Sociedade De Fomento Industrial Pvt.ltd v. The Assistant Commissioner Ofincome Tax, Circle

Vinita IN THE HIGH COURT OF BOMBAY AT GOA. WRIT PETITION NO. 233 OF 2015. Sociedade de Fomento Industrial Pvt.Ltd. Through its Deputy GeneralManager (Taxation), Mr. Sitaram P.Bhat, Vila Flores Da Silva, ErasmoCarvalho Street, Margao, Goa- 403601 ...Petitioners. VERSUS 1.The Assistant Commissioner ofIncome tax, Circle - 1, 3rd Floor,Blessing Pioneer Complex, Opp.District & Session Court, Margao -Goa. Income tax, Circle - 1, 3rd Floor,Blessing Pioneer Complex, Opp.District & Session Court, Margao -Goa. 2.The Joint Commissioner ofIncome-tax, Margao Range, 3rdFloor, Blessing Pioneer Complex,Opp. District & Session Court,Margao - Goa. Income-tax, Margao Range, 3rdFloor, Blessing Pioneer Complex,Opp. District & Session Court,Margao - Goa. 3.The Commissioner of Income-tax,AayakarBhavan,EDCCommercial Complex, Patto Plaza,Panaji – Goa.AayakarBhavan,EDCCommercial Complex, Patto Plaza,Panaji – Goa. 4.The Union of India, Through theSecretary,DepartmentofRevenue, Ministry of Finance,Government of India, NorthBlock, New Delhi-110 001.Secretary,DepartmentofRevenue, Ministry of Finance,Government of India, NorthBlock, New Delhi-110 001. …Respondents. Mr. K. Ceasar Simoes, Mr. R. Vazarkar, Ms N. Kholkar and Mr A.Parrikar, Advocate for the petitioners. Ms S Linhare, Standing Counsel with Ms. E. Fernandes for theRespondents. WITH WRIT PETITION NO. 883 OF 2016 SHANTILAL KHUSHALDAS & BROTHERSPVT. LTD A Pvt Ltd Company Incorporatedunder the Indian Companies Act with itsoffice at Salgaocar Bhavan Altinho, Panaji –Goa Through its Director Mr MukeshMathuradas Saglani major of age, IndianNational, resident of Margao, Salcete -Goa. ….. Petitioner. Versus 1.The Assistant Commissioner ofIncome-Tax, Circle-1, BlessingsPioneer Complex, Opp. District &Sessions Court, Margao, Goa. Income-Tax, Circle-1, BlessingsPioneer Complex, Opp. District &Sessions Court, Margao, Goa. 2.Jt. Commissioner of Income-tax,Margao Range, Blessings PioneerComplex, Opp. District & SessionsCourt, Margao, Goa. Margao Range, Blessings PioneerComplex, Opp. District & SessionsCourt, Margao, Goa. 3.The Commissioner of Income-tax,Aayakar Bhavan, Plot No.5, EDCComplex, Patto Plaza, Panaji, Goa. Aayakar Bhavan, Plot No.5, EDCComplex, Patto Plaza, Panaji, Goa. 4.Union of India,Through the Secretary, Department ofRevenue, Ministry of Finance,Government of India, North Block,New Delhi-110 001. Through the Secretary, Department ofRevenue, Ministry of Finance,Government of India, North Block,New Delhi-110 001. ….. Respondents. Mr P. Pardiwala, Senior Counsel with Mr A. D. Bhobe, Ms S Shaikhand Mr S. Sayal, Advocate for the petitioners.Ms. A. Razaq, Standing Counsel for the respondents. CORAM: BHARAT P. DESHPANDE, & VALMIKI SA MENEZES, JJ. Reserved on : 15[th] December 2023Pronounced on: 19[th] January 2024. JUDGMENT : (Per BHARAT P. DESHPANDE,J) 1.Both these petitions were earlier part of the group of mattersin which leading matter was Writ Petition No.141 of 2015. Saidgroup along with present petitions were heard by the CoordinateBench of this Court. While disposing of some of the petitions,Coordinate Bench of this Court (S. C. Gupte and Nutan D. Sardessai,JJ) vide order dated 9.7.2019, detagged the present petitions sincesome additional grounds were involved than the one which weredecided by order dated 19.7.2019. Paragraph 28 of the order dated9.7.2019 while deciding the group of petitions reads thus:- “28. The following petitions, Writ Petition Nos.141and 233 of 2015, 198, 199, 262, 264, 265, 271, 272,879, 880, 881, 882, 883 of 2016 are all petitionswhere reopening notices contained additional 1.Both these petitions were earlier part of the group of mattersin which leading matter was Writ Petition No.141 of 2015. Saidgroup along with present petitions were heard by the CoordinateBench of this Court. While disposing of some of the petitions,Coordinate Bench of this Court (S. C. Gupte and Nutan D. Sardessai,JJ) vide order dated 9.7.2019, detagged the present petitions sincesome additional grounds were involved than the one which weredecided by order dated 19.7.2019. Paragraph 28 of the order dated9.7.2019 while deciding the group of petitions reads thus:- “28. The following petitions, Writ Petition Nos.141and 233 of 2015, 198, 199, 262, 264, 265, 271, 272,879, 880, 881, 882, 883 of 2016 are all petitionswhere reopening notices contained additional reasons involving issue under Section 10B of the Actor Section 14A of the Act or commission paid toforeign agents or other reasons. These petitionsdeserve to be detagged from the group of petitions tobe disposed of by this order.” 2.Accordingly, present petitions along with others were listedtogether. However, present two petitions were finally heard.Learned counsel for respective parties would submit that sinceadditional grounds in other petitions are involved independently,present two petitions could be disposed of whereas remainingpetitions be detagged. 3.Accordingly, Writ Petition Nos. 141 of 2015, 196, 199, 264, 265,271, 272, 879, 880, 881 and 882 of 2016 are detagged. 4.We have heard learned Senior Counsel Mr S. S. Kantak alongwith learned Counsel Mr P. Rao, Mr P. Talaulikar, Mr. K. CeasarSimoes, Mr. R. Vazarkar, Ms N. Kholkar and Mr A. Parrikar for thepetitioners and Ms S Linhare, learned Standing Counsel along withlearned Counsel Ms. E. Fernandes for the Revenue argued on behalfof the respondents in Writ Petition No.233/2015. 5.Learned Senior Counsel Mr P. Pardiwala along with learnedCounsel Mr A. D. Bhobe, Ms S Shaikh and Mr S. Sayal for thePage 4 of 47 petitioners and Ms. A. Razaq, learned Standing Counsel for theRevenue advanced arguments on behalf of the respondents/revenuein Writ Petition No.883/2016. Facts in Writ Petition No. 233 of 2015 (Sociedade deFomento Industrial Pvt. Ltd.) 6.In the nutshell, it is the contention of the petitioner that theyfiled returns of their income for the Assessment Year 2008-2009after claiming exemption under Section 10B towards profits derivedfrom its export of iron ore produced in its 100% EOU known asGreater Ferro-met. Such iron order produce consist of ore fromwhich raw material was purchased by the petitioner from other mineowners as also extracted from its own mine. Returns were processedby Revenue under Section 143(1) of the Income Tax Act (for short“the Act”) on 16.2.2010. On 9.1.2012, petitioner’s case for assessmentfor the Assessment Year 2008-09 was reopened by notice underSection 148 of the Act. On 6.2.2012, a survey was conducted at thepremises of the petitioner under Section 133A of the said Act. On thesame day petitioner addressed a letter to the Assessing Officerrequesting that the returns already filed on 30.9.2008 may betreated as the returns filed in response to notice under Section 148 of the said Act and requested for the reasons for reopening of theAssessment. The reasons were furnished to the petitioner vide letterdated 8.2.2012. 7.On 16.2.2012, the petitioner filed objections challenging thejurisdiction under Section 148 of the Act. of the said Act and requested for the reasons for reopening of theAssessment. The reasons were furnished to the petitioner vide letterdated 8.2.2012. 7.On 16.2.2012, the petitioner filed objections challenging thejurisdiction under Section 148 of the Act. 8.Revenue by its order dated 2.3.2012 rejected the objectionsfiled by the petitioner. Vide order dated 23.3.2012 and after detailedscrutiny, the exception claimed by the petitioner under Section 10Bof the Act was rejected by respondent no.2 mainly on the ground thatpetitioner has already availed such exemption for the AssessmentYear 1990-91 to 1994-95 and thus, exhausted the entire tax holidaygranted to it and secondly the activities of the petitioner did notamount to production or manufacture within the meaning of Section10B of the Act. On 19.4.2012, petitioner challenged such orderrejecting exemption under Section 10B, before the Commissioner ofIncome Tax (Appeals) (hereafter called as “CIT(A)” for short). On20.12.2012, appeal of the petitioner was partly allowed in favour ofthe petitioner thereby holding that the petitioner is entitled to claimexemption under Section 10B of the Act, in connection with activitiescoming within the definition of production. Since appeal was partly allowed, the petitioner challenged such order before the Income TaxAppellate Tribunal (for short “ITAT”). On 28.3.2014, the ITATupheld the claim of the petitioner under Section 10B of the Act. TheRevenue then challenged such order before this Court whereinappeal was admitted. 9.On 24.10.2014, the petitioner received another notice underSection 148 of the Act seeking to reopen the returns for theAssessment Year 2008-09. Petitioner requested reasons for suchreopening, which were furnished on 29.12.2014. The petitioner alsoreceived notice under Section 142(1) of the Act from respondent no.2 requesting the petitioner to submit details/information ascontained in notice dated 7.1.2015. The petitioner immediately filed adetailed objections raising a question of jurisdiction of respondentno.1 to reopen the Assessment. However, on 30.1.2015, respondentno.2 passed an order dismissing the objections. Respondent no.2 on11.3.2015 issued another notice under Section 142(1) calling uponthe petitioner to appear before him on 13.3.2015 for submittingdetails as per notice dated 29.12.2014. No time was given to thepetitioner to challenge such rejection of objections and he wascoerced to participate in the proceedings. The petitioner filed his reply on 17.3.2015. However, challenged such action on the part ofthe respondents by filing present petition. 10.By filing a reply/affidavit, Revenue objected to the prayer inthe petition and claimed that action on the part of the concernedofficer is justified in the given circumstances. Facts in Writ Petition No. 883 of 2016 (ShantilalKhushaldas and Brothers Pvt. Ltd) 11.Petitioner’s Company is engaged in the business of mining,trading and export of minerals and ores. The petitioner filed returnof income tax for the Assessment Year 2011-12 declaring NIL income.The case of the petitioner was taken up for scrutiny/assessment videnotice dated 24.6.2013 and the petitioner was asked to furnishfurther details. Accordingly on 27.8.2013, the petitioner submitteddetails. On 14.3.2014, respondent no.2 passed an order underSection 143(3) of the Act making certain disallowances for theAssessment Year 2011-12. On 26.7.2014, the Director of RevenueIntelligence issued notice alleging that the petitioner has not paidcustom duty to the extent of the reduction of the sale considerationon account of the commission directly paid to the agents by buyers.The petitioner then approached the Settlement Commission to settlethe issue of payment of additional customs duty. On 24.6.2015, Settlement Commission vide its order determined additional customduty together with interest and penalty in respect of the exportsmade from 1.4.2008 t0 31.3.2013 of more than five crores whichhave been duly paid by the petitioner. 12.Respondent no.1 issued notice dated 24.5.2015 (impugnednotice) under Section 148 of the Act stating that he has reason tobelieve that income of the petitioner chargeable to tax for theAssessment Year 2011-12 has escaped assessment within themeaning of Section 147 of the Act. On 28.12.2015, the petitionermade a request that original returns filed under Section 139(1) of theAct be treated as returns filed in response to the impugned noticeunder Section 148 of the Act. On 8.1.2016, respondent no.1furnished reasons for issuing notice under Section 148 of the Act. On27.1.2016 objections were filed by the petitioner challenging validityof reassessment proceedings. Vide order dated 25.7.2016,respondent no.1 rejected the objections, which are impugned in thepresent proceedings. 13.Respondents by filing their reply/affidavit objected to theprayers in the petition on the ground that opening of reassessmenthas been properly carried out and there are reasons to believe which have been recorded. SUBMISSIONS OF THE PETITIONERS. 14.Learned Senior Counsel Mr Kantak and Mr Pardiwala wouldsubmit that first of all the Coordinate Bench of this Court in theearlier bunch of petitions have clearly held that reasons forreopening on the basis of the third report of Justice ShahCommission is not available to the Revenue. They specifically reliedupon the finding on this aspect. Learned Senior Counsel would thensubmit that in both these matters another notices were issued ondifferent counts by taking recourse to Section 10B of the Act andSection 50 of the said Act, which are not at all available for thepurpose of reopening of the assessment which was alreadycompleted. 15.It is their submission that the Shah Commission's report isonly the opinion of the said commission which has no binding effectand no independent inquiry was conducted before issuing notices forreopening. 16.Mr Kantak, would submit that the chart which was publishedin the third report of Shah Commission is lifted from the said reportand pasted in the reasons which is not permissible at all. He would then submit that grounds for reopening are not at all available andobjections raised to such opening ought to have been accepted.According to him, there is no reason to believe, and thus notice mustfail. 17.Mr Kantak would then submit that ground for reopeningunder Section 10B of the Act is also covered by the decision of theCoordinate Bench of this Court and other decisions and therefore,such ground is not at all available to the Revenue. He submits thatthere is absolutely no independent inquiry conducted to thesatisfaction of the Assessing Officer for the purpose of reopening. Hequestioned as to what material and more specifically tangiblematerial was available with the Assessing Officer for the purpose ofissuing notice of reopening. 18.Mr. Pardiwala would submit that findings of Shah Commissionreport are not at all sufficient for the Revenue to reopen and conductfresh assessment. He submits that other than material of ShahCommission, no other inquiry was conducted to the satisfaction ofthe concerned authority. 19.Mr Pardiwala would submit that in his case allegations are inconnection with under invoicing of the material. He submits that for 18.Mr. Pardiwala would submit that findings of Shah Commissionreport are not at all sufficient for the Revenue to reopen and conductfresh assessment. He submits that other than material of ShahCommission, no other inquiry was conducted to the satisfaction ofthe concerned authority. 19.Mr Pardiwala would submit that in his case allegations are inconnection with under invoicing of the material. He submits that for such ground, absolutely no material was collected and that in acommercial market, there are always ups and downs with regards tothe price of the commodities even during the particular day's trade.Price of the particular commodities may not be same even during thecourse of the day's transaction. He would therefore submit thatRevenue failed to consider any material and moreso, tangiblematerial to issue notice by considering the aspect of under invoicing.He would submit that the Assessing Officer must record his reasonsand reason to believe and such reasons to believe must be on thebasis of tangible material. It cannot be only on the whims and fencesof the concerned officer. 20.Learned Senior Counsel Mr S. S. Kantak for the petitioner-Sociedade De Fomento Industrial Pvt. Ltd. relied upon followingdecisions:- 1The Commissioner of Income Tax Vs M/s Sociedade de Fomento Industrial Pvt. Ltd. [1]Sociedade de Fomento Industrial Pvt. Ltd. [1] 2The Commissioner of Income Tax Vs M/s Sociedade de Fomento Industrial Pvt. Ltd.[2]Sociedade de Fomento Industrial Pvt. Ltd.[2] 3Fomento Resources Pvt. Limited and anr. Vs Union of India and others[3]Union of India and others[3] 1 . Spl. Leave to Appeal ( C ) No(s).6730/2021 dated 25.1.2022 2 . Tax Appeal Nos. 23 and 25 of 2023 dated 22.10.2020 3. Writ Petition Nos.606 of 2014 and other connected matters decided on 2.7.20192.7.2019 4 Commissioner of Income Tax, Gujarat Vs A. Raman and Co. [4]Raman and Co. [4] 5.Aroni Commercials Ltd Vs Dy. Commissionerof Income Tax, [5]of Income Tax, [5] 6.M/s S. Ganga Saran and Sons Pvt. Ltd Vs Income tax Officer and others.[6]Income tax Officer and others.[6] 7.Mr. Teofilo Frenando Antonio Pinto Vs Unionof India and others,[7]of India and others,[7] 21.Learned Senior Counsel Mr. Pardiwala for the petitioner– Shantilal Khushaldas & Brothers Pvt. Ltd. relied upon following decisions:- 1.Principal Commissioner of Income Tax-5 Vs Shodiman Investment (P) Ltd. [8]Shodiman Investment (P) Ltd. [8] 2.Commissioner of Income-Ta Vs. A. Raman & Co. [9] 3.Reynolds Shirting Ltd. Vs Assistant Commissioner of Income-Tax, Central Circle6(3) Mumbai[10]of Income-Tax, Central Circle6(3) Mumbai[10] 4.Prashant S. Joshi Vs Income Tax Officer & anr.[11] 5.N. D. Byat, Inspecting Assistant Commissioner and anr Vs I. B. M. World Trade Corporation, [12]anr Vs I. B. M. World Trade Corporation, [12] 4. 1967 SCC online SC 49 5. 2014 SCC Online 6. (1981) 3 SCC 143 7. Writ Petition No. 1099 of 2023(*ling) decided on 6.9.2023. 8 . (2018) 93 Taxman.com 153(Bombay) 9 . (1968) 67 ITR 11 (SC) 10 . (2022) 135 Taxmann.Com 78(Bombay) 11 . (2010) 324 ITR 0154 12. (1995) 216 IR 0811 6.Patel Stationers Private Limited Vs R. Andiappan[13] SUBMISSIONS OF RESPONDENTS. 22.Per contra Ms S. Linhares and Ms A. Razaq, learned standingCounsel for the Revenue would submit that the reasons forreopening clearly discloses tangible material which was consideredby the Assessing Officer before issuing notice. It is their contentionthat Assessing Officer is not required to give all detailed reasons andthat petitioner would be having an opportunity to contest the matteronce the assessment is reopened and inquiry is conducted. MsRazaq would submit that in Writ Petition No.883/2016, there aresubsequent developments wherein a suit filed in the Singapore HighCourt clearly revealed admission on the part of the assessee of underinvoicing. She, therefore, submits that such material is sufficientenough for the purpose for reopening of the assessment. 22.Per contra Ms S. Linhares and Ms A. Razaq, learned standingCounsel for the Revenue would submit that the reasons forreopening clearly discloses tangible material which was consideredby the Assessing Officer before issuing notice. It is their contentionthat Assessing Officer is not required to give all detailed reasons andthat petitioner would be having an opportunity to contest the matteronce the assessment is reopened and inquiry is conducted. MsRazaq would submit that in Writ Petition No.883/2016, there aresubsequent developments wherein a suit filed in the Singapore HighCourt clearly revealed admission on the part of the assessee of underinvoicing. She, therefore, submits that such material is sufficientenough for the purpose for reopening of the assessment. 23.Ms Razaq would then submit that information was receivedfrom the Government department upon which analysis were carriedout by the Assessing Officer. She would submit that there should notbe any disbelief with regard to information received from theGovernment department. According to her, there are sufficient 13. Writ Petition No. 142 of 2005 decided on 3.12.2021. reasons disclosed for the purpose of reopening. It depends uponsubjective satisfaction of the concerned officer which has beenreflected in the reasons. 24.Ms A. Razaq, learned Standing Counsel for the respondentsrelied upon following decisions:- 1.Income Tax Offier Vs Selected Dalurband Coal Co.(P) Ltd.[14](P) Ltd.[14] 2.Assistant Commissioner of Income Tax Vs Rajesh Jhveri Stock Brokers(P) Ltd.[15]Jhveri Stock Brokers(P) Ltd.[15] 3.Income Tax Officer Vs Lakhmani Mewal Das[16] DISCUSSIONS AND CONCLUSIONS 25.Various decisions have been cited, which we would like todiscussed at the relevant stage. 26.Before considering the facts of each case, it is clear that thecommon ground in both these petitions is the third report of ShahCommission by which it was observed that there were illegal exportparticularly by means of under invoicing on the part of mininglessees and the exporters. 27.In Sociedade De Fomento Industrial Pvt. Ltd.(Writ Petition 14. (1978) 113 ITR 489(Calcutta) 15. (2007) 161 Taxman 316(SC) 16. (1976) 103 ITR 437(SC) No.233 of 2015), notice under Section 148 of the Act is dated20.10.2014. The concerned officer claimed that he has reason tobelieve that the income of the petitioner chargeable to tax for theAssessment Year 2008-09 has escaped assessment within themeaning of Section 147 of the said Act. He, therefore, proposed toreassess the income and called upon the petitioner to deliver thereturns in prescribed form within a period of 30 days. The petitionervide their letter dated 20.11.2014 called upon the concerned officer tofurnished reasons for reopening. Vide letter dated 29.12.2014, thecopy of the reasons for reopening is furnished to the petitioner. 28.Reasons for reopening contains in all five grounds. Groundno.1 is under invoicing of export. In the said ground it is claimed bythe Revenue that some new facts came to the light regarding illegalextraction and export of iron ore and under invoicing OFan export ofiron ore extracted from the mines in Goa. Such new facts emergedfrom the third report of Justice M. V. Shah Commission of inquirywhich was submitted to the Government wherein Commission hasobserved that there is prima facie under invoicing of the exports asthe average price of iron ore per metric ton for the correspondingperiod and the grade was higher. A chart is appended to such grounds no.1. Finally it is claimed that prima facie there is totalunder invoicing to the extent of Rs.72,36,65,086/- as seen in theabove chart. These are some instances of the petitioner which werenot noticed till report of Commission was made public. A statementis made thereafter in the reasons, which is assailed by the petitionerand which reads thus:- grounds no.1. Finally it is claimed that prima facie there is totalunder invoicing to the extent of Rs.72,36,65,086/- as seen in theabove chart. These are some instances of the petitioner which werenot noticed till report of Commission was made public. A statementis made thereafter in the reasons, which is assailed by the petitionerand which reads thus:- “This office afterward, independently, made inquiryand sent the Assessee notices to collect connectedinformation, after acquiring permission fromCommissioner of Income Tax, Panaji and found outthat, for the same period, for the same FE content,assessee has under invoiced, his export for certainconsignment when compared to average market rateor rates at which one parties have exported on thesame day. Therefore, I have reason to believe thatincome to the tune of Rs. 72, 36,65,086/- has escapedassessment and need to be taxed for the AssessmentYear 2008-09.” 29.Mr Kantak would submit that the chart and the figuresmentioned therein are identical as compared to the figuresmentioned in the Shah Commission Report. He would submit thatno independent inquiry was made by the concerned officerwhatsoever before issuing notice for reopening. Thus, he would submit that only on the basis of conclusions drawn by theCommission, Revenue is not entitled to rely and to reopenspecifically when there is no other material available with theconcerned authority to arrive at a conclusion that there exist a reasonto believe that the income has escaped assessment for the saidparticular year. 30.Ms A. Razaq would submit that the figures mentioned in thesaid chart though adopted from the Shah Commission Report, theofficer clearly disclosed that thereafter independently he madeinquiries and thus such statement is sufficient to conclude that thematerial prima facie shows that income escaped assessment for thesaid year. She would submit that no detailed reasons or materialcollected during the inquiry is required to be given to the petitionerat that stage. 31.In Shantilal Khushaldas and Brothers Pvt. Ltd, (Writ PetitionNo 883 of 2016),the petitioner received notice under Section 148 ofthe Act dated 24.7.2015 wherein authority claimed that it had reasonto believe that the income of the petitioner chargeable to tax for theAssessment Year 2011-12 has escaped assessment within themeaning of Section 147 of the Act. Accordingly, the petitioner was called upon to deliver returns within a period of 30 days. Petitionerthen asked for the reasons, which were supplied vide revenue letterdated 8.1.2016. There are basically two reasons for reopening of theassessment for the Assessment Year 2011-12. 32.The first reason discloses that some new facts came to the lightregarding under invoicing of exports of iron ore. Such informationwas received from the Directorate of Revenue, Intelligence(DRI),Mumbai through the office of the Principal Commissioner of IncomeTax, Panaji. The details were obtained from the local office DRI. Asper these information of DRI, the issue of under invoicing related tonumber of exporters of iron ore from the State of Goa came to thelight. Out of such exporters, the petitioner is one of them who alsoresorted to this modus operandi for various reasons. 33.Reasons in ground no.1 further shows the details aboutinvestigation carried out by DRI Mumbai. The DRI Mumbai duringthe investigation observed that assessee were evading exportcustoms duty by under valuing iron ore shipment exported to variousoverseas buyers from different ports in India. It was further gatheredby DRI, Mumbai that the assessee were declaring lower FOB price toCustoms Authorities than the price that was actually finalized 33.Reasons in ground no.1 further shows the details aboutinvestigation carried out by DRI Mumbai. The DRI Mumbai duringthe investigation observed that assessee were evading exportcustoms duty by under valuing iron ore shipment exported to variousoverseas buyers from different ports in India. It was further gatheredby DRI, Mumbai that the assessee were declaring lower FOB price toCustoms Authorities than the price that was actually finalized between them and the overseas buyers. The difference between thedeclared and the actual FOB price was paid by their overseas buyers,on behalf of the assessee, directly to the overseas agent appointedby the assessee. Since the customs duty on the export of iron ore islevied as a percentage of FOB value of the export consignment, theintelligence pointed to evasion of appropriate export duty of customsby the assessee by resorting to mis-declaration of the actual FOBprice of the export. It was further revealed by DRI Mumbai that thebuyer himself suggested and on acquiescence of the seller, appointedand paid part of the price payable for the export goods to the agenton account of seller and deducted the same from the finally agreedprice. As such seller directly paid charges to the agent and suchcharges would be includable in the FOB value for the purposes ofassessment of the export customs duty on iron ore, in terms ofSection 14 of the Customs Act 1952. Thus, it was apparent that feespaid to the protective agents were part of the value of the goodsexported. Had there been no protective agents, the fees paid to themwould have been received by the seller and thus, it is apparent thatthe fees paid to the protective agents are indeed part of normal valueof the good as finalized between seller and the buyer by mutual agreement and not been disclosed to the Customs Authority in Indiaat the time of export. 34.Mr Pardiwala would therefore submit that all the reasons inground no.1 are from the investigation carried out by the DRI whichin facts relates to the customs duty. The Income Tax Officer onlylifted such material from DRI and pasted it in its reasons withoutmaking any independent inquiry so as to arrive at prima facieconclusion that there was any under invoicing as far as income tax isconcerned. 35.Ms S. Linhares, appearing for the Revenue would submit thatthe material was received from the DRI which is also a Governmentdepartment and an agency authorized to conduct investigation.There was no doubt with regards to such investigation as thepetitioner paid additional custom charges and therefore, it is clearthat the petitioner was involved in under invoicing. According to her,such reason is sufficient for the officer to believe that there wasunder invoicing and that such material was not available at the timeof assessment of the returns. The reopening on this ground is,therefore justified. 36.Both the learned Senior Counsel would submit that the Assessing Officer practically relied upon the report of differentauthorities and failed to independently assess and therefore, suchaction on the part of the concerned officer is in fact illegal. 37.As far as Shah Commission Report is concerned, both thelearned Senior Counsel placed reliance on the findings of theCoordinate Bench of this Court wherein (S. C. Gupte, J) discussed indetail the third report of Shah Commission and observed thatfindings/observations of the Commission are merely the expressionof its opinion and it lacks finality as well as authoritativeness. Onlyon the basis of such expression of the Commission, there cannot beany prima facie belief which could be recorded by the AssessingOfficer without any independent material for reopening ofassessment. Assessing Officer practically relied upon the report of differentauthorities and failed to independently assess and therefore, suchaction on the part of the concerned officer is in fact illegal. 37.As far as Shah Commission Report is concerned, both thelearned Senior Counsel placed reliance on the findings of theCoordinate Bench of this Court wherein (S. C. Gupte, J) discussed indetail the third report of Shah Commission and observed thatfindings/observations of the Commission are merely the expressionof its opinion and it lacks finality as well as authoritativeness. Onlyon the basis of such expression of the Commission, there cannot beany prima facie belief which could be recorded by the AssessingOfficer without any independent material for reopening ofassessment. 38.We are clear in our mind that jurisdiction of this Court aboutthe judicial scrutiny is limited and to the extent whether or not therewas material on the basis of which belief could have been formedabout escapement of income from assessment, but not whether thematerial was actually adequate or sufficient for formation of suchbelief. Thus, we are concerned with whether or not such belief couldhave been formed on the basis of such material as was available with the Assessing Officer. Action of the Assessing Officer has to bescrutinized and has to pass the test of judicial scrutiny and morespecifically point of view of unreasonableness. Scrutiny is whetherauthority has kept itself within the four corners of law andconsequently even if it is so kept itself, whether it has come to theconclusion so unreasonable that no reasonable authority could everhave come to it. Notice under Section 148 of the Income Tax Act hasto pass master of unreasonableness and whether material placedbefore the Assessing Officer is actually sufficient to hold that incomeescaped from assessment. 39.It has been held consistently that the belief under Section 147of the Act is not a matter of mere opinion of the Assessing officer. Achange of opinion in this regard, is not at all sufficient for reopeningof the assessment. The reasons must demonstrate that the materialused by the Assessing Officer to reopen, is reasonably capable offormation of his belief that income has escaped assessment. Thebelief does not mean purely subjective satisfaction on the part of theconcerned officer, it must be held in good faith. It is open to theCourt to examine whether the reason has a rational connection with or relevant bearing on the formation of the belief and it must not beextraneous or irrelevant for the purpose. 40.In both these matters, we have already recorded the reasonsspecifically in ground no.1 and it shows that the Assessing Officer inSociedade de Fomento Industrial Pvt. Ltd. (Writ Petition No. 233 of2015) practically believed on the third report of Shah Commissionand the figures mentioned therein. We say so for the reasons thatMr. Kantak placed before us report of Shah Commission whereinfigures mentioned in the ground no.1 of the reasons are found atdifferent places against different assesees. What the officer did isonly compiling it in one format and pasted it in ground no.1 of thereasons. 41.We also found that apart from the statements below chart asquoted earlier, there is only a bare statement that the officeindependently made inquiries. The word “this office”, nowherespecifies as to whether the concerned officer who issued notice,himself carried out any independent inquiry. Similarly the details ofsuch inquiry and material collected during such inquiry is not partand parcel of the reasons. The purpose of disclosing reasons is to givean opportunity to the assessee to meet such reasons effectively or to 41.We also found that apart from the statements below chart asquoted earlier, there is only a bare statement that the officeindependently made inquiries. The word “this office”, nowherespecifies as to whether the concerned officer who issued notice,himself carried out any independent inquiry. Similarly the details ofsuch inquiry and material collected during such inquiry is not partand parcel of the reasons. The purpose of disclosing reasons is to givean opportunity to the assessee to meet such reasons effectively or to accept it for the purpose of reopening. If the assessee is unable toaccept such reasons, he is entitled to file objections. Thus merelysaying that the office conducted independent inquiry apart from thematerial found in the Shah Commission report, would not besufficient, in our opinion, to come to the conclusion that there isreason to believe about the income being escaped from assessment. 42.In the said matter, we have noted that the reasons disclosed bythe Assessing Officer specifically in ground no.1, are purelyspeculative and based on the observations of the Shah Commissionreport. Barely mentioning that independent inquiry was conductedby the office, is too dangerous to accept that the officer has reason tobelieve. If such contention is accepted for reopening, the AssessingOfficer, without giving proper reasons and by just saying that officeconducted independent inquiry, would be able to reopen each andevery case. This is not the purpose which has been laid down invarious decisions of the Apex Court. There must be rationalconnection or relevant bearing disclosed in the reasons for formationof the belief. It must not be extraneous or irrelevant for suchpurpose. Reasons demonstrated in the notice (ground no.1 ) aretherefore, considered to be imported from the Shah Commission’s Report and there is no any independent material collected by theAssessing Officer to form his own opinion or reason to believe. 43.In Shantilal Khushaldas and Brothers Pvt. Ltd ( Writ PetitionNo.883 of 2016), ground no.1 shows that the material was receivedfrom the office of the DRI Mumbai. The gist of the DRI Mumbaiinvestigation or inquiry into the matter regarding customs acts hasbeen reproduced including the chart. There is absolutely nostatement of the Assessing Officer that apart from material receivedfrom DRI Mumbai office, he applied his mind or conducted anyfurther inquiry into the matter of under invoicing. 44.Mr Pardiwala would submit that DRI investigation was inconnection with the price and commission paid to the overseasagents, which is not at all connected with the returns filed by thepetitioner. He explained that the price for which the iron ore wassold is the same however, only some commission was given to theoverseas agent. He submits that valuation of the ore sold by thepetitioner is properly disclosed in the account and in returns andthere is no under valuation. The petitioner has shown the exact pricein the returns however, since there is no independent assessment orinquiry conducted by the Assessing Officer and placing reliance only on the information received from DRI Mumbai, the Assessing Officerhas no jurisdiction to reopen the assessment. 45.We clearly observed that apart from material received from theoffice of DRI Mumbai and quoting some part of it in the reasons, theAssessing Officer nowhere disclosed about any independent inquiryconducted by him or his office to arrive at the opinion. There is noother tangible material except report from DRI Mumbai which couldhave been considered as reason to believe of the income escapedfrom assessment. on the information received from DRI Mumbai, the Assessing Officerhas no jurisdiction to reopen the assessment. 45.We clearly observed that apart from material received from theoffice of DRI Mumbai and quoting some part of it in the reasons, theAssessing Officer nowhere disclosed about any independent inquiryconducted by him or his office to arrive at the opinion. There is noother tangible material except report from DRI Mumbai which couldhave been considered as reason to believe of the income escapedfrom assessment. 46.The main contention of the petitioner/assessee is that there isno belief on the part of the Assessing Officer that the income escapedand that there is no reason of any failure on the part of the assesseeto make such disclosure fully and truly. It is claimed that theAssessing Officer cannot simply make a bald assertion thatescapement of the income is due to the result of failure on the part ofthe Assessee to fully and truly disclose all the material facts. Hemust indicate though briefly what is it that was not disclosed andwhich gives the Assessing Officer reason to believe that such incomehas escaped assessment. 47.In both these matters ground no.1 deals with the foundationthat assessee showed under invoicing of the exports. In other wordsit is case of the Revenue that the assessee failed to fully and trulydisclose all material facts and suppressed by under invoicing export. 48.Mr. Kantak would then submit that in view of the findings ofthe Apex Court in the case of A. Rehan Company (Supra), this Courtis entitled to test as to whether there are reasons to believe thatincome chargeable to tax has escaped assessment and that it is inconsequence of information which officer has in its possession andthat he has reason to believe that income escaped assessment. TheApex Court observed that High Court in exercising jurisdiction underArticle 226 of the Constitution of India has power to set aside thenotice issued under Section 147 of the Act if condition precedent tothe exercise of jurisdiction does not exist. The Court may in exerciseof its powers ascertain whether the Income Tax Officer had in itspossession any information and the Court may also determinewhether from that information officer may have reason to believethat the income chargeable to tax had escaped assessment. 49.In the case of Aroni Commercial Limited (supra), the DivisionBench of this Court sitting at the Principal seat observed in paragraph 13 that the common judicial requirement for reopening ofthe assessment both within and beyond the period of four years hasto be on the basis of reason to believe that income chargeable to taxhas escaped assessment and the reason for issuing a notice to reopenare recorded before issuing a notice. However, there is one additionaljudicial requirement to be satisfied while seeking to reopen theassessment beyond the period of four years from the end of therelevant Assessment Year which requires that there must have beena failure on the part of the assessee to disclose fully and truly allmaterial facts necessary for assessment during the originalassessment proceedings. Primary requirement to reopen anyassessment is a reason to believe that income chargeable to tax hasescaped assessment. The concept of reason to believe does not givearbitral power to reopen an assessment. 50.The concept of change of opinion is excluded/omitted fromwords reason to believe. Thus a change of opinion would not bereason to believe that income to tax has escaped assessment.Besides the power to reassess is not a power to review. Furtherreopening must be on the basis of tangible material. If all facts areavailable on record and particular opinion is formed, then merely 50.The concept of change of opinion is excluded/omitted fromwords reason to believe. Thus a change of opinion would not bereason to believe that income to tax has escaped assessment.Besides the power to reassess is not a power to review. Furtherreopening must be on the basis of tangible material. If all facts areavailable on record and particular opinion is formed, then merely because there is change of opinion on the part of the AssessingOfficer, notice under Sections 147/148 of the Act is not permissible.Such powers cannot be exercised to correct the errors/mistakes onthe part of the Assessing Officer while passing the original order ofassessment. There is a sanctity bestowed on the order of assessmentand the same can be disturbed by exercise of powers under Section147/148 of the Act, only on the satisfaction of the jurisdictionalrequirements. At the time of issuance of notice under Section 148 ofthe Act to reopen a concluded assessment, satisfaction of theAssessing Officer is of primary importance. It must be prima faciesatisfaction of having a reason to believe that the income chargeableto tax has escaped assessment. At this stage the officer is notrequired to establish beyond doubt that the income indeed hadescaped assessment. 51.Various other decisions on the same propositions have beenrelied upon. However, we need not discuss each judgment since it isnow a settled proposition of law. 52.In Shodiman Investments Pvt. Ltd, the Coordinate Bench ofthis Court sitting at the principal seat, while considering appealunder Section 260A of the Income Tax Act challenging the order passed by ITAT, considered the question of law as to whether onfacts and in the circumstance of the case and in law, the Tribunal wasjustified in holding that reopening of the assessment is notsustainable in law. In that matter Shodiman filed returns for theAssessment Year 2003-04 declaring loss. Such returns wereproceeded under Section 143(1) of the Income Tax Act. Somewherein March, 2010, the Assessing Officer issued notice under Section148 of the Act seeking to re-open assessment for Assessment Year2003-04 on the reason that it was intimated that search action wasconducted under Section 132 of the IT Act on 25.11.2009. In case ofMahasagar Securities Pvt. Ltd where it is found suspicioustransaction taken place in bank account of Shodiman and relatedcompanies. This was challenged before the Assessing Officer byfiling objections which were rejected and the concerned officerproceeded to assess returns under Section 143(3) read with Section147 of the said Act. An assessment order was passed therebydemanding income of Rs. 67.10 lakhs from Shodiman. Appealpreferred before CIT (Appeals) was rejected. Appeal preferredbefore the ITAT by Shodiman was allowed. Revenue challenged theorder of ITAT by filing appeal before the High Court. While rejecting the said appeal, the Court has observed that the reasonable belief onthe basis of tangible material could be prima facie formed toconclude that income chargeable to tax has escaped assessment.Words “whatever reasons” is qualified by the words “having reasonsto believe that income has escaped assessment” the words “whateverreasons” only means any tangible material which would onapplication to the facts on record lead to reasonable belief thatincome chargeable to tax has escaped assessment. This materialwhich forms basis, is not restricted but material must lead toformation of reasons to believe that income chargeable to tax hasescaped assessment. Mere obtaining of material by itself does notresult in reason to believe that income has escaped assessment. Itcan only be the basis of forming the belief. However, belief must beindependently formed in the context of material obtained that thereis an escapement of income. Otherwise no meaning is being given towords “to believe” as found in Section 147 of the Act. The words“whatever” reasons in Rajesh Jhaveri Stock Borkers (P) Ltd’s case(supra), only means whatever the mat