-assessment orders passed by the [3] AO, the petitioners made endeavour to implore annulment of theseorders by way of additional affidavit. In relation to the other writpetitions i.e. S.B. Civil Writ Petition No. 1250/2014, 1248/2014 and1496/2014 respectively which were laid subsequently, the ex-partere-assessment orders were also questioned besides notice underSection 147/148 of the Act and rejection of preliminary objections inthe original petition. [3] AO, the petitioners made endeavour to implore annulment of theseorders by way of additional affidavit. In relation to the other writpetitions i.e. S.B. Civil Writ Petition No. 1250/2014, 1248/2014 and1496/2014 respectively which were laid subsequently, the ex-partere-assessment orders were also questioned besides notice underSection 147/148 of the Act and rejection of preliminary objections inthe original petition. The undisputed facts, necessary and germane to thematter, are that a search under Section 132 of the Act and surveyunder Section 133A of the Act was simultaneously conducted by theinvestigation wing of the Income Tax Department at thebusiness/residential premises of Sirohi based Modi alias AdarshGroup. The petitioners Mukesh Modi, Daksha Kumari Jain andBharat Das Vaishnav were eventually covered under the searchaction and vis-à-vis other assessees, viz., Prakash Beverages,Nakoda Land Developers and Sambhav Energy, a survey wasconducted wherein certain documents/loose papers wereseized/impounded. The Income Tax Department carried out thisentire exercise on 10[th] of February 2010. Subsequent to that, on 6[th]of January 2011 notice under Section 153A of the Act was issued incase of Mukesh Modi, Daksha Kumari Jain and Bharat Das Vaishnavwhereas notice under Section 153 of the Act was issued in case ofKrishna Dairy by relying on certain documents found during thecourse of search. While undertaking proceedings under Section153A of the Act, the AO scrutinized the seized/impounded materialduring the course of search/survey dated 10[th] of February 2010 andafter consideration and analyzing the same issued a consolidated [4] questionnaire to the concerned assessees. Be that as it may, noproceeding for framing regular assessment under Section 143(3) ofthe Act was initiated in case of Prakash Beverages, Nakoda LandDevelopers and Sambhav Energy. This exercise was completed on21[st] of October 2011. Proceedings initiated in case of Krishna Dairy,under Section 132 was also dropped on 24[th] of November 2011.Finally, on 23[rd] of December 2011 assessment under Section 153Aread with Section 143(3) of the Act was completed on the strengthof seized record/impounded documents, thereby making variousadditions of Income Tax in the hands of Mukesh Modi, Diksha Jainand Bharat Das Vaishnav. The subject matter of these additionsare related to the very same transactions/orders in relation to whichthe first respondent has initiated the impugned re-assessmentproceedings. It is also clearly discernible that these additions aresubject matter of respective appeals preferred by the petitioners-assessees before the Commissioner of Income Tax (Appeals) andare still pending adjudication. The sequence of events took abruptturn in the month of March 2013 and on 22[nd] of March 2013 the firstrespondent while recording reasons to reopen the assessmentunder Section 147 of the Act issued the impugned notices underSection 148 of the Act for initiation of proceedings under Section147 vis-à-vis to the petitioners-assessees. The petitioners in thewrit petition have pleaded that the first respondent has notrecorded cogent reasons and per-se the reasons recorded suggestthat the AO has assumed jurisdiction to initiate re-assessmentproceedings on its mere ipse-dixit to clear suspicions and forverification. [5] Joining the issue with the Department, petitionersMukesh Modi, Daksha Kumari Jain and Bharat Das Vaishnav,submitted reply to the impugned notice dated 22[nd] March, 2013 withthe request to the first respondent to treat the return of incomefiled under Section 153A of the Act, as return filed in response tothe aforesaid notice. With the same breath, Prakash Beverages,Nakoda Land Developers and Sambhav Energy also submitted replywith the request to treat original returns filed under Section 139(1)of the Act as returns filed in response to notice under Section 148 ofthe Act. [5] Joining the issue with the Department, petitionersMukesh Modi, Daksha Kumari Jain and Bharat Das Vaishnav,submitted reply to the impugned notice dated 22[nd] March, 2013 withthe request to the first respondent to treat the return of incomefiled under Section 153A of the Act, as return filed in response tothe aforesaid notice. With the same breath, Prakash Beverages,Nakoda Land Developers and Sambhav Energy also submitted replywith the request to treat original returns filed under Section 139(1)of the Act as returns filed in response to notice under Section 148 ofthe Act. On 31[st] May, 2013, the petitioners submitted detailedpreliminary objections to resist the proceedings under Section 147of the Act and put stiff resistance against the issuance of theimpugned notice. The main edifice of the preliminary objectionsremained the basis of the reasons recorded for issuance of such anotice by categorizing it to be dehors the procedure mandated byHon'ble Apex Court. The assessing authority after considering thepreliminary objections rejected the same by passing order dated15[th] of October, 2013. The petitioners have very specifically pleaded in thewrit petitions that the third respondent, who was quite consciousabout the power of judicial review of this Court under Article 226 ofthe Constitution to examine the legality and propriety of order onthe objections cleverly and malafide resorted to a novel procedure.Elaborating the procedure, it is specifically averred in the writpetitions that the same was adopted with the solemn object to thwart such efforts of the assessees. With a view to substantiatethis assertion, the petitioners have pleaded that the thirdrespondent by a sheer ingenuity floated a proposal to all thepetitioners that instead of deciding these preliminary objectionsseparately by passing an order he shall deal with those objections atthe threshold in the opening paragraphs of the re-assessment orderso that same will form a part of the re-assessment order. Theproposal, so mooted at the instance of the third respondent, did notfind favour from the assessees, and therefore, on 23[rd] October,2013, the same was objected on the anvil of mandate of Hon'bleApex Court. Be that as it may, on 17[th] January, 2014, the firstrespondent disposed of all the objections submitted by theassessees and concluded that the proceedings under Section 147 ofthe Act are perfectly valid and legal. While disposing of theobjections submitted by the assessees, the first respondent hasissued impugned notice to the petitioners under Section 143(2) ofthe Act calling upon them to produce any documents, accounts andany other evidence on which they may rely to support the returnfiled by them. According to the petitioners, the intent of firstrespondent for issuing the impugned notice is clear and explicitinasmuch as its intent is to make roving and fishing inquiries in theguise of the re-assessment proceedings. The petitioners have alsoaverred that on 27[th] January, 2014, the first respondent called uponthem to furnish the requisite details while hurling threats to makeadditions of income in the form of passing re-assessment orderswithout further notice. Highlighting the conduct of the firstrespondent in showing haste for passing re-assessment order, thepetitioners have also submitted that the attempt made by them for [7] [7] deferment of the proceedings was not even acknowledged, and thefirst respondent refused to entertain the adjournment applications,thereby made it imperative for the assessees to sent them by speedpost on the same day i.e. 3[rd] February, 2014. The adjournmentapplications were also sent through e-mail, Fax etc. The petitionershave very specifically pleaded in the writ petitions that the firstrespondent knowing it fully well that the petitioners are approachingthis Court for assailing the impugned order dated 17[th] January 2014,with intent to brow beat the assessees hurriedly passed the ex-parte assessment orders. The petitioners have set out a specificcase in the additional affidavit that the re-assessment orders havebeen passed to frustrate the cause of the petitioners, which is asubject-matter of these petitions. On passing the re-assessmentorders, notices were also issued to the petitioners calling upon themas to why penalty should not be levied from them. Referringspecifically to the cases of Mukesh Modi, Bharat Das Vaishnav,Sambhav Energy and Krishna Dairy, which were scheduled to beheard on 4[th] February, 2014, the petitioners have pleaded that there-assessment orders were passed on a day anterior to thescheduled date i.e., 3[rd] February, 2014, despite availability ofstatutory time for passing these orders upto 31[st] March, 2014. On behalf of the respondents, replies to the writpetitions are submitted. In the reply, it is pleaded that theproceedings under Section 147/148 of the Act have been initiatedwith due process of law and the AO has recorded plausible reasonsfor the said action. The petitions are also contested on the anvil thatgrievance of the petitioners is against the show-cause notice and [8] petition against the show-cause notice is not maintainable. Whilereferring to search undertaken by the Department under Section132 of the Act by its investigation wing, the respondents havepleaded in the reply that the search was conducted at thebusiness/residential premises of Sirohi based Modi alias Adarshgroup consisting of Adarsh Credit Co-operative Society Ltd., MukeshModi, Bharat Modi, Virendra Modi, Mahendra Tak, Bharat Vaishnavand their family members and business associates etc., and most ofthem residing at Sirohi have revealed several incriminatingdocuments along with cash, jewelry and other valuables. Duringsurvey under Section 133A of the Act, inventories of variousitems/books of accounts/vouchers/documents were prepared andtaken. During survey, it was also revealed that regular books ofaccounts/copies of returns of income for various years were notavailable, and therefore, it was not possible to verify the details ofbooks/documents. It is also submitted in the return that besidesnon-availability of the requisite books of accounts/documents andfinancial statements and in absence of responsible/answerable/qualified persons to handle the job of verification, it wasnot possible to undertake the job of verification. The respondentshave also submitted in the reply that survey under Section 133-A ofthe Act was also carried out at the corporate offices of KrishnaDairy, Virendra Enterprises, Prakash Beverages, Mukesh Modi andBalaji Securities on 10[th] February, 2010. According to therespondents, the transactions, which were shown in theseorders/impounded documents, remained unexplained, andtherefore, while passing the re-assessment orders, at the thresholdin the opening paragraphs, reasons have been recorded for treating [9] [9] the above transactions as unexplained. Adverting to the objectionssubmitted by the assessees, the respondents have pleaded in thereply that the assessees have not clarified the details about thetransactions with due verification of books of accounts. Defendingthe reasons recorded in the assessment orders, the respondentshave also submitted in the reply that the amount in question hasescaped assessment for assessment year in question. Therespondents have very specifically pleaded in the return that theassessees have not availed the chance before the AO to explain thecase on merits, which clearly establishes escapement of income ontheir part. While referring to the words ‘reason to believe’ therespondents have submitted in the return that expression ‘reason tobelieve’ cannot be equated with final ascertainment of the fact bylegal evidence or conclusion. For substantiating this proposition, therespondent-Revenue has also placed reliance in the pleadings on averdict of Hon’ble Apex Court in Assistant Commissioner ofIncome Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd.[(2007) 291 ITR 500]. Joining issue with the petitioners for their objections,the respondent-Revenue has submitted in the reply that, whileinvoking the provisions of Sections 147/148 of the Act, the AO wasabreast with the definite and specific information and same cannotbe categorized as roving and fishing inquiries. A specific preliminaryobjection is raised in the return that after passing of the re-assessment orders, alternative statutory remedy is available to thepetitioners by way of an appeal under Section 246 and 246A of theAct and as such the writ petitions are not maintainable. Buttressing [10] its submissions, in this behalf, the respondent-Revenue hasspecifically pleaded that the notice under Section 147/148 of the Acthas finally culminated into re-assessment orders, therefore, now theassessees are well advised to avail the remedy of appeal underSections 246/246A of the Act and the writ petitions are liable to bethrown away merely on that count. The respondents have alsosubmitted in the alternative that the re-assessment orders are notsubject-matter of judicial scrutiny in these petitions and as suchafter passing of the re-assessment orders, nothing survives foradjudication in these petitions. The attempt made by thepetitioners to assail the re-assessment orders is also resisted by therespondents on the ground that no requisite amendments havebeen made in the writ petitions for challenging the same. Highlighting the conduct of the assessees, moreparticularly their litigating perseverance, the respondent-Revenuehas relied on the assessments of all the assessees completed underSection 144 of the Act ex-parte. The respondents also relied uponthe observations of AO on the issue of TDS categorizing the conductof the assessees as evasive. The respondent-Revenue has assertedthat the petitioners were not interested in getting the things verifiedon merits. Defending the action of the AO for floating the proposalof deciding the objections at the threshold while passing the re-assessment orders, the Revenue has pleaded that there is nothingunusual in the said proposal and the petitioners are unnecessarilymaking mountain out of molehill. Making specific averment in thereturn that the assessees have always adopted defiant posture andhave not cooperated with the AO and thus, the AO was left with no [11] option but to pass re-assessment orders ex-parte. According to therespondents, the whole object of the assessees was to prolong theassessment so that it may reach to dead end, i.e., the end of theassessment year, which may facilitate assessments withoutverification/proper examination of the relevant materials and evenleading to a situation that other assessees may suffer for delay intheir assessment cases. [11] option but to pass re-assessment orders ex-parte. According to therespondents, the whole object of the assessees was to prolong theassessment so that it may reach to dead end, i.e., the end of theassessment year, which may facilitate assessments withoutverification/proper examination of the relevant materials and evenleading to a situation that other assessees may suffer for delay intheir assessment cases. On merits, the respondent-Revenue has defended itsaction with full emphasis at its command and submitted that theentire exercise undertaken by the Revenue is in strict adherence ofthe Act and, as such, the cause of grievance of the petitioners iswholly unfounded and cannot be sustained. Reiterating thepreliminary objections and also countering the grounds urged onmerits of the case, the respondent-Revenue has specifically pleadedfor rejection of the writ petitions. Mr. Parkul Khurana has strenuously urged that the veryfoundation/basis for issuance of the impugned notice under Section148 of the Act to initiate re-assessment proceedings is dehors thelaw falling short of requirements envisaged by the legislature.Elaborating his submissions, learned counsel for the petitionerswould contend that for issuing the notice the first respondent hasnot recorded reasons to fulfill and satisfy statutory precondition of“reason to believe” mandated under Section 147 of the Act. Mr.Khurana has submitted that it is ex-facie clear from the reasonsrecorded that the very purpose of initiation of re-assessment [12] proceedings is to verify certain documents and transactions and tomake rowing and fishing enquiries which is nothing but an attemptby the AO to transgress its powers under Section 147 of the Act.Buttressing his submissions with full eloquence, Mr. Khurana hasargued that while assuming jurisdiction under Section 147 of theAct the AO has acted on mere suspicion and the said action of therespondent cannot withstand the test of “reason to believe” insistedunder Section 147 of the Act. Learned counsel, Mr. Khurana hascontended with full emphasis that endeavor of the first respondentin the garb of reassessment proceedings is to verify some of thedetails on the strength of material which was already available onrecord, impounded/seized in the year 2010 duly considered andverified in the course of re-assessment proceedings under Section153A of the Act vis-à-vis various members of Adarsh Groupincluding the petitioners Mukesh Modi, Daksha Kumari Jain andBharat Das Vaishnav and on proper appreciation of these materialsproceedings were dropped in case of Krishna Dairy. Makingscathing attack on the reasons recorded, Mr. Khurana would urgethat verification of details found during surveys already examinedand scrutinized earlier by the AO, cannot furnish a plausible groundfor initiating action against the assessees under Section 147/148 ofthe Act as the same is on the face of it outside the scope of theseprovisions much less satisfying the requirement of “reason tobelieve”. Learned counsel for the petitioners has also submittedthat on the face of it the reasons recorded are absolutely vague,cryptic and ex-facie contrary to the intent of legislation. Forsubstantiating this argument, learned counsel contended that thefirst respondent through re-assessment proceedings seeks to verify [13] [13] the nexus and proximity of the material seized/impounded with thebooks of accounts of the assessees while simultaneously expressingdoubts that such details are not reflected from the regularbooks/returns furnished by the assessees. According to Mr.Khurana, if the reasons recorded by the AO for initiating re-assessment proceedings are critically examined, then there remainsno doubt that the authority has assumed the jurisdiction for re-initiating assessment proceedings on its mere ipse-dixit andsuspicion instead of the requisites i.e. the reason to believe that anyincome chargeable to tax has escaped assessment. Learnedcounsel for the petitioners has urged that legal position is no moreres-integra that for issuance of a valid notice under Section 148 ofthe Act the concerned AO is under an obligation to keep himselfabreast with definite information/material in possession on the basisof which he forms opinion of reason to believe that some incomehas escaped assessment in the year in question and in want of thesame initiation of impugned re-assessment proceedings are whollywithout jurisdiction. Mr. Khurana, while elaborating on this issuewould urge that if the reasons recorded per-se reflect that thematter requires detail investigation and further verification was atthe most can be categorized that AO has reasons to suspect and not“reason to believe” that income chargeable to tax has escapedassessment rendering the re-initiation proceedings all the morevulnerable. With these submissions, Mr. Khurana has urged thatthe impugned re-assessment proceedings are wholly nonest in theeye of law and are liable to be annulled. In support of hiscontention, learned counsel for the petitioners has placed relianceon following judgments: Bakulbhai Ramanlal Patel Vs. Income Tax Officer(2011) 56 DTR (Guj) 212(2011) 56 DTR (Guj) 212 Agrawal J.V. Vs. Income Tax Officer & Anr. (2013)257CTR(Guj)112Agrawal J.V. Vs. Income Tax Officer & Anr. (2013)257CTR(Guj)112 Commissioner of Income Tax Vs. Biggabas MaheshwariSeva Samiti [2008] 220 CTR (Raj.) 369.Commissioner of Income Tax Vs. Biggabas MaheshwariSeva Samiti [2008] 220 CTR (Raj.) 369. In Bakulbhai’s case (supra), the Division Bench ofGujarat High Court, while examining true purport of the words“reason to believe” has held that where the reasons recorded reflectthat the matter requires detailed investigation and furtherverification, the AO has reason to suspect and not reason to believethat income chargeable to tax has escaped assessment andtherefore the assumption of jurisdiction by AO is invalid and as suchthe impugned notice under Section 148 is not sustainable and liableto be quashed. The relevant paragraphs of the judgment are 19,20, 23 & 30, which are reproduced as infra: Commissioner of Income Tax Vs. Biggabas MaheshwariSeva Samiti [2008] 220 CTR (Raj.) 369.Commissioner of Income Tax Vs. Biggabas MaheshwariSeva Samiti [2008] 220 CTR (Raj.) 369. In Bakulbhai’s case (supra), the Division Bench ofGujarat High Court, while examining true purport of the words“reason to believe” has held that where the reasons recorded reflectthat the matter requires detailed investigation and furtherverification, the AO has reason to suspect and not reason to believethat income chargeable to tax has escaped assessment andtherefore the assumption of jurisdiction by AO is invalid and as suchthe impugned notice under Section 148 is not sustainable and liableto be quashed. The relevant paragraphs of the judgment are 19,20, 23 & 30, which are reproduced as infra: 19. For the purpose of invoking the provisions ofsection 147 of the Act, formation of requisite belief precedesthe initiation of the proceedings. In the circumstances, in thelight of the provisions of sub-section (2) of section 148,before issuing notice under section 148 of the Act, the AO isrequired to record reasons for the formation of belief thatincome chargeable to tax has escaped assessment. In thepresent case, on a plain reading of the reasons recorded, asnoted hereinabove no such belief appears to have beenrecorded by the AO. However, in the penultimate para of thereasons recorded, the AO has recorded thus: "In view of theExplanation 2 to section 147 of the IT Act, the case of theassessee is that where cash transaction made is verified.Therefore, I have reason to believe that deemed income hasescaped assessment by not disclosing the true incomerelating to assessment year 2003-04. Hence, it is a fit casefor issuance of notice under section 148 of the IT Act." Thisin effect and substance is the only satisfaction recorded bythe AO as regards income having escaped assessment. Abare reading of Explanation 2 to section 147 of the Actshows that the same merely lays down the categories ofcases which shall be deemed to be cases where incomechargeable to tax has escaped assessment. The saidexplanation nowhere speaks of verification of transactions orof deemed income.section 147 of the Act, formation of requisite belief precedesthe initiation of the proceedings. In the circumstances, in thelight of the provisions of sub-section (2) of section 148,before issuing notice under section 148 of the Act, the AO isrequired to record reasons for the formation of belief thatincome chargeable to tax has escaped assessment. In thepresent case, on a plain reading of the reasons recorded, asnoted hereinabove no such belief appears to have beenrecorded by the AO. However, in the penultimate para of thereasons recorded, the AO has recorded thus: "In view of theExplanation 2 to section 147 of the IT Act, the case of theassessee is that where cash transaction made is verified.Therefore, I have reason to believe that deemed income hasescaped assessment by not disclosing the true incomerelating to assessment year 2003-04. Hence, it is a fit casefor issuance of notice under section 148 of the IT Act." Thisin effect and substance is the only satisfaction recorded bythe AO as regards income having escaped assessment. Abare reading of Explanation 2 to section 147 of the Actshows that the same merely lays down the categories ofcases which shall be deemed to be cases where incomechargeable to tax has escaped assessment. The saidexplanation nowhere speaks of verification of transactions orof deemed income. 20. Reading the reasons recorded in their entirety,there is nothing whatsoever to indicate as to which is theincome that has not been disclosed by the petitioner or thatany income chargeable to tax has in fact escapedassessment. The entire tenor of the reasons recordedindicates that on the basis of some unsubstantiated and 20. Reading the reasons recorded in their entirety,there is nothing whatsoever to indicate as to which is theincome that has not been disclosed by the petitioner or thatany income chargeable to tax has in fact escapedassessment. The entire tenor of the reasons recordedindicates that on the basis of some unsubstantiated and vague information, the AO has reopened the assessment forthe purpose of making a roving and fishing inquiry to verifyas to whether any income has in fact escaped assessmentwhich fact is borne out from the reasons recorded, whereinthe AO has categorically recorded thus: "In view of theabove facts and circumstances of the case, detailedinvestigation/ verification is required and it is also requiredto bring the assessee in tax net." Insofar as bringing theassessee in the tax net is concerned, the petitioneradmittedly has filed return of income and has been assessedin respect thereof, the petitioner is, therefore, already withinthe tax net. Since the reasons recorded do not reflect therequisite belief that income chargeable to tax has escapedassessment, the basic requirements of section 147 of the Acthave not been satisfied. 23. In the facts of the present case, it is not the caseof the AO that any income chargeable to tax has escapedassessment. The case of the AO is that in case the petitioneris a defaulter, under the provisions of the Act, in relation toground No.2 either under section 269SS or section 271B ofthe Act and in relation to ground No. 3 either under section269T or section 40A(3) of the Act. In case of default underthe provisions of section 269SS, section 269T and section271B of the Act, penalty is leviable under the sections 271D,271E and 271B of the Act respectively. The aforesaidprovisions are penalty provisions and even if the petitionerwere liable to pay penalty under the said provisions, thesame would not give rise to a conclusion that income hasescaped assessment. 30. In the present case, as noticed hereinabove,from the reasons recorded, it is apparent that the AO did nothave any material before him so as to satisfy therequirements of section 147 of the Act in as much as, thereis no material whatsoever before the AO on the basis ofwhich a reasonable man would come to the conclusion thatany income chargeable to tax has escaped assessment. Thereasons recorded reflect that the AO feels that the matterrequires detailed investigation and further verification. Thus,it appears that the AO has reason to suspect and not reasonto believe that income chargeable to tax has escapedassessment. This, however, is not a valid ground for invokingthe provisions of section 147 of the Act. The reason tobelieve that income chargeable to tax has escapedassessment must be based upon material on record. In thefacts of the present case, there is no such material. In thecircumstances, in the absence of basic requirements ofsection 147 of the Act being satisfied, the assumption ofjurisdiction by the AO is invalid and as such, the impugnednotice under section 148 of the Act cannot be sustained. In Agrawal J.V.’s case (supra), Division Bench ofGujarat High Court has reiterated the same principles. Learned counsel for the petitioners Mr. Khurana hasimpeached the impugned reassessment proceedings on the groundthat the very edifice of the said action of the AO is mere change of [16] In Agrawal J.V.’s case (supra), Division Bench ofGujarat High Court has reiterated the same principles. Learned counsel for the petitioners Mr. Khurana hasimpeached the impugned reassessment proceedings on the groundthat the very edifice of the said action of the AO is mere change of [16] opinion and such proceedings merely on strength of so calledchanged opinion is forbidden by law. For authenticating thesesubmissions, Mr. Khurana has submitted that during proceedingsunder Section 153A of the Act, the AO analyzed and considered theseized material and thereupon issued a consolidated questionnaireto all concerned vide notice dated 21[st] of October 2011 which wasduly replied by petitioner Mukesh Modi and after receiving reply, theAO formed an opinion and thereafter passed the order underSection 153A read with Section 143(3)/144 on 23[rd] of December2011 thereby making an addition of Rs.21,89,880 in the hands ofthe petitioners. Mr. Khurana while quoting this example hashighlighted the pitfalls in the initiation of re-assessment proceedingsand submitted with full emphasis that mere change of opinioncannot validate initiation of proceedings which was illegal at thevery inception. Laying stress on the term specifically used by the AOfor reopening of the assessment which are “verifying” or“verification”, learned counsel for the petitioners would urge thatconnotation of these words is to re-examine the existing materialand therefore the action initiated by the AO is per-se founded onmere change of opinion. Mr. Khurana submits that the reasonswhich are forthcoming in reopening assessment are falling short ofthe requisites prescribed by the statute under Section 147 of theAct. In order to authenticate this submission, the learned counselfor the petitioners has placed reliance on the following judgments: Satnam Overseas Ltd. & Anr. Vs. Addl. Commissioner ofIncome Tax (2010) 228 CTR (Del) 121.Income Tax (2010) 228 CTR (Del) 121. Pardesi Developers & Infrastructure Pvt. Ltd.. Vs. Pardesi Developers & Infrastructure Pvt. Ltd.. Vs. Commissioner of Income Tax, Delhi & Ors. (2013)258CTR(Del) 411. In Satnam Overseas (supra), Delhi High Court whileexamining the powers of the AO under Section 147 and 148 of theAct, made following observations: Satnam Overseas Ltd. & Anr. Vs. Addl. Commissioner ofIncome Tax (2010) 228 CTR (Del) 121.Income Tax (2010) 228 CTR (Del) 121. Pardesi Developers & Infrastructure Pvt. Ltd.. Vs. Pardesi Developers & Infrastructure Pvt. Ltd.. Vs. Commissioner of Income Tax, Delhi & Ors. (2013)258CTR(Del) 411. In Satnam Overseas (supra), Delhi High Court whileexamining the powers of the AO under Section 147 and 148 of theAct, made following observations: 6. We feel that the Writ Petitions have to succeedbecause the contentions as raised on behalf of the counselfor the petitioner are well founded. The only reason whichhas been given seeking re-opening of the assessment for theyears 1997-98 and 1998-99 is that suppression of sales havetaken place on account of the fact that when average price ofthe closing stock is multiplied with the quantity of the salesin the year then the value of the sales would be at a higherfigure than that as declared by the assessee. Clearly, thereis no new material which is alleged to have come to thenotice of the Assessing Officer which has caused him to seekre-opening of the assessment. Admittedly, the reasons givenfor seeking re-opening of the assessment contains theexpression “perusal of the case record reveals‟ clearlyshowing that it is on the basis of the same assessmentrecord as was filed by the assessee, during the relevantassessment years and also scrutinized by the AssessingOfficer before passing the orders under Section 143(3) is thebasis for seeking re-opening of the assessment. Further thenew logic, rationale and opinion which has been formed bythe Assessing Officer for seeking re-opening of theassessment is nothing but a change of opinion and a newapproach to the existing facts and material which theAssessing Officer could well have done during the regularassessment proceedings of the relevant assessment years.Not only this, the rationale/logic/reasons given that saleprice of stocks during the entire assessment year wouldremain constant is something which indeed confounds us. Itcannot stand to reason that the price of sale ofpaddy/rice/pulses remained constant throughout the year sothat on the basis of an average price of the closing stock thesale price for the entire year comprising of 12 months, 48weeks and 365 days can be ascertained in that the samewould have remained fixed throughout this period. Evenassuming that this logic is correct, it was surely an exercisewhich the Assessing Officer could have done on the basis ofmaterials which he is now presently seeking to do becausethe same very materials were available to him in therelevant assessment years and merely because theAssessing Officer feels that he has failed to do what he oughtto have done cannot be a valid ground for seeking initiationof re-assessment under Sections 147/148 of the Act. While reiterating the said view in Pardesi Developers &Infrastructure (supra), Division Bench of Delhi High Court has heldas under: There is nothing to show that the assessing officer did not receive the said information and, there is nothing toshow that the assessing officer had not applied his mind tothe information received by him. On the contrary, it isapparently because he was mindful of the said informationthat he issued notices under section 133(6) of the said Actdirectly to the parties to confirm the factum of application ofshares and the source of funds of such shares. Therefore,the very foundation of the notice under section 148 of thesaid Act is not established even ex facie. Consequently, itcannot be said that the assessing officer had the requisitebelief under section 147 of the said Act and, as aconsequence, the impugned notice were quashed. The writpetition was allowed. There is nothing to show that the assessing officer did not receive the said information and, there is nothing toshow that the assessing officer had not applied his mind tothe information received by him. On the contrary, it isapparently because he was mindful of the said informationthat he issued notices under section 133(6) of the said Actdirectly to the parties to confirm the factum of application ofshares and the source of funds of such shares. Therefore,the very foundation of the notice under section 148 of thesaid Act is not established even ex facie. Consequently, itcannot be said that the assessing officer had the requisitebelief under section 147 of the said Act and, as aconsequence, the impugned notice were quashed. The writpetition was allowed. Mr. Prakul Khurana, while articulating his submissions,has urged that the impugned proceedings are bad and illegal asthese proceedings are barred by third proviso to Section 147 of theAct. Mr. Khurana has argued that after completing assessment incase of Mukesh Modi, Daksha Kumari Jain and Bharat Das Vaishnavunder Section 143(3)/144 read with Section 153A of the Act whichwas founded on thorough scanning of seized/impounded materialunearthed during the course of search/survey operations in case ofModi/Adarsh Group, which is clearly discernible from the reasonsrecorded while assessing the total income of the petitioners, howand in what manner AO can reopen the assessment proceedingswhen these assessments under Section 153A of the Act are sub-judice before the Commissioner of Income Tax (Appeals) in theform of appeals laid by the assessees. Taking shelter of thirdproviso to Section 147 of the Act, Mr. Khurana would contend thatby virtue of the said proviso initiation of re-assessment proceedingsis barred by law and cannot be sustained. In support of thisargument, learned counsel has placed reliance on followingjudgment: ·National Dairy Development Board Vs. Dy.Commissioner of Income Tax (2011) CTR (Guj) 302. In this verdict, Division Bench of Gujarat High Court,while examining the true purport of third proviso to Section 147 ofthe Act, which at the relevant point of time was second proviso toSection 147 of the Act, held as under: “Moreover, insofar as the second ground forreopening of assessment is concerned, it may be noted thatthe second proviso to s.147 of the Act expressly providesthat the AO may assess or reassess such income, other thanthe income involving matters which are subject-matter ofany appeal, reference or revision, which is chargeable to taxand has escaped assessment. Thus by virtue of the secondproviso to s.147 of the Act, income involving matters whichare subject-matter of any appeal, reference or revision hasexpressly been taken out of the purview of the said section.In the circumstances, insofar as the income stated to haveescaped assessment under the second ground is concerned,the same having been subject-matter of appeal would notfall within the ambit of s.147 of the Act and as such the AOlacks jurisdiction to reopen the assessment on the saidground. Lastly, learned counsel for the petitioners has urgedwith full emphasis that the impugned re-assessment proceedingsconducted by the AO are nothing but an eye wash and the approachof the AO is biased and he is acting to the detriment of assesseeswith pre-determined mind. For authenticating this submission,learned counsel has laid emphasis on letter dated 15.10.2013whereby a proposal was mooted and conveyed to the assesseesthat the objections submitted on their behalf shall be decided in there-assessment order itself. Mr. Khurana would urge that this sort ofproposal by the AO speaks volume about the fact that he has actedmechanically and has made an affirmative attempt to shirk from itsresponsibility to dispose of the objections by a speaking ordermandated by Hon’ble Apex Court inG.K.N. Driveshafts(India) Ltd. v. ITO and Ors. [(2003) 259 ITR 19]. Mr.Khurana has also questioned the proactive role of the AO in passingthe re-assessment orders with undue haste. Mr. Khurana has [20] submitted that the whole endeavour of AO while passing the re-assessment orders hurriedly was intended to frustrate the cause ofthe petitioners to seek judicial review of the impugned action underArticle 226 of the Constitution. Per contra, learned Senior Standing Counsel for theRevenue Mr. K.K. Bissa has argued that there is no infirmity muchless infirmity in initiation of re-assessment proceedings against theassessees under Section 147/148 of the Act. Mr. Bissa wouldcontend that notices under Section 148 of the Act were issued toassessees on noticing material discrepancies from the availablematerial which was seized and impounded during surveys. Learnedcounsel further submits that certain anomalies remainedunexplained due to non-verification of the materials for which AOhad reason to believe that income of the assessees chargeable totax has escaped assessment. Learned counsel Mr. Bissa would contend that whereprima facie lie hidden or embedded in the record including books ofaccounts, which are filed along with the return, it may require deepexercise and deep study to uncover same and this kind of disclosurecannot be said to be a true and full disclosure of primary facts. Inexercise of power under Section 147 of the Act, the AO can verywell invoke such powers for re-opening the assessment to unearthescapement of income chargeable to tax at the behest of theassessee. For this proposition, the learned counsel Mr. Bissa hasplaced reliance on the Division Bench judgment of this Court in case [21] of AssistantCommissioner of Income Tax Vs. BanswaraSynthetics [272 ITR 642 (Raj.)]. Division Bench in this casehas held that sufficiency of reasons for forming the belief forreopening assessment is not for the Court to judge and in the factsand circumstances of that case the Court has upheld the action ofthe AO. The Division Bench finally held as under: 10. The question, whether disclosure was made fullyand truly depends upon the facts and circumstances of eachcase. Where primary facts lie hidden or embedded in therecord including the books of account, which are filed alongwith the return, it may require detailed exercise and deepstudy to discern or uncover the same. This kind ofdisclosure cannot be said to be a true and full disclosure ofprimary facts. [21] of AssistantCommissioner of Income Tax Vs. BanswaraSynthetics [272 ITR 642 (Raj.)]. Division Bench in this casehas held that sufficiency of reasons for forming the belief forreopening assessment is not for the Court to judge and in the factsand circumstances of that case the Court has upheld the action ofthe AO. The Division Bench finally held as under: 10. The question, whether disclosure was made fullyand truly depends upon the facts and circumstances of eachcase. Where primary facts lie hidden or embedded in therecord including the books of account, which are filed alongwith the return, it may require detailed exercise and deepstudy to discern or uncover the same. This kind ofdisclosure cannot be said to be a true and full disclosure ofprimary facts. 11. In the instant case, the assessee had claimedlease-rent on accrual basis. The letter of the assessingauthority dt. 5th Dec., 2003, records that the lease-r