AMBALAL LALJIBHAI PATEL V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(2)

SCA/19547/2018

AI Insights

The case involves Ambalal Laljibhai Patel, who, along with other co-owners, sold an agricultural land and declared the income from the sale in their tax returns. The Income Tax Department later issued a notice to reopen the assessment for the Assessment Year 2011-2012, alleging that the actual sale consideration was much higher than declared, based on documents seized during a search in the case of M/s. K. Star Corporation. The petitioner challenged the reopening in the Gujarat High Court, arguing that the reopening was based on incorrect assumptions and lacked substantive evidence linking the petitioner to any unaccounted income. The court agreed with the petitioner, noting that the reopening was not justified and quashed the notice.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 673807 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 12-07-2022
• Assessment Year: misc
• Other Referred Cases: Kantibhai Dharamshibhai Narola v. Assistant Commissioner of Income Tax, Ward 3(2)(4) reported in (2021) 436 ITR 202(Gujarat), Raymond Woolen Mills Ltd Vs. ITO reported in 236 ITR 34 (SC), Kalyanji Mavji & Co. Vs. CIT reported in 102 ITR 287 (SC), AGR Investments Ltd. Vs. Addl. CIT & Anr. (Del) reported in 333 ITR 146
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NIKUNT RAVAL; KALPANA RAVAL
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Income tax reassessment; Long Term Capital Gain; Reopening of assessment; Search and seizure; Unaccounted cash
• Section: 147; 148; 143(3); 143(1); 151

Judgement Text

"C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19547 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== AMBALAL LALJIBHAI PATEL Versus THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(2) ========================================================== Appearance: MR TUSHAR HEMANI SENIOR ADVOCATE WITH MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR NIKUNT RAVAL WITH MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 12/07/2022 ORAL JUDGMENT Page 1 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.Heard learned Senior Advocate Mr. Tushar Hemani assisted by learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval with learned advocate Mrs. Kalpana K. Raval for the respondents. 2.Having regard to the controversy involved in this petition, with the consent of the learned advocates for the respective parties, the petition is taken up for final hearing. 3.Rule returnable forthwith. Learned advocate Mr. Nikunt Raval waives service of notice of rule for the respondents. 4.The petitioner has preferred this petition under Article 226 of the Constitution of India challenging the impugned notice dated Page 2 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 28.03.2018 issued under section 148 of the Income Tax Act, 1961 (For short “the Act”) proposing to reopen the assessment for the Assessment Year 2011-2012. 5.Brief facts of the case are that the petitioner is an individual and is basically an agriculturist. The petitioner, along with three other co-owners, sold an agricultural piece of land bearing Revenue Survey No.203/2, Khata No.2637, old tenure land, admeasuring 0-58-53 hectare (equivalent to 7000 square yards), draft Town Planning scheme No.50, Final Plot No.68, situated at village Katargram, Surat to two persons namely (1) Ankitkumar Gagjibhai Koshiya and (2) Swintubhai Arvindbhai Mavani vide sale deed dated 29.03.2011 for total sale consideration of Rs.1,46,33,000/-. It is the case of the petitioner that such sale consideration was received by cheque. Details Page 3 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 as to share-holding of all four co-owners of land in question are as follows: Kantibhai Dharamshibhai Narola : 1/6th Vijaybhai Dharamshibhai Narola : 1/6th Jerambhai Bhikhabhai Khokariya : 1/3rd Ambalal Laljibhai Patel (Petitioner) : 1/3rd 5.1) The petitioner filed return of income for the Assessment Year 2011-2012 i.e. the year under consideration on 17.01.2012 declaring total income at Rs.48,14,499/- (excluding agricultural income) which included Long Term Capital Gain of Rs.45,06,219/- arising on account of sale of the land in question. Such return of income was processed under section 143(1) of the Act. 5.2) It is the case of the petitioner that after a period of four years from the Page 4 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 end of the relevant assessment year, the respondent issued the impugned notice dated 28.03.2018 under section 148 of the Act seeking to reopen the assessment for the year under consideration. 5.3) In response to such notice, the petitioner filed return of income for the year under consideration on 21.04.2018. It is the case of the petitioner that the petitioner, vide letter dated 24.04.18, intimated such fact to the respondent and further requested the respondent to supply the copy of reasons recorded for reopening the assessment. 5.4) The respondent supplied the copy of reasons recorded for reopening vide letter dated 08.05.2018. The reasons recorded by the Assessing Officer for reopening the assessment under section 147 of the Act read Page 5 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 as under : “Brief details of the Assessee: (a) Nature of business activity:- NIL (b) Brief details of return of income filed along with details of processing of return:- Sr. No. A.Y. Date of filing ROI Date of processing Whether selected for scrutiny/re- open The assessee has not filed his return of income for the year under consideration. Brief details of information collected/received by the AQ:- In this case, an information was received from the DCIT, Central Circle-4, Surat, vide his letter dated 15.03.2018, intimated that a search and seizure action u/s.132 of the I.T. Act in the case of M/s. K. Star Corporation was carried out by the Investigation Wing of Income- tax Department, Surat on 17.08.2016. From various incriminating documentary evidences seized during the course of search, it is found that during the year the assessee along with three other co- owners had sold an immovable property, bearing F.P. No.68, T.P..50 (Katargam), R.S. No.203/2, situated at Katargam, Surat, for a sale consideration of Rs.1,46,33,000/- and paid stamp duty of Page 6 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 Rs.7,17,100/-. However, from the seized incriminating documents, was clearly mentioned that the purchase of the above piece of land is at Rs.20,000/- per Sq. Yd. and total purchase value is worked out at Rs.13,08,80,100/- whereas the sale deed is made for only, Rs.1,46,33,000/-. 3&4. Analysis of information collected/received and enquiries made by the AO as sequel to information collected/received:- Not Applicable. 5&6. Finding of the AO/Basis of forming reason to believe and details of escapement of income:- From the details available on record, it is noticed that the assessee has not filed his return of Income for the A.Y. 2011-12 even though the transactions more than the taxable limit, l.e. long term capital gain on transfer of the property discussed above. Since the assessee has not filed his return of income for the year under consideration and this office has not available the actual shareholding of the assessee in he above property, therefore, 1/4th of the property considered to be the assessee's share and accordingly the assessee has received long term capital gain of Rs.3,27,20,025/- (Rs.13,08,80,100 x 1/4th share), therefore, an addition of Rs.3,27,20,025/- is required to be made on account of unexplained long term capital gain and added to the total income of the assessee. Page 7 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 As such, in view of the above facts and material, I have reason to believe that the income to the tune of Rs.3,27,20,025/- chargeable to tax has escaped assessment within the meaning of Section 147 of the 1.T. Act, 1961 for A.Y. 2011-12. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India:- Not Applicable. 8. Applicability of the provisions of Section 147/151 to the facts of the case:- In this case, no return of income was filed for the year under consideration, accordingly, In this case, no assessment was made and the only requirement to Initiate proceeding u/s.147 of the I.T. Act is reason to believe which has been recorded above (as per paragraph-2 to 6 above). It is pertinent to mention here that in this case the assessee has not filed return of income for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed in para-2 to 6 above and the assessee was assessable under the Act. In view of the above, provisions of clause (a) of explanation 2 to Section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. Page 8 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 In this case, more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s.148 of the I.T. Act has been obtained separately from the Pr. Commissioner of Income-tax- 3, Surat as per the provisions of Section 151 of the I.T. Act.” 5.5) The petitioner, in order to raise objections against reopening, requested the respondent vide letter dated 25.05.2018 to provide copy of data/information/working/ incriminating material etc. relied upon by the respondent. 5.6) The Petitioner, thereafter vide letter filed on 22.11.2018, raised objections against reopening the assessment and requested that the reopening proceedings may be dropped. 5.7) The respondent, however, vide order dated 24.11.2018 disposed off the objections Page 9 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 raised by the petitioner against reopening the assessment holding that the action of reopening is valid in the eye of law. 5.8) The Petitioner, thereafter, sent a letter dated 29.11.2018 to the office of the respondent clarifying that the petitioner and the other co-owners had sold the land in question to Ankitbhai Koshiya and Swintubhai Mavani and that M/s. K Star Corporation (i.e. the person searched) was an unknown entity and the petitioner had not entered into any transaction with the said entity. It was also clarified that it had come to the knowledge of the petitioner that M/s. K Star Corporation was not even in existence at the time of execution of the sale deed in question. 5.9) Being aggrieved by the impugned notice as well as order disposing of the Page 10 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 objections, the petitioner has preferred the present petition. 6.Learned advocate for the petitioner submitted that the petitioner has filed return of income for the year under consideration on 17.01.2012 declaring total income at Rs.48,14,499/- (excluding agricultural income) which included long term capital gain of Rs.45,06,219/- arising on account of sale of the land in question. Thus, the initial premise for reopening the case of the petitioner for the year under consideration is erroneous since the petitioner had already disclosed the details of agricultural income which included the long term capital gain arising out of the land in question. 6.1) It was submitted that the so called seized material was collected during the course of search action carried out in the Page 11 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 case of M/s. K Star Corporation who is a third party and on the basis of such material, the respondent has concluded that the petitioner might have received total sale consideration of Rs. 13,08,80,100/- from the said party as against sale consideration of Rs. 1,46,33,000/-, as mentioned in the sale deed. It was submitted that as a matter of fact, the petitioner has sold the land in question to Ankitbhai Koshiya and Swintubhai Mavani and not to M/s. K Star Corporation and M/s. K Star Corporation is an unknown entity for the petitioner and the petitioner had not at all entered into any transaction with the said entity. It was submitted that upon inquiry, it came to the knowledge of the petitioner that M/s. K Star Corporation was not even in existence at the time of execution of the sale deed with respect to transfer of the land in question. It was therefore, submitted that the petitioner is Page 12 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 not at all connected with M/s. K Star Corporation, much less with respect to the transaction as to sale of the land in question and therefore, the respondent is not right in concluding that the petitioner might have received any sale consideration, over and above the sum specified in the sale deed, from M/s. K Star Corporation which is not at all a party to such sale transaction. 6.2) It was further submitted that in the so called seized material, nowhere it has been mentioned that any cash was ever paid to the petitioner or any of the co-owners towards sale consideration over and above the sale consideration mentioned in the sale deed. 6.3) Learned Senior Advocate Mr. Hemani submitted that that during the course of the search, statements of the concerned persons Page 13 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 of K. Star group were recorded but no question regarding implications or interpretation or purpose behind seized material i.e. a sheet of paper, was put by the authorized officer. Thus, such seized material remained totally unsubstantiated and therefore, no reliable inference can be drawn from such material. It was submitted that there is no nexus whatsoever or live link between seized material and the so-called belief on the part of respondent regarding escapement of income and the respondent, without any application of mind made an assumption that such seized material proves receipt of unaccounted consideration. It was submitted that the belief of the respondent has to be a rational belief which can be drawn by a reasonable person from analysis of the given set of facts which aspect is missing in this case. Page 14 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 6.4) It was submitted that the seized material appears to be merely a rough estimate prepared by M/s. K Star corporation as to some construction project namely \"Silverstone river\" on the land in question which shows estimated return from the project vis-a-vis total cost of the project including cost of land and cost of construction. It was submitted that on perusal of such paper it reveals that cost of land has been worked out at Rs. 13,08,80,100/- which is only an estimated figure and not supported by any evidence and further it is also mentioned in the said paper that flats/apartments already build up and sold are not less than 1,22,000 sq. ft. and remaining area is unsold and it is a fully developed land and this sheet has been prepared after full development in the year 2014-2015. 6.5) It was further submitted that in the Page 15 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 said paper, it is not mentioned anywhere that any cash was ever paid to the petitioner and the land cost may be the estimated market value as on the date of preparing such sheet for the purpose of working out the total cost of the project. 6.6) Learned Senior Advocate Mr. Hemani submitted that in any case, notings in such paper appears to be some rough estimate worked out by K. Star Corporation with respect to construction of some project known as 'Silverstone River' on the said land and to the best of the knowledge of the petitioner, the two individuals who purchased the agricultural land in March, 2011 from the petitioner and other there co-owners, subsequently joined the newly formed partnership firm namely \"M/s. K. Star Corporation\" as partners and their respective shares in the agricultural land were Page 16 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 contributed as share capital. It was further submitted that the seized document i.e. sheet works out estimated receipts from sale of constructed property by assuming certain rates and land cost is estimated at Rs. 13,08,80,100/-. It was submitted that the petitioner, as a co-owner, had sold agricultural land and before any project is developed on agricultural land, status of the land is required to be changed from agricultural to urban land which involves long procedure and substantial expenditure. Further, expenditure is also required to be incurred on leveling of the land and other activities for making land suitable for construction of a project. Thereafter, building plans have to be approved by the concerned authorities which also requires incurring of substantial expenditure. It was therefore, submitted that in all probability, the cost of land in the seized document has Page 17 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 been estimated by taking into account such expenses and there is no basis whatsoever or evidence for the unfounded assumption that the agricultural land was sold for Rs.13,08,80,100/-. 6.7) Learned Senior Advocate Mr. Hemani submitted that there is no tangible material so as to reopen the case of the petitioner inasmuch as vague information collected during the course of a third party cannot be equated with tangible material which can be made the basis for reopening the case of the Petitioner and therefore, reopening is unjustified. 6.8) It was submitted that the respondent has not made reference to any seized document/evidences/statement etc. in the reasons for reopening especially as to the working of sale consideration and it was only Page 18 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 when the petitioner requested the respondent to provide such details, the respondent furnished the evidence found during the course of search i.e. one sheet of paper. It was submitted that it is a settled law that legality of the proceedings initiated under section 147 of the Act are to be judged on the basis of the reasons recorded for reopening and if reasons suffer from vagueness or any other defects or contradictions, the same cannot be improved by adding something more to the reasons. 6.9) It was submitted that the respondent has acted illegally and without jurisdiction in issuing the impugned notice inasmuch as statutory notice under section 148 can be issued if and only if \"an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment\" which implies that an Assessing Officer Page 19 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 himself must be satisfied that some income chargeable to tax has escaped assessment and such satisfaction must be of the concerned Assessing Officer himself. It was submitted that in the present case, no such satisfaction has been recorded by the respondent Assessing Officer. In fact, the respondent has merely relied upon the information received from the office of the DCIT, Central Circle 4, Surat for the purpose of reopening the assessment in the case of the petitioner and the respondent has not at all applied his mind independently so as to reach a conclusion that any income has escaped assessment. In absence of any such exercise at the end of the respondent, reopening is nothing but merely based on borrowed satisfaction as against the statutory requirement of independent satisfaction which is not tenable in the eye of law. Page 20 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 6.10) Reliance was placed on decision of Division Bench of this Court in case of Kantibhai Dharamshibhai Narola v. Assistant Commissioner of Income Tax, Ward 3(2)(4) reported in (2021) 436 ITR 202(Gujarat) to submit that when there was no failure on part of the assessee to disclose fully and truly all material facts necessary for assessment, reopening the assessment beyond a period of four years from the end of relevant assessment year was not justified. 7.On the other hand learned advocate Mr. Nikunt Raval for the respondent submitted that as the petitioner failed to disclose fully and truly all the material facts while filing the return of income, therefore, after recording the reasons and obtaining approval under section 151(1) of Act of the Pr. Commissioner of Income-tax-3, Surat, vide letter dated Page 21 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 23.03.2018, the proceedings under section 147 of the Act were initiated and notice under section 148 of the Act, was issued on 28.03.2018 and duly served upon the petitioner by Speed Post as well as through on-line e-assessment portal. 7.1) Referring to section 149 of the Act, learned advocate Mr. Raval pointed out the the time limit for re-opening of assessment and issuing notice under section 148 of the Act and submitted that reopening the assessment in case of the petitioner by the Assessing Officer was justified. 7.2) Learned advocate Mr. Raval thereafter referring to the facts of the case submitted that petitioner along with other three co-owners have jointly sold an immovable property, i.e. agricultural land, admeasuring 5853 Sq. Mtrs. bearing R.S. Page 22 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 No.203/2 of Katargam, Surat, for a sale consideration of Rs. 1,46,33,000/- and paid stamp duty of Rs.7,17,100/-, vide Registered Document No.SRT/4/KTG/7068/2011 dated 25.03.2011. Thereafter, in the case of M/s. K. Star Corporation, a search and seizure action under section 132 of the Act was carried out by the Investigation Wing of Income-tax Department, Surat on 17.08.2016 and during the course of search at the back office of M/s. K. Star Corporation located at opposite Nilkanth School, the digital data imaging was done. From the analysis of data, it was found that it contains working in respect of various aspect of the project \"Silverstone River\" like numbers of units constructed, sale value, sold area, unsold area, average cost of construction, land cost, etc. of various projects of the group which was seized. It was submitted that from the incriminating documents impounded during Page 23 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 the course of search in the case of M/s. K. Star Corporation, it is found that the petitioner along with other three co-owners has sold above said agricultural land for Rs. 13,08,80,100/- and since the petitioner was having 1/4th share in the above property, therefore Rs.3,27,20,025/- is considered as sale value of his share. However, in the return of income, the petitioner has shown total sale consideration at Rs.48,77,000/-. Accordingly, after claiming deduction for \"indexed cost of acquisition\" Rs.3,70,781/- being expenditure on transfer and Rs.26,50,000/- being claim of exemption under section 54 of the Act, the petitioner has calculated long term capital gain at Rs. 18,56,219/-. It was furher submitted that according to the incriminating documents seized, Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani have purchased land bearing R.S. No.203/2 of Katargam, Surat, Page 24 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 admeasuring 7000 Sq. Yards @ Rs.20,000/- per Sq Yard from the assessee and three other co- members. Hence, the total sale consideration as per this seized paper comes to Rs. 13,08,80,100/-. However, the sale document for said land was registered at Rs.1,46,33,000/- on 25.03.2011. It was submitted that from the above data, it is very clear that the actual rate at which land sold is @ Rs.20,000/- per square yard. Thus, total sale consideration is Rs. 13,08,80,100/-. Hence, there was involvement of \"on money\" of Rs. 11,62,47,100/- in the said transaction in land. 7.3) Learned advocate Mr. Raval submitted that during the course of search, Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani were confronted with these evidences and recorded statements. In the statement recorded, they have admitted that they are Page 25 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 partners in M/s. K. Star Corporation and developed the project \"Silverstone River\" on the land situated at R.S. No.203/2 of Katargam, Surat, purchased from Shri Ambabhai Laljibhai Narola and other three co-members and on the basis of above information, the respondent reopened the case and after obtaining approval from the higher authorities issued the impugned notice under Section 148 of the Act on 28.03.2018 for reopening the assessment for the year under consideration. It was submitted that subsequently, the petitioner, vide his letter dated 24.04.2018, has submitted a copy of ITR-V e-filing the return on 21.04.2018 declaring total income at Rs.21,64,500/-. The petitioner had also requested to supply reasons recorded for reopening the case, which was provided to the petitioner on 05.11.2018 and immediately after receipt of copy of reasons recorded, the petitioner Page 26 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 raised objections against the reopening, vide his letter dated NIL received in this office on 22.11.2018, which was disposed of by passing a speaking order by the respondent on 24.11.2018. 7.4) It was submitted that before re- opening of the assessment, sanction of competent authority, i.e. Pr. Commissioner of Income-tax-3, Surat, has been obtained, vide letter dated 23.03.2018. Therefore, notice issued under Section 148 of the Income-tax Act is a valid notice. 7.5) It was submitted that the from sequence of proceedings being taken before and after the issuance of notice under section 148 of the Act by the respondent, it is evidence that the reopening proceeding is within the prescribed time limit as prescribed in the Act and therefore, the Page 27 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 proceedings started under section 147 of the Act by the respondent is proper and as per the procedure laid down by the Hon'ble Apex Court in the case of GKN Drvieshaft (P)Ltd reported in 259 ITR 19 (SC). 7.6) Learned advocate Mr. Raval submitted that the petitioner has filed his return of income on paper mode, however before proceeding for reopening the respondent verified with e-filing mode and therefore, it was observed by the respondent Assessing Officer that the petitioner has not filed his return of income. It was submitted that on verification of the return of income filed on 17.01.2012 it was noticed that the petitioner has declared total income at Rs.48,14,499/- whereas in response to notice issued under section 148 of the Act, the petitioner has filed his return of income on 21.04.2018 declaring total income at Rs.21,64,500/- (by Page 28 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 way of e-filing) and claimed refund of Rs.5,86,510/- without pointing out any clarification of the difference or cogent evidences and, therefore, action of the respondent of reopening the assessment is valid. 7.7) It was submitted that during the course of search proceedings conducted at M/s. K. Star Corporation, several incriminating documents were seized in which it is clearly mentioned that the petitioner has received Rs. 13,08,80,100/- including cash receipt from the above parties and keeping in view the provisions of Section 132(4A) of the Act, it is presumed that the evidences found from the possession of Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani belongs to petitioner and the contents of the evidences are true and correct. It was submitted that it is very Page 29 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 clear that the transactions mentioned in the digital data imaging were real rather than a rough estimate. 7.8) Relying upon the decision in case of Raymond Woolen Mills Ltd Vs. ITO reported in 236 ITR 34 (SC) it was submitted that while determining whether commencement of re- opening proceedings are valid, it has only to be seen whether there was prima facie some material on the basis of which department could re-open the case. In the present case, the respondent received specific information about receipt of on-money exceeding the value adopted by the petitioner on transfer of property and therefore, the Assessing Officer has issued notice under section 148 of the Act which requires no interference. 7.9) Relying upon the decision in case of Kalyanji Mavji & Co. Vs. CIT reported in 102 Page 30 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 ITR 287 (SC) it was submitted that information may come from external sources or even from internal sources and even from material already on record and reopening the assessment on basis of such evidence, cannot be termed as illegal or bad in law. Further, relying upon the decision in case of AGR Investments Ltd. Vs. Addl. CIT & Anr. (Del) reported in 333 ITR 146, it was submitted that reopening on the basis of information from Investigation is considered as valid. It was therefore submitted that there is no illegality in the impugned orders and the prayers sought in the present petition are required to be rejected and petition is required to be dismissed with costs. 8.Having considered the submissions made by learned advocates of both the sides in order to reopen the assessment it is necessary to form the reason to believe on the basis of Page 31 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 prima facie material that income has escaped assessment. The crucial link between the information made available to the AO and the formation of belief should be gathered. The reasons must be self evidenced and they must speak for themselves so as to enable on perusal of the reasons that tangible material which forms the basis for the belief that income has escaped assessment must be evident. 9.In the facts of the case, the original assessment is processed under section 143(1) of the Act and not under section 143(3) of the Act and therefore, provision to section 147 of the Act would not apply. Reopening of the assessment under section 147 of the Act is a potent power and should not be lightly exercised and it can never be invoked casually or mechanically. The AO being a quasi judicial authority is expected to Page 32 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 arrive at a subjective satisfaction independently on an objective criteria. 10. It is true that report of the investigation wing might constitute the material, on the basis of which, the AO forms reason to believe, however the process of arriving at such satisfaction should not be mere repetition of the report of the investigation. The AO must demonstrate some link between tangible material and formation of belief or reason to belief that income has escaped assessment. In the facts of the case merely certain material which is otherwise tangible and enables the AO to form a belief that income chargeable to tax has escaped assessment, which form part of original assessment record per se would not bar the AO from reopening the assessment on the basis of such material. The expression “tangible material” does not mean material alien to the Page 33 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 original record. 11. However, even if the decision to reopen assessment on the basis of report of investigation wing condemned or dubbed as a fishing or roving inquiry, AO has to act as a reasonable and prudent man on the basis of information secured by him that there is a case for reopening so as to form a reason to believe that income has escaped assessment but at the same time, in order to assume the jurisdiction under section 147 of the Act is not the ultimate result of inquiry but the test is whether the AO entertain a bona fide belief upon the definite information presented before him and the jurisdiction to reopen the assessment cannot be exercised on mere rumor or suspicion. Therefore, in the facts of the case the AO could not have issued the impugned notice under section 148 of the Act considering the loan and advances Page 34 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 given by the petitioner out of sale proceeds of the immovable property for a short period which ultimately has been received back by the assessee, so as to verify the debit entries representing the short period of loan. The assessee has disclosed all the material facts in the return which was processed under section 143(1) of the Act and therefore, formation of belief of the AO that income of Rs 50 lakhs is chargeable to tax, has escaped the assessment for AY 2012-2013 by reason of failure on part of the assessee to file true and correct return cannot be sustained. 12. This Court in case of Kantibhai Dharamsinh Narola (supra) has summarised the law as regard reopening the assessment under section 147 of the Act as under: “1. Since the issues raised in all the Page 35 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 captioned writ-applications are interrelated, those were heard analogously and are being disposed of by this common judgment and order. 2. For the sake of convenience, the Special Civil Application No.19549 of 2018 is treated as the lead matter. 3. By this writ-application under Article 226 of the Constitution of India, the writ-applicant seeks to challenge the legality and validity of the notice dated 28th March 2018 (Annexure-A to the writ-application) issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short, 'the Act 1961') seeking to reopen the writ-applicant's income tax assessment for the Assessment Year 2011- 12 on the ground of being illegal, contrary to law and without jurisdiction. 4. The facts giving rise to this writ- application may be summarised as under : 5. The writ-applicant derived income from a partnership firm, salary, capital gains and income from other sources during the Assessment Year 2011-12, i.e. the year under consideration. 6. It appears from the materials on record that the writ-applicant along with three other co-owners (writ- applicants of the connected writ- applications) sold a parcel of agriculture land bearing Revenue Survey No.203/2, Khata No.2367, old tenure land admeasuring 7000 sq.yards of Draft Town Page 36 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 Planning Scheme No.50, Final Plot No.68, situated at village Katargam, Surat, to two individuals, namely, Ankitkumar Gagjibhai Koshiya and Swintubhai Arvindbhai Mavani, vide the sale-deed dated 29th March 2011 for the total sale consideration of Rs.1,46,33,000=00. 7. It is the case of the writ-applicant that the sale consideration was received by cheque. The details as to the share holdings of all the four co-owners of the land in question are as follows : Name Share Kantibhai Dharamshibhai Narola (Petitioner) 1/6th Vijaybhai Dharamshibhai Narola 1/6th Jerambhai Bhikhabhai Khokariya 1/3rd Ambalal Laljibhai Patel 1/3rd 8. The writ-applicant filed his return of income for the Assessment Year 2011- 12 on 29th December 2011 declaring the total income at Rs.6,67,350=00, which included the long-term capital gain of Rs.22,48,496=00 arising on account of sale of the land in question. 9. The case of the writ-applicant for the year under consideration was selected for scrutiny and various details were called for by the then Assessing Officer and the same were duly furnished by the writ-applicant from time to time. 10. It is the case of the writ-applicant Page 37 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 that he had furnished a declaration in writing at the stage of the original assessment, whereby it was pointed out that he himself along with three other co-owners had sold the land in question. The writ-applicant also furnished the purchase-deed as well as the sale-deed with respect to the land in question. 11. Upon due examination of all the relevant aspects of the matter, the then Assessing Officer chose not to make any addition in respect of the capital gains arising on account of the sale of the land in question while framing the assessment under Section 143(3) of the Act 1961 vide order dated 31st December 2013. 12. It appears that after a period of four years from the end of the relevant Assessment Year, the respondent issued the impugned notice dated 28th March 2018 under Section 148 of the Act 1961 for the purpose of reopening of the assessment for the year under consideration. 13. The reasons assigned for reopening of the assessment are as under : “In the case of assessee, a piece of information was received from the DCIT, CC-4, Surat, regarding that a search and survey operation was carried at the residential and business premises in the case of K.Star Group on 17.08.2016. During the course of search and survey, it was found that the M/s. K. Star Page 38 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 Corporation was purchased land amounting to Rs.1,46,33,000/-, situated at moje. Katargam, Dis: Surat, having F.P. No. 68, T.P. No.50, R.S. No. 203/2, sale deed registration no. SRT/4/KTG/7068/2011 dated 25.03.2011. Total area 5853 Sq. and Meters = 7000 sq. yards. The project “Silverstone River” was developed by M/s. K.Star Corporation upon the said piece of land. The rate of purchase of the above piece of land is Rs.20,000/- per Sq. yard and the purchase value of the piece of land mentioned in the said working is Rs.13,08,80,100/- (may be after some deductions) but the sale deed is made for Rs.1,46,33,000/- only. This proved that the M/s. K.Star Corporation has made unaccounted cash investment of Rs.11,62,47,100/- (Rs. 13,08,80,100/- less Rs.1,46,33,000/-) for purchase of the said land piece of land. The actual and sole developers of the project is Kishorbhai Bhurabhai Koshiya. As such, Shri Kishorbhai Bhurabhai Koshiya made unaccounted cash investment of Rs.11,62,47,100/-, for purchase of the aforesaid land, upon which, the project “Silverstone River’ was developed by the assessee group. Similarly, the above unaccounted cash payments and by the assessee also constitute Page 39 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 unaccounted income of the seller of the land. The assessee i.e. Shri Kantilal Dharmashibhai Narola was one partner of seller of the land. As per the information, the assessee Shri Kantilal Dharmashibhai Narola has received unaccounted cash receipts of Rs.2,90,61,775/- (as per the assessee share 25% of Rs.11,62,47,100/-) and not shown his return of income for the A.Y. 2011-12. Information has been analysis and consciously considered. On the perusal of the details received from the DCIT, Central Circle-4, Surat, during the course of survey and search proceedings, it was found that the M/s. K.Star Corporation has made unaccounted investment of Rs.11,62,47,100/- for purchase of the said piece of the land. In this case, the assessee i.e. Shri Kantilal Dharmashibhai Narola has received unaccounted cash of Rs.2,90,61,775/- (25% of Rs.11,62,47,100/-) during the F.Y. 2010-11 relevant to A.Y. 2011-12. On the verification of the return of income filed by the assessee, it is appeared that he has not disclosed the amount of Rs.2,90,61,775/- cash receipts during the year under consideration and same is requires to be taxed as an unaccounted income of the assessee for A.Y. 2011-12. Page 40 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 In view of the above facts and circumstances of the case, I have therefore reason to believe that income of Rs.2,90,61,775/- has escaped assessment in this case, for which the case of the assessee for A.Y. 2011-12 needs to be reopened within the meaning of section u/s 147 of the I.T. Act.” 14. The writ-applicant filed his objections to the reasons referred to above vide letter dated 30th November 2018, which read as under : “1. The assessee was in receipt of reasons recorded for reopening of the assessee’s case for A.Y. 2011-12. From the reason recorded it is evident that during the course of search and survey proceedings in the case of K.Star Group it is found that M/s K.Star Corporation has purchased land amounting to Rs.1,46,33,000/- having total area of 5853 Sq. mts. equivalent to 7000 Sq. yards. In the reasons your Good Self alleged that as per “seized incriminating document” found during the search proceedings the rate of purchase of land is Rs.20,000/- per sq. yard and total purchase value as per said “seized incriminating document” comes to Rs.13,08,80,100/-. On the basis of said alleged working Your Good Self have Page 41 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 stated that the assessee being one of co-owner of land and having 25% share received cash of Rs.2,90,61,775/- [116247100 (130880100-14633000) * 25%] which was not shown in return of income. On the basis of said alleged working your Good Self have stated that the assessee being one of co-owners of land and having 25% share received cash of Rs.2,90,61,775/- which was not shown in return of income. The assessee vehemently objected the alleged receipt of unaccounted cash for the sale of land to M/s K.Star Corporation. However to file detailed objection against your good selves belief of escapement of income i.e. Rs.2,90,61,775/-, the assessee requested Your Good Self to forward the copy of alleged “seized incriminating document” relied upon to work out the rate of purchase of land. 2. With reference to captioned subject the assessee is in receipt of aforesaid letter wherein your Good Self have forwarded the seized incriminating information received from ADIT (Inv) on the basis of which reopening of the assessee's case for A.Y. 2011-12 was made. The said information/excel sheet is Page 42 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 reproduced herein below for ready reference purpose : 2 S.N.203/2, FP-68, TP-50 (KATARGAM),LAXMIVADI, SURAT SILVERSTON E RIVER SQ. FT. AVERAGE TOTAL SOLD 122475 3434 420635489 UNSOLD 33699 4800 195755200 TOTAL 161174 3762 606390689 LAND COST 7000*20000 130880100 AVERAGE CONSTR. COST PER SQ. FT 161174 1500 241761000 TOTAL COST 372641100 BALANCE 233749589 SHARE-KB 100 233749589 3. From the reasons it is evident that : (a) During the course of search and survey proceedings in the case of K.Star Group it is found that M/s K.Star Corporation has purchase land amounting to Rs.1,46,33,000/- having total area of 5853 Sq. mts equivalent to 7000 Sq. yards. (b) As per working the rate of purchase of land is Rs.20,000/- per sq. yard and total purchase value as per said workings comes to Rs.13,08,80,100/- as against sale deed of Rs.1,46,33,000/-. Page 43 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 (c) On the basis of alleged working your Good Self have concluded that Shri Kishorbhai Bhurabhai Koshiya, the sole key person of K.Star Corporation has made unaccounted investment of Rs.11,62,47,100/- for purchase of land. (d) On the basis of said alleged working your Good Self have stated that the assessee being one of co-owner of land and having 25% share received cash of Rs.2,90,61,775/- which was not shown in return of income. 3. The assessee vehemently objects to the alleged receipt of cash from M/s K.Star Corporation or Kishorbhai Bhurabhai Koshiya amounting to Rs.2,90,61,755/- and consequential reopening of his case for A.Y. 2011-12. The sale consideration was received as per document value only. 4. At the outset the assessee state that from the reasons recorded for reopening it is evident that the sole base for the current year’s reopening is the alleged details found during the course of search proceedings at K.Star Group. In this connection the assessee state that, now as per the settled law in view of various judicial ruling any proceedings/ Page 44 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 additions on the basis of third party evidences is bad in law. The assessee vehemently object to the allegation of the receipt of cash towards the sale of land to M/s K.Star Corporation. 5. In reasons recorded for reopening Your Good Self have solely relied on the working reproduced above found during the course of search and seizure proceeding in the case of K.Star group. In this regard it is submitted that the said sheet seems to be the estimate sheet prepared by the K.Star Group. This sheet shows the estimated working of project of Silverstone river showing thereof the no. of square feet booked, its average rate, total amount of booked flats, un- booked no. of Sq feets, the estimated rate at which the flats may be booked and its total amount, land cost showing therein the area in Sq. yards, its rate per Square meter and total cost of land. Area of Square foot to be constructed, Average cost of construction per Square Foot and total estimated cost of construction. Working of total estimated cost, total estimated collection and estimated balance amount. Thus as seen above all the figures mentioned in the above reproduced sheet are on estimated basis and therefore Page 45 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 the land cost of Rs.13,08,80,100/- cannot be considered as actual consideration received by the assessee along with his co- owners. 6. Further it is submitted that the assessee had not made any transaction with K.Star Corporation. As informed by Your Good Self in the aforesaid letter the said incriminating document on which Your Good Self is relying upon was seized from the back office of M/s. K.Star Corporation. The assessee had sold the land under reference to Shri Swintubhai Mavani and Shri Ankitbhai Koshiya. In this regard copy of sale deed is enclosed herewith. M/s. K.Star Corporation is an unknown entity for the assessee and the assessee had not executed any agreement or made any transactions with the said firm. It also came to the knowledge of the assessee that M/s. K.Star Corporation was not into existence at the time of execution of sale deed. Therefore reopening made on the basis of the document seized from an unknown entity is not justified and therefore the reopening proceedings should be quashed. 7. Further nowhere in the above sheet it is mentioned that the Page 46 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 assessee along with other co- owners have received Rs.13,08,80,100/- for sale of land. The assessee has not received any amount over and above the document value i.e. Rs.36,58,250/- (25% of Rs.1,46,33,000/-). The land cost mentioned in the sheet may be the estimated market value of the land as on the date of preparing the sheet. Thus the assessee vehemently objects alleged receipt of unaccounted cash for the sale of land to M/s. K.Star Corporation just on the basis of the estimate sheet. 8. Further, there is no failure on the part of the assessee to disclose the particulars of sale of land in question during the course of original assessment proceedings and accordingly current reassessment proceedings beyond 4 years is bad in law and need to be quashed. In view of what is stated herein above, the assessee vehemently object alleged receipt of unaccounted cash and consequential reopening of its case for A.Y. 2011-12. Therefore the assessee requests your goodselves to drop the reassessment proceeding initiated under section 148 of the Act.” 15. The objections came to be disposed Page 47 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 of by the respondent vide order dated 3rd December 2018, which reads as under : “As per the information available on record, the assessee along with other co- owners has sold a property for a total sale consideration of Rs.1,46,33,000/- only whereas the seized incriminating documents actual sale was made for Rs.13,08,80,100/- hence, receipt of on-money to the tune of Rs.11,62,47,100/- was allegedly received by the sellers of the land, wherein the assessee's share comes to Rs.3,27,20,025/- (1/4th share). Thus, there was good enough reason to believe that income has escaped assessment within the meaning of section 147 of Income-tax Act, 1961 and accordingly the case was re- opened. The provision of Section 147 of the I.T. Act and ratio of various case laws delivered in the context of the above provisions have imparted a clear direction to the A.O. under which circumstances a case can be re-opened and what are the pre-requisites for doing so. It is worthwhile to note that in all the case laws of the Apex Court as elaborately discussed hereunder, it is commonly held that what is required to re-open a case is “Reason to believe” but not to establish facts of Page 48 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 escapement of income. The sufficiency or correctness of the material is not to be considered because it is open to the assessee to prove that the facts assumed by the Assessing Officer in the notice were erroneous (Raymond Woolen Mills vs. ITO [(1999) 236 ITR 34 (SC)]. (i) In this case, notice u/s.148 of the I.T. Act is issued after recording reason applicable to the relevant A.Y. As observed by the Hon'ble Supreme Court in the case of “Centre Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 191 ITR 662, for initiation of action u/s.147(a) (as the provision stood at the relevant time) fulfillment of the two condition is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, what is required is “Reason to believe” but not to establish fact of escapement of income. 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 material would conclusively prove the escapement is not the concern at this stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective Page 49 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 satisfaction.” 16. Being dissatisfied with the above, the writ-applicant is here before this Court with the present writ-application. SUBMISSIONS : 17. Mr.Tushar Hemani, the learned senior counsel, assisted by Ms.Vaibhavi Parikh, the learned counsel appearing for the writ-applicant, vehemently submitted that the assessment for the year under consideration was framed under Section 143(3) of the Act 1961 and the same is sought to be reopened beyond the period of four years from the end of the relevant Assessment Year on the ground that the Assessing Officer has received information that certain amount was received by the writ-applicant in cash towards his share of the sale consideration. 18. Mr.Hemani would argue that there is nothing on record to even remotely indicate that there was failure on the part of the writ-applicant to make full and true disclosure of the transaction. The capital gains earned on the sale of land was duly disclosed in the return of income. The then Assessing Officer, after minute examination of all the relevant aspects, had consciously chose not to make any addition in respect of the capital gains while framing the assessment under Section 143(3) of the Act 1961. The respondent now proposes to touch the very same issue by reopening the case of the writ-applicant, which is nothing but mere change of opinion. Page 50 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 19. Mr.Hemani submitted that the writ- applicant and the other co-owners had no transaction worth the name with M/s. K.Star Corporation. M/s. K.Star Corporation is a third party. In the course of the search, which might have been carried out in the case of M/s. K.Star Corporation, some documents might have been collected, and relying on the same, it is now sought to be said that the total sale consideration received was Rs.13,08,80,100=00 as against the sale consideration of Rs.1,46,33,000=00 as mentioned in the sale-deed. 20. Mr.Hemani pointed out that the land was sold to two individuals, viz. Ankitkumar Koshiya and Swintubhai Mavani respectively, and not to M/s. K.Star Corporation. M/s. K.Star Corporation is an unknown entity and the writ-applicant had no transaction with the same. 21. Mr.Hemani would submit that there is nothing in the materials collected from M/s. K.Star Corporation to indicate as regards the actual sale consideration over and above the sale consideration mentioned in the sale-deed. 22. Mr.Hemani submitted that the department, on its own, has prepared a rough estimate as regards the cost of the project put up by M/s. K.Star Corporation. While working out the cost of project, the department has come out with the figure of Rs.13,08,80,100=00 towards the value of the land. 23. Mr.Hemani pointed out that the two Page 51 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 individuals named above who purchased the agriculture land in March 2011 from the writ-applicant along with the three co-owners later joined the newly formed partnership firm, namely, M/s. K.Star Corporation, as partners and their respective share in the agriculture land were contributed as share capital. 24. Mr.Hemani would submit that there is absolutely no basis whatsoever or any evidence for the unfounded assumption that the agriculture land was sold for Rs.13,08,80,100=00. He submits that there is no tangible material so as to reopen the case of the writ-applicant. 25. In such circumstances referred to above, Mr.Hemani, the learned senior counsel, prays that there being merit in his writ-application, the same may be allowed and the impugned notice be quashed and set-aside. 26. On the other hand, this writ- application and the connected two writ- applications have been vehemently opposed by Ms.Kalpana Raval, the learned senior standing counsel appearing for the Revenue. Ms.Raval would submit that the office of the respondent received information from the DCIT, Central Circle-4, Surat, that a search and survey operation was carried out at the residential and business premises of M/s. K.Star Group on 17th August 2016. During the course of the search and survey, it was found that M/s. K.Star Corporation had purchased the land in question situated at Mouje Katargam, Surat. She would submit that the writ- Page 52 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 applicant is one of the sellers of the land and at the relevant point of time he had 25% share holding in the land and had received Rs.2,90,61,775=00 towards his share. In such circumstances, the Assessing Officer has formed an opinion that the amount of Rs.2,90,61,775=00 escaped assessment. 27. Ms.Raval invited the attention of this Court to the averments made in paragraphs 5, 6 and 7 of the affidavit- in-reply, which read thus : “5. With reference to para no. 3.2, I state that this office has received information from the DCIT, Central Circle-4, Surat wherein it was communicated that a search and survey operation was carried out at the residential and business premises in the case of K.Star Group on 17.08.2016. During the course of search and survey, it was found that the M/s. K.Star Corporation was purchased land amounting to Rs.1,46,33,000/- situated at Moje Katargam, Dist.Surat situated at F.P. No.68, T.P. No.50, RS. No.203/2, sale deed registration No.SRT/4/ KTG/7068/2011 dated 25.03.2011. Total area of 5853 sq. mts = 7000 sq. yard. The project “Silverstone River” was developed by M/s. K.Star Corporation upon the said piece of land. The rate of purchase of the above piece of land was Rs.20,000/- per sq. yard and the Page 53 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 purchase of the above piece of land mentioned in the said working was Rs.13,08,80,100/- (may be after some deductions) but the sale deed was executed for Rs.1,46,33,000/- only. The above working proved that M/s. K.Star Corporation had made unaccounted cash investment of Rs.11,62,47,100/- (Rs.13,08,80,100/- - Rs.1,46,33,000/-) for purchase of said piece of land. The actual and sole developers of the project were Shri Kishorbhai Bhurabhai Koshiya. So, it is ascertained that Shri Kishorbhai Bhurabhai Koshiya made unaccounted cash investment of Rs.11,62,47,100/- for purchase of the aforesaid land, upon which, the project “Silverstone River” was developed by the assessee group. The assessee is one of the sellers of the land and was 25% share holder in the land and received Rs.2,90,61,775/- (25% of Rs.11,62,47,100/-) and the same is not shown in his return of income for the AY 2011-12. After recording the above reasons and forming satisfaction that the amount of Rs.2,90,61,775/- escaped assessment, the case was reopened u/s. 147 of the Act. Further, notice u/s. 148 of the Act was issued after following the procedure prescribed as per the Act and obtaining approval from the Competent Authority Page 54 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 which was duly served upon the assessee. 6. With reference to para no. 3.3 to 7, this office is in possession of specific information received from the DCIT, Central Circle which is further based on Investigation Wing and these are the internal limbs of the Department and the decision of the Hon’ble High Court in the case of Aradhana Estate P. Ltd. Vs. DCIT is applicable in this case. It is once again reiterated that there is no change of opinion. Further, impounded material was also received wherein the above facts could clearly be examined. So, after forming the belief and obtaining necessary approvals and as per the procedure laid down in the Act, the case was reopened u/s. 147 of the Act. There is no estimation of the figures but the working was made after deducing the figures on the documentary evidences collected during the course of search. In view of the above discussion and on the ratio laid down by the Hon’ble High Court there is no borrowed satisfaction and all the reasons recorded for reopening are valid and this office duly followed the complete procedure as per the provisions of the Act. There is no deviation from the procedure. The contention that Page 55 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 the impugned notice is bad, illegal, contrary to law and is required to be appropriately quashed and set aside is totally ruled as this office based on the information available and after examining the same, reopened the assessment of the assessee. 7. In view of the above stated facts, there is no illegality in the issue of the notice u/s 148 dated 28.03.2018 and the prayers sought in the present petition are required to be rejected and petition is required to be dismissed with costs.” 28. In such circumstances referred to above, Ms.Raval prays that there being no merit in this writ-application and also the connected two writ- applications, those be rejected. 29. As regards the averments made in paragraphs 5,6 and 7 of the reply referred to above filed by the Revenue, the writ-applicant has filed rejoinder, wherein paragraph 5 states that : “5. As regards Para 5 and 6 of the Affidavit-in-reply, contents thereof are denied. It is submitted that the Petitioner has sold the land in question to two individuals [viz. (1) Ankitkumar Gagjibhai Koshiya and (2) Swintubhai Arvindhbhai Mavani) and not to M/s. K.Star Corporation. There is no Page 56 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 involvement of any unaccounted cash investment over and above the sale consideration recorded in the conveyance deed. The project ‘Silverstone river” has not been developed by the Petitioner. The so called seized material was found during the course of search carried out in the case of a third party namely M/s. K.Star Corporation and the same appears to be merely some rough estimates prepared by M/s. K.Star Corporation with respect to some construction project namely “Silverstone river” on the land in question. In this paper, it was also mentioned that flats/apartments already build up and sold are not less than 1,22,000 sq. ft. and remaining area is unsold. It suggests that this is fully developed land and this sheet has been prepared after full development in the year 2014-15. Also the Petitioner has not entered into any transaction with M/s. K.Star Corporation. It is also nowhere stated in the so called seized material that the Petitioner or any of the other co-owners was given any cash towards sale consideration over and above the amount mentioned in the conveyance deed. It has been baselessly stated that the sole developer of the project was Kishore Bhurabhai Koshiya and it has been further baselessly assumed that the said Page 57 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 person has made unaccounted cash payment of Rs.11,62,47,100/-. In any case, this reopening beyond a period of four years and there is no failure on the part of the Petitioner as to full and true disclosure. Also the issue on hand was threadbare examined at the original assessment stage. Validity of reopening is to be tested strictly on the basis of reasons recorded prior to reopening. Also reopening is based on borrowed satisfaction. Also the share of the Petitioner has been erroneously presumed to be 25%. All these fallacies clearly show that no case is made out for reopening. Hence, the impugned notice deserves to be quashed.” ANALYSIS : 30. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned notice should be quashed. 31. On 14th December 2018, a Coordinate Bench of this Court, while issuing the notice, passed the following order : “1. Mr. Tushar Hemani, learned advocate for the petitioner has invited the attention of the court to the reasons recorded for reopening the assessment, to submit that the Assessing Page 58 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 Officer seeks to reopen the assessment on the ground that the assessee has received unaccounted cash in respect of the sale of the property described therein. It was pointed out that in this case, scrutiny assessment had been carried out for the assessment year under consideration, during the course of which, details had been called for by the Assessing Officer, which had been duly furnished. Reference was made to Annexure-B to the petition to point out that the details with regard to the sale transaction had been duly submitted to the Assessing Officer. The attention of the court was further invited to the communication dated 28.10.2013 of the petitioner to the Assessing Officer furnishing details with regard to the property in question and the working of the capital gain calculation as per indexation, to submit that during the course of scrutiny assessment, the Assessing Officer has looked into all these aspects in detail and, therefore, the assessment is sought to be reopened on a mere change of opinion. 2. It was further submitted that the document in question was seized during the course of search in the case of M/s. K.Star Corporation, however, the petitioner has not sold the land Page 59 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 in question to M/s. K. Star Corporation but to two other persons, and hence also, the very basis for the formation of the belief that income chargeable to tax has escaped assessment, is incorrect. 3. Having regard to the submissions advanced by the learned advocate for the petitioner, Issue Notice returnable on 5th February, 2019. By way of ad-interim relief, the respondent is permitted to proceed further pursuant to the impugned notice; he, however, shall not pass the final order without the permission of this court. Direct service is permitted today.” 32. The law as regards the reopening of the assessment under Section 147 of the Act 1961 is well-settled. (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from Page 60 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied-a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Page 61 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. (vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. (viii) If the original assessment is processed under Section 143(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment. (ix) In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two conditions are required to be satisfied; (i) The Assessing Officer must have Page 62 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 reason to believe that the income chargeable to tax has escaped assessment; (ii) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression “tangible Page 63 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 material” does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the “reasons to believe”. (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression “reason to believe” appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a “bona fide” belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. Page 64 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 (xvi) The concept of “change of opinion” has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. (xvii) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assesee's profits have escaped assessment or have been assessed at a low rate. However, nothing would preclude the Income Tax Officer from conducting any formal inquiry under Section 133(6) of the Act before proceeding for reassessment under Section 147 of the Act. (xviii) The “full and true” disclosure of the material facts would not include that material, which is to be used for testing the veracity of the particulars mentioned in the return. All such facts would be expected to be elicited by the Assessing Officer during the course of the assessment. The disclosure required only reference to those material facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries. (xix) The word “information” in Section 147 means “instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An Page 65 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the A.O. regarding the escapement of the income but then, while recording the reasons for the belief formed, the A.O. is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation Page 66 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court.” 13. It appears from the material on record as well as on perusal of the reasons recorded for reopening the assessment that on the basis of search and seizure under section 132 of the Act in case of M/s K Star Corporation carried out by the investigation wing of Surat, certain incriminating documentary evidence was found and based upon one such document seized during course of search, assessment is sought to be reopened on the ground that the petitioner along with others sold the property for a consideration of Rs. 1,30,80,100/- whereas amount shown in the sale deed is only 1,46,33,000/-. It is also the case of the AO that no return of income was filed by the petitioner at the relevant time and the assessed income to the tune of Rs. 3,27,20,025/- has escaped assessment on Page 67 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 account of unexplained long term capital gain. 14. It appears that the AO has without verification of the record has issued the impugned notice as the petitioner has filed the return of income for the AY 2011-2012 on 17.01.2012 declaring total income of Rs.4,81,499/- which has been processed under section 143(1) of the Act. Thus the entire premise for reopening of the assessment that the petitioner has failed to disclose the long term capital gain by filing return of income is without any basis. 15. Even while disposing the objection of the assessee, the AO failed to consider that the return of income was filed by the assessee on 17.01.2012 declaring long term capital gain with regard to the sale of the land. Moreover, reliance placed by AO on the document seized during the course of search Page 68 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 from M/s. K Star Corporation is not at all related to assessee as explained in letter dated 29.11.2018 addressed by the assessee to the AO categorically stating that M/s. K Star Corporation is an unknown entity for the assessee and assessee has not executed any agreement or made any transaction with the said firm and the assessee has executed the sale deed along with other co-owners with Shri Swintobhai Mawani and Ankitbhai Koshiya. Thus the AO has failed to establish any live nexus between the material relied upon to reopen the assessment and as such reopening on the basis of such information is not valid in the eyes of law and liable to be quashed for the reason that the AO failed to apply his mind by arriving at reasonable belief by recording reasons on the borrowed satisfaction. This Court I ncase of other co- owner Kantibhai Dharmasinh Narola quashed the reopening proceedings and therefore, on the Page 69 of 70 C/SCA/19547/2018 JUDGMENT DATED: 12/07/2022 same reasoning the impugned notice is liable to be quashed and set aside. 16. For the foregoing reasons, the impugned notice dated 28.03.2018 issued under section 148 of the Act by the respondent exercising the powers to reopen the assessment for the Assessment Year 2011-2012 is quashed and set aside. As a consequence, order dated 24.11.2018 of the Assessing Officer disposing of the objections of the petitioner against the impugned notice is also quashed and set aside. 17. The petition succeeds and is allowed. Rule is made absolute to the aforesaid extent. No order as to costs. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 70 of 70 "