Wp(C)/16551/2016 Of Sri Jose Thomas v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 29TH DAY OF JULY 2016/7TH SRAVANA, 1938 WP(C).No. 16551 of 2016 (T) ---------------------------- PETITIONER(S): ----------------------- SRI.JOSE THOMAS,PADINJAREVEETTIL PUTHENVEEDU,KANNAMCODE, ADOOR P.O.,PATHANAMTHITTA DISTRICT - 691 523,PAN : . BY SRI.P.J.PARDIWALLA, SENIOR ADVOCATE. ADVS. SRI.JOJO ISAAC NEYYARAPALLY, SRI.RAMESH CHERIAN JOHN. RESPONDENT(S): --------------------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PUBLIC LIBRARY BUILDING, SASTRI ROAD, KOTTAYAM - 686 001. 2. THE INCOME TAX OFFICER, WARD -2, AAYAKAR BHAVAN, NR. KARBALA JUNCTION, RAILWAY STATION ROAD, KOLLAM - 691 001. 3. THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PUBLIC LIBRARY BUILDING, SASTRI ROAD, KOTTAYAM - 686 001. 4. THE COMMISSIONER OF INCOME TAX (APPEALS)-III, POORNIMA BUILDING, MANORAMA JUNCTION, PANAMPILLY NAGAR, KOCHI - 686 036. 5. THE ASST. COMMISSIONER OF INCOME TAX, INVESTIGATION CIRCLE, AAYAKAR BHAVAN, NR. KARBALA JUNCTION, RAILWAY STATION ROAD, QUILON - 691 001. BY SRI.P.K.R. MENON, SENIOR COUNSEL. ADV. SRI.JOSE JOSEPH, SC. rs. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03/06/2016, ALONG WITH WP(C).NO.16556 OF 2016, THE COURT ON 29/07/2016 DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S EXHIBITS:- P1 TRUE COPY OF THE ACKNOWLEDGMENT OF RETURN FILED FOR THE ASSESSMENT YEAR 2004-05 BEFORE THE INCOME TAX OFFICER, WARD -1, KOLLAM, THE 2ND RESPONDENT. P2 TRUE COPY OF THE ACKNOWLEDGMENT OF RETURN FILED FOR THE ASSESSMENT YEAR 2008-09 BEFORE THE INCOME TAX OFFICER, WARD -1, KOLLAM, THE 2ND RESPONDENT. P3 TRUE COPY OF NOTICE DTD. 03.12.2009 ISSUED FOR 2003-04. P4 TRUE COPY OF JUDGMENT DTD. 12.02.2013. P5 TRUE COPY OF THE NOTIFICATION DTD. 25.09.2009. P6 TRUE COPY OF NOTIFICATION DTD. 24.04.1999. P7 TRUE COPY OF NOTICE UNDER 142(1) DTD. 06.08.2014. P8 TRUE COPY OF THE LETTER DTD. 06.03.2014. P9 TRUE COPY OF LETTER DTD. 18.09.2015 CONTAINING THE ORDER SHEET ENTRY.ORDER SHEET ENTRY. P10 TRUE COPY OF NOTICE DTD. 21.09.2015. P11 TRUE COPY OF LETTER DTD. 26.09.2015. P12 TRUE COPY OF LETTER DTD. 29.09.2015. P13 TRUE COPY OF LETTER DTD. 20.01.2016. P14 TRUE COPY OF LETTER DTD. 05.01.2016. P15 TRUE COPY OF LETTER DTD. 27.01.2016. P16 TRUE COPY OF LETTER DTD. 29.01.2016. P17 TRUE COPY OF OBJECTION DTD. 22.02.2016. P18 TRUE COPY OF LETTER DTD. 07.08.2015. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// rs. P.S. TO JUDGE A.M.SHAFFIQUE, J * * * * * * * * * * * * W.P.C.Nos.16551 & 16556 of 2016 ---------------------------------------- Dated this the 29[th] day of July 2016 J U D G M E N T Since common issues arise for consideration in these writpetitions the same are heard and decided together. 2.Petitioners challenge the assessment orders passed bythe Deputy Commissioner of Income Tax, Kottayam Circle, the 1[st]respondent for the assessment year 2010-11, on the ground thatthe proposal for assessment and the consequent assessment areillegal. 3. The facts involved in the writ petitions would disclose that consequent to a search conducted on 04/03/2009, theAssistant Commissioner of Income Tax issued separate noticesunder Section 148 of the Income Tax Act, 1961, to the petitionersto reopen the assessment for the assessment year 2010-2011. 4. In W.P.(C) No. 16551/2016 it is stated that the 1strespondent, by letter dated 18/09/2015 (Ext.P9), furnished a copyof the reason recorded for reopening assessment, as stated in theorder sheet. According to the petitioner, without passing anyspeaking order on the objections filed by the petitioner, he was 3. The facts involved in the writ petitions would disclose that consequent to a search conducted on 04/03/2009, theAssistant Commissioner of Income Tax issued separate noticesunder Section 148 of the Income Tax Act, 1961, to the petitionersto reopen the assessment for the assessment year 2010-2011. 4. In W.P.(C) No. 16551/2016 it is stated that the 1strespondent, by letter dated 18/09/2015 (Ext.P9), furnished a copyof the reason recorded for reopening assessment, as stated in theorder sheet. According to the petitioner, without passing anyspeaking order on the objections filed by the petitioner, he was served with notice dated 21/09/2015 under Section 143(2) of theAct. Petitioner filed Ext.P11 dated 26/09/2015 and in response toExt.P9, petitioner submitted Ext.P12 letter dated 29/09/2015. Inresponse to Ext.P12, the first respondent issued reply dated05/01/2016. The petitioner, by Ext.P15 letter dated 27/1/2016made a request for the copy of the agreement dated 23/02/2009which was replied by the 1[st] respondent as per letter dated29/01/2016 (Ext.P16). Petitioner again filed objection as Ext.P16.It is contended that without passing any order on the objections,the assessment was completed under Section 143(3) read withSection 147 of the Act as per Ext.P18 order dated 23/03/2016assessing his total income at Rs.4,90,59,495/-. 5.WP(C) No.16556/2016 also gives rise to similar set offacts. Ext.P2 is the notice dated 28/04/2014 issued by the 3[rd]respondent under Section 148 of the Act. Ext.P31 is theassessment order for the assessment year 2010-2011 by whichthe total income of the petitioner had been assessed asRs.5,04,19,190/-. 6. Petitioners contend that though they objected to thereason recorded for the issue of notice under section 148 of the Act, without passing a speaking order with reference to theobjections raised, the assessment orders are passed. Further it iscontended that the 3rd respondent relied upon materials whichwere not stated in the reasons stated for reopening assessment. 7.The learned Standing Counsel appearing on behalf ofthe respondents submitted that there is no necessity to considerthe writ petitions on merit as separate appeals have already beenfiled by the petitioners before the Commissioner of Income(Appeals), Kottayam. 8.The learned counsel for the writ petitioner, however,limits their argument to certain jurisdictional issues which hadarisen in the matter relating to the proceedings which hadculminated in the impugned assessment orders and contends thatpendency of the appeal shall not preclude the petitioners toproceed with the writ petitions on such jurisdictional and legalissues involved in the matter. 9.Before proceeding further, it would be useful toconsider the facts on which notices under section 148 of the Acthad been issued to the petitioners. During the search conductedin the case of Carmel Educational Trust, Adoor on 26/2/2009, an agreement dated 23/02/2009 was also seized. As per the termsof the agreement, all the eleven trustees decided to hand overthe Trust, Engineering College and its entire assets to M/s.Believers Church, Thiruvalla for a consideration of Rs.43.50Crores. Petitioners were also the trustees whose names andaddresses appeared in the first page of the agreement. Theirshare of consideration was Rs.14.50 Crores each, out of whichRs.9 Crores each were received during the financial year 2010-11.However, in the return, the aforesaid receipt was not disclosed.The 1[st] respondent has informed the petitioners that the receiptsare revenue receipts taxable under the head 'income from othersources' under Section 56(2) of the Act and since the said incomeis not disclosed in the return, there is reason to believe that theincome has escaped assessment within the meaning of Section148 of the Act. 10. In WP(C) No.16556/2016, the reason for reopening wascommunicated to the petitioner on 04/11/2014. An objection wasfiled by the assessee for which the assessing officer had issued aspeaking order dated 04/03/2015. Petitioner was given anopportunity to appear and present the case on 28/09/2015. 11.Perusal of Ext.P18 order in W.P.(C) NO.16551/2016,which is substantially the same as Ext.P31 in WP(C)No.16556/2016, would further show that as per agreement dated23/02/2009, the Trust and their entire assets were handed over toM/s.Believers Church. Though, legally, a Trust cannot be sold, allthe 11 trustees relinquished their trusteeship in favour of theappointees in M/s.Believers church. For relinquishment of thetrusteeship, the outgoing trustees should be paid a considerationof Rs.37.5 Crores, which ought to be shared between two familygroups, which are headed by the petitioner and oneSri.P.J.Paulsose. The consideration so received would constitutetaxable income in the hands of the recipient, assessable underthe head 'income from other sources'. It is indicated that a draftunsigned agreement dated 23/02/2009 was seized from theresidence of Sri.P.J.Paulose. As per the terms of the saidagreement, the Trust, Engineering College and its entire assetwere to be handed over to M/s.Believers Church for a totalamount of Rs.43.50 Crores and one third of which is to be sharedbetween each family group. Further, M/s.Believers Church wouldpurchase a rubber estate measuring 55.15 Acres lying adjacent to the compound of Carmel Engineering College. The totalconsideration of the estate would be Rs.6.5 Crores. It is statedthat, as per Clause 17 of the agreement, the sale price agreed forthe rubber estate is Rs.6.50 Crores. The parties would enhancethe registration value and the surplus amount shall be theconsideration for handing over operation of the Trust. The surplusamount has to be divided equally by three of the family groupsand it will purely be a book adjustment. It is further stated that inthe signed agreement dated 10/03/2009, the amount for handingover of the Trust is reduced from 43.5 Crores to 37.5 Crores andthe consideration of the rubber estate is increased by Rs.6 Crores.As per the registered sale deed, the rubber estate is transferredfor a value of Rs.12.5 Crores. It is also mentioned that thoseowners who were not trustees were paid only Rs.15 lakhs perAcre, whereas the owners who were trustees were paidRs.25,40,400/- per Acre. Further, reference is made to Clause 5of the agreement dated 10.3.2009 which indicates that theparties are to prepare the accounts with the help of CharteredAccountants in order to find out the debt and liabilities within sixmonths in order to clear the liabilities from the aforesaid amount of Rs.37.50 Crores. The first party, namely M/s.Believers Churchagreed to release their funds as per demand. 2[nd] party alsoagreed that they will complete the ongoing constructions ofbuilding, landscape, hostels, play grounds etc. It is stated thatthough the attempt was to treat the aforesaid amount of Rs.37.5Crores for the purpose of clearing the outstanding liability and forcompleting the ongoing construction, there was no such liabilityand no such construction was carried out. The Officer furtherobserved that, in the assessment order of the Trust, for theassessment year 2010-11, they have not carried out anyconstruction at all and no such expenditure appears in the finalaccounts. Another agreement dated 01/06/2010 was executedbetween M/s.Believers Church and Family groups headed by thepetitioners wherein it was stated that Rs.37.5 Crores was paid tothe former trustees for clearing and paying the liabilities of theTrust as on 10/03/2009 and the outgoing trustees have agreed tocomplete the construction. M/s.Believers Church signed anotheragreement with 2[nd] family group headed by Sri.P.J.Paulose on30/11/2009 wherein Sri.P.J.Paulose admitted receipt of Rs.4.5Crores from M/s.Believers Church. As per clause 5 of the agreement it is stated that subsequent to verification of accounts,it was found that all liabilities have been cleared and there is noneed to pay any further amount to him. It is stated by the firstrespondent that agreements give an indication that the Trust hada liability of Rs.37.5 Crores and thereafter, when supplementaryagreements were executed, it was found that no such liabilityexisted. It is further observed that the petitioners herein and theirfamily members formed M/s.St.Thomas Educational Society andSri.P.J.Paulose and his family members formed M/s.ChristEducational Society. M/s.Believers Church made a payment ofRs.16 Crores to M/s.St.Thomas Educational Society and Rs.7.97Crores to M/s.Christ Educational Society. These Trusts wereintended for running educational institutions. However, it isstated that not even a single student is admitted into theinstitution run by such Trust. It was therefore found that theconsideration received by the former trustees of M/s.CarmelEducational Trust, in lieu of relinquishment of trusteeship isRs.37.5 Crores or above which constitutes taxable income in theirhands, but was not offered to tax, instead, several agreementswere made for the purpose of evading tax which amounts to colourable devices to escape tax value. Further, on sale of rubberplantation, the trustees, who were owners, were paid at the rateof Rs.25,40,400/- per Acre, whereas the other owners were paidonly @ Rs.15 lakhs per acre. The surplus paid was towards thehanding over of the Trust. It was, therefore, found that the totalincome of the assessee for the year 2010-11 was computed byadding Rs.4.5 Crores. 12.The main contention urged by the petitioners is thatthere is non-compliance of the law laid down by the SupremeCourt in G.K.N.Driveshafts (India) Ltd. v. Income- TaxOfficer and Others [259 ITR 19]which was followed by thisCourt in Tolins Rubbers v. Assistant Commissioner ofIncome Tax [2004 270 ITR 280]. The contention is that, when anotice is issued under Section 148 of the Act, the assessee isentitled to seek reasons for issuing such notice, in which event,the Assessing Officer is bound to furnish reasons within areasonable time. On receiving such reasons, the noticee isentitled to file objections to issuance of notice and the AssessingOfficer is bound to dispose of the same by passing a speakingorder. It is contended that though in WP(C) No. 16556/2016, such W.P.C.Nos.16551 & 16556 of 2016 a method was adopted, in WP(C) No. 16551/2016, the saidprocedure was not adopted. 13. The Apex Court in G.K.N.Driveshafts (supra) held asunder: “Heard learned Counsel for the parties. Leave is granted. W.P.C.Nos.16551 & 16556 of 2016 a method was adopted, in WP(C) No. 16551/2016, the saidprocedure was not adopted. 13. The Apex Court in G.K.N.Driveshafts (supra) held asunder: “Heard learned Counsel for the parties. Leave is granted. By the order under challenge, a DivisionBench of the High Court at Delhi (see [2002] 257ITR 702) dismissed the writ petition filed by theappellant challenging the validity of notices issuedunder Sections 148 and 143(2) of the Income-taxAct, 1961. The High Court took the view that theappellant could have taken all the objections in itsreply to the notices and that, at that stage, thewrit petition was premature. Accordingly, the writpetition was dismissed on January 31, 2002.Aggrieved by that order, the appellant is in appealbefore us. Mr.M.L.Verma, learned senior counselappearing for the appellant, submits that theimpugned notices relate to seven assessmentyears; that during the pendency of these appeals,in respect of two assessment years, viz., 1995-96and 1996-97, assessment has been completedagainst which appeals have been filed. Notices relating to the other five assessment years, viz.,1992-93, 1993-94, 1994-95, 1997-98 and 1998-99, are now the subject-matter of these appeals. We see no justifiable reason to interfere withthe order under challenge. However, we clarifythat when a notice under Section 148 of theIncome-tax Act is issued, the proper course ofaction for the noticee is to file a return and if he sodesire, to seek reasons for issuing notices. TheAssessing Officer is bound to furnish reasonswithin a reasonable time. On receipt of reasons,the noticee is entitled to file objections to issuanceof notice and the Assessing Officer is bound todispose of the same by passing a speaking order.In the instant case, as the reasons have beendisclosed in these proceedings, the AssessingOfficer has to dispose of the objections, if filed, bypassing a speaking order, before proceeding withthe assessment in respect of the abovesaid fiveassessment years. In so far as the appeals filed against theorder of assessment before the Commissioner(Appeals), we direct the appellate authority todispose of the same, expeditiously. With the above observations, the civilappeals are dismissed. No costs.” 14.In Tolins Rubbers (supra), the petitioner challenged the reasons for issuing the notice. This Court relying uponG.K.N.Driveshafts(supra) held that once the assessing authorityhad furnished the reasons for reopening the assessment, it is forthe petitioner to file objections to the same. If any such objectionis filed, the assessing officer will consider the said objection andpass a speaking order, which has to be done before proceedingwith the assessment, pursuant to the returns filed by the assesseeand the decision has to be communicated to the petitioner. 15. The learned counsel also relied upon a few otherjudgments, which are as follows: (i)The Division Bench judgment of Bombay High CourtWP(C) Nos.2287/2009 and 59/2010 considered the challengeto the notices issued under Section 148 of the Act. It was heldthat the question as to whether there is reason to believe withinthe meaning of Section 147 of the Act must be determined withreference to the reasons recorded by the Assessing Officer, whichcannot be supplemented by affidavits. In that case, it was heldthat there was no basis for the Officer to form a belief that anyincome chargeable to tax has escaped assessment within the meaning of substantive provisions of Section 147. That was acase in which the assessee contended that the amounts receivedon account of the retirement of petitioner from the partnershipfirm were Capital Receipts and therefore not offered to tax. (i)The Division Bench judgment of Bombay High CourtWP(C) Nos.2287/2009 and 59/2010 considered the challengeto the notices issued under Section 148 of the Act. It was heldthat the question as to whether there is reason to believe withinthe meaning of Section 147 of the Act must be determined withreference to the reasons recorded by the Assessing Officer, whichcannot be supplemented by affidavits. In that case, it was heldthat there was no basis for the Officer to form a belief that anyincome chargeable to tax has escaped assessment within the meaning of substantive provisions of Section 147. That was acase in which the assessee contended that the amounts receivedon account of the retirement of petitioner from the partnershipfirm were Capital Receipts and therefore not offered to tax. (ii)Another judgment relied upon is of a Division Bench ofthe Gujarat High Court in M/s.Prakriya Pharmachem Thru itsCurrent Partner v. Income Tax Officer[Special CivilApplication No.20492/2015]. Paragraphs 7, 9 and 10 of the saidjudgment are relevant, which reads as under: “7. We are conscious that in the present casereturn of the income filed by the petitioner was nottaken in scrutiny. No scrutiny assessment wastherefore, framed. Return was only accepted undersection 143(1) of the Act. In that view of the matterthe scope for the Assessing Officer to reopen suchassessment on a valid reason to believe that theincome chargeable to tax had escaped assessmentwould be much wider compared to the case wherescrutiny assessment has been framed. This would beso since there would be no opinion formed by theAssessing Officer while accepting return under section143(1) of the Act without scrutiny. Consequently,therefore, the question of change of opinion would notarise. This is in sum and substance held by the Supreme Court in the case of Assistant Commissionerof Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd.(supra). It is on this ground that the Supreme Courthad in the case of Deputy Commissioner of IncomeTax and another Vs. Zuari Estate Development andInvestment Company Ltd. (supra) reversed thejudgment of the High Court. However, even in thecase of assessment previously framed withoutscrutiny which is sought to be reopened by issuanceof notice under section 148 of the Act, the principlerequirement that the Assessing Officer has reason tobelieve that the income chargeable to tax hadescaped assessment would still survive. Of course,this formation of belief by the Assessing Officer mustbe prima facie and at the stage when the Court istesting validity of such a notice; it would not benecessary for the Assessing Officer to conclusivelyestablish that the income chargeable to tax hadescaped assessment. 9. With this narrow scrutiny permissible at thisstage we would examine the reasons recorded by theAssessing Officer for issuing the impugned notice. Wemay recall that in the reasons provided it is statedthat the assessee has transferred 5,30,410 sharesduring year under consideration whose market valueon the date of transfer was Rs. 7.63 crores (roundedoff). This transfer had taken place in favour of M/s.Nerka Chemicals Pvt. Ltd. without consideration under transfer deed dated 26.02.2010. In view of such facts,the Assessing Officer has reason to believe that theincome chargeable to tax in excess of Rs. 1,00,000/-had escaped assessment. 10. For multiple reasons we are convinced that thesereasons lack validity. The first and foremost, reasonsthemselves record merely the transaction and nothingmore. Quite apart from there not being live linkbetween the first portion of the reasons recorded,namely, by merely duplicating the recording oftransaction of transfer of sizable number of shareshaving considerable market value withoutconsideration and second portion of the reasonswhere he concluded that the income chargeable totax had escaped assessment.” transfer deed dated 26.02.2010. In view of such facts,the Assessing Officer has reason to believe that theincome chargeable to tax in excess of Rs. 1,00,000/-had escaped assessment. 10. For multiple reasons we are convinced that thesereasons lack validity. The first and foremost, reasonsthemselves record merely the transaction and nothingmore. Quite apart from there not being live linkbetween the first portion of the reasons recorded,namely, by merely duplicating the recording oftransaction of transfer of sizable number of shareshaving considerable market value withoutconsideration and second portion of the reasonswhere he concluded that the income chargeable totax had escaped assessment.” iii)In Varshaben Sanatbhai Patel v. Income TaxOfficer[Special Civil Application No.12873/2014 and12875/2014]. Paragraphs 13 and 15 are relevant which reads asunder: “13. On a plain reading of the reasons recorded,what emerges is that the Assessing Officer, onverification of the details available on record, hasnoticed that there were bogus purchases. However,there is no assertion as regards on the basis of whichmaterial on record he has come to such conclusion. Aperusal of the order rejecting the objections raised by the petitioner,shows that the reopening is based, notupon the material on record, but on the basis ofmaterial received from an external source viz., theDGIT (Inv.), Mumbai, pursuant to inquiriesmade byhim (the DGIT). Therefore, the material on the basis ofwhich the Assessing Officer seeks to assumejurisdiction under section 147 of the Act, is theinformation received from an external source viz.,from the DGIT and not the material on record asreflected in the reasons recorded. Under thecircumstances, on the basis of the material on record,the Assessing Officer could not have formed the beliefthat income chargeable to tax has escapedassessment, inasmuch as, the formation of belief ofthe Assessing Officer is not based upon the detailsavailable on record, but on the material madeavailable by the DGIT (Inv.), Mumbai which is anexternal source. Under the circumstances, it cannotbe said that the requirements of section 147 of the Actare satisfied, inasmuch as, the belief of the AssessingOfficer is not based upon the material on record, buton some other material from an external source whichdoes not find reference in the reasons. As is clear on aplain reading of the reasons recorded, except for theassertion that there were bogus purchases, theAssessing Officer has not referred to any material onthe basis of which he proceeded to invoke theprovisions of section 147 of the Act. The assertion made by the Assessing Officer is a bare one, withoutany reference to the material on the basis of which hemade such assertion. made by the Assessing Officer is a bare one, withoutany reference to the material on the basis of which hemade such assertion. 15. Adverting to the facts of the present case, thereturns filed by the assessee have been processedunder section 147(1) of the Act. The Assessing Officerin the reasons recorded for the purpose of reopeningthe assessment has placed reliance upon the record ofthe case. As noted hereinabove, there is no assertionas regards on what basis the Assessing Officer hasstated that the assessee had made claim in respect ofbogus purchases in the trading and the Profit and LossAccount as expenditure. The Assessing Officer hasstated that on verification of the details available onrecord, it has been noticed that the assessee hasmade bogus purchases; however, no specificaverments are made as regards which detailsavailable on record reflected such bogus purchases. Itis evident that the Assessing Officer for the purpose ofreopening the assessment has placed reliance uponthe material from an external source which does notform part of the record. However, the said aspect isnot reflected in the reasons recorded. On behalf of theAssessing Officer, the learned counsel is not in aposition to point out any material on the record on thebasis of which the Assessing Officer could haveformed such belief. What is now sought to be stated by way of the order rejecting the objections as well asthe affidavit-in-reply filed in response to theaverments made in the petitions is that the formationof belief is based upon the information which isreceived from the DGIT (Inv.), Mumbai. It is settledlegal position as held by a catena of decisions that thesubstratum for formation of belief that income liableto tax has escaped assessment has to form part of thereasons recorded. In the present case, the substratumfor formation of belief, as indicated in the orderrejecting the objections as well as the affidavit-in-reply, is the information given by the DGIT (Inv.),Mumbai, which got no relation with the reasonsrecorded, which are stated to be based upon thematerial available on record. Under thecircumstances, the Assessing Officer, on the basis ofthe material on record, could not have formed beliefthat there was any escapement of income chargeableto tax so as to validly assume jurisdiction undersection 147 of the Act. As held by the Supreme Courtin a catena of decisions, the reasons recorded cannotbe supplemented in the affidavit or by the orderrejecting the objections. The material, on the basis ofwhich, the belief that income chargeable to tax hasescaped assessment has been formed, has to findplace in the reasons itself.” iv)Further reference has been made to judgment in AroniCommercials Ltd. v. Deputy Commissioner of Income-Taxand Another[2014 362 ITR 403 (Bom)] wherein also it is heldthat the reasons for reopening an assessment have to be testedor examined only on the basis of the reasons recorded at the timeof issuing a notice under Section 148 of the Act. The reasonscannot be improved or supplemented or substituted by affidavitsor oral submissions. v)Judgment of the Delhi High Court in Northern EximP.Ltd v. Deputy Commissioner of Income-Tax[(2013) 357ITR 586 (Delhi)] wherein also the Delhi High Court, after referringto various earlier judgments, held that the validity of theassumption of jurisdiction under Section 147 can be tested onlyby reference to the reasons recorded under Section 148(2) of theAct and the Assessing Officer is not authorised to refer to anyother reason even if it can be otherwise inferred and/or gatheredfrom the records. He is confined to the recorded reasons tosupport the assumption of jurisdiction. 16.On the other hand, learned Standing Counselappearing on behalf of the respondents, while submitting that the v)Judgment of the Delhi High Court in Northern EximP.Ltd v. Deputy Commissioner of Income-Tax[(2013) 357ITR 586 (Delhi)] wherein also the Delhi High Court, after referringto various earlier judgments, held that the validity of theassumption of jurisdiction under Section 147 can be tested onlyby reference to the reasons recorded under Section 148(2) of theAct and the Assessing Officer is not authorised to refer to anyother reason even if it can be otherwise inferred and/or gatheredfrom the records. He is confined to the recorded reasons tosupport the assumption of jurisdiction. 16.On the other hand, learned Standing Counselappearing on behalf of the respondents, while submitting that the writ petitions are not maintainable on account of the petitionershaving already preferred appeals, submits that the facts involvedin the case do not warrant any interference as far as thejurisdictional issue or legality is concerned, as the respondentshave complied with the statutory provisions in letter and spirit. Itis submitted that in G.K.N.Driveshafts(supra), the SupremeCourt did not interfere with the impugned orders. That was acase in which the challenge was to the validity of notice issuedunder Section 148(2) of the Act. High Court held that the writpetition was premature and accordingly, the writ petition wasdismissed. It was submitted before the Court that the noticesrelated to seven assessment years and during the pendency ofthe appeals, the assessment has been completed with respect totwo assessment years 1995-96 and 1996-97, against whichappeals have been filed and the issue was only with reference tonotices to other five assessment years. The Apex Court observedthat there is no reason to interfere with the order underchallenge. It was only by way of a clarification that the ApexCourt observed that when a notice under Section 148 of the Act isissued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notice. Ifreasons are sought for, Assessing Officer is bound to furnish thereasons within a reasonable time. Thereafter, the assessee getsan opportunity to file objections, which is to be disposed of by aspeaking order. In WP(C) No. 16551/2016, petitioner has notsought for reasons whereas in WP(C) No.16556/2016, reasonshave already been furnished when there was a request andtherefore, there is no basis for the aforesaid contentions. 17.On a perusal of the materials placed on record, I do notfind any infirmity in the proceedings initiated by the respondentauthorities. Section 147 of the Act reads as under: “147. Income escaping assessment.—If the AssessingOfficer, has reason to believe that any incomechargeable to tax has escaped assessment for anyassessment year, he may, subject to the provisionsof Sections 148 to 153, assess or reassess suchincome and also any other income chargeable to taxwhich has escaped assessment and which comes tohis notice subsequently in the course of theproceedings under this section, or recompute theloss or the depreciation allowance or any otherallowance, as the case may be, for the assessmentyear concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevantassessment year):” 18.Section 148 relates to issuance of notice where incomeescaped assessment. “147. Income escaping assessment.—If the AssessingOfficer, has reason to believe that any incomechargeable to tax has escaped assessment for anyassessment year, he may, subject to the provisionsof Sections 148 to 153, assess or reassess suchincome and also any other income chargeable to taxwhich has escaped assessment and which comes tohis notice subsequently in the course of theproceedings under this section, or recompute theloss or the depreciation allowance or any otherallowance, as the case may be, for the assessmentyear concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevantassessment year):” 18.Section 148 relates to issuance of notice where incomeescaped assessment. “148. Issue of notice where income has escapedassessment.— (1) Before making the assessment,reassessment or recomputation under Section 147,the Assessing Officer shall serve on the assessee anotice requiring him to furnish within such period, asmay be specified in the notice, a return of his incomeor the income of any other person in respect of whichhe is assessable under this Act during the previousyear corresponding to the relevant assessment year,in the prescribed form and verified in the prescribedmanner and setting forth such other particulars asmay be prescribed; and the provisions of this Actshall, so far as may be, apply accordingly as if suchreturn were a return required to be furnished underSection 139:” 19.The petitioners are virtually contending that the reasonto believe as envisaged under Section 147 of the Act cannot bebased on an unsigned agreement which is nonest in the eye oflaw. Ext.P7 dated 06/08/2014 is the notice issued to thepetitioner in WP(C) No. 16551/2016 under Section 148 of the Act wherein he was asked to give certain clarifications and he wasasked to appear on 24/09/2014. There is no explanation as towhether he had actually appeared or filed any objection.However, Ext.P8 is seen produced which is a letter dated06/03/2014 (an apparent mistake regarding date, it might be06/03/2015) wherein he had requested for a copy of notice dated28/04/2014. He also informed that the return for the assessmentyear 2010-11 has to be treated as return pursuant to the notice.Further he requested for the reasons recorded for reopening inview of the judgment in G.K.N.Driveshafts(supra)). It ispursuant to Ext.P8, that letter dated 18/09/2015 was issued bythe first respondent referring to the notice dated 28/04/2014wherein the reasons has been recorded for reopeningassessment. It was therefore apparent that when notice dated28/04/2014 was issued, petitioner did not object to the reasonrecorded for reopening, whereas when a 2[nd] notice was issued asExt.P7, he had replied by Ext.P8. It is thereafter that Ext.P12 wasissued again requesting for a copy of the agreement. The Officerhad, by Ext.P14 dated 05/01/2016, called for objections to thereasons for reopening. By Ext.P15, petitioner informed the 1[st] respondent that, without providing a copy of the agreement,further proceedings shall not be taken. In Ext.P16 petitioner wasinformed that the reason to believe was based on a tangibleinstrument which is a draft agreement and therefore the Officer isjustified in proceeding further. respondent that, without providing a copy of the agreement,further proceedings shall not be taken. In Ext.P16 petitioner wasinformed that the reason to believe was based on a tangibleinstrument which is a draft agreement and therefore the Officer isjustified in proceeding further. 20.Perusal of the facts in WP(C) No. 16556/2016 wouldfurther show that similar notices were issued to the petitioner on06/08/2014 (Ext.P5) wherein a reply was sent on 13/08/2014placing reliance on G.K.N.Driveshafts(supra). However, shewas offered that the reasons for reopening assessment will beprovided on the petitioner complying with the requirements innotice under Section 148 of the Act. The reasons for reopeningassessment has been supplied to the petitioner under cover ofletter dated 04/11/2014 (Ext.P12). Petitioner filed a reply dated03/02/2015 (Ext.P13) requesting for a copy of the agreementwhich was supplied as per Ext.P14 dated 18/02/2015. Petitionerfiled further objections Ext.P15 dated 25/02/2015 and the orderpassed is Ext.P16. Therefore it is evident that in the case of thepetitioner in WP(C) No. 16556/2016, there is strict compliance ofthe judgment in G.K.N.Driveshafts(supra). 21.As far as WP(C) No.16551/2016 is concerned, thepetitioner did not care to seek the reasons to believe asenvisaged under Section 147 of the Act, immediately on receipt ofnotice under Section 148 of the Act and he cannot claim thebenefit of the judgment. Only at a later stage he had asked forthe reasons which was supplied. At that stage, there was nofurther obligation to pass another order. However, it could beseen that there is substantial compliance of the statutoryprovisions. All materials available, which have been relied upon,has been given to the petitioner. 22.A contention had been raised that an unsignedagreement can never be the basis of a reason to believe. In thesewrit petitions, it was clearly indicated that the reason to believe isstated to be on the basis of the contents of agreement dated23/02/2009. The agreement indicates that there is aconsideration paid for vacating the post of trustees. Theassessee's receipt for the assessment year 2010-11 isRs.9 Crores. This amount had escaped the assessment. It istherefore apparent that the reason to believe that the income ofthe assessee for the year has escaped assessment within the meaning of Sec.148 of the Act is the agreement dated23/02/2009. True that the agreement is not signed by the parties.But, the Department proceeds on the basis that the subsequentmaterials proves the fact that the terms of the said agreementwas the actual arrangement between the parties. 23. The position of law in this regard is well settled. Thereason to believe that the income has escaped assessment, forfailure on the part of assessee to fully and truly to disclose allmaterial facts is also amenable to writ jurisdiction. However eachcase depends upon its own facts and circumstances. InS. GangaSaran & Sons (P) Ltd. v. ITO, [(1981) 3 SCC 143] the Apex Courtheld as under: “6. It is well-settled as a result of several decisions ofthis Court that two distinct conditions must besatisfied before the Income Tax Officer can assumejurisdiction to issue notice under Section 147(a).First, he must have reason to believe that theincome of the assessee has escaped assessment andsecondly, he must have reason to believe that suchescapement is by reason of the omission or failureon the part of the assessee to disclose fully and trulyall material facts necessary for his assessment. Ifeither of these conditions is not fulfilled, the notice “6. It is well-settled as a result of several decisions ofthis Court that two distinct conditions must besatisfied before the Income Tax Officer can assumejurisdiction to issue notice under Section 147(a).First, he must have reason to believe that theincome of the assessee has escaped assessment andsecondly, he must have reason to believe that suchescapement is by reason of the omission or failureon the part of the assessee to disclose fully and trulyall material facts necessary for his assessment. Ifeither of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be withoutjurisdiction. The important words under Section 147(a) are “has reason to believe” and these words arestronger than the words “is satisfied”. The beliefentertained by the Income Tax Officer must not bearbitrary or irrational. It must be reasonable or inother words it must be based on reasons which arerelevant and material. The court, of course, cannotinvestigate into the adequacy or sufficiency of thereasons which have weighed with the Income TaxOfficer in coming to the belief, but the court cancertainly examine whether the reasons are relevantand have a bearing on the matters in regard to whichhe is required to entertain the belief before he canissue notice under Section 147(a). If there is norational and intelligible nexus between the reasonsand the belief, so that, on such reasons, no oneproperly instructed on facts and law couldreasonably entertain the belief, the conclusion wouldbe inescapable that the Income Tax Officer could nothave reason to believe that any part of the income ofthe assessee had escaped assessment and suchescapement was by reason of the omission or failureon the part of the assessee to disclose fully and trulyall material facts and the notice issued by him wouldbe liable to be struck down as invalid." In ITO v. Selected Dalurband Coal Co. (P) Ltd., [(1997) 10 SCC68] it is held that: "3. It is well settled by various decisions of this Courtthat the notice under Section 148 read with Section147 can be issued only where the Income Tax Officerhas reason to believe that the income, profits orgains chargeable to tax had been underassessed orescaped assessment and further that suchescapement or underassessment was occasioned byreason of the failure of the assessee to disclose fullyand truly all material facts necessary for theassessment of that year. [We are not concerned withclause (b) of Section 147 here but only with clause(a).] In other words, there must be relevant materialbefore the assessing officer upon which he mustreasonably and rationally form the requisite opinion(belief). The question, therefore, is whether the letterof the Chief Mining Officer aforesaid does notconstitute relevant material upon which the IncomeTax Officer could have formed the requisite belief? Itmust be remembered that the formation of belief bythe Income Tax Officer is essentially within hissubjective satisfaction. 4. xxxxxxxxxx It may well be that the assessee maybe able to establish that the facts stated in the saidletter are not true but that conclusion can be arrivedat only after making the necessary enquiry. At the stage of the issuance of the notice, the only questionis whether there was relevant material, as statedabove, on which a reasonable person could haveformed the requisite belief. Since we are unable tosay that the said letter could not have constitutedthe basis for forming such a belief, it cannot be saidthat the issuance of notice was invalid. Inasmuch as,as a result of our order, the reassessmentproceedings have now to go on, we do not and weought not to express any opinion on merits." InCIT v. Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14 SCC208, it is held as under: 4. xxxxxxxxxx It may well be that the assessee maybe able to establish that the facts stated in the saidletter are not true but that conclusion can be arrivedat only after making the necessary enquiry. At the stage of the issuance of the notice, the only questionis whether there was relevant material, as statedabove, on which a reasonable person could haveformed the requisite belief. Since we are unable tosay that the said letter could not have constitutedthe basis for forming such a belief, it cannot be saidthat the issuance of notice was invalid. Inasmuch as,as a result of our order, the reassessmentproceedings have now to go on, we do not and weought not to express any opinion on merits." InCIT v. Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14 SCC208, it is held as under: "19. Section 147 authorises and permits theassessing officer to assess or reassess incomechargeable to tax if he has reason to believe thatincome for any assessment year has escapedassessment. The word “reason” in the phrase“reason to believe” would mean cause orjustification. If the assessing officer has cause orjustification to know or suppose that income hadescaped assessment, it can be said to have reason tobelieve that an income had escaped assessment.The expression cannot be read to mean that the assessing officer should have finally ascertained thefact by legal evidence or conclusion. The function ofthe assessing officer is to administer the statute withsolicitude for the public exchequer with an inbuiltidea of fairness to taxpayers. 20. As observed by the Delhi High Court (sic theSupreme Court) in Central Provinces Manganese OreCo. Ltd. v. ITO for initiation of action under Section147(a) (as the provision stood at the relevant time)fulfilment o