WP(C)/7482/2017 on 21 July, 2025

Gauhati High Court

WP(C)/7482/2017 on 21 July, 2025

IN THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
PRINCIPAL SEAT
W.P(C) NO. 7101/2017
1. Mukund System and Networking Private
Limited
Third Floor, Royal Arcade, Part-II, B. Baruah Road,
Ulubari, P.O. Guwahati-781007, Police Station: Paltan
Bazar, District: Kamrup Metro (Assam)

2. Shri Rishi Gupta (Formerly Shri Rishi Kumar
Gupta)
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,
District: Kamrup Metro (Assam)

........Petitioners

-Versus-

Page 1 of 70
Police Station: Dispur, District: Kamrup (Metro),
Assam
3. Principal Commissioner/Commissioner of
Income Tax, Guwahati-2, Guwahati Aayakar
Bhawan, Christian Basti, G.S. Road, P.O. Guwahati-
781005, Police Station: Dispur, District: Kamrup
(Metro), Assam
4. Principal Chief Commissioner of Income Tax
(CCA), (NER), Guwahati, Office of the Principal
Chief Commissioner of Income Tax (NER), First
Floor, Aayakar Bhawan, Christian Basti, G.S. Road,
P.O. Guwahati-781005, Police Station: Dispur,
District: Kamrup (Metro), Assam
5. Central Board of Direct Taxes, Represented by
its Chairperson, under the Ministry of Finance
(Department of Revenue), Government of India,
North Block, New Delhi-110001
6. Union of India
Represented by the Secretary to the Ministry of
Finance, Government of India, New Delhi.

........Respondents

W.P(C) NO. 7102/2017
1. Mukund Infotel Private Limited
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,
District: Kamrup Metro (Assam)

2. Shri Rishi Gupta (Formerly Shri Rishi Kumar
Gupta)
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,
District: Kamrup Metro (Assam)

........Petitioners

-Versus-

1. The Assistant/Deputy Commissioner of
Income Tax, Circle-4, Guwahati

Page 2 of 70
Room No. 502, 5th Floor, Aayakar Bhawan, Christian
Basti, G.S. Road, P.O. Guwahati-781005, Police
Station: Dispur, District: Kamrup (Metro), Assam
2. Additional/Joint Commissioner of Income Tax,
Range-4, Guwahati, Aayakar Bhawan, Christian
Basti, G.S. Road, P.O. Guwahati-781005, Police
Station: Dispur, District: Kamrup (Metro), Assam
3. Principal Commissioner/Commissioner of
Income Tax, Guwahati-2, Guwahati Aayakar
Bhawan, Christian Basti, G.S. Road, P.O. Guwahati-
781005, Police Station: Dispur, District: Kamrup
(Metro), Assam
4. Principal Chief Commissioner of Income Tax
(CCA), (NER), Guwahati, Office of the Principal
Chief Commissioner of Income Tax (NER), First
Floor, Aayakar Bhawan, Christian Basti, G.S. Road,
P.O. Guwahati-781005, Police Station: Dispur,
District: Kamrup (Metro), Assam
5. Central Board of Direct Taxes, Represented by
its Chairperson, under the Ministry of Finance
(Department of Revenue), Government of India,
North Block, New Delhi-110001
6. Union of India
Represented by the Secretary to the Ministry of
Finance, Government of India, New Delhi.

........Respondents

W.P(C) NO. 7103/2017
1. Mukund Infrastructure Private Limited
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,
District: Kamrup Metro (Assam)

2. Shri Rishi Gupta (Formerly Shri Rishi Kumar
Gupta)
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,
District: Kamrup Metro (Assam)

........Petitioners

Page 3 of 70
-Versus-

1. The Assistant/Deputy Commissioner of
Income Tax, Circle-4, Guwahati Room No. 502, 5th
Floor, Aayakar Bhawan, Christian Basti, G.S. Road, P.O.
Guwahati-781005, Police Station: Dispur, District:
Kamrup (Metro), Assam
2. Additional/Joint Commissioner of
Income Tax, Range-4, Guwahati, Aayakar Bhawan,
Christian Basti, G.S. Road, P.O. Guwahati-781005,
Police Station: Dispur, District: Kamrup (Metro), Assam
3. Principal Commissioner/Commissioner of
Income Tax, Guwahati-2, Guwahati Aayakar
Bhawan, Christian Basti, G.S. Road, P.O. Guwahati-
781005, Police Station: Dispur, District: Kamrup
(Metro), Assam
4. Principal Chief Commissioner of Income
Tax (CCA), (NER), Guwahati, Office of the
Principal Chief Commissioner of Income Tax (NER),
First Floor, Aayakar Bhawan, Christian Basti, G.S.
Road, P.O. Guwahati-781005, Police Station: Dispur,
District: Kamrup (Metro), Assam
5. Central Board of Direct Taxes, Represented
by its Chairperson, under the Ministry of Finance
(Department of Revenue), Government of India,
North Block, New Delhi-110001
6. Union of India
Represented by the Secretary to the Ministry of
Finance, Government of India, New Delhi.

........Respondents

W.P(C) NO. 7104/2017
1. Pawan Communications Private Limited
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,
District: Kamrup Metro (Assam)

2. Shri Rishi Gupta (Formerly Shri Rishi Kumar
Gupta)
Abhay Chandra Dutta Lane, F.A. Road, Kumarpara,
P.O. Guwahati-781001, Police Station: Bharalumukh,

Page 4 of 70
District: Kamrup Metro (Assam), represented by the
Director, Pawan Communications Pvt. Ltd

........Petitioners

-Versus-

1. The Assistant/Deputy Commissioner of
Income Tax, Circle-4, Guwahati Room No. 502, 5th
Floor, Aayakar Bhawan, Christian Basti, G.S. Road, P.O.
Guwahati-781005, Police Station: Dispur, District:
Kamrup (Metro), Assam
2. Additional/Joint Commissioner of Income Tax,
Range-4, Guwahati, Aayakar Bhawan, Christian
Basti, G.S. Road, P.O. Guwahati-781005, Police Station:
Dispur, District: Kamrup (Metro), Assam
3. Principal Commissioner/Commissioner of
Income Tax, Guwahati-2, Guwahati Aayakar
Bhawan, Christian Basti, G.S. Road, P.O. Guwahati-
781005, Police Station: Dispur, District: Kamrup
(Metro), Assam
4. Principal Chief Commissioner of Income
Tax (CCA), (NER), Guwahati, Office of the Principal
Chief Commissioner of Income Tax (NER), First Floor,
Aayakar Bhawan, Christian Basti, G.S. Road, P.O.
Guwahati-781005, Police Station: Dispur, District:
Kamrup (Metro), Assam
5. Central Board of Direct Taxes, Represented
by its Chairperson, under the Ministry of Finance
(Department of Revenue), Government of India,
North Block, New Delhi-110001
6. Union of India
Represented by the Secretary to the Ministry of
Finance, Government of India, New Delhi.

........Respondents

W.P(C) NO. 7482/2017
1. Pawan Cement Company Private Limited
Represented by its director Shri Rajesh Kumar Mittal,
Shanti Sadan, Alok Press, Bye Land Road, Narayan
Nagar, Kumarpara, P.O. Guwahati-781001, Police
Station: Bharalumukh, District: Kamrup Metro (Assam)

Page 5 of 70
2. Shri Rajesh Kumar Mittal
Shanti Sadan, Alok Press, Bye Land Road, Narayan
Nagar, Kumarpara, P.O. Guwahati-781001, Police
Station: Bharalumukh, District: Kamrup Metro (Assam)

........Petitioners

-Versus-

1. The Assistant/Deputy Commissioner of
Income Tax, Circle-4, Guwahati Room No. 502, 5th
Floor, Aayakar Bhawan, Christian Basti, G.S. Road, P.O.
Guwahati-781005, Police Station: Dispur, District:
Kamrup (Metro), Assam
2. Additional/Joint Commissioner of Income Tax,
Range-4, Guwahati, Aayakar Bhawan, Christian
Basti, G.S. Road, P.O. Guwahati-781005, Police Station:
Dispur, District: Kamrup (Metro), Assam
3. Principal Commissioner/Commissioner of
Income Tax, Guwahati-2, Guwahati Aayakar
Bhawan, Christian Basti, G.S. Road, P.O. Guwahati-
781005, Police Station: Dispur, District: Kamrup
(Metro), Assam
4. Principal Chief Commissioner of Income
Tax (CCA), (NER), Guwahati, Office of the Principal
Chief Commissioner of Income Tax (NER), First Floor,
Aayakar Bhawan, Christian Basti, G.S. Road, P.O.
Guwahati-781005, Police Station: Dispur, District:
Kamrup (Metro), Assam
5. Central Board of Direct Taxes, Represented
by its Chairperson, under the Ministry of Finance
(Department of Revenue), Government of India,
North Block, New Delhi-110001
6. Union of India
Represented by the Secretary to the Ministry of
Finance, Government of India, New Delhi.

........Respondents

Page 6 of 70
-BEFORE-
HON'BLE MR. JUSTICE SOUMITRA SAIKIA

Advocate for the petitioner :Mr. R Goenka, Sr. Advocate
Assisted by Mr. U.K. Borthakur, Advocate

Advocate for the respondents :Mr. S.C. Keyal, Standing Counsel, Income Tax

Dates of Hearing : 13.06.2024, 20.06.2024, 23.07.2024,
06.08.2024, 20.09.2024, 04.03.2025
07.04.2025

Date of Judgment and Order: 21.07.2025

JUDGMENT AND ORDER (CAV)

These writ petitions are preferred by the assessees assailing the

proceedings initiated under Section 147 of the Income Tax Act. It

raises similar questions of law and are therefore taken up together

for hearing and disposal.

2. In W.P(C) No. 7101/2017; W.P(C) No. 7102/2017; W.P(C) No.

7103/2017 and W.P.(C) No. 7104/2017, the petitioners put into

challenge the recording of reasons for issuance of notice under

Section 148 of the Income Tax Act, 1961 (hereinafter referred to as

"the Act"), the notice under Section 148 of the Act, the Notice under

Sub-Section 2 of Section 143 dated 23.05.2017 as well as the notices

under Sub-Section 1 of Section 142 dated 23.05.2017 and

31.10.2017.

3. In W.P(C) No. 7482/2017, the petitioner is a private limited

company. The company has submitted its return of income for the

Page 7 of 70
assessment years 2010-11 on 14.10.2010 showing total income at

Rs. NIL. Subsequently, respondent No. 1 re-opened the case of the

writ petitioner under Section 148 of the Income Tax Act, 1961 by

issuing of notice dated 31.03.2017 under Section 148 of the Act. In

response to the Notice under Section 148 of the Act, the petitioner

submitted its return of income on 09.08.2017 and thereafter vide its

letter dated 10.08.2017 applied to the respondent No. 1 to provide

its ground on which the notice under Section 148 of the Act was

issued. The respondent No. 1 vide letter dated 30.08.2017

communicated to the petitioner copy of the reasons recorded for

issue of notice under Section 148 of the Act. Hence the writ petition

has been filed put into challenge the recording of reasons for

issuance of notice under Section 148 of the Income Tax Act, 1961

(hereinafter referred to as "the Act"), the notice under Section 148

dated 31.03.2017, the notice under Sub-Section (2) of Section 143

dated 06.11.2017 and notice under Sub-Section (1) of Section 142

dated 06.11.2017.

4. Since the learned counsel for the petitioner has urged W.P.(C)

No. 7103/2017 before the Court as a lead case, the facts pertaining

to the said writ petition are referred to wherever required. However,

Page 8 of 70
the specific facts in respect to the other writ petitions will be referred

to accordingly.

5. The petitioner company is a private limited company

incorporated under the Companies Act, 1956 on the 14 th day of

February, 2008. The petitioner has registered office at Abhay

Chandra Dutta Lane, F.A. Road, Kumarpara, Guwahati-781001. The

petitioner is a regular assessee under the Income Tax Act, 1961. The

petitioner is represented in the present proceedings by one of the

Directors who is arrayed as petitioner No. 2.

6. The case projected before this Court that for the previous

Financial year 2009-10 relevant to assessment year 2010-11, the

petitioner had earned income related to renting of immovable

property and did not commence its business activities on mobile

and other telephone connectivity services. It is submitted that it's

original return of income under Section 139 voluntarily for the said

year on 04.03.2011 disclosing total taxable income as Rs. NIL.

Thereafter a search and seizure operation and survey were carried

on under Section 132 in the premises belonging to the petitioner

company. The petitioner thereafter submitted an identical return on

08.09.2014 in response to the notices received from the Department

under Section 153A/153C read with Section 142(1) of the Act.

Page 9 of 70
Thereafter a scrutiny assessment was made under Section 143(3)

read with Section 153C of the Act. After considering the materials in

support of the return as required by the Office of the respondent No.

1 making the assessment of the total income at NIL by accepting the

income disclosing the return. Thereafter on 31.03.2017 a notice

under Section 148(1) was issued by the respondent No. 1 to the

petitioner No. 1 to assess/re-assess its income for the assessment

year 2010-11 on the ground that she had reasons to believe that

income had escaped assessment within the meaning of Section 147.

The petitioner No. 1 thereafter as per procedure prescribed

submitted a return on 27.04.2017 which was identical in respect of

the earlier returns dated 04.03.2011 and 08.09.2014. Thereafter, the

petitioner applied for a certified copy of the reasons recorded. The

reasons were thereafter supplied to the petitioner which however did

not indicate the date it was recorded on.

7. It is contended on behalf of the petitioners that the

respondent No. 1 made a statement that information was available to

the assessing officer that the petitioner No. 1 had raised share capital

of Rs. 1,51,00,000.00. It was further mentioned in the reasons that

this information was received from the DIT(Investigation), Kolkata

that most of the allottee companies were paper companies without

Page 10 of 70
any genuine business. In the reasons, it was mentioned that most of

the companies were owned by an individual named Shri Narendar

Kumar Jain. During the survey conducted, Shri Narendra Kr. Jain had

sworn on oath on 11.04.2014 that he dealt in dubious transaction as

a bogus entry provider and providing bogus unsecured loans.

However, these reasons were not supported by any tangible

materials or details as to how the escapement of income of the writ

petitioner company for the assessment year 2010-11 had any link

with the so-called activities of the said Shri Narendara Kr. Jain. On

such vague information based on allegations without any tangible

materials showing the link between the information and the

escapement of income of the writ petitioner, the respondent No. 1

held that it had reasons to believe that income of Rs. 1,51,00,000.00

escaped assessment for the assessment year 2010-11 and as such,

notice under Section 148(1) of the Income Tax Act, 1961 was issued

to the petitioners. The petitioners in response to the notice served

filed its objections against the assessment/re-assessment

proceedings by way of written submissions filed on 12.10.2017

objecting to the proposed action sought to be taken and that the

same were violative of the procedure and the provisions prescribed

under Section 147 of the Income Tax Act, 1961. Thereafter, by order

dated 24.10.2017, the assessing officer rejected the objections raised

Page 11 of 70
by the petitioner company, although the specific objections raised by

the petitioner were not specifically met by the authorities.

8. The learned counsel for the petitioner submits that the

materials/basis for stating in the reasons recorded that most of the

allottee companies were paper companies with no genuine business

of their own have not been indicated. No such material/basis is

disclosed in the reasons recorded to lead to the formation of such a

belief. Details of the names and addresses of the allottee companies,

number of shares allotted, amount received from them, mode of

receipt etc. have not been disclosed in the reasons recorded, and

therefore, totally opaque.

9. It is contended on behalf of the petitioner that it was

incumbent upon the assessing officer to incorporate or indicate in the

reasons recorded, at least the very essential part of details of "data

prepared by the DIT(Investigation), Kolkata" referred to in the

reasons and how it led to formation of belief that the petitioner's

income had escaped assessment. This had not been done. The

essential materials to link the reasons with belief arrived at by the

assessing officer is absent. "Narendra Kumar Jain" referred to in the

reasons recorded in whose case survey was conducted on

11.04.2014 is a stranger. No case has been made out that he

Page 12 of 70
provided any accommodation entry to the petitioner. In the reasons

recorded also there is no such statement attributed to Narendra

Kumar Jain where he has stated that he provided any

accommodation entry to the petitioner company. His statement was

not recorded in connection with the petitioner company's case. Any

information received from the Investigation wing/valuation officer or

from any other source, per se cannot be said to be a "tangible

material" for reopening of a case in the absence of any enquiry

conducted by the assessing officer to verify its correctness, relevance

or otherwise its link to the alleged escapement of income. In the

Instant case the reasons do not disclose that after receipt of

information any such enquiry was conducted by the assessing officer.

The assessing officer merely accepted the vague information in a

mechanical manner without application of his mind.

10. The learned counsel for the petitioner submits that there is no

material/evidence to show that the funds for share capital emanated

from the petitioner company. The petitioner company's assessment

for the assessment year 2010-11 was made on 31.03.2015 vide

order passed under Sections 153C/143(3) by the assessing officer

after proper verification of all the seized material details, documents

and audited accounts. The aforesaid order dated 31.03.2015 was

Page 13 of 70
passed with the prior approval of the Additional Commissioner of

Income Tax, Range-4, Guwahati (Respondent No.2) as per provisions

of section 153D of the Act. There was a search & seizure operation in

the case of the petitioner companies on 11.07.2012 and no

incriminating material regarding share capital was found during the

course of search. The information regarding increase in share capital

was disclosed by the petitioner in its audited accounts which was

already on record. (Annexure-2 of the writ petition). Thus, the

petitioner had necessarily made full and true disclosure of all material

facts necessary for completion of its assessment and there was no

failure on the part of the petitioner on this count.

11. Referring to the provisions of Section 147, it is submitted that

as per the first proviso to Section 147 of the Income Tax Act, 1961,

where an assessment has been made under Section 143(3) of the

Act, no action shall be taken under Section 147 of the Act after

expiry of four years from the end of the relevant assessment year,

unless any Income chargeable to tax has escaped assessment for

such assessment year by reason of failure on the part of the

assessee to disclose fully and truly all material facts necessary for his

assessment, for that assessment year. The assessing officer has not

disclosed in the reasons recorded as to which fact or material was

Page 14 of 70
not disclosed by the assessee fully and truly which is necessary for

the assessment of that assessment year so as to establish the vital

link between the reasons and the evidence. This vital link is

necessary as a safe guard against arbitrary re-opening of the

concluded assessment. It is submitted that there is no whisper or

allegation in the reasons recorded to the effect that there was failure

on the part of the petitioner to disclose fully and truly all material

facts necessary for its assessment for that year.

12. It is submitted that while rejecting the petitioner's objections

dated 09-10-2017 on the reasons recorded by the assessing officer

(Annexure "16"), the assessing officer in her order dated 24-10-2017

(Annexure "17") has introduced certain new facts, which were not

there in the reasons recorded by the assessing officer. It is submitted

that it is a settled law that in the event of challenge to the

jurisdiction to issue notice under Section 148 of the Act on the basis

of reasons recorded by an assessing officer, the reasons are required

to be read as these are recorded and no

addition/substitution/deletion are permissible to such reasons.

Therefore, introduction of new facts by the assessing officer was not

permissible as per settled law. Further, while rejecting the objections

of the petitioner vide her order dated 24.10.2017, the assessing

Page 15 of 70
officer has referred to the provisions of Explanation 2(ca) to Section

147 and has stated that in the instant case, information has been

received from the Directorate of Investigation that the petitioner

company has raised share capital with the allotment on 31.03.2010

to the tune of Rs. 1,51,00,000/- with the face value of Rs. 10/- and

premium of Rs. 90/-.

13. Referring to Explanation 2(ca) inserted by the Finance Act,

2016 w.e.f. 01.06.2016, it is submitted that Explanation 2 lays down

the instances which may be deemed to be cases where income

chargeable to tax has escaped assessment. Under Clause (ca), the

notice may be issued by the assessing officer on the basis of

information or document received from the prescribed authority

under sub-section 2 of Section 133C. It is submitted that Section

133C was introduced in the Finance (No.2) Act, 2014 w.e.f

01.10.2014. However, no income tax authority was authorized by the

CBDT to act as prescribed authority under Section 133C till 2019.

Even in 2019 also the centralized verification scheme 2019 was

notified vide Notification No. S.O 550(E) dated 30.01.2019. Even

under the said scheme, only centralized verification centre was

authorized to issue notices and process the information or

documents and make available the outcome of the processing to the

Page 16 of 70
assessing officer. Under the said scheme, only the Commissioner of

Income Tax (e-Verification), Delhi was authorized for the purposes of

Section 133C having jurisdiction over "All Cases of persons in respect

of all incomes within the limits of all states and Union territories of

India with respect to whom there is any information in possession of

Directorate of Income-Tax (Systems), Central Board of Direct Taxes".

It is therefore submitted that not every information is included within

the scope and ambit of Section 133C(2) of the Income Tax Act,

1961. To be an information under Section 133C(2) of the Act,

requirement of Section 133C of the Act will have to be met.

14. The learned counsel for the petitioner has referred to the

statutory provision of Sections 147, 148, 149 and 151 of the Income

Tax Act, 1961. Referring to these provisions, it is submitted that the

provision of Section 148(1) required recording of reasons within the

meaning of Section 147 before issuance of Notice under Section

148 and such provision is mandatory and such reasons are subject to

judicial scrutiny. It is submitted that the reasons are to be read as

they were recorded by the assessing officer. No substitution or

deletion is permissible. No addition can be made to those reasons

and no inference can be called to be drawn on the basis of the

reasons not recorded. The Assessing Officer, in the event of

Page 17 of 70
challenge to the reasons, must be able to justify the same based on

materials available on record. In support of his contentions, the

learned counsel for the petitioner refers to the judgment rendered by

the following Judgments:

1. Guwahati Metropolitan Development Authority Vs. C.I.T,

reported in (2017) 390 ITR 137 (Gauhati);

2. Hindustan Lever Ltd. Vs. R.B. Wadkar, A.C.I.T, reported in

(2004) 268 ITR 332(Bombay);

3. Assam Co. Ltd. Vs. Union of India, reported in (2005) 275

ITR 609 (Gauhati);

4. I.T.O. Vs. Madnani Engineering Works Ltd. reported in

(1979) 118 ITR 1 (SC) and

5. Northern Exim Pvt. Ltd. Vs. D.C.I.T., reported in (2013) 357

ITR 586 (Delhi)

15. The second limb of argument made by the learned counsel for

the petitioner is that the term "reason to believe" suggests that the

belief must be that of an honest and reasonable person, based on

reasonable grounds and though the Assessing Officer may act on

direct or substantial evidence, but he cannot act on mere suspicion,

gossip or rumor. It is submitted that the grounds or reasons, which

Page 18 of 70
led to the formation of belief as contemplated by Section 147 of the

Act of 1961 must have a material bearing on the question of

escapement of income of the assessee from assessment. It is

submitted that the expression "reason to believe" does not mean a

purely subjective satisfaction of the Assessing Officer and it must be

held in good faith and cannot be merely pretense or based on

extraneous or irrelevant consideration. It is submitted that there

must be a "live link" between the material and the formation of belief

about the escapement of income. It is submitted that if there is no

rational and intelligible nexus between the reasons and the belief so

that on such reasons no one properly instructed on facts and law

could reasonably entertain the belief, the conclusion would be

inescapable that the Assessing Officer did not have reason to believe

that any part of the assessee had escaped his assessment. In

support of his contention, he relies on the Judgments rendered in

I.T.O Vs. Lakhmani Mewal Das, reported in (1976) 103 ITR 437 (SC);

JCIT Vs. George Williamson (Assam) Ltd. reported in (2002) 258 ITR

126 (Gauhati); CIT Vs. Atul Jain & Vinita Jain, reported in (2008) 299

ITR 383 (Delhi); Assam Co. Ltd. Vs Union of India & Ors, reported in

(2005) 275 ITR 609 (Gauhati) and CIT Vs. Kelvinator of India Ltd.,

reported in (2010) 320 ITR 561 (SC).

Page 19 of 70
16. The third limb of argument made by the learned counsel for

the petitioner is that the Court cannot go into the sufficiency or

adequacy of the material and substitute its own opinion for that of

the Income Tax Officer on the point as to whether action should be

initiated for re-opening assessment. It is not any and every material

howsoever vague and indefinite or distant, remote or far-fetched,

which would warrant the formation of belief relating to escapement

of the income of the assessee from assessment. The Court cannot

substitute its own opinion with that of the Income Tax Officer. The

learned counsel for the petitioner again refers to the Judgments of

Lakshmani Mewal Das (Supra); George Williamson (Assam) Ltd

(Supra) and Sesa Sterlite (India) Ltd Vs. A.C.I.T., reported in (2019)

417 ITR 334 (Bombay).

17. The forth limb of argument made by the learned counsel for

the petitioner is that if the re-assessment proceedings are to be

initiated after a period of four years from the end of the relevant

assessment year in terms of first proviso to Section 147 of the

Income Tax Act, 1961, on the ground that the assessee failed to

disclose fully and truly all the material facts necessary for the

assessment for that year, then the Assessing Officer must state so in

the reasons recorded as to what was the material fact that was not

Page 20 of 70
disclosed by the assessee and the action should be founded on such

reasons. In support of his contentions, the learned counsel for the

petitioner has relied upon the Judgments rendered in ACIT Vs. CEAT

Ltd, reported in (2022) 449 ITR 171 (SC); CIT Vs. Sonitpur Solvex

Ltd., reported in (2013) 352 ITR 305 (Gauhati); Cedric De Soouza

Faria Vs. DCIT, reported in (2018) 400 ITR 30 (Bombay); Usha

Exports Vs. ACIT, reported in (2020) 312 CTR 237 (Bombay) ; Fenner

India Ltd. Vs. DCIT, reported in (2000) 241 ITR 672 (Madras);

Haryana Acrylic Manufacturing Vs. CIT, reported in (2009) 308 ITR

38 (Delhi) and SABH Infrastructure Ltd. Vs. ACIT, reported in (2017)

398 ITR 198 (Delhi).

18. The fifth limb of argument raised by the learned counsel for the

petitioner is that the duty cast on the assessee is only to make full

and true disclosure of all primary facts. It is not for him to tell the

Assessing Officer what inferences, whether of facts or law should be

drawn by the Assessing Officer. To refer the meaning "true and full

disclosure", the learned counsel for the petitioner has placed reliance

on the Judgments of the Apex Court rendered in Calcutta Discount

Co. Ltd. Vs. ITO, reported in (1961) 41 ITR 191 (SC); Parshuram

Pottery Works Co. Ltd. Vs. ITO, reported in (1977) 106 ITR 1 (SC).

Page 21 of 70
The learned counsel for the petitioner also refers to the Judgment of

this Court rendered in Sonitpur Solvex Ltd (Supra).

19. The sixth limb of argument before this Court is that the

information received from the investigation Wing is to the effect that

the assessee is a beneficiary of accommodation entries but no

further enquiry was undertaken by the assessing officer to verify its

correctness, relevance or otherwise, then such information per se

cannot be said to be a "tangible material" for re-opening of a case.

In the present case, the Assessing Officer mechanically accepted the

vague information received without any application of mind to

conclude that there was reason to believe about escapement of

income of the petitioner assessee, on the materials received from the

investigation wing. The learned counsel for the petitioner strongly

relied upon the Judgment rendered in JCIT Vs. George Williamson

(Assam) Ltd, reported in (2002) 258 ITR 126 (Gauhati) as also

Judgments rendered in Chhugamal Raj Pal Vs. S.P. Chaliha & Ors,

reported in (1971) 79 ITR 63 (SC); PCIT Vs. RMG Polyvinyl (I) Ltd,

reported in (2017) 396 ITR 5 (Delhi); PCIT Vs. Meenakshi Overseas

Pvt. Ltd., reported in (2017) 395 ITR 677 (Delhi); CIT Vs. SFIL Stock

Brooking Ltd., reported in (2010) 325 ITR 285 (Delhi); CIT Vs.

Insecticides (India) Ltd., reported in (2013) 357 ITR 330 (Delhi) CIT

Page 22 of 70
Vs. Atual & Vinita Jain (Supra); ACIT Vs. Dhariya Constructions Co.

reported in (2010) 328 ITR 515 (SC).

20. The learned counsel for the petitioner further questions the

impugned re-assessment proceedings on the ground that the

Assessing Officer in the garb of exercising powers under Section 147

of the Income Tax Act, 1961 cannot institute a roving enquiry with

the object of fishing out material. It is submitted that the Assessing

Officer is making an attempt to verify the share capital raised by the

assessee company on the ground as most of the allottee companies

are paper companies with no genuine business of their own. This is

nothing but an attempt by the assessing officer to make a roving and

fishing enquiry which is not permissible while exercising powers

under Section 147. In support of his contentions, he has pressed into

service the Judgment of Assam Co. Ltd Vs. Union of India (Supra).

21. The further proposition raised by the learned counsel for the

petitioner is that the power to re-open a case under Section 147 of

the Act, there must "tangible material" to come to the conclusion

that there was escapement of income from the assessment. In

support of the contention, the learned counsel for the petitioner

refers to the Judgment of Kelvinator of India Ltd (Supra) and

Guwahati Metropolitan Development Authority (Supra).

Page 23 of 70
22. It is further submitted that the writ petition is maintainable

against a Notice issued under Section 148 of the Income Tax Act.

Notwithstanding the plea of alternative remedy, a writ petition is

maintainable to question a notice issued under Section 148 to re-

open the assessment in the absence of tangible and cogent materials

leading to atleast a prima facie view that income of the assessee had

escaped assessment. It is submitted that the Judgment of the Apex

Court rendered in Calcutta Discount Co. Ltd (Supra) which had laid

down the proposition is still holding its field and has not been diluted

since. In support of his contention, the learned counsel for the

petitioner also refers to the Judgments rendered in Smt. Jaswamt

Kaur Sehgal & Ors. Vs. CIT, reported in (2004) 271 ITR 475

(Gauhati) was well as Garden Finance Ltd. Vs. ACIT, reported in

(2004) 268 ITR 48 (Gujarat).

23. The learned counsel for the petitioner strenuously submits

before the Court that disclosure in the Balance Sheet amounts to full

and true disclosure of all material facts necessary for assessment. It

is submitted that the Balance Sheet which was filed by the petitioner

company disclosed all the true and full materials necessary for

assessment on the basis of which the scrutiny assessment were also

conducted. Therefore, there was no suppression of materials before

Page 24 of 70
the authorities concerned and in the absence thereof the Assessing

Officer could not have come to the conclusion that there was

escapement of income without arriving at a conclusion as to how the

Balance Sheet filed by the petitioner failed to disclose full and true

materials necessary for assessment. The learned counsel for the

petitioner submits that the ratio of the Judgment rendered in CIT Vs.

Corporation Bank Ltd., reported in (2002) 254 ITR 791 (SC) by the

Apex Court was considered elaborately and discussed by the Gauhati

High Court in Sonitpur Solvex Ltd (Supra). Similar view was adopted

by the Gauhati High Court in another Judgment rendered in DCIT

Vs. Naginimara Veener and Saw Mills Pvt. Ltd., reported in (2000)

241 ITR 636 (Gauhati). It is submitted by the learned counsel for the

petitioner that in view of the submissions made above and the law

laid down by the various Courts including the Apex Court and the

Gauhati High Court which have been referred to the proceedings

sought to be initiated against the writ petitioners under Section 147

by the Assessing Officer is totally uncalled for and contrary to the

provisions of law and the same should there be interfered with, set

aside and the impugned Notices as well as the reasons be set aside

and quashed and the writ petitions be allowed.

Page 25 of 70
24. Mr. S.C. Keyal, learned Standing Counsel appearing for the

Income Tax Department strongly disputes to the contentions raised

by the learned counsel for the petitioner. It is submitted that in

compliance to the notice under section 148 of Income Tax Act dated

31/3/2017, the assessee company filed a return on 27.04.2017 for

the assessment year 2010-11 showing total income at Rs.

1,64,62,050 and the tax payable on it at Rs. 59,80,122 and

consequent to a search and seizure operation conducted in the case,

assessee company had filed return under section 153(A) vide

acknowledgement No. 345082611040914 dated 04.09.2014 declaring

total income at Rs.1,64,62.050/- and tax payable thereon was shown

as Rs. 65,76,379/- and accordingly assessment under section 143(3)

read with section 153(A) was completed on 31.03,2015 determining

total income at Rs. 2,61,17,250/-

25. Mr. Keyal further submits that the notice under section 148

issued to the writ petitioner on 31.3.2017 for the assessment year

2010-11 based on reason to believe that income chargeable to the

tax has escaped assessment within the meaning of section 147 of the

Income Tax Act 1961.

26. It is further submitted by the learned Standing Counsel that the

return of income filed on 24.07.2017 in response to the notice under

Page 26 of 70
section 148 of Income Tax Act was identical in all respect with the

aforesaid revised return filed on 04.09.2014 since the return filed by

the assessee company in response to the section 148 proves that the

writ petitioner participate in the proceedings. In response to the

request of the writ petitioner the reason recorded under section 148

of Income Tax Act, certified copy of the same was supplied to the

assesse company dated 07.09.2017.

27. It is submitted by the learned Standing Counsel that the

assessment officer formed the belief that there is escapement of

income tax of income was clearly mentioned therein and necessary

approval of the competent authority, i.e., the Commissioner of

Income Tax had been duly obtained online within the prescribed

period.

28. It is further submitted by the learned Standing Counsel that

notice was issued on 31.03.2017 with prior online approval of

Principal Commissioner of Income Tax, Guwahati-2 Guwahati vide his

approval dated 31.03.2017. The reasons for reopening is clearly

mentioned in the approval sent to the Principal Commissioner of

Income Tax compliance with the mandatory provision of section 151

of the act. The information based on which proceedings under

section 147 was initiated was received after the completion of

Page 27 of 70
assessment under section 143(3)/153(A). The proceeding was

initiated based on the information available to the assessment officer

who has jurisdiction to know that income has escaped and reason to

believe and has prima facie materials to reopen the case. The

information was received as the directorate of investigation which

forms the prescribed authority as per section 133 of income tax act

and accordingly reason to believe was formed on the basis of

information received which cannot be said without jurisdiction.

29. It is further submitted by the learned Standing Counsel that the

information was received after conducting necessary enquiry that the

share capital raised by the assessee company requires verification as

most of the allotted companies are paper companies with no genuine

business of their own. And these companies belong to well known

entry operator of Kolkata, Shri Narendra Kr Jain who had sworn on

oath that he is an accommodation entry provider who provides bogus

accommodation entries, bogus unsecured loan, etc in lieu of cash

commission. A distinctive feature of a paper company is one which is

trading only in shares with no other substantial business-oriented

transaction as such featuring in its balance sheet and profit and loss

account. It is submitted that a paper company is established to

involve in 'jamakharchi'/ accommodation purpose not for any other

Page 28 of 70
work. It is submitted that income chargeable to tax which has

escaped assessment exceeds Rs. 1 lakh and the assessment year

falls within the time limit of 6 years. Therefore notice under section

148 was validly issued after taking prior approval of the jurisdictional

commissioner of income tax.

An independent enquiry is not required for formation of a

reason to believe, enquiry is to follow during the course of

assessment proceedings, reason to believe was formed on the

objective satisfaction of assessing officer based on specific

information received from DDIT(Inv), unit-2(2), working under

DIT(Inv), Guwahati, which forms prescribed authority under section

133C of the Act.

30. Mr. Keyal further submits that the writ petitioner has already

filed return in response under section 148 of the act and participate

in the assessment under section 147 in the act. The writ petition is

not maintainable on the ground that the writ petitioner has

alternative remedy by way of filing appeal against assessment order.

It is submitted that the notification relied by the writ petitioner is not

applicable in the instant case as the same is issued subsequently.

The learned counsel for the respondents relies upon the following

authorities in support of his contentions:

Page 29 of 70
1. Girish Kumar Agarwalla Vs. The Assistaint Commisisoner of
Income Tax, reported in 2023 (0) Supreme (Gau) 1358;

2. Rochana Agarwal Vs. Assistant Commissioner of Income Tax,
reported in 2022 Legal Eagel (ALD) 154 and

3. Commissioner of Income Tax & Ors. Vs. Chhabil Das
Agarwal, reported in 2014 (1) SCC 603

31. Heard learned counsel for the parties. Perused the pleadings.

The moot questions before this Court firstly is whether the

proceedings under Section 147 pursuant to a notice under Section

148 which had been initiated on the basis of information admittedly

received from the Director of Investigation, Kolkata, Income Tax

Department that the share capital raised by the assessee company

relates to certain companies which are found to be companies

existing only on paper and are found to be traceable to one Shri

Narendra Kr. Jain and who on an affidavit on oath also admitted to

this fact can be the basis of re-opening of assessments under Section

147 of the Income Tax Act, 1961 without any further enquiry by the

assessing officer and secondly whether such information can be

considered to be "tangible material" and whether it has a "livelink"

for initiating the proceedings under Sections 147 and 148 of the

Income Tax Act, 1961.

Page 30 of 70
32. Before proceeding to examine this question, it is necessary to

refer to the relevant statutory provisions. The relevant statutory

provisions are extracted below:

"133C. (1) The prescribed income-tax authority may, for the
purposes of verification of information in its possession relating to any
person, issue a notice to such person requiring him, on or before a
date to be specified therein, to furnish information or documents
verified in the manner specified therein, which may be useful for, or
relevant to, any inquiry or proceeding under this Act.
(2) Where any information or document has been received in
response to a notice issued under sub-section (1), the prescribed
income-tax authority may process such information or document and
make available the outcome of such processing to the Assessing
Officer. [Inserted vide Finance Act, 2016 w.e.f. 01.06.2016]
(3) The Board may make a scheme for centralised issuance of notice
and for processing of information or documents and making available
the outcome of the processing to the Assessing Officer. [Inserted vide
Finance Act, 2017 w.e.f. 01.04.2017]
Explanation. In this section, the term "proceeding" shall have the
meaning assigned to it in clause (b) of the Explanation to section
133A.
Income escaping assessment.
147. If the Assessing Officer has reason to believe that any income
chargeable to tax has escaped assessment for any assessment year,
he may, subject to the provisions of sections 148 to 153, assess or
reassess such income and also any other income chargeable to tax
which has escaped assessment and which comes to his notice
subsequently in the course of the proceedings under this section, or
recompute the loss or the depreciation allowance or any other
allowance, as the case may be, for the assessment year concerned
(hereafter in this section and in sections 148 to 153 referred to as the
relevant assessment year):
Provided that where an assessment under sub-section (3) of section
143 or this section has been made for the relevant assessment year,
no action shall be taken under this section after the expiry of four
years from the end of the relevant assessment year, unless any
income chargeable to tax has escaped assessment for such
assessment year by reason of the failure on the part of the assessee
to make a return under section 139 or in response to a notice issued
under sub-section (1) of section 142 or section 148 or to disclose fully

Page 31 of 70
and truly all material facts necessary for his assessment, for that
assessment year:
Provided further that nothing contained in the first proviso shall apply
in a case where any income in relation to any asset (including
financial interest in any entity) located outside India, chargeable to
tax, has escaped assessment for any assessment year:
Provided also that the Assessing Officer may assess or reassess such
income, other than the income involving matters which are the
subject matters of any appeal, reference or revision, which is
chargeable to tax and has escaped assessment.
Explanation 1.-Production before the Assessing Officer of account
books or other evidence from which material evidence could with due
diligence have been discovered by the Assessing Officer will not
necessarily amount to disclosure within the meaning of the foregoing
proviso.
Explanation 2.-For the purposes of this section, the following shall
also be deemed to be cases where income chargeable to tax has
escaped assessment, namely:-
(a) where no return of income has been furnished by the assessee
although his total income or the total income of any other person in
respect of which he is assessable under this Act during the previous
year exceeded the maximum amount which is not chargeable to
income-tax;
(b) where a return of income has been furnished by the assessee but
no assessment has been made and it is noticed by the Assessing
Officer that the assessee has understated the income or has claimed
excessive loss, deduction, allowance or relief in the return;
(ba) where the assessee has failed to furnish a report in respect of
any international transaction which he was so required under section
92E;
(c) where an assessment has been made, but-
(i) income chargeable to tax has been underassessed; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under
this Act; or (iv) excessive loss or depreciation allowance or any other
allowance under this Act has been computed;
[(ca) where a return of income has not been furnished by the
assessee or a return of income has been furnished by him and on the
basis of information or document received from the prescribed
income- tax authority, under sub-section (2) of section 133C, it is
noticed by the Assessing Officer that the income of the assessee
exceeds the maximum amount not chargeable to tax, or as the case

Page 32 of 70
may be, the assessee has understated the income or has claimed
excessive loss, deduction, allowance or relief in the return;]
(d) where a person is found to have any asset (including financial
interest in any entity) located outside India.
Explanation 3.-For the purpose of assessment or reassessment under
this section, the Assessing Officer may assess or reassess the income
in respect of any issue, which has escaped assessment, and such
issue comes to his notice subsequently in the course of the
proceedings under this section, notwithstanding that the reasons for
such issue have not been included in the reasons recorded under sub-
section (2) of section 148.
Explanation 4.-For the removal of doubts, it is hereby clarified that the
provisions ons of this section, as amended by the Finance Act, 2012,
shall also be applicable for any assessment year beginning on or
before the 1st day of April, 2012.
148 Issue of notice where income has escaped assessment.
148. (1) Before making the assessment, reassessment or re-
computation under section 147, the Assessing Officer shall serve on
the assessee a notice requiring him to furnish within such period, as
may be specified in the notice, a return of his income or the income of
any other person in respect of which he is assessable under this Act
during the previous year corresponding to the relevant assessment
year, in the prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed; and the
provisions of this Act shall, so far as may be, apply accordingly as if
such return were a return required to be furnished under section 139:
Provided that in a case-
(a) where a return has been furnished during the period commencing
on the 1st day of October, 1991 and ending on the 30th day of
September, 2005 in response to a notice served under this section,
and
(b) subsequently a notice has been served under sub-section (2) of
section 143 after the expiry of twelve months specified in the proviso
to sub-section (2) of section 143, as it stood immediately before the
amendment of said sub-section by the Finance Act, 2002 (20 of 2002)
but before the expiry of the time limit for making the assessment, re-
assessment or re-computation as specified in sub-section (2)of section
153, every such notice referred to in this clause shall be deemed to be
a valid notice:
Provided further that in a case- (a) where a return has been furnished
during the period commencing on the 1st day of October, 1991 and
ending on the 30th day of September, 2005, in response to a notice
served under this section, and

Page 33 of 70
(b) subsequently a notice has been served under clause (ii) of sub-
section (2) of section 143 after the expiry of twelve months specified
in the proviso to clause (ii) of sub-section (2) of section 143, but
before the expiry of the time limit for making the assessment,
reassessment or re-computation as specified in sub-section (2) of
section 153, every such notice referred to in this clause shall be
deemed to be a valid notice.
Explanation. For the removal of doubts, it is hereby declared that
nothing contained in the first proviso or the second proviso shall apply
to any return which has been furnished on or after the 1st day of
October, 2005 in response to a notice served under this section.
(2) The Assessing Officer shall, before issuing any notice under this
section, record his reasons for doing so.
149. Time limit for notice.
149. (1) No notice under section 148 shall be issued for the relevant
assessment year,-
(a) if four years have elapsed from the end of the relevant
assessment year, unless the case falls under clause (b) or clause (c);
(b) if four years, but not more than six years, have elapsed from the
end of the relevant assessment year unless the income chargeable to
tax which has escaped assessment amounts to or is likely to amount
to one lakh rupees or more for that year;
(c) if four years, but not more than sixteen years, have elapsed from
the end of the relevant assessment year unless the income in relation
to any asset (including financial interest in any entity) located outside
India, chargeable to tax, has escaped assessment.
Explanation. In determining income chargeable to tax which has
escaped assessment for the purposes of this sub-section, the
provisions of Explanation 2 of section 147 shall apply as they apply for
the purposes of that section.
(2) The provisions of sub-section (1) as to the issue of notice shall be
subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be served
is a person treated as the agent of a non-resident under section 163
and the assessment, reassessment or re-computation to be made in
pursuance of the notice is to be made on him as the agent of such
non-resident, the notice shall not be issued after the expiry of a
period of six years from the end of the relevant assessment year.
Explanation. For the removal of doubts, it is hereby clarified that the
provisions of sub-sections (1) and (3), as amended by the Finance
Act, 2012, shall also be applicable for any assessment year beginning
on or before the 1st day of April, 2012.

Page 34 of 70
151. Sanction for issue of notice
151. (1) No notice shall be issued under section 148 by an Assessing
Officer, after the expiry of a period of four years from the end of the
relevant assessment year, unless the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner is
satisfied, on the reasons recorded by the Assessing Officer, that it is a
fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice
shall be issued under section 148 by an Assessing Officer, who is
below the rank of Joint Commissioner, unless the Joint Commissioner
is satisfied, on the reasons recorded by such Assessing Officer, that it
is a fit case for the issue of such notice.
(3) For the purposes of sub-section (1) and sub-section (2), the
Principal Chief Commissioner or the Chief Commissioner or the
Principal Commissioner or the Commissioner or the Joint
Commissioner, as the case may be, being satisfied on the reasons
recorded by the Assessing Officer about fitness of a case for the issue
of notice under section 148, need not issue such notice himself."

33. The essential facts involved in this case are not disputed. The

petitioner submitted its return of income for assessment year 2010-

11 on 04.03.2011 showing a total loss at Rs. 5,17,306/-. Thereafter a

search and seizure operation under Section 132 was conducted in

respect of the petitioner from 11.07.2012 to 03.09.2012 and the

petitioner thereafter submitted its return of income on 08.09.2014 as

per provision 153C read with Section 153A. Subsequently, a detailed

scrutiny assessment order was passed by the respondent No. 1 on

31.03.2015 under Section 153C/143(3) of the Income Tax Act. After

the assessment, the gross total income and total income assessed at

NIL by the concerned assessing officer.

34. From the Assessment order, it is seen that the said assessment

order was passed on verification and examination of the seized

Page 35 of 70
materials and the order was passed with the prior approval of the

Addl. Commissioner of Income Tax, Range-IV. Thereafter notice

dated 31.03.2017 under Section 148 of the Income Tax Act, 1961 for

the assessment year 2010-11 was issued by the respondent No. 1

putting the petitioner to notice that there are reasons to believe that

the income chargeable to tax have escaped assessment within the

meaning of Section 147. Pursuant to this notice, the petitioner as per

the provisions of the statute filed its returns showing NIL taxes.

Subsequent thereto by communication dated 23.05.2017, return of

income was submitted by the petitioner on 27.04.2017 for the

assessment year 2010-11, whereafter certain further information was

called for requiring the petitioner to attend office either in person or

by authorized representative on 14.06.2017 and to produce all

accounts and documents. The petitioner assessee by communication

dated 07.09.2017, upon receipt of the notice under Section 148,

requested the Assessing Officer to furnish the grounds on which the

assessment order under Section 148 was to be passed. These

grounds were furnished to the assessee by communication dated

07.09.2017. The grounds as furnished by the Revenue are extracted

below:

Page 36 of 70
"Reason recorded u/s 148 of the I.T. Act, 1961:-

As per information, it is found that M/s Mukund Infrastructure Pvt. Ltd
(PAN: AAFCM4378R) raised its capital to the tune of Rs. 1,51,00,000/- by
allotment of shares, with allotment a face value of Rs. 10 and premium of
Rs. 90/-. As per the information received most of the allottee companies
are paper companies which exist only on paper with no genuine business
of their own. As per the data prepared by DIT(Inv.), Kolkata most of
these companies are belong to Shri Narendra Kr. Jain. Shri Narendra
Kumar Jain during the course of survey conducted on 11.04.2014 had
shorn under oath that he is an accommodation entry provider who
provides bogus accommodation entries, bogus unsecured loan etc.

So, I have reason to believe that the assessee's income to Rs.
1,51,00,000/- chargeable to tax for the F.Y 2009-10 with relevant to A.Y.
2010-11 has escaped assessment within the meaning of section 147 of
the I.T. Act, 1961. It is a fit case for issue of notice u/s 148 of the I.T Act,
1961.

Since the case is beyond four years, the approval for issue of notice u/s
148 of the I.T. Act, 1961 is sought from the Pr. CIT, Guwahati-2,
Guwahati through proper channel."

35. From the grounds furnished to the assessee, it is evident that

the information received was on the basis of the data prepared by

DIT(Investigation), Kolkata. As per the information, the assessee

company raised capital to the tune of Rs. 1,51,00,000/- by allotment

of shares with allotment face value of Rs. 10 and premium of Rs.

90/-. As per the information received, most of the allottee companies

are paper companies which exists on paper with no genuine business

of their own. As per the data made available by the DIT(Inv),

Kolkata, most of these companies belonged to Shri Narendra Kr. Jain.

Shri Jain during the course of survey conducted on 11.04.2014 had

sworn under oath that he is an accommodation entry provider which

Page 37 of 70
provides bogus accommodation entries, bogus unsecured loan etc.

As such the Assessing Officer had recorded reason to believe that the

assessee's income of Rs. 1,51,00,000/- is chargeable to tax for the

financial year 2009-10 which is relevant to the assessment year

2010-11 and the same had escaped assessment within the meaning

of Section 147 of the Income Tax Act, 1961 and that it was a fit case

for issuance of notice under Section 148 of the Income Tax Act,

1961. The reasons also revealed that since the case is beyond four

years, approval for issuance of notice under Section 148 is sought for

from the Pr. CIT, Guwahati-2, Guwahati through proper channel.

36. Upon receipt of the grounds for issuance of notice under

Section 147, the petitioner assessee filed a detailed objection.

Thereafter, by order dated 24.10.2017, the Assessing Officer rejected

the objections raised and concluded that the proceedings under

Section 147 may validly initiated.

37. The findings in the impugned order dated 24.10.2017 rejecting

the objections raised by the petitioner are extracted below:

"Findings with reasoning and conclusion:

The submission of the assessee is considered thoroughly. The purpose
and object of the law behind initiation of proceedings u/s 147 is to
protect the interest of venue by bringing to tax the escaped income and
"reason to believe" requires relevant materials to assume that income
has escaped assessment. The reasons recorded for re opening are
absolutely and undoubtedly based on rational, relevant and material

Page 38 of 70
facts related to the case of the assessee and thus, reopening u/s 147 is
as per law and justice.

Reliance is placed the case of Pr. CIT vs Paramount Communication
(P) Ltd. [2017] 79 taxman 409 (Delhi) , Where the Hon'ble Delhi
High court held that while it is true that the court is conscious that the
reassessment Notice should not have been routinely issued, at the same
time, the nature of power is wide enough that when there is an
escapement of income and the revenue has information ruling that this
escapement is also relatable to suppression of material facts ( which
could include false claims) the power to reopen concluded assessments
can validly be exercised. The consideration which ought to weigh with
the revenue and are considered valid are the existence of tangible
material or information -- in the light of the judgement in CIT vs
Kelvinator of India [2010] 320 ITR 561/187 Taxman 312(SC).

The purpose and objective of law is crystal clear and further well settled
also as per the below mentioned judgements of the Hon'ble Supreme
court in CIT vs Rajesh Thaveri Stock Broker (P) Ltd. (161
Taxman 316) 2007 (SC) in which the Hon'ble Apex court held that -

Section 147 authorises and permits the Assessing Officer to assess or
reassess income chargeable to tax if he has reason to believe that
income for any assessment year has escaped assessment. The word
'reason' in the phrase 'reason to believe' will mean cause or justification.
If the Assessing Officer has Cause or justification to know or suppose
that income has escaped assessment, it can be said to have 'reason to
believe' that an income has escaped assessment.

The said expression cannot be read to mean that the Assessing Officer
should have finally ascertained the fact by legal evidence or conclusion.
The function of the Assessing Officer is to administer the statute with
solicitude for the public exchequer with an in-built idea of fairness to
taxpayers.

As observed by the Supreme Court in Central Provinces Manganese
Ore. Co. Ltd. V. ITO [1991]191 ITR 662, for initiation of action
u/s147(a) (as the provision stood at the relevant time.), fulfilment of two
requisite condition in that regard is essential. The final outcome of the
proceedings was not relevant. What was relevant was the existence of
reasons to make the ITO believe that there had been under-assessment
of the assessee's income for a particular year. At the stage of issue of
notice, the only question is whether there was relevant material on
which a reasonable person could have formed a requisite belief. Whether
the materials would conclusively prove the escapement is not the
concern at that stage. This is so because the formation of belief by the

Page 39 of 70
Assessing Officer is within the realm of subjective satisfaction. ITO v.
Selected Dalurband Coal Co. (P.) Ltd.[1996]217 ITR597 (SC);
Raymond Woollen Mills Ltd. v. IT0[1999]236 ITR 34 (SC).

On careful perusal of the judgements of the above two cases , it is clear
that the then AO was totally justified in invoking the proceedings u/s 147
in the instant case. His 'reason to believe' was based on concrete facts
and he recorded the same in a clear and unambiguous manner. He took
due cognisance of the spirit of the statute as stressed upon in the Apex
Court order in Central Provinces Manganese ore co Itd v ITO
[1991]191itr 662. His formation of the belief was also very much within
the realm of subjective satisfaction as emphasised in ITO v. Dalurband
Coal Co. (P.) Ltd.[1996]217 ITR597 (SC); Raymond Woollen
Mills Ltd. v. ITO[1999]236 ITR 34 (SC).

Further , the assessee is totally wrong to suggest that he was deprived
of the fairness on the part of the AO. In this regard and as the above
facts suggest the AO administered the relevant statute with absolute
"solicitude for the public exchequer with an in-built idea of fairness to
taxpayers" which is his prime duty as per the verdict of the Apex Court
in CIT vs Rajesh Thaveri Stock Broker (P) Ltd. (161 Taxman
316) 2007 (SC).

The decisions of the Delhi High Court and the Hon'ble Supreme Court as
discussed above squarely applies to the present case

It may also be stated here that as per provisions of section 147
Explanation 2 (ca) to section 147, states as follows-

Quote "where a return of income has not been furnished by the
assessee or a return of income has been furnished by him and on the
basis of information or document received from the prescribed income
tax authority, under sub section (2) of section 133C, it is noticed by the
assessing officer that the income of the assessee exceeds the maximum
amount not chargeable to tax, or as the case may be, the assessee has
understated the income or has claimed excessive loss, deduction,
allowance or relief in the return; 'unquote.

In the instant case, information has been received from the Directorate
of investigation that the company M/S Mukund Infrastructure Pvt. Ltd
has raised capital with allotment on 31.03.2010 to the tune of Rs
1,51,00,000/-, with face value Rs 10/- and premium Rs 90/-. Most of the
allottee companies for that particular corresponding year w.r.to M/S
Mukund Infrastructure Pvt. Ltd are paper companies which exist only on
paper with no genuine business of their own. Most of the allottee
companies belong to well known entry operator of Kolkata, Sri. Narendra

Page 40 of 70
kumar Jain who had sworn under oath that he is an accommodation
entry provider who provides bogus accommodation entries, bogus
unsecured loans etc in lieu of cash commission Therefore, proceedings
u/s 147 was validly initiated and as per provisions of the I.T. Act 1961."

38. As such the only ground for re-opening of the assessments and

initiation of proceedings under Section 147 is the data received from

the DIT(Inv), Kolkata.

39. Perusal of the pleadings reveal that the Assessing Officer by

Communication No. F.No. AAFCM4378R/DCIT/C-4/GHY/2017-

18/1794 dated 30.10.2017 (Annexure-19) had sought for several

documents. For the purposes of deciding this issue, this

communication is relevant and therefore the contents of the

communication is extracted below:

"GOVERNMENT OF INDIA
MINISTRY OF FINANCE: DEPARTMENT OF REVENUE
OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE-4, GUWAHATI
Aayakar Bhawan, 502, Fifth Floor, G.S. Road, Guwahati
------------------------------------------------------------------------------------------

F.No. AAFCM4378R/DCIT/C-4/GHY/2017-18/1794 Dated 30.10.2017

To
M/S Mukund Infrastructure Pvt. Ltd.

Royal Arcade, B. Barroah Road,
Guwahati: 781 007

Sir/Madam,

Sub:- Assessment proceeding for the A.Y. 2010-11-requisition of
information/documents-regarding

Please refer to the above.

In connection with the above assessment proceeding, you are requested to
furnish/produce the following details/documents.

Page 41 of 70

1. Bank statement of all Bank Accounts for the relevant period along with
bank reconciliation statement if any.

2. Whether additional depreciation was claimed on new Plant & Machinery
acquired and put to use?

Also, submit bills/vouchers in support of your claim.

3. Furnish details in respect of the following companies from whom you
have raised share capital during the previous year.

(i) Tradecom Pvt. Led.

(ii) Star Delcom Pvt. Ltd.

The details should be furnished with reference to following-

a) Copy of application form for allotment of shares and share application
money received with date of receipt and mode of transaction.

b) no. of shares allotted to each company.

c) Copy of letter of allotment.

d) Amount received in- (i) Face value (ii) Share premium per company

e) Give details of mode of transaction-whether through bank or by cash
along with documentary evidence.

Your case has been re-fixed for hearing on 07.11.2017 at 11.30 Am on
which date you are requested to furnish the above details.
A notice u/s 142(1) is enclosed for compliance.

Yours faithfully
Sd/-

[Ms. Nibedita Gupta]
Dy. Commissioner of Income Tax,
Circle-4, Guwahati

40. Although the petitioner had pleaded his case extensively on the

provisions of Section 147, 148 and 153 and has urged on the

shortcomings of the revenue to the effect that the mandate under

the relevant sections have not been followed, the writ petition does

not contain any material to show that the petitioner had responded

to the communication dated 30.10.2017 which is enclosed as

Annexure-19 to the writ petition. This communication reflects that

inter alia the following information with supporting documents were

sought for:

Page 42 of 70

“a) Copy of application form for allotment of shares and share
application money received with date of receipt and mode of
transaction.

b) no. of shares allotted to each company.

c) Copy of letter of allotment.

d) Amount received in- (i) Face value (ii) Share premium per company

e) Give details of mode of transaction-whether through bank or by
cash along with documentary evidence.”

41. Pursuant to the said communication, the petitioner sought for

adjournment by Email dated 10.11.2017 a copy of which was also

sent by post. However, there is no averment found in the writ

petition as to whether these information as sought for by the

Assessing Officer were furnished.

42. As discussed above in the forgoing paragraphs, the materials

available before the Assessing Officer for re-opening the assessments

as is evident from the grounds furnished to the assessee is that the

petitioner assessee company had raised share capital with allotment

on 31.03.2010 to the tune of Rs. 1,51,00,000/- with face value of Rs.

10/- and premium of Rs. 90/- and most of the allottee companies

with regard to the capital raised for that particular assessment year

are paper companies which exists only on paper with no genuine

business of their own and most of these allottee companies belonged

to one Shri Narendra Kr. Jain who is well known accommodation

entry operator of Kolkata and which fact was sworn on oath by the

said Shri Narendra Kr. Jain. Shri Narendra Kr. Jain provides bogus

Page 43 of 70
accommodation entries, bogus unsecured loans etc. in lieu cash

commissions.

43. In the opinion of the Court, this information sought for by the

Revenue from the assessee appears to be crucial information which

will reflect whether the grounds of belief on which the proceedings

under Section 147 has been initiated are found to be germane and

whether it provides a vital connection thereto. However, since there

are no avernments made in the writ petitions, it is not known as to

whether these information were furnished before the authorities.

Since the proceedings came to be initiated by the Revenue by

issuance of the communication dated 30.10.2017, the writ petitioner

approached this Court and filed the present proceedings. This Court

while issuing notice on 20.11.2017 has stayed the further

proceedings pertaining to the impugned notice under Section 148.

44. In order to examine the grounds urged before this Court

regarding the correctness of the proceedings initiated, it is relevant

to refer to Section 147 of the Income Tax Act, 1961. The Section

147 prior to its amendment in the year 1987 reads as under:

“147. Income escaping assessment.–If

(a) the Income Tax Officer has reason to believe that, by reason of the
omission or failure on the part of an assessee to make a return under
Section 139 for any assessment year to the Income Tax Officer or to
disclose fully and truly all material facts necessary for his assessment for

Page 44 of 70
that year, income chargeable to tax has escaped assessment for that
year, or

(b) notwithstanding that there has been no omission or failure as
mentioned in clause (a) on the part of the assessee, the Income Tax
Officer has in consequence of information in his possession reason to
believe that income chargeable to tax has escaped assessment for any
assessment year,
he may, subject to the provisions of Sections 148 to 153, assess or
reassess such income or recompute the loss or the depreciation
allowance, as the case may be, for the assessment year concerned
(hereafter in Sections 148 to 153 referred to as “the relevant assessment
year”).”

Thereafter, the said Section underwent an amendment with

effect from 01.04.1989. Post the said amendment, Section 147 reads

as under:

“147. Income escaping assessment.–If the assessing officer, for
reasons to be recorded by him in writing, is of the opinion that any
income chargeable to tax has escaped assessment for any assessment
year, he may, subject to the provisions of Sections 148 to 153, assess or
reassess such income and also any other income chargeable to tax which
has escaped assessment and which comes to his notice subsequently in
the course of the proceedings under this section, or recompute the loss or
the depreciation allowance or any other allowance, as the case may be,
for the assessment year concerned (hereafter in this section and in
Sections 148 to 153 referred to as “the relevant assessment year”).”

45. From the above, it is seen that prior to its amendment, the

Assessing Officer was required to have the reason to believe that by

omission or failure on the part of an assessee to file returns under

Section 139 for the relevant assessment year or having filed failed to

disclose fully and truly all material facts necessary for such

assessment that the Income Tax Officer had reasons to believe that

income chargeable to tax had escaped assessment for the relevant

Page 45 of 70
assessment year pursuant to information in his possession and

therefore, the concerned Income Tax Officer may seek to re-open

the assessment.

46. However, pursuant to the amendment brought in with effect

from 01.04.1989, the only requirement for re-opening the

assessments by an Assessing Officer, for reasons to be recorded by

him in writing, is that the Assessing Officer is of the opinion that any

income chargeable to tax had escaped assessment for any

assessment year and that he should assess or reassess such income

chargeable to tax which had escaped assessment and which came to

his notice subsequently. It is evident that pursuant to the

amendment brought in to the statute after 01.04.1989, the scope to

re-open an assessment is wider than it was before prior to the

amendment. It is thus seen that if the assessing officer has reason to

believe that any income chargeable to tax has escaped assessment

for any assessment year, he may re-assess such an income in the

course of the proceedings under Section 147 which the Assessing

Officer has reasons to believe has escaped assessment and which

comes to his notice subsequently. Once the Assessing Officer comes

to such a finding and records such a reason then before making the

assessment or re-assessment as the case may be under Section 147,

Page 46 of 70
proper notice under Section 148 must be issued calling upon the

assessee is to file a return of its income in the prescribed form. The

propositions which are espoused by the learned counsel for the

petitioner that the reasons must provide a live link for the purposes

of re-opening the assessment are well settled, this Court respectfully

accepts the propositions laid down by the Apex Court as well as by

the High Court in the Judgments which are cited.

47. Let us now deal with the submissions rendered by the learned

counsel for the petitioner.

48. The 1st proposition is to the effect that recording of reasons

within the meaning of Section 147 before issuance of Notice under

Section 148 is mandatory and such reasons are subject to judicial

scrutiny.

In the facts of the case, this issue need not be addressed at

length because the reasons had been recorded by the Revenue

which are enclosed to the writ petition itself as Annexure-15.

Consequently, the Judgments which are pressed into service in

support of the first proposition is also not in dispute and therefore,

there is no quarrel with the ratio laid down by this Court in Guwahati

Metropolitan Development Authority (Supra) and the other

Judgments pressed that the reasons must be recorded. The reasons

Page 47 of 70
having been recorded in the present proceedings and in that view of

the matter no further discussions are required in respect of the first

proposition urged by the assessee writ petitioner.

49. The 2nd and 3rd propositions urged are that “reason to believe”

must be the belief of an honest and reasonable person, based on

reasons though the Assessing Officer may act on direct or substantial

evidence, but it cannot be on the basis of mere suspicion, gossip or

rumor. The reasons to believe do not mean purely subjective

satisfaction of the Assessing Officer.

In this context, it is again necessary to refer to the

amendments brought in to the Section 147 after 01.04.1989.

Pursuant to the said amendment brought, the only ground for

proceeding for re-opening of an assessment is that Assessing Officer

has reasons to believe that any income chargeable to tax has

escaped assessment for any assessment year. In the present

proceedings, the information available with the Assessing Officer is

the data made available from the Director of Investigation, Kolkata to

the effect that the share capital raised to the tune of Rs.

1,51,00,000/- has been found to be allotted to some bogus

companies which exists only on paper with no real business etc. and

these bogus companies are nothing but accommodation entries in

Page 48 of 70
lieu of cash commissions which are furnished by one Shri Narendra

Kr. Jain who is found to an accommodation provider and therefore,

this information having come to the possession of the Assessing

Officer, the proceedings were sought to be initiated under Section

147 by issuance of a Notice under Section 148. The data made

available to the Assessing Officer by the DIT, Kolkata appears to be

the “reasons to believe” for the assessing officer to initiate

proceedings under Section 147. Pursuant to approval from higher

authorities as required as per the statute, notice under Section 148

was issued. Although the petitioner submitted its reply, the quarries

raised by the assessing officer do not appear to have been answered

in the reply furnished. Even before this Court, no grounds or

materials have been placed to show that prima facie the “reasons to

believe” was misplaced.

50. In so far as the 4th, 5th, 6th, 7th, 8th and 10th propositions are to

the effect that the assessee must have failed to disclose fully and

truly all materials necessary for the assessment and then the

Assessing Officer must state so in the reasons to be recorded as to

what material fact was not disclosed by the assessee for the

Assessing Officer to enable into proceed under Section 147. The

Page 49 of 70
further contention is that these materials available must provide a

live link to the allegations for re-opening of the assessments.

In this context, it is discussed in the forgoing paragraphs that

pursuant to the amendment brought into Section 147, the scope and

the ambit of the powers of the Assessing Officer under Section 147

has been widened. It is not in dispute that the information available

to the assessing officer is on the basis of the data supplied by the

Director of Investigation, Kolkata regarding the share capital raised

by the petitioner by making bogus entries. These information prima

facie cannot be said to be information not germen for re-opening of

assessments or that it does not provide a “live link” for re-opening of

the assessment.

51. As discussed in the forgoing paragraphs pursuant to the

amendments made on 01.04.1989, the Assessing Officer can re-open

the assessments if the Assessing Officer has the reason to believe

that income chargeable to tax has escaped assessment for any

assessment year. It has to be held that pursuant to the amendment

brought into Section 147 and the powers of the Assessing Officer

being widened by the statute, it is evident that the Assessing Officer

can proceed under Section 147 if he has reasons to believe which are

Page 50 of 70
recorded in writing and which are furnished to the assessee on such

demand made.

52. From the materials placed before the Court the reasons

recorded by the Assessing Officer are on the basis of the data

available from the Director of Investigation, Kolkata that for the

relevant previous year to the corresponding assessment year, the

petitioner assessee company has raised an amount of

Rs.1,51,00,000/- as share capital by allotment of shares to some

bogus companies. These bogus companies as per the Date furnished

by the DIT, Kolkata are found to be only inexistence in paper and the

investigation has been carried on the basis of the statements

recorded on oath by One Shri Narendra Kr. Jain who stated on oath

that he is an accommodation provider who provides for bogus

accommodation in lieu of cash commission. This information is

recorded in the grounds which were also for initiating the

proceedings under Section 147 furnished to the petitioner.

53. It is seen that pursuant to receipt of the grounds, the petitioner

filed its reply before the Assessing Officer questioning the

proceedings sought to be initiated. But what is seen from perusal of

the grounds furnished by the assessing officer and the reply

submitted by the petitioner is that in the grounds furnished by the

Page 51 of 70
assessing officer to the assessee writ petitioner, the grounds for re-

opening of the assessments under Section 147 had clearly stated

that as per the information received the petitioner assessee company

has raised its capital to the tune of Rs. 1,51,00,000/- by allotment of

shares with allotment of face value of Rs. 10/- and premium of

Rs.90/-. As per the information received, most of allottee company

are paper companies which exists only on paper with no genuine

business of their own. As per the data prepared by the DIT(Inv),

Kolkata most of the companies belonged to one Shri Narendra Kr.

Jain and Shri Narendra Kr. Jain in the course of the survey conducted

on 11.04.2014 had sworn under oath that he is an accommodation

entry provider who provide bogus accommodation entries and bogus

unsecured loans etc and accordingly the assessing officer recorded

its grounds for the reasons to believe that the assessee’s income to

Rs. 1,51,00,000/- chargeable to tax for the financial year 2009-10

and relevant to assessment year 2010-11 has escaped assessment

within the meaning of Section 147 of Income Tax Act, 1961 and

therefore it was considered to be a fit case for issuance of notice

under Section 148 of the Income Tax Act, 1961. In the reasons

recorded, it was also mentioned that since the case is beyond four

years approval for issuance of the notice under Section 148 of the

Page 52 of 70
Income Tax Act, 1961 is sought from the Pr. CIT, Guwahati-II

through proper channel.

54. Coming to the reply filed dated 09.10.2011 which is

subsequent to furnishing of the grounds recorded by the revenue, it

is seen that the although the grounds recorded have been reflected

in the reply however, no material was placed in support of its

contention that the allegation made against the writ petitioner

assessee company regarding escapement of income to the tune of

Rs. 1,51,00,000/- which was alleged to have been raised a share

capital by allotment to some bogus companies is not correct. The

reply does not reveal that any reference to any such material have

been referred to or relied upon by the assessee questioning the

correctness of the grounds leading to the reasons to believe for

initiating proceedings under Section 147. Even in the present writ

petition, no materials have been placed before this Court nor any

averments are made in the writ petition to justify the contentions of

the assessee writ petitioner that atleast prima facie the recording of

the grounds for the reasons to believe by the assessing officer are

incorrect on facts and/or on the records. Under such circumstances,

these arguments made by the petitioner will have to be rejected.

Page 53 of 70

55. The contention raised by the petitioner to the effect that

whatever materials were furnished or filed by the petitioners and the

same having been accepted by the assessing officer unless there are

strong grounds to suspect that income has escaped relating to the

relevant assessment year, there is no scope for the respondent to

proceed for initiation of the proceedings under Section 147. It is

urged before this Court that the returns having been duly filed once

showing it to be NIL returns and also pursuant to the search and

seizure proceedings carried on, a similar NIL return having been filed

and which was duly accepted by the assessing officer, there is no

occasion subsequently to re-open the assessments on the basis of

the said materials which were already before the assessing officer

and the same having been filed.

56. The question urged before this Court in the present

proceedings on the facts pleaded is that in the reasons to believe

recorded by the assessing officer leading to escapement of income to

the tune of Rs. 1,51,00,000/- and pursuant to which the assessing

officer is proposing to re-open the assessment is based on the

information subsequently made available to the assessing officer by

the Director of Investigation, Kolkata and whether such information

is discernable from the returns filed by the assessee and whether

Page 54 of 70
such reasons/information provide a live link for initiation of

proceeding under Section 147.

57. The expression “information” is not defined under the Income

Tax Act. This expression “information” came up for consideration

before the Apex Court in L&T Ltd. v. State of Jharkhand, reported in

(2017) 13 SCC 780. The Apex Court in that matter was also

confronted with the issued as to the meaning of the term

“information”. The apex Court held that the expression “information”

means instruction or knowledge derived from an external source

concerning facts or parties or as to law relating to and/or having a

bearing on the assessment. It comprehends not only variety of

factors including information from external sources of any kind but

also the discovery of new facts or information available in the record

of assessment not previously noticed or investigated. The expression

“information” means instruction or knowledge derived from an

external source concerning facts or parties or as to law relating to

and/or after bearing on the assessment. The relevant paragraphs of

the said Judgment are extracted below:

“26. It is also pertinent to understand the meaning of the word
“information” in its true sense. According to Oxford Dictionary,
“information” means facts told, heard or discovered about
somebody/something. The Law Lexicon describes the term
“information” as the act or process of informing, communication or
reception of knowledge. The expression “information” means

Page 55 of 70
instruction or knowledge derived from an external source concerning
facts or parties or as to law relating to and/or having a bearing on the
assessment. We agree that a mere change of opinion or having
second thought about it by the competent authority on the same set
of facts and materials on the record does not constitute “information”

for the purposes of the State Act. But the word “information” used in
the aforesaid section is of the widest amplitude and should not be
construed narrowly. It comprehends not only variety of factors
including information from external sources of any kind but also the
discovery of new facts or information available in the record of
assessment not previously noticed or investigated. Suppose a mistake
in the original order of assessment is not discovered by the assessing
officer, on further scrutiny, if it came to the notice of another assessor
or even by a subordinate or a superior officer, it would be considered
as information disclosed to the incumbent officer. If the mistake itself
is not extraneous to the record and the informant gathered the
information from the record, the immediate source of information to
the officer in such circumstances is in one sense extraneous to the
record. It will be information in his possession within the meaning of
Section 19 of the State Act. In such cases of obvious mistakes
apparent on the face of the record of assessment, that record itself
can be a source of information, if that information leads to a discovery
or belief that there has been an escape of assessment or under-
assessment or wrong assessment.

32. The expression “information” means instruction or knowledge
derived from an external source concerning facts or parties or as to
law relating to and/or after bearing on the assessment. We are of the
clear view that on the basis of information received and if the
assessing officer is satisfied that reasonable ground exists to believe,
then in that case the power of the assessing authority extends to
reopening of assessment, if for any reason, the whole or any part of
the turnover of the business of the dealer has escaped assessment or
has been under-assessed and the assessment in such a case would be
valid even if the materials, on the basis of which the earlier assessing
authority passed the order and the successor assessing authority
proceeded, were same. The question still is as to whether in the
present case, the assessing authority was satisfied or not.”

58. Coming to the expressing “reasons to believe”, in CIT v. Rajesh

Jhaveri Stock Brokers (P) Ltd., reported (2008) 14 SCC 208, the Apex

Court held that the word “reason” in the phrase “reason to believe”

Page 56 of 70

would mean cause or justification. If the assessing officer has cause

or justification to know or suppose that income had escaped

assessment, it can be said to have reason to believe that an income

had escaped assessment. The expression cannot be read to mean

that the assessing officer should have finally ascertained the fact by

legal evidence or conclusion. The function of the assessing officer is

to administer the statute with solicitude for the public exchequer with

an inbuilt idea of fairness to taxpayers. The relevant paragraph of

the said Judgment is extracted below:

“19. Section 147 authorises and permits the assessing officer to
assess or reassess income chargeable to tax if he has reason to
believe that income for any assessment year has escaped assessment.
The word “reason” in the phrase “reason to believe” would mean
cause or justification. If the assessing officer has cause or justification
to know or suppose that income had escaped assessment, it can be
said to have reason to believe that an income had escaped
assessment. The expression cannot be read to mean that the
assessing officer should have finally ascertained the fact by legal
evidence or conclusion. The function of the assessing officer is to
administer the statute with solicitude for the public exchequer with an
inbuilt idea of fairness to taxpayers.

59. In CIT v. M.R. Shah Logistics (P) Ltd., reported in (2022) 14

SCC 101, the Apex Court held that Section 147 of the Act authorises

the reopening of any assessment of a previous year [ “147. Income

escaping assessment.–If any income chargeable to tax, in the case

of an assessee, has escaped assessment for any assessment year,

the assessing officer may, subject to the provisions of Sections 148

Page 57 of 70
to 153, assess or reassess such income or recompute the loss or the

depreciation allowance or any other allowance or deduction for such

assessment year.

Referring to the Calcutta Discount Co. Ltd. Vs. ITO, reported in

1960 SCC OnLine SC 10, it was held that there is a duty cast on the

assessee for disclosing all primary facts relevant to the question.

As to what can be the valid ground for reopening of the

assessment, the Apex Court held that the “reasons to believe” must

be based on objective materials and on a reasonable view. Referring

to the Apex Court in ITO v. Lakhmani Mewal Das reported in (1976)

3 SCC 757 it was held that once there exist reasonable grounds for

the Income Tax Officer to form the belief that was material for

escapement of income, it will be sufficient to clothe him with a

jurisdiction to issue the notice. However, whether these grounds are

adequate or not is not a subject matter of the court to investigate.

The sufficiency of the grounds which induce the income Tax officer

to act is therefore not a justiciable ground.

Again referring to the Judgment of Phool Chand Bajrang Lal Vs.

ITO, reported in (1993) 4 SCC 77, it was held that after consideration

of the earlier precedents on this subject, the Apex Court concluded

that a valid re-opening is one, preceded by specific, reliable and

Page 58 of 70
relevant information and that the sufficiency of such reasons is not

subject to judicial review and the only caveat being that the Court

can examine the record, if such material existed. It was held that the

facts disclosed in the return, if found later to be unfounded or false,

can always be on the basis of a re-opening of assessment.

The Apex Court held that where the assessing officer has “reason

to believe” that income had escaped assessment it confers

jurisdiction to reopen the assessment. Therefore, after the

amendment of 01.04.1989, the power to reopen, conferred on the

assessing officer is much wider. It was held that the basis for valid

re-opening of assessment should be availability of tangible material

which can lead the assessing officer scrutinize the return for the

previous assessment year in question to determine whether the

proceedings under Section 147 is called for. The Apex Court also held

that the “tangible material” which the assessing officer come by will

enable it to re-open an assessment meaning thereby that the entire

assessment (for the year concerned) is at large and the Revenue

would then get to examine the returns for the previous year, on a

clean slate as it were. The possibility that the assessee may have a

reasonable explanation is not a ground for the High Court quashing a

notice under Section 147. As long as there are objective tangible

Page 59 of 70
material (in the form of documents, relevant to the issue) the

sufficiency of that material cannot dictate the validity of the notice.

The relevant paragraphs of the said Judgment of M.R. Shah

Logistics(Supra) are extracted below:

“18. Section 147 of the Act authorises the reopening of any
assessment of a previous year [ “147. Income escaping
assessment.–If any income chargeable to tax, in the case of an
assessee, has escaped assessment for any assessment year, the
assessing officer may, subject to the provisions of Sections 148 to 153,
assess or reassess such income or recompute the loss or the
depreciation allowance or any other allowance or deduction for such
assessment year (hereafter in this section and in Sections 148 to 153
referred to as the relevant assessment year).Explanation.–For the
purposes of assessment or reassessment or recomputation under this
section, the assessing officer may assess or reassess the income in
respect of any issue, which has escaped assessment, and such issue
comes to his notice subsequently in the course of the proceedings under
this section, irrespective of the fact that the provisions of Section 148-A
have not been complied with.” ] . Section 148, which contains the
conditions for reopening assessments, including the limitation period
within which notices can be issued, by its proviso, enacts that:

“Provided that no notice under this section shall be issued unless
there is information with the assessing officer which suggests that the
income chargeable to tax has escaped assessment in the case of the
assessee for the relevant assessment year and the assessing officer has
obtained prior approval of the specified authority to issue such notice.”

19. Long ago, in its decision reported as Calcutta Discount Co.
Ltd. v. ITO [Calcutta Discount Co. Ltd. v. ITO, 1960 SCC OnLine SC 10 :

(1961) 2 SCR 241 : AIR 1961 SC 372] this Court had underscored the
obligation of every assessee to make a true and full disclosure and said
that : (AIR p. 376, para 9)

“9. There can be no doubt that the duty of disclosing all the primary
facts relevant to the decision of the question before the assessing
authority lies on the assessee.”

Page 60 of 70

The Court further held that once the duty is discharged, it is up to
the assessing officer to inquire further and draw the necessary
inferences while completing the assessment.

20. As to what can be the valid grounds for reopening an
assessment has been the subject-matter of several decisions of this
Court. In ITO v. Lakhmani Mewal Das [ITO v. Lakhmani Mewal Das,
(1976) 3 SCC 757 : 1976 SCC (Tax) 402 : (1976) 3 SCR 956] this Court
held that the “reasons to believe” must be based on objective materials,
and on a reasonable view. The Court held as follows : (SCC p. 763, para

“8. The grounds or reasons which lead to the formation of the belief
contemplated by Section 147(a) of the Act must have a material bearing
on the question of escapement of income of the assessee from
assessment because of his failure or omission to disclose fully and truly
all material facts. Once there exist reasonable grounds for the Income
Tax Officer to form the above belief, that would be sufficient to clothe
him with jurisdiction to issue notice. Whether the grounds are adequate
or not is not a matter for the Court to investigate. The sufficiency of
grounds which induce the Income Tax Officer to act is, therefore, not a
justiciable issue. It is, of course, open to the assessee to contend that
the Income Tax Officer did not hold the belief that there had been such
non-disclosure. The existence of the belief can be challenged by the
assessee but not the sufficiency of reasons for the belief. The expression
“reason to believe” does not mean a purely subjective satisfaction on the
part of the Income Tax Officer. The reason must be held in good faith. It
cannot be merely a pretence. It is open to the Court to examine whether
the reasons for the formation of the belief have a rational connection
with or a relevant bearing on the formation of the belief and are not
extraneous or irrelevant for the purpose of the section. To this limited
extent, the action of the Income Tax Officer in starting proceedings in
respect of income escaping assessment is open to challenge in a court of
law.”

21. In Phool Chand Bajrang Lal v. ITO [Phool Chand Bajrang
Lal v. ITO, (1993) 4 SCC 77 : (1993) 1 SCR Supp 28] , after reviewing
the previous case law, and concluding that a valid reopening is one,
preceded by specific, reliable and relevant information, and that the
sufficiency of such reasons is not subject to judicial review the only
caveat being that the court can examine the record, if such material
existed, it was held that the facts disclosed in the return, if found later to
be unfounded or false, can always be the basis of a reopening of
assessment : (SCC p. 96, para 26)

Page 61 of 70
“26. … appears to us to be, to ensure that a party cannot get away
by wilfully making a false or untrue statement at the time of original
assessment and when that falsity comes to notice, to turn around and
say ‘you accepted my lie, now your hands are tied and you can do
nothing’. It would be travesty of justice to allow the assessee that
latitude.”

22. A three-Judge Bench, of this Court in CIT v. Kelvinator of India
Ltd. [CIT v. Kelvinator of India Ltd., (2010) 2 SCC 723 : (2010) 1 SCR
768] after considering the previous decisions, restated the correct
position as follows : (SCC p. 725, paras 5-7)

“5. … where the assessing officer has reason to believe that income
has escaped assessment, confers jurisdiction to reopen the assessment.
Therefore, post-1-4-1989, power to reopen is much wider. However, one
needs to give a schematic interpretation to the words “reason to
believe”….

…. Section 147 would give arbitrary powers to the assessing officer
to reopen assessments on the basis of “mere change of opinion”, which
cannot be per se reason to reopen.

6. We must also keep in mind the conceptual difference between
power to review and power to reassess. The assessing officer has no
power to review; he has the power to reassess. But reassessment has to
be based on fulfilment of certain precondition and if the concept of
“change of opinion” is removed, as contended on behalf of the
Department, then, in the garb of reopening the assessment, review
would take place.

7. One must treat the concept of “change of opinion” as an in-built
test to check abuse of power by the assessing officer. Hence, after 1-4-
1989, assessing officer has power to reopen, provided there is “tangible
material” to come to the conclusion that there is escapement of income
from assessment. Reasons must have a live link with the formation of
the belief.”

29. Another aspect which should not be lost sight of is that the
information or “tangible material” which the assessing officer comes by
enabling reopening of an assessment, means that the entire assessment
(for the year concerned) is at large; the Revenue would then get to
examine the returns for the previous year, on a clean slate as it were.
Therefore, to hold as the High Court did, in this case, that since the
assessee may have a reasonable explanation, is not a ground for
quashing a notice under Section 147. As long as there is

Page 62 of 70
objective tangible material (in the form of documents, relevant to the
issue) the sufficiency of that material cannot dictate the validity of the
notice.”

60. In ITO v. Selected Dalurband Coal Co. (P) Ltd. , reported in

(1997) 10 SCC 68, the Apex Court held that there must be relevant

material before the assessing officer upon which he must reasonably

and rationally form the requisite opinion. It was held that that the

formation of belief by the Income Tax Officer is essentially within his

subjective satisfaction. In the said matter, the proceedings under

Section 147 was initiated on the basis of the letter of the Chief

Mining Officer and the question before the Apex Court is whether the

said letter can be construed to be relevant material upon which the

Income Tax Officer can form a requisite belief. The Apex Court

concluded that the said letter cannot be construed to be not relevant

material or the basis on which the Income Tax Officer could not have

reasonably formed the requisite belief. It was held that whether the

facts stated in the letter are true or not is not the concerned at that

stage. It may well be that the assessee may be able to establish the

said facts stated in the said letter to be incorrect but that conclusion

can only come after making a necessary enquiry. At the stage of

issuance of notice, the question is whether there was relevant

material and whether a reasonable person would have form the

Page 63 of 70
requisite belief. The relevant paragraphs of the said Judgment is

extracted below:

“3. It is well settled by various decisions of this Court that the notice
under Section 148 read with Section 147 can be issued only where the
Income Tax Officer has reason to believe that the income, profits or
gains chargeable to tax had been underassessed or escaped assessment
and further that such escapement or underassessment was occasioned
by reason of the failure of the assessee to disclose fully and truly all
material facts necessary for the assessment of that year. [We are not
concerned with clause (b) of Section 147 here but only with clause (a).]
In other words, there must be relevant material before the assessing
officer upon which he must reasonably and rationally form the requisite
opinion (belief). The question, therefore, is whether the letter of the
Chief Mining Officer aforesaid does not constitute relevant material upon
which the Income Tax Officer could have formed the requisite belief? It
must be remembered that the formation of belief by the Income Tax
Officer is essentially within his subjective satisfaction.

4. After hearing the learned counsel for the parties at length, we are
of the opinion that we cannot say that the letter aforesaid does not
constitute relevant material or that on that basis, the Income Tax Officer
could not have reasonably formed the requisite belief. The letter shows
that a joint inspection was conducted in the colliery of the respondent on
9-1-1967 by the officers of the Mining Department in the presence of the
representatives of the assessee and according to the opinion of the
officers of the Mining Department, there was under-reporting of the
raising figure to the extent indicated in the said letter. The report is
made by a Government Department and that too after conducting a joint
inspection. It gives a reasonably specific estimate of the excessive coal-
mining said to have been done by the respondent over and above the
figure disclosed by it in its returns. Whether the facts stated in the letter
are true or not is not the concern at this stage. It may well be that the
assessee may be able to establish that the facts stated in the said letter
are not true but that conclusion can be arrived at only after making the
necessary enquiry. At the stage of the issuance of the notice, the only
question is whether there was relevant material, as stated above, on
which a reasonable person could have formed the requisite belief. Since
we are unable to say that the said letter could not have constituted the
basis for forming such a belief, it cannot be said that the issuance of
notice was invalid. Inasmuch as, as a result of our order, the

Page 64 of 70
reassessment proceedings have now to go on, we do not and we ought
not to express any opinion on merits.”

61. In Central Provinces Manganese Ore Co. Ltd. v. ITO , reported

in (1991) 4 SCC 166, the Apex Court held that there are two

conditions to confer jurisdiction under Section 147(a) of the Act

which are required to be satisfied. The first one is that the Income

Tax Officer must have reason to believe that the income chargeable

to tax has been under-assessed and such under assessment has

occurred by reason of omission or failure on the part of the assessee

to disclose fully and truly all materials necessary for the assessment.

It may be mentioned herein that the interpretation of Section 147

was prior to the amendment brought in 1989. It was held that the

final outcome of the proceedings is not relevant. What is relevant is

the existence of reasons for the Income Tax Officer to believe that

there has been under-assessment for the assessee’s income for a

particular year.

62. In the present proceedings, the returns which were stated to

have been filed before the assessing officer and copies of which are

enclosed to the petition does not reflect the breakup of the share

capital distributed and/or the allottees of the share holders. This is

generally not available in the balance-sheet or the other

accompanying financial statements furnished unless these are

Page 65 of 70
specifically called for. The income tax being a self-assessment tax,

ordinarily whatever returns are filed by the assessee, the same are

generally accepted unless the same are not filed as per the proper

procedure prescribed. On the basis of financial markers which the

Central Processing Unit of the Department considers it necessary

cases are picked up for scrutiny assessment. Nevertheless while it is

available to the assessee to submit the relevant documents and

financial papers through to its disclosures making a true and full

disclosure, the question regarding truthfulness and falsehood of

transactions reflected in the return can only be examined during

original assessment and not at a later stage subsequent thereto has

been held by the Apex Court to be too broad and general in nature

and would thus be violence to the legislative intent of the plain

phraseology of Section 147(A) and Section 148 and is against the

settled law. The purpose and intent of the provisions have to be

looked into. One of the purposes of Section 147 appears to be to

ensure that a person cannot getaway by willfully making a false and

untrue statement at the time of original assessment and when falsity

comes to the notice of the assessing officer then the assessee cannot

be permitted to turn around and say that “you accepted my lie, now

your hands are tied and you cannot do nothing”. It would be travesty

of justice to allow the assessee that latitude.

Page 66 of 70

In this context the reference to the Judgment of the Apex

Court rendered in Phool Chand Bajrang Lal & Anr. Vs. Income Tax

Officer & Anr., reported in (1993) 4 SCC 77 has already been made

in the foregoing paragraphs.

63. From the law discussed above, it is seek that the precondition

for incoming powers under Sections 147/148 is the belief of the

assessing officer that there are materials for the belief that income

had escaped assessment. This belief must be taken down in writing

and there must be tangible materials which have a live link for

entertaining such a belief. Once these preconditions are satisfied

then the assessing officer can proceed under Sections 147/148 of the

Act. The possibility that this belief may ultimately be unfounded will

not be a ground to interfere the notice under Section 148. Further

the reasons must also be supplied to the assesse.

64. Under such circumstances, the contention of the petitioner that

once the returns have been filed and have been accepted and the

same cannot be re-opened at any stage would be contrary to the

very provision of Section 147 more particularly after the amendment

with effect from 01.04.1989 whereby the scope of re-opening on

assessment by the Assessing Officer stood widened giving powers to

the assessing officer to re-open assessment if the assessing officer

Page 67 of 70
has reason to believe that income for any assessment year has

escaped assessment. The only requirement is that of recording of

such reasons as well as taking the statutory precautions for sanction

by higher authority and furnishing a copy of the reasons recorded by

the Assessing Officer to the assessee. All these steps have been duly

undertaken by the Revenue.

65. As have been discussed in the forgoing paragraphs, the reply

filed by the assessee also does not disclose any material prima facie

come to a conclusion that the reason to believe enabling the

assessing officer to proceed for re-opening of the assessment under

Section 147 is found to be prima facie uncalled for or unwarranted.

In that view of the matter the contentions raised by the petitioner

stands rejected. In view of the discussions and conclusions arrived at

by this Court in the foregoing paragraphs, the Judgments referred to

by the learned counsel for the petitioner need not be discussed.

66. In so far the proposition 9 is concerned that notwithstanding

the existence of alternative remedy by way of an appeal, writ is

maintainable is required to examine in the light of the various

pronouncements rendered by the Apex Court. In Commissioner of

Income Tax & Ors Vs. Chhabil Dass Agarwal, reported in 2013 0

Supreme (SC) 724, the Apex Court held that ordinarily where the

Page 68 of 70
statutory remedy is available, the writ court ought not to exercise its

powers in judicial review. Same view is also reiterated in a

subsequent Judgments whereby the Apex Court held that where

alternative remedy is available, it is only under the exceptions culled

out that a judicial review is permissible. These exceptions have been

culled out in a Judgment rendered by the Apex Court in Assistant

Commissioner of State Tax and Ors. Vs. Commercial Steel Ltd.,

reported in (2022) 16 SCC 447 are extracted below:

(i) breach of fundamental rights;

(ii) Violation of principles of natural justice;

(iii) Excess of jurisdication;

(iv) challenge to the vires of the statute or delegated legislature

It is only under these circumstances that writ is maintainable.

67. While, the law laid down by the Apex Court regarding the

existence the alternative remedy being power for exercise of writ

jurisdiction or exercise of judicial review under the jurisdiction is not

in dispute at all. However, under the scheme of the Income Tax Act,

1961 there is no specific provision laid down for an appeal against an

order rejecting the objections of the assessee to the notice issued

under Section 148. The provisions for an appeal would lie against the

Page 69 of 70
order of re-assessment. Therefore technically speaking there is no

specific alternative remedy prescribed under the provisions of the

Income Tax Act, 1961 against orders passed rejecting the objections

of assessee. Nevertheless, the question whether the judicial review is

required to be exercised in such cases notwithstanding there being

no specific provisions for an appeal, the same will have to be

considered on the facts and circumstances of each cases on the basis

of which the Revenue is alleged to have formed opinion or recorded

the reasons to believe. Therefore under such circumstances in the

absence of any statutory remedy, writ proceedings are maintainable

where the objections raised by the assessee have been rejected by

the assessing officer.

68. In view of the discussions above, the writ petitions are

disposed of in terms of the above. Interim order dated 20.11.2017

stands vacated. Pending I.As, if any, also stand disposed of.

JUDGE

Comparing Assistant

Page 70 of 70

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