Subodh Agarwal v. State Of U.p. And Others

Chief Justice's Court Serial No. 3038 HIGH COURT OF JUDICATURE AT ALLAHABAD *** WRIT TAX No. -1290 of 2022Pronounced on : January 25, 2023 Subodh Agarwal ...Petitioner Through : Mr. Dhruva Agrawal, Senior Advocate withShubham Agrawal, Advocate v/s State of U.P. and others ...Respondents Through : Mr. Gaurav Mahajan, Senior Standing Counselfor Income Tax Department CORAM : HON'BLE RAJESH BINDAL,CHIEF JUSTICE HON’BLE J. J. MUNIR, JUDGE ORDER 1.The petitioner has approached this Court praying forquashing of notice dated March 28, 2022 (Annexure-13) issued underSection 148A(b) of the Income Tax Act, 1961 (for short ‘the Act’),notice dated April 24, 2022 (Annexure-15) issued under Section 148of the Act and order dated April 24, 2022 passed by respondent no. 2rejecting the objections raised by the petitioner against issuance ofnotice under Section 148A(b) of the Act. Further prayer has beenmade for dropping the re-assessment proceedings initiated in 2 WTAX No. -1290 of 2022 pursuance of notice under Section 148(1) of the Act. 2.Mr. Dhruva Agrawal, learned Senior Counsel appearing forthe petitioner submitted that search was carried out at the premises of thepetitioner on August 31, 2015. A show cause notice was issued on June 1,2016 under Section 153A of the Act for block assessment. The order ofassessment was passed on December 31, 2017, which was challenged bythe petitioner as well as the Department before the Income Tax Tribunal.The appeal filed by the petitioner was accepted whereas the one filed bythe Department was dismissed. The order was further challenged by theDepartment by filing an appeal before this Court, which was dismissedvide order dated December 12, 2022. 3.After passing of the order under Section 153A of the Act,during pendency of the appeal against the aforesaid order, a show causenotice was issued to the petitioner on March 28, 2022 under Section148A(b) of the Act, which was duly replied to by the petitioner. Rejectingthe objection raised by the petitioner, order was passed on April 24, 2022granting sanction for initiation of proceedings against the petitioner underSection 148A(d) of the Act and consequently, a notice was also issued onApril 24, 2022. Initiation of proceedings under Section 148 of the Act issubject matter of challenge in the present writ petition. 4.Referring to scheme of the Act, Mr. Agrawal, learned SeniorCounsel pointed out that special procedure has been prescribed in the Actfor framing of assessment/re-assessment in cases of search and seizure.Chapter XIV-B was added. Subsequently, Section 153A was added witheffect from June 1, 2003. Second proviso to Section 153A provides thatany proceeding pending for assessment/re-assessment for the relevantperiod on the date of initiation of the search under Section 132 orrequisition under Section 132A shall abate. In the case in hand also, afterthe assessment was framed under Section 153A, as a consequence ofsearch, all pending proceedings abated. Section 149 of the Act was 3 WTAX No. -1290 of 2022 referred to, which provides for limitation for issuance of notice underSection 148 of the Act. As assessment of the petitioner had already beenframed under Section 153A of the Act, which is comprehensive andframed, after taking approval from the higher authorities, the assessmentfor the same year cannot be reopened by issuing notice under Section 148of the Act. In support of the arguments, reliance was placed uponjudgments of Madhya Pradesh High Court in Ram Ballabh Gupta Vs.Assistant Commissioner of Income Tax and others[1] and Gujarat HighCourt in Cargo Clearing Agency vs. Joint Commissioner of IncomeTax[2]. 3 WTAX No. -1290 of 2022 referred to, which provides for limitation for issuance of notice underSection 148 of the Act. As assessment of the petitioner had already beenframed under Section 153A of the Act, which is comprehensive andframed, after taking approval from the higher authorities, the assessmentfor the same year cannot be reopened by issuing notice under Section 148of the Act. In support of the arguments, reliance was placed uponjudgments of Madhya Pradesh High Court in Ram Ballabh Gupta Vs.Assistant Commissioner of Income Tax and others[1] and Gujarat HighCourt in Cargo Clearing Agency vs. Joint Commissioner of IncomeTax[2]. 5.As far as merits of the controversy and challenge to the ordergranting permission for issuance of notice under Section 148 of the Actare concerned, it was submitted that the grounds mentioned in the ordergranting approval for the show cause notice is nothing else but change ofopinion. In support of the argument, reliance was placed upon judgmentof Hon’ble the Supreme Court in Commissioner of Income Tax vs.Kelvinator of India Ltd[3]. At the time of block assessment after searchwas carried out all the issues and the material available, were considered.In fact, the entire process started after an audit objection, to which replywas given by the assessee explaining the reasons as to why the objectionraised by the audit was not tenable. There was no fresh material available.Initiation of proceedings under Section 148 of the Act are bad on theground of audit objection only. In support of the arguments, reliance wasplaced on judgments of Gujarat High Court in Reckit BenckiserHealthcare India Pvt. Ltd. vs. Deputy Commissioner of Income Tax[4]andDelhi High Court in Principal Commissioner of Income Tax vs.Meenakshi Overseas Pvt. Ltd.[5] 1(2005) 199 CTR2(2008) 218 CTR3(2010) 228 CTR (SC) 4884(2017) 392 ITR 336 5(2017) 395 ITR 6772(2008) 218 CTR3(2010) 228 CTR (SC) 4884(2017) 392 ITR 336 5(2017) 395 ITR 677 4 WTAX No. -1290 of 2022 6.In response, learned counsel for the Revenue submitted thatin terms of the amended provisions of Clause(ii) to second proviso ofExplanation 1 of Section 148 of the Act specific mention has been madeas to what shall form information with the Assessing Officer, which wouldsuggest that ‘income chargeable to tax has escaped assessment’. Auditobjection has been mentioned as one of them. The aforesaid amendmentwas introduced with effect from April 1, 2022. Prior to that, the aforesaidproviso provided for objection raised by the Comptroller and AuditorGeneral of India (hereinafter referred to as ‘CAG’). In the case in hand aswell, there was an objection raised by the Audit specifying that hugeincome had escaped assessment as the text messages exchanged by thepetitioner with various parties have not at all been considered whileframing the assessment.This has caused huge loss to the revenue as theincome chargeable to the tax had escaped assessment. 7.The objection raised by the Auditor was not treated asinformation prior to the amendment of Section 148 with effect from April1, 2022. 7.The objection raised by the Auditor was not treated asinformation prior to the amendment of Section 148 with effect from April1, 2022. 8.It is merely a show cause notice to the petitioner at this stage.His preliminary objection against the same has already been consideredand rejected. During course of assessment proceeding, the petitioner willhave fair opportunity to raise all objections, in the proceedings initiatedagainst him, who has been able to defraud the revenue to the tune ofcrores of rupees. These proceedings should not be scuttled at the verythreshold. In terms of the second proviso to Section 153A of the Act, onlypending proceeding abates. The section does not talk about proceedings tobe initiated later on. The present case was not a case of re-assessmentunder Section 153A of the Act; rather it was assessment framed. Hefurther referred to judgment of Punjab and Haryana High Court in CWPNo. 10219 of 2022 titled as Anshul Jain Vs. Principal Commissioner ofIncome Tax and another decided on June 2, 2022, to submit that merits 5 WTAX No. -1290 of 2022 of the controversy cannot be gone into at this stage. Once the competentauthority had applied its mind while granting approval for reopening ofthe assessment, the merits of the controversy cannot be gone into. SpecialLeave Petition filed against the aforesaid order before Hon’ble theSupreme Court also stands dismissed vide order dated September 2, 2022. 9.Heard learned counsel for the parties and perused the paperbook. SCHEME OF INCOME TAX ACT FOR REASSESSMENT 10.Before we proceed to consider the arguments raised by theparties, we deem it appropriate to examine the scheme of the Act forreassessment as the same has undergone a change with effect from April1, 2021. Position prior to April 1, 2021 11.In terms of Section 147 of the Act, existing prior to itsamendment with effect from April 1, 2021, an Assessing Officercould initiate proceedings for reassessment for reasons to believe thatany income chargeable to tax has escaped assessment. Explanation 2of Section 147 provides certain instances which for the purpose ofsection were admitted to be a case where income chargeable to taxhas escaped assessment. 12.Section 148 of the Act as existing upto that date requiredthat before making assessment, reassessment or recomputation underSection 147, the Assessing Officer shall serve on the assessee anotice requiring him to furnish his return. Section 148(2) providesthat the Assessing Officer, before issuing any notice under thesection, record his reasons for doing so. 6 WTAX No. -1290 of 2022 13.As the law as stood at that time, upon filing the returnthe assessee could seek reasons for issuing such notice. After receiptof reasons, the assessee was entitled to question the initiation ofreassessment proceedings by filing objections before the AssessingOfficer. Before proceeding further, the Assessing Officer wasrequired to dispose of the objections raised by the assessee,challenging his jurisdiction to initiate reassessment proceeding. Anysuch order passed could be challenged by invoking writ jurisdictionof the Court. Reference can be made to a judgment of Hon’ble theSupreme Court in GKN Driveshafts (India) Ltd. Vs. Income TaxOfficer[6] 14.The law interpreting the aforesaid provision as existingat that time also provided that the belief has to be that of a prudentperson having connection with the material. Fishing and rovingenquiry was not possible nor a change of opinion. Sufficiency ofreasons could not be a ground to challenge initiation of reassessmentproceedings. 15.Section 151 of the Act provides for prior approval of thecompetent authority before issuance of notice under Section 148 ofthe Act. Position after April 1, 2021 16.Substantial changes have been made in the provisionsproviding for reassessment with effect from April 1, 2021. 14.The law interpreting the aforesaid provision as existingat that time also provided that the belief has to be that of a prudentperson having connection with the material. Fishing and rovingenquiry was not possible nor a change of opinion. Sufficiency ofreasons could not be a ground to challenge initiation of reassessmentproceedings. 15.Section 151 of the Act provides for prior approval of thecompetent authority before issuance of notice under Section 148 ofthe Act. Position after April 1, 2021 16.Substantial changes have been made in the provisionsproviding for reassessment with effect from April 1, 2021. 17.Section 147 of the Act, which initially provided forreopening of assessment ‘for reasons to believe’ was amended. Itnow provides that if any income chargeable to tax has escapedassessment, the Assessing Officer may assess or reassess suchincome or recompute the loss. The exercise of power is subject to 6259 ITR 19 (SC) 7 WTAX No. -1290 of 2022 Sections 148 to 153 of the Act. 18.Before passing an order under Section 147 of the Act,the Assessing Officer is required to serve the assessee a notice alongwith copy of the order passed under clause (d) of Section 148A of theAct, requiring him to file the return. First proviso of Section 148provides that no notice under this Section shall be issued unless thereis information with the Assessing Officer which suggests that incomechargeable to tax has escaped assessment. The prerequisite is onlyavailability of information, suggesting that income has escapedassessment. Such an exercise of power has to be with prior approvalof the specified authority. 19.In Explanation 1 to the aforesaid Section, meaning ofwords ‘information with the Assessing Officer which suggests thatincome chargeable to tax has escaped assessment’, has been defined.It includes objection raised by the CAG to the effect that assessmentfor the relevant assessment year has not been made in accordancewith the provisions of the Act. 20.The aforesaid provision has undergone a change vide Finance Act, 2022 with effect from April 1, 2022. Clause (ii) ofExplanation 1, now contain words ‘any audit objection’ instead ofthe words ‘any final objection raised by the CAG’. The condition isinformation in the form of audit objection to the effect thatassessment has not been framed in accordance with the provisions ofthe Act. The relevant clauses are reproduced hereunder : “Explanation 1-For the purposes of this section andsection 148A, the information with the AssessingOfficer which suggests that the income chargeable to taxhas escaped assessment means,- (i) any information in the case of the assessee for therelevant assessment year in accordance with the risk 8 WTAX No. -1290 of 2022 management strategy formulated by the Board fromtime to time; (ii) any audit objection to the effect that theassessment in the case of the assessee for the relevantassessment year has not been made in accordance withthe provisions of this Act; or (iii) any information received under an agreementreferred to in Section 90 or Section 90A of the Act; or (iv) any information made available to the AssessingOfficer under the scheme notified under Section 135A;or (v) any information which requires action inconsequence of the order of a Tribunal or a Court.” (emphasis supplied) (i) any information in the case of the assessee for therelevant assessment year in accordance with the risk 8 WTAX No. -1290 of 2022 management strategy formulated by the Board fromtime to time; (ii) any audit objection to the effect that theassessment in the case of the assessee for the relevantassessment year has not been made in accordance withthe provisions of this Act; or (iii) any information received under an agreementreferred to in Section 90 or Section 90A of the Act; or (iv) any information made available to the AssessingOfficer under the scheme notified under Section 135A;or (v) any information which requires action inconsequence of the order of a Tribunal or a Court.” (emphasis supplied) 21.Newly added Section 148A of the Act provides that theAssessing Officer before issuing notice under Section 148 of the Actshall conduct enquiry, if required, with prior approval of thespecified authority with respect to the information which suggeststhat income chargeable to tax has escaped assessment. Clause (b)thereof provides that an opportunity of hearing is to be afforded tothe assessee to show cause as to why notice under Section 148 of theAct be not issued on the basis of information which suggests thatincome chargeable to tax has escaped assessment. Reply of theassessee, if any, is to be considered and an order is required to bepassed in terms of Section 148(d) of the Act. Second proviso to theaforesaid Section provides eventualities in which the scheme will notapply. 22.Newly added Section 148B of the Act which was addedwith effect from April 1, 2021 by Finance Act, 2021 provides that noorder of assessment or reassessment or recomputation shall 9 WTAX No. -1290 of 2022 be passed by an Officer below the rank of Joint Commissioner, towhich Clauses (i) to (iv) of Explanation 2 to Section 148 applyexcept with prior approval of Additional Commissioner or AdditionalDirector or Joint Commissioner or Joint Director. DISCUSSIONS 23.In the case in hand, notices under Section 148 of the Acthas been issued on the basis of an audit objection to the effect thatassessment has not been made in accordance with the provisions ofthe Act. This constitutes information which is sufficient to initiateproceedings under Sections 147 and 148 of the Act. After thesubstantial amendments carried out in the Act, it now provides thatthe proceedings can be initiated in case where income chargeable totax has escaped assessment. Proviso to Section 148 of the Actprovides that before issuing such notice, the Assessing Officershould have information which suggests that the income chargeableto tax has escaped assessment. In terms of Clause (ii) of Explanation1, meaning has been assigned to the term information suggesting thatincome chargeable to tax has escaped assessment to include even anaudit objection. In the case in hand as well, notice under Section 148of the Act has been issued on the basis of an audit objection givingcomplete details as to how the income chargeable to tax has escapedassessment. Merely because in some of the show cause noticesissued to the petitioner during the course of assessment proceedingsafter search, a brief reference was made to some information, whichwas not finally dealt with, will not absolve or will not come to therescue of the assessee to claim that the issue has already beenconsidered. It is for this reason that the audit objection was raised. 24.For the sake of convenience, Sections 147, 148 and148A of the Act are reproduced below : 10 WTAX No. -1290 of 2022 24.For the sake of convenience, Sections 147, 148 and148A of the Act are reproduced below : 10 WTAX No. -1290 of 2022 “147.If any income chargeable to tax, in thecase of an assessee, has escaped assessment for anyassessment year, the Assessing Officer may, subject tothe provisions of sections 148 to 153, assess orreassess such income or recompute the loss or thedepreciation allowance or any other allowance ordeduction for such assessment year (hereafter in thissection and in sections 148 to 153 referred to as therelevant assessment year). Explanation -For the purposes of assessment orreassessment or recomputation under this section, theAssessing Officer may assess or reassess the incomein respect of any issue, which has escaped assessment,and such issue comes to his notice subsequently in thecourse of the proceedings under this section,irrespective of the fact that the provisions of section148A have not been complied with.” “148. Before making the assessment, reassessment orrecomputation under section 147, and subject to theprovisions of section 148A, the Assessing Officershall serve on the assessee a notice, along with a copyof the order passed, if required, under clause (d) ofsection 148A, requiring him to furnish within suchperiod, as may be specified in such notice, a return ofhis income or the income of any other person inrespect of which he is assessable under this Actduring the previous year corresponding to the relevantassessment year, in the prescribed form and verified 11 WTAX No. -1290 of 2022 in the prescribed manner and setting forth such otherparticulars as may be prescribed; and the provisionsof this Act shall, so far as may be, apply accordinglyas if such return were a return required to be furnishedunder section 139: Provided that no notice under this section shall beissued unless there is information with the AssessingOfficer which suggests that the income chargeable totax has escaped assessment in the case of the assesseefor the relevant assessment year and the AssessingOfficer has obtained prior approval of the specifiedauthority to issue such notice: Provided further that no such approval shall berequired where the Assessing Officer, with the priorapproval of the specified authority, has passed anorder under clause(d) of section 148A to the effectthat it is a fit case to issue a notice under this section. Explanation 1-For the purposes of this section andsection 148A, the information with the AssessingOfficer which suggests that the income chargeable to-tax has escaped assessment means, (i) any information in the case of the assessee for therelevant assessment year in accordance with the riskmanagement strategy formulated by the Board fromtime to time; (ii) any audit objection to the effect that theassessment in the case of the assessee for therelevant assessment year has not been made inaccordance with the provisions of this Act; or 12 WTAX No. -1290 of 2022 (iii) any information received under an agreementreferred to in Section 90 or Section 90A of the Act;or (iv) any information made available to the AssessingOfficer under the scheme notified under Section135A; or (v) any information which requires action inconsequence of the order of a Tribunal or a Court.Explanation 2.-For the purposes of this section,where,- (i) a search is initiated under section 132 or booksof account, other documents or any assets arerequisitioned under section 132A, on or after the1st day of April, 2021, in the case of the assessee;or (ii) a survey is conducted under section 133A,other than under sub-section(2A) of that section,on or after the 1st day of April, 2021, in the caseof the assessee; or (iii) any information received under an agreementreferred to in Section 90 or Section 90A of the Act;or (iv) any information made available to the AssessingOfficer under the scheme notified under Section135A; or (v) any information which requires action inconsequence of the order of a Tribunal or a Court.Explanation 2.-For the purposes of this section,where,- (i) a search is initiated under section 132 or booksof account, other documents or any assets arerequisitioned under section 132A, on or after the1st day of April, 2021, in the case of the assessee;or (ii) a survey is conducted under section 133A,other than under sub-section(2A) of that section,on or after the 1st day of April, 2021, in the caseof the assessee; or (iii) the Assessing Officer is satisfied, with theprior approval of the Principal Commissioner orCommissioner, that any money, bullion, jewelleryor other valuable article or thing, seized orrequisitioned under section 132 or section 132A incase of any other person on or after the 1st day ofApril, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with theprior approval of Principal Commissioner orCommissioner, that any books of account or 13 WTAX No. -1290 of 2022 documents, seized or requisitioned under section132 or section 132A in case of any other person onor after the 1st day of April, 2021, pertains orpertain to, or any information contained therein,relate to, the assessee, the Assessing Officer shall be deemed to haveinformation which suggests that the incomechargeable to tax has escaped assessment in the caseof the assessee where the search is initiated or booksof account, other documents or any assets arerequisitioned or survey is conducted in the case of theassessee or money, bullion, jewellery or othervaluable article or thing or books of account ordocuments are seized or requisitioned in case of anyother person. Explanation 3.-For the purposes of this section,specified authority means the specified authorityreferred to in section 151.” “148A.The Assessing Officer shall, beforeissuing any notice under section 148,- (a)conduct any enquiry, if required, with theprior approval of specified authority, with respect tothe information which suggests that the incomechargeable to tax has escaped assessment; (b)provide an opportunity of being heard to theassessee by serving upon him a notice to showcause within such time, as may be specified in thenotice, being not less than seven days and but not 14 WTAX No. -1290 of 2022 exceeding thirty days from the date on which suchnotice is issued, or such time, as may be extendedby him on the basis of an application in this behalf,as to why a notice under section 148 should not beissued on the basis of information which suggeststhat income chargeable to tax has escapedassessment in his case for the relevant assessmentyear and results of enquiry conducted, if any, as perclause (a); (c)consider the reply of assessee furnished, ifany, in response to the show-cause notice referredto in clause (b); (d)decide, on the basis of material available onrecord including reply of the assessee, whether ornot it is a fit case to issue a notice under section148, by passing an order, with the prior approval ofspecified authority, within one month from the endof the month in which the reply referred to in clause(c) is received by him, or where no such reply isfurnished, within one month from the end of themonth in which time or extended time allowed tofurnish a reply as per clause (b) expires: Provided that the provisions of this section shall notapply in a case where,- (a)a search is initiated under section 132 orbooks of account, other documents or any assetsare requisitioned under section 132A in the case ofthe assessee on or after the 1st day of April, 2021;or 15 WTAX No. -1290 of 2022 Provided that the provisions of this section shall notapply in a case where,- (a)a search is initiated under section 132 orbooks of account, other documents or any assetsare requisitioned under section 132A in the case ofthe assessee on or after the 1st day of April, 2021;or 15 WTAX No. -1290 of 2022 (b)the Assessing Officer is satisfied, with theprior approval of the Principal Commissioner orCommissioner that any money, bullion, jewelleryor other valuable article or thing, seized in a searchunder section 132 or requisitioned under section132A, in the case of any other person on or afterthe 1st day of April, 2021, belongs to the assessee;or (c)the Assessing Officer is satisfied, with theprior approval of the Principal Commissioner orCommissioner that any books of account ordocuments, seized in a search under section 132 orrequisitioned under section 132A, in case of anyother person on or after the 1st day of April, 2021,pertains or pertain to, or any information containedtherein, relate to, the assessee. (d)the Assessing Officer has received anyinformation under the scheme notified undersection 135A pertaining to income chargeable totax escaping assessment for any assessment year inthe case of the assessee. Explanation.- For the purposes of this section,specified authority means the specified authorityreferred to in section 151.” (emphasis supplied) 25.In the present case, a perusal of the notice shows that it wasissued on the basis of an audit objection. There were cash transactions tothe tune of 156,45,19,154/-. During course of assessment, the source and�genuineness of the transaction was not asked for. These, having remained 16 WTAX No. -1290 of 2022 unexplained, were required to be treated as income of assessee underSection 68 of the Act. It may have tax effect to the tune of�64,34,53,872/-. Details of the cash transactions were also annexed withthe reasons. It was on the basis of various messages recovered from themobile phone of the petitioner, which was seized during raid. In terms ofaforesaid text messages, the amount was to be delivered to differentpersons on being identified by showing currency notes bearing particularnumbers. The illegal activities of the petitioner were found to be in thenature of providing accommodation entries through stage managed shamsale and purchase of penny stocks. 26.Aforesaid notice was replied to by the petitioner vide hisletter dated April 15, 2022 after seeking adjournments. The plea raisedwas that all the texts and the information which was available with theDepartment was examined in detail at the time of framing assessmentunder Section 153A of the Act, hence, there was no scope for issuing anynotice under Section 148 of the Act. There was no fresh materialavailable. Aforesaid reply was supplemented by another reply vide letterdated April 19, 2022. It was stated that after the search the phone of thepetitioner was also seized and the messages were extracted therefrom. Thechats and messages were thoroughly examined and on the basis of same,additions were made in the case of M/s Kanpur Organics Pvt. Ltd.,wherein a sum of 1,51,00,000/- was surrendered. Also on the basis of the�said material, the assessments of other group assessees were framed. Thecontents of the information as such was not disputed by the petitioner. 27.The details of the persons to whom the cash has beendelivered as per the information extracted from the text messages in themobile of the petitioner, which forms part of the notice are extractedbelow: 17 WTAX No. -1290 of 2022 18 WTAX No. -1290 of 2022 19 WTAX No. -1290 of 2022 20 WTAX No. -1290 of 2022 21 WTAX No. -1290 of 2022 27.The details of the persons to whom the cash has beendelivered as per the information extracted from the text messages in themobile of the petitioner, which forms part of the notice are extractedbelow: 17 WTAX No. -1290 of 2022 18 WTAX No. -1290 of 2022 19 WTAX No. -1290 of 2022 20 WTAX No. -1290 of 2022 21 WTAX No. -1290 of 2022 Extracts/analysis of messages derived from Mobile I phone of Subodh Agarwaldocumentised as Document-2 22 WTAX No. -1290 of 2022 23 WTAX No. -1290 of 2022 Extracts/analysis of messages derived from Mobile I phone of SubodhAgarwal documentised as Document-2: 24 WTAX No. -1290 of 2022 28.After considering the objections filed by the petitioner interms of Section 148A(c) of the Act, order was passed under Section148A(d) and a notice under Section 148 of the Act was issued callingupon the petitioner to file his return on the prescribed form for theassessment year 2015-16. It is the aforesaid show cause notice which isunder challenge in the present petition. The order under Section 148(d) ofthe Act as annexed with the aforesaid notice specifically refers to the auditobjection as the information on the basis of which proceedings wereinitiated. The information is specific. From the information it was evidentthat the petitioner was indulging in Hawala activities/transactions. It wasspecifically mentioned that the material as referred to in the auditobjection was not considered at the time of initial assessment. The 25 WTAX No. -1290 of 2022 petitioner had not explained the entries as put to him in the show causenotice issued under Section 148(b) of the Act. His reply was based onlyon technicalities. The unverified and unexplained transactions are to thetune of 156,45,19,154/-.� Section 153A of the Act 29.As far as assessment of the petitioner framed under section153A of the Act is concerned, in the appeal filed against the order,Commissioner of Income Tax (Appeals) has upheld the order ofassessment. Appeal filed before Income Tax Appellate Tribunal, LucknowBench ‘B’, Lucknow (hereinafter referred to as ‘the Tribunal’) wasallowed vide order dated October 7, 2021 on the ground that there wasviolation of provisions of Section 153D of the Act with reference to priorapproval of Additional Commissioner of Income Tax before passing theorder of assessment. The opinion of the Tribunal was that the process ofgranting mechanical approval under Section 153D of the Act vitiated theentire proceedings. The Department filed Income Tax Appeal No. 86 of2022 against the aforesaid order before this Court, which was dismissedon December 12, 2022, upholding the order passed by the Tribunal on theground that approval of draft assessment order by the CompetentAuthority was without application of mind. 30.Second proviso to Section 153A of the Act will not come tothe rescue of the petitioner for the reason that in terms thereof assessmentor re-assessment pending for the assessment years in question on the dateof initiation of search under Section 132 or making requisition underSection 132A of the Act shall abate. Admittedly, in the case in handpresent re-assessment proceedings were not pending on the date whensearch was carried out at the premises of the petitioner. Notice in the casein hand for initiating re-assessment proceeding was issued on April 24, 26 WTAX No. -1290 of 2022 2022 whereas search was carried out on August 31, 2015. 30.Second proviso to Section 153A of the Act will not come tothe rescue of the petitioner for the reason that in terms thereof assessmentor re-assessment pending for the assessment years in question on the dateof initiation of search under Section 132 or making requisition underSection 132A of the Act shall abate. Admittedly, in the case in handpresent re-assessment proceedings were not pending on the date whensearch was carried out at the premises of the petitioner. Notice in the casein hand for initiating re-assessment proceeding was issued on April 24, 26 WTAX No. -1290 of 2022 2022 whereas search was carried out on August 31, 2015. 31.As to whether an audit objection can constitute informationon the basis of which re-assessment proceeding can be initiated, referencecan be made to Explanation 1, Clause (ii) to second proviso of Section148 of the Act. The aforesaid provision clearly provides that any auditobjection to the effect that assessment in case of assessee for the relevantassessment year has not been made in accordance with the provisions ofthe Act is included in the term ‘information regarding escapedassessment’. In the case in hand, it is not a matter of dispute that there isan audit objection raised that the assessment of assessee has not beenframed properly in accordance with the provisions of the Act. It is a casewhere petitioner was indulging in providing accommodation entries. Thetext messages recovered from his mobile phone clearly corroborated themodus operandi adopted by the petitioner. The amount involved is to thetune of 156,45,19,154/-.� 32.Merely because at one stage the Assessing Officer hadanswered to the queries raised by the Auditor regarding the assessmentbeing in accordance with the provisions of the Act and there being noillegality therein, will not mean that the information in the form of auditobjection could not be relied upon to opine that the income chargeable totax had escaped assessment. Existence or non-existence of informationcan be subject matter of litigation but not the sufficiency thereof. 33.As far as the argument raised by learned counsel for thepetitioner that after assessment had been framed under Section 153A ofthe Act there was application of mind and examination of record atdifferent levels in the Department as the assessment order is passed withapproval of the higher authorities, there was no scope for initiation offresh proceedings for re-assessment under Section 148 of the Act, in ouropinion, even this argument is also to be noticed and rejected. In supportof the argument no provision of law as such has been cited except 27 WTAX No. -1290 of 2022 second proviso of Section 153A of the Act, in terms of which onlypending proceeding abate. Only reference was made to the judgment ofGujarat High Court passed in Cargo Clearing Agency’s case (supra). Aplain reading of the aforesaid judgment shows that it is based on the factthat at the time of framing block assessment after search there is detailedexamination of the record even at the higher level, hence, no scope is leftfor raising the issue again by initiating proceeding under Section 148 ofthe Act. However, in the case in hand, it is undisputed case on record thatthe order of assessment passed in case of the petitioner under Section153A of the Act was set aside only on the ground that there was noapplication of mind by the higher authorities for granting approval underSection 153D of the Act. And the issue raised by the Audit has not beenexamined at the time of assessment after search. It may further be addedthat in the assessment year for the period under consideration in theaforesaid judgment the audit objection was not an information which hasbeen added in Clause(ii) to second proviso of Explanation 1 of Section148 of the Act with effect from April 1, 2022. 34.Similar issue came up for consideration before Gujarat HighCourt in Krishna Developers and Company vs. Deputy Commissionerof Income-tax[7], wherein the Court considered a case where originalassessment of the assessee was set aside on technical ground that noticeunder Section 143(2) of the Act was not served. The argument raised byassessee was that original assessment having failed on the ground of non-issuance of mandatory notice for scrutiny, initiation of proceedings underSection 147/148 was illegal as object was only to cure the defect. The saidcontention was rejected and the petition was dismissed by the DivisionBench of the Gujarat High Court observing that merely on the ground thatthe reasons recorded by the Assessing Officer were same on the basis ofwhich Assessing Officer has initially decided to make addition but failed 28 WTAX No. -1290 of 2022 as the order was set aside on technical ground would not preclude himfrom carrying out the exercise of reopening of assessment. Relevantparagraphs are reproduced as under: “20. Nothing contained in the language ofsection 147 would permit us to hold that even if all theparameters to enable the Assessing Officer to assess orreassess the income by reopening the assessment are present,same may not be permitted in cases where the originalassessment framed by the Assessing Officer has failed on anytechnical ground, such as in the presentcasei.e. want ofservice of notice under section 143(2) of the Act. Once theoriginal assessment is declared as invalid as having beencompleted without the service of notice on the assesseewithin the statutory period, there would be thereafter noassessment in the eye of law. The situation therefore, be akinto where return of the assessee has been accepted without ascrutiny. Reopening of the assessment, if the AssessingOfficer has the reason to believe that income chargeable totax has escaped assessment, would be entirely permissibleunder section 147 of the Act. Merely on the ground that thereasons recorded by the Assessing Officer proceeded on thesame basis on which the Assessing Officer initially desired tomake additions but which failed on account of setting asidethe order of assessment, would not preclude the AssessingOfficer from carrying out the exercise of reopening of theassessment. In the presentcase, facts are peculiar. It is not asif the Assessing Officer after noticing certain discrepancies inthe return of the assessee, slept over his right to undertake thescrutiny assessment. The scrutiny assessment was initiated byissuance of notice under section 143(2) of the Act on 29 WTAX No. -1290 of 2022 23.9.2013. It was also dispatched for service to the assesseeon 24.9.2013 by Speed Post on the last known address. TheCommissioner (Appeals) however, held that there was noproof of service of notice and since section 143(2) requiresservice of notice, the assessment was framed withoutcomplying with the mandatory requirements. 21. We may refer to some of the decisions on the point.Incaseof A G Group Corporation (supra), the Court noticedthat at one point the Revenue had reopened the assessment ofthe assessee. However, such assessment failed on the groundthat the reasons were not recorded by the Assessing Officerfor issuing such a notice. On the same ground, the Revenueissued fresh notice of reopening which was challenged beforethe High Court. The High Court held that when the earlierorder stood annulled on the ground of lack of fulfillment ofthe basic requirement under section 147 of the Act, there wasno bar against reopening the assessment once again on thesame grounds after following due procedure in accordancewith law.” (emphasis supplied) 21. We may refer to some of the decisions on the point.Incaseof A G Group Corporation (supra), the Court noticedthat at one point the Revenue had reopened the assessment ofthe assessee. However, such assessment failed on the groundthat the reasons were not recorded by the Assessing Officerfor issuing such a notice. On the same ground, the Revenueissued fresh notice of reopening which was challenged beforethe High Court. The High Court held that when the earlierorder stood annulled on the ground of lack of fulfillment ofthe basic requirement under section 147 of the Act, there wasno bar against reopening the assessment once again on thesame grounds after following due procedure in accordancewith law.” (emphasis supplied) 35.The aforesaid order of the Gujarat High Court attainedfinality after dismissal of the Special Leave Petition of the assessee byHon’ble Supreme Court vide judgment reported in (2018) 91taxmann.com 306 (SC).36.Similar issue came up for consideration before Delhi HighCourt in CIT Vs. Vishal Gupta[8]. In that case also, the order ofassessment was set aside by Tribunal on the ground that statutory noticeunder Section 143(2) of the Act was not served within stipulated period.Thereafter, notice for reopening the assessment was issued. The Tribunal 30 WTAX No. -1290 of 2022 again set aside the said order. However, Delhi High Court, reversing theorder of the Tribunal, observed that if the reason to believe that incomefor any assessment year has escaped assessment are available, theproceedings under Section 147/148 of the Act are independent. There maybe valid ground for setting aside the original assessment order, but thesame cannot be the basis to quash the reassessment proceedings. Relevantparagraphs are reproduced as under: “11. The facts elucidated above clearly show that thetribunal has quashed/set aside the original proceedings on thetechnical ground that statutory notice underSection143(2)was not served on therespondent-assessee within thestipulated period of 12 months from the month in whichreturn was filed. 12. The Assessing Officer thereafter had recorded freshreasons and issued notice under Section 147/148 of the Act.The reasons to believe now recorded have to stand on theirown legs and are separate from the reasons to believe, whichwere recorded earlier before initiation of the re-assessmentproceedings, which abated. The said reasons to believe andissue of notice under Section 147/148 of the Act cannot befaulted and rejected on the ground that in the earlier/originalassessment or re-assessment proceedings, notice underSection 143(2) was not served on the assessee within thestatutory time/period. This was a valid ground to quash thefirst/original assessment/re-assessment order, but it cannot bea ground to quash the re-assessment proceedings, which havebeen initiated afresh after recording reasons to believe.” 37.It is the settled position of law that prima facie availability ofmaterial is sufficient for reopening of the reassessment proceedings and 31 WTAX No. -1290 of 2022 the sufficiency and correctness of the material is not to be considered atthat stage. In the case of Raymond Woollen Mills Ltd. Vs. ITO andothers[9] even though it was a case where reasons were required to berecorded in writing, Hon’ble the Supreme Court opined that only primafacie material has to be seen on the basis of which the Department couldreopen the case. Sufficiency or correctness of the material is not to beconsidered. The issues can be examined in detail during the assessmentproceedings. Relevant paragraph thereof is extracted below: 37.It is the settled position of law that prima facie availability ofmaterial is sufficient for reopening of the reassessment proceedings and