AMI ORGANICS LIMITED V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1)

SCA/19545/2018

AI Insights

Ami Organics Limited challenged the notice issued for reopening of its income tax assessment for the assessment year 2012-13, alleging that the reopening was beyond the permissible period and based on a change of opinion. The Income Tax Department had received information suggesting that Ami Organics was involved in hawala transactions and had made bogus purchases from M/s. Brown Pharmaceuticals. The court examined the reasons for reopening provided by the assessing officer, which included details of suspicious transactions and the involvement of hawala operators. The court concluded that the reopening was justified based on the new information and the failure of Ami Organics to disclose fully and truly all material facts necessary for the assessment.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 759924 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 08-03-2021
• Assessment Year: misc
• Other Referred Cases: Aaradhna Estate Pvt. Ltd. Vs. Deputy Commissioner of Income Tax, Yogendrakumar Gupta vs. Income Tax Officer, Jayant Security and Finance Ltd. v. Assistant Commissioner of IncomeTax Circle1(1), Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: VAIBHAVI PARIKH
• Keywords: Accommodation entry; Bogus purchase; Hawala; Income tax reassessment; Scrutiny assessment
• Section: 147; 148; 143(3); 143(2); 195; 143(1); 40A(3)

Judgement Text

"C/SCA/19545/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19545 of 2018 ========================================================== AMI ORGANICS LIMITED Versus THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) ========================================================== Appearance: MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 08/03/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this writ application under Article 226 of the Constitution of India, the writ applicant seeks to challenge the the impugned Notice issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) dated 01.03.2008 for the A.Y. 2012-13, whereby, the assessment is sought to be reopened in exercise of the powers under Section 147 of the Act, 1961. 2. The brief facts can be summarized as under: 2.1 The assessee company is engaged in the manufacuring of pharmaceutical intermediates. The assessee filed its e-return of income on 27.09.2012 declaring total income at Rs.2,02,52,860/-. The return was processed under Section 143 (1) of the Act. The case was selected for scrutiny assessment and under Section 143 Page 1 of 22 C/SCA/19545/2018 ORDER (2) of the Act, the notice was issued on 06.08.2013. The notice under Section 142 (1) of the Act along with questionnaire was issued on 17.10.2013 and 30.10.2014 and in response to the notices, the assessee company submitted its details. After perusing the details furnished by the assessee, the assessing officer raised the issues i.e. (1) Disallowance of cash payment under Section 40A (3) of the Act, (2) Employee's contribution towards P.F & ESIC (3) Disallowance under Section 195 of the Act and finally, the additions were made under the issue raised and the scrutiny assessment framed vide order dated 04.03.2015. 2.2 Thereafter, the assessing officer reopened the assessment under Section 147 of the Act by issuing impugned notice dated 01.03.2018 under Section 148 of the Act. 2.3 At the request, the reasons recorded have been furnished to the assessee, which reads as under:- “Brief details of the assessee The assessee company is engaged in the business manufacturing of Pharmaceuticals Intermediates. The assessee filed its e-return of income on 27.09.2012 declaring total income of Rs.2,02,,52,860/-. The return was processed under Section 143(3) of the Act. The case was selected for scrutiny assessment and order under Section 143(3) of the Act was passed on 09.03.2015 determining total income at Rs.2,20,77,490/-. Brief details of information received by this office :- This office is in receipt of following information from the office of Asst. (Inv.) Unit-2(2), Mymbai:-”Enquiries have been conducted in the case of Shri Yogesh D. Waghela, Prop. Of M/s. Brown Pharmaceuticals & Chemicals, PAN AAWPW7911Q. It is seen that Shri Yogesh D. Waghela has not filed return of income for A.Y. 1011-12 & 2012-13. Summons were issued to HDFC & ICICI Bank and statements of Page 2 of 22 C/SCA/19545/2018 ORDER following accounts for F.Ys 2010-11 & 2011-15 were obtained: Sr. No.Name of the Bank Account in the name of Account No.1HDFC Bank Brown Pharmaceuticals & Chemicals 4750500016352ICICI Bank Brown Pharmaceuticals & Chemicals 15805006609 On further perusal of account nos.00475050001635 & 015805006609 of the assessee held with HDFC Bank & ICICI Bank respectively, it is seen that credits & debits in the above bank accounts are as under:- Bank account No.F.Y. 2010-11F.Y. 2011-12Credits (Rs.)Credits (Rs.)Debits (Rs.)HDFC Bank – 47505000163512,48,64,51412,30,04,96311,85,82,618 12,04,41,646ICICI Bank -158050066091,15,28,0511,15,39,051Account closed on 15.07.2010 It is pertinent to mention here M/s. Brown Pharmaceuticals & Chemicals is amongst the concerns which are declared as suspicious parties by Mahrashtra State VAT department. Further, summons were issued to HDFC Bank & ICICI Bank to provide the details of credits and debit parties in the above bank statement and from the anaylysis of details received from the HDFC Bank & ICICI Bank and the list of beneficiaries to hawala operators received from sales Tax Department (Maharashtra) which is consolidated by the Directorate of investigation, Mumbai, it is observed that following entities reflecting in the bank statement are also reflecting in such hawala list either as beneficiaries or as Hawala Dealer: Sr. No.Name of Beneficiary/hawala DealerPAN1SRS PHARMACEUTICALS PVT. LTDAAFCS4633P2TEJAK CHEMICALSAAIPS4674C3MEDICHEMAAAPT6698M4LESANTO LABORATORIESAAAFL9947M5SOMIL ENTERPRISE PVT. LTD.AAKCS9160L6AQUATIC REMEDIES PVT LTDAABCA3876G7CAMEL PHARMACAREATEPP8150D8D W PHARMA TRADEAAWPW0421A9KINGSY PHARMAABRPW5450E10NAVPAD CHEMAGKPM6888Q11SOMIL ENTERPRISE PVT LTDAAKCS9160L12SWASTIK PHARMACEUTICALSAADPS3220M13YASH CHEMAODPM1361D Furthermore, summons issued to the assessee at F-15, Saibaba Nagar, Boriwali (W), Mumbai was returned unserved. An inspector was deputed to trace out the assessee. Inspector submitted his report, wherein it has been stated that the above mentioned subject party is not traceable at the given address. Page 3 of 22 C/SCA/19545/2018 ORDER In view of the above facts that the assessee is a non filer, there are huge credits and almost equal debits in the bank in the bank accounts of the assessee, name of the assessee is operating in the hawala dealer list for F.Y. 2009-10 & 2010-11; the names of many parties who have credited/debited amounts to /from the accounts of the assessee are also reflecting in such list either as Hawala Dealer or as beneficiaries; it is established that the assessee is merely a entry provider having not genuine business. Therefore, all the parties who/which have credits or to whom money is debited are alleged beneficiaries of accommodation entries provided by the assessee in the form of either purchased or sale. In the above background, it is established that the assessee is involved in hawala dealings, having no genuine business and only providing accommodation entries in the form of sale/purchase to its beneficiary parties (identified on the basis of details of credits/debit parties provided by the banks). List of such beneficiaries is enclosed as Annexure-1. It is also seen from the bank stataements provided by the HDFC Bank and ICIC Bank (which are enclosed herewith) that the amount of transactions entered into by the beneficiaries mentioned in the Annexure-1 is more than Rs.1 lakh for F.Y. 2010-11 & 2011-12. Therefore, this information is being passed on to you as your assessee has transacted with Shri Yogesh D Waghela, Prop. Of M/s. Brown Pharmaceuticals & Chemicals, PAN AAWPW7911Q and has availed accommodation entries by way of sale /purchase to evade the due taxes. Analysis of Information received From the information received it is clear that Mr. Yogesh D. Waghela is involved in hawala dealings (entry providing/cheque discounting/bogus billing etc.), in the name of M/s. Brown Pharmaceuticals & Chemicals, PAN AAWPW7911Q, which has no genuine business and only providing accommodation entries in the form of sale/purchase to its beneficiary parties. The assessee i.e. M/s. Ami Organics Pvt. Ltd. Is one of the beneficiaries as per the list provided along with the information. Therefore, the transactions reflected in the bank statement of M/s. Brown Pharmaceuticals & Chemicals are nothing but only for the benefit of the assessee (Ami Organics Pvt. Ltd.) by way of providing bogus entry by M/s. Brown Pharmaceuticals & Chemicals. Enquiries made by this office : The information is passed by the Asst. DIT. Unit 2(2), Mumbai, after making enquiries by way of issuing notice u/s. 133(6) and deputing inspector for tracing out the assessee. Bank statement of M/s. Brown Pharmaceuticals & Chemicals is credited with Rs.1,40,78,914/- which was transferred by the assessee company through RTGS in February March 2012. Considering the factual aspects, it is concluded that the information received is true and correct. Page 4 of 22 C/SCA/19545/2018 ORDER Finding of this office :- It is clear from the bank statement that the assessee paid Rs.1,40,78,914/- to M/s. Brown Pharmaceuticals & Chemicals on different dates. This transaction is for showing bogus purchase in assessee's books. Besides, it is also to be considered that as per the information M/s. Brown Pharmaceuticals & Chemicals is amongst the concerns which are declared as suspicious parties by Maharashtra State VAT Department. The assessee assessed under the jurisdiction of this office is also one of the beneficiaries of the accommodation entries provided in the form of purchase/sale by M/s. Brown Pharmaceuticals & Chemicals, Transactions with a merely entry provider entry which has not genuine is enough to formulate the reason to believe that the amount of Rs.1,40,78,914/- has not been taxed and has escaped assessment. Basis of formation of reason to believe : The following facts emerging from information/data available with this office make strong reason to believe that the amount of Rs.1,40,78,914/- is assessee's bogus purchase and it was to be added in assessee's income. Thus, this income chargeable to tax has escaped assessment and this is a fit case for the proceedings u/s. 147 of the I.T.Act, 1961. Shri Yogesh D Waghela (Prop. Of M/s. Brown Pharmaceuticals & Chemicals, PAN AAWPW7911Q) has not filed return of income for the year under consideration i.e. A.Y. 2012-13. Transactions carried out by the assessee, mostly in March-2012, reflected in the HDFC Bank account of M/s. Brown Pharmaceuticals & Chemicals, A/c. 00475050001635. M/s. Brown Pharmaceuticals & Chemicals is amongst the concerns which are declared as suspicious parties by Maharashtra State VAT Department. M/s. Brown Pharmaceuticals & Chemicals is merely an entry provider having not genuine business. Therefore, all the parties who which have credits or to whom money is debited are alleged beneficiaries of accommodation entries provided by M/s. Brown Pharmaceuticals & Chemicals in the form of either purchased or sale. Therefore, the assessee is one of the beneficiaries of accommodation entries. The information was passed after making proper enquiry and after issuing summons 133(6) Notices to the Banks/parties. Satisfaction of this office :- The failure is on the part of assessee as it has shown bogus purchases by way of making transaction with an entry provider entity i.e. M/s. Brown Pharmaceuticals & Chemicals. The assessee has not disclosed true fair picture of its business transactions. Considering the abovementioned factual backdrop, I Page 5 of 22 C/SCA/19545/2018 ORDER have reasons to believe that in this case, income of Rs.1,40,78,914/- has escaped assessment within the meaning of explanation-1 to section 147 of the I.T. Act, 1961. I am fully satisfied that the income of Rs. 1,40,78,914/- chargeable to tax has escaped assessment and this is a fit case for the proceedings u/s. 147 of the I.T. Act, 1961. Applicability of the provisions of section 147 to the facts of the case: In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3) or reassessment u/s 147 was made on 09.03.2015. Since, 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceeding u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons : to believe that income has escaped assessment for the year under consideration have been recorded in preceding paragraphs. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the material facts necessary for his assessment for the year under consideration. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s. 147 of the Act. It is true that the assessee has filed a copy of annual report and audited P & L A/c. and balance sheet along with return of income where various information / material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above, It is pertained to mention here that even though the assessee has produced books of accounts. Annual report, audited P & L A/c and balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could been discovered with due diligence, accordingly attracting provisions of Explanation 1 of section 147 of the Act. It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment/ reassessment. This fact is corroborated from the contents of noticed issued by the AO u/s 143(2)/142(1) and order sheet entries recorded during the 143(3)/147 proceedings. It is imported to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in annual report, Page 6 of 22 C/SCA/19545/2018 ORDER audited P & -L A/c. balance sheet and books of account in such a manner that it would required due diligence by the AO to extract these information. For foretasted reasons, it is not a case of charge of opinion by the AO. In this case, more than four years have lapsed from the end of assessment year 201213. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income-tax, Vadodara-l, Vadodara as per the provisions of section 151 of the Act.” 2.4 The writ applicant raised the objections vide its communication dated 10.12.2018 and raised the following issues on facts and law : (i) Reopening is bad in law as the same is “beyond a period of four years from the end of the assessment year”. (ii) Reopening is based on “change of opinion”. (iii) Reopening is based on “borrowed satisfaction”. (iv) The assessee company has not made any purchase from M/s. Brown Pharmaceuticals during the year under consideration. (v) The respondent has proceeded merely on the basis of the conjectures and surmises. 2.5 The objections came to be rejected by the respondent. 3. Being aggrieved by the disposal of the objections and issuance of notice for reopening of the assessment, the writ applicant has come up before this Court by filing present writ application. 4. We have heard Mr. Tushar Hemani, the learned Senior Counsel assisted by Ms. Vaibhavi K. Parikh, the learned counsel appearing for the writ applicant and Mr. Varun K. Patel, the learned standing Page 7 of 22 C/SCA/19545/2018 ORDER counsel appearing for the Revenue. 5. Mr. Hemani, the learned Senior Counsel appearing for the writ applicant has raised the following contentions : (a) The impugned notice is patently bad, illegal and contrary to law; (b) The learned counsel for the writ applicant vehemently argued that, there was no failure on the part of the assessee to disclose necessary materials at the time of original assessment and now in the absence of any tangible material in the hands of the Assessing officer, reopening is impermissible in law. In this regard, the learned counsel submitted that, at the time of previous assessment, various details were called for including purchase and sales register, stock register, monthly quantitative and value wise details of purchases and after examining the details, conscious decision being taken by the assessing officer not to make any addition in respect of purchases while framing the assessment under Section 143 of the Act. Therefore, the amount paid to M/s. Brown Pharmaceuticals at the instance of Aroma Impex to discharge the dues having reflected in the ledger of said entities as well as in the audited books of accounts, which had already been examined at the time of scrutiny assessment. In this background of the facts, the learned counsel submitted that, pre-condition for reopening in the case of beyond four years having not been satisfied as there was no failure on the part of the assessee to Page 8 of 22 C/SCA/19545/2018 ORDER disclose the material facts and it is a case of mere change of opinion; (c) It was submitted that, the assessing officer has acted mechanically on the basis of the information received from the concerned department and there is no any independent application of mind by the assessing officer to arrive at a conclusion that the income chargeable to tax has escaped assessment. Therefore, reopening based on the borrowed satisfaction cannot be sustained in law; (d) It was further contended that, the assessee has not made any purchases from M/s. Brown Pharmaceuticals during the year under consideration and therefore, the question of any bogus purchases from M/s. Brown Pharmaceuticals does not arise at all and therefore, the revenue failed to appreciate the facts properly and has proceeded merely on the basis of the conjectures and surmises. 6. In view of the aforesaid contentions, the learned counsel for the writ applicant submitted that, the impugned notice as well as the order of disposing off the objections are bad, illegal and without jurisdiction and therefore, the same deserve to be quashed and set aside and accordingly, the writ application may be allowed. 7. On the other hand, Mr. Varun K. Patel, the learned standing counsel appearing for the Revenue vehemently opposed the writ Page 9 of 22 C/SCA/19545/2018 ORDER application and contended that, the revenue is justified in reopening the assessment for the year under consideration. He urged that, at the time of original assessment proceedings, the alleged transactions having not been disclosed truly by the assessee and therefore, after fresh information in the form of tangible materials received from the concerned department, the assessing officer has reasons to believe that, the amount paid by the assessee to M/s. Brown Pharmaceuticals at the instance of Aroma Impex, has escaped assessment. Referring to the additional Affidavit-in- Reply filed for and on behalf of the revenue, the learned counsel submitted that, during the investigation subsequent to the present proceedings, proprietor of Aroma Impex in his affidavit before the authority, made declaration that, he has never made any genuine sale or purchase transactions in the name of M/s. Aroma Impex. In this background facts, the learned counsel for the revenue submitted that, the whole transactions reflected in the books of account of the assessee is nothing, but an accommodation entry for which the assessing officer has rightly come to the conclusion that the income has escaped assessment. 8. Having heard the learned counsel for the respective parties and having gone through the materials on record, the only question that falls for our consideration is whether the impugned notice of reopening should be quashed ? It is an admitted fact that, the assessee Ami Organics ltd. entered into financial transactions to the tune of Rs.1,40,78,914/- with M/s. Brown Pharmaceuticals for the Page 10 of 22 C/SCA/19545/2018 ORDER year under consideration. According to the case of the assessee, it made total purchases of Rs.25,68,35,509/- during the year under consideration which were duly reflected in the audited annual accounts. The total purchases included the purchases of Rs.2,56,18,486/- made from Aroma Impex and certain payments were directly made to Aroma Impex, however, as regard the payment to the tune of Rs.1,40,78,914/- due to the Aroma Impex, the party i.e. Aroma Impex had requested the assessee to make payment to that extent i.e. Rs.1,40,78,914/- directly to M/s. Brown Pharmaceuticals towards the dues of Aroma Impex and accordingly, on different dates, the assessee had paid the same to M/s. Brown Pharmaceuticals. 9. We take the notice of the fact that, on the basis of the particulars furnished by the assessee, the previous assessment was framed by addition of certain amount under the different heads as noted above. However, at the relevant time, no specific query was raised so far the payment of Rs.1,40,78,914/- made to M/s. Brown Pharmaceuticals is concerned and apparently, there was no suspicion in the mind of the assessing officer with regard to the alleged payment. Therefore, there was no occasion to form an opinion with regard to the alleged payment made by the assessee towards the purchases made from Aroma Impex. 10. A plain reading of the reasons recorded reveals that, the revenue received information from the office of the Assistant DIT, (Inv.), Unit 2(2), Mumbai that, M/s. Brown Pharmaceuticals is a non filer Page 11 of 22 C/SCA/19545/2018 ORDER and providing accommodation entries without having actual business and the parties who have credited and debited in the bank accounts of M/s. Brown Pharmaceuticals were beneficiaries of the accommodation entries in the form of bogus sales or purchases. The assessing officer while recording the reasons observed that, the assessee M/s. Ami Organics was one of the beneficiaries as per the list provided along with the information and therefore, the transactions reflected in the bank statement of M/s. Brown Pharmaceuticals is bogus and sham. It also appears from the reasons recorded that, the assessing officer had verified the bank statements and made enquries and reached to the conclusion that the information received is correct and further, made the enquiry with regard to the alleged bogus purchase as well as money transactions directly made to M/s. Brown Pharmaceuticals and finally, formed his opinion that, he has “reason to believe” that the amount of Rs.1,40,78,914/- has escaped assessment. 11. After careful examination of the reasons recorded and the materials on record, we are of the view that, the assessing officer could be said to have applied his independent mind to the information received from the concerned department and after independent enquiries, he came to the conclusion that, the income has escaped assessment. Therefore, on the basis of the specific and definite information, the assessing officer after being duly satisfied reached to the conclusion that, the assessee failed to disclose true facts with regard to the transactions made with M/s. Brown Page 12 of 22 C/SCA/19545/2018 ORDER Pharmaceuticals, which provides a link between his conclusion and materials gathered during the enquiries. 12. In view of the aforesaid discussions, it could be said that after framing of the assessment made under Section 143(3) of the Act, some tangible material came into the hands of the assessing officer through the investigation wing and upon perusal of the same, he made independent enquiries and applied his mind and upon due satisfaction, he formed an opinion that, the income has escaped assessment. 13. The learned counsel for the writ applicant vehemently contended that, it is a case of mere change of opinion and the proceedings could be said to have been initiated mechanically on the basis of the third party information. This Court in the case of Aaradhna Estate Pvt. Ltd. Vs. Deputy Commissioner of Income Tax [(2018) 91 taxmann.com 119], after referring to various other decisions of this Court as well as of the Apex Court observed in paras 11, 12, 13, 14, 15 & 16 as under : 11. Merely because the transactions in question were examined by the Assessing Officer during the original assessment would not make any difference. The scrutiny was on the basis of disclosures made and materials supplied by the assessee. Such material is found to be prima facie untrue and disclosures not truthful. Earlier scrutiny or examination on the basis of such disclosures or materials would not debar a fresh assessment. Each individual case of this nature is bound to have slight difference in facts. Judgement of Delhi High Court in case of Allied Strips Ltd.((supra)) does not suggest that merely because a particular issue was examined during the original assessment proceeding, the Assessing Officer would be debarred from resorting to reopening of the assessment, even if he had sufficient fresh materials at his command, to form a reasonable belief that the assessee had made incorrect disclosures or had not made full disclosures which would have a vital bearing on the assessment of his income. If that is the ratio, counsel for the petitioner wishes to Page 13 of 22 C/SCA/19545/2018 ORDER cull out from such judgment, we record our respectful disagreement. In case of Yogendrakumar Gupta((supra)), the Court rejected a petition challenging the notice of reopening which was issued beyond a period of four years from the end of relevant assessment year, in which also one of the grounds was that the issue was previously scrutinised during the assessment proceedings. The Court observed as under : “16. Ostensibly, thus, there was disclosure and the occasion would not arise to term this as the assessee not having disclosed fully and truly all the material facts necessary for assessment. However, in essence, if the unsecured loans obtained from Basant Marketing Pvt. Ltd. from the material supplied by them, the DCIT, Kolkata reveals that the same was as a result of accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. to the tune of Rs.8.71 crore, the case of the assessee would surely be covered under the said provision of law as it would not amount to full and true disclosure on the part of the assessee. At this stage, the reasons recorded shall have to be regarded, which have been based on the information contained in the report of the DCIT, Kolkata, dated March 24, 2013, wherein it had been noticed that the assessee company obtained accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. and, therefore, the Assessing Officer based his reason to believe that the income chargeable to tax had escaped the assessment. Xxx 17. In the post notice correspondence dated March 05, 2014, it has been stated by the Assessing Officer that Basant Marketing Pvt. Ltd. provided accommodation entry to various companies, where assessee company is one of them. Basant Marketing Pvt. Ltd. is a dummy company of one Shri Arun Dalmia and substantial material is found to base such reasons recorded during the search by CBI, Mumbai and, therefore, the Assessing Officer issued a notice to show cause as to why the said amount of Rs.8.71 crore received from Basant Marketing Pvt. Ltd. should not be treated as cash credit under section 68 of the Act. 21. This Court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appear to be the case where the Assessing Officer on vague or unspecific information initiated the proceedings of reassessment, without bothering to form his own belief in respect of such material. We need to notice that the Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai. A case is registered against Mr.Arun Dalmia, Harsh Dalmia and during the search at their residence and office premises, the substantial material indicated that 20 dummy companies of Mr.Arun Dalmia were engaged in money laundering and the incometax evasion. The said entities included Basant Marketing Pvt. Ltd. also. From the analysis of details furnished and the beneficiaries reflected, which are spread Page 14 of 22 C/SCA/19545/2018 ORDER across the country, the CIT, Koklata, suspected the accommodation entry related to the assessment year 200607 as well, this information has been provided to Director General of Incometax, Kolkata, who in turn, communicated to the Chief Commissioner of Incometax,Ahmedabad. Further revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition. Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. The proceedings initiated under section 147 of the Act would not be rendered void on nonsupply of such document for which confidentiality is claimed at this stage, following the decision of the Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. ((supra)). Assumption of jurisdiction on the part of the Assessing Officer is since based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference.” 12. In case of Jayant Security and Finance Ltd. v. Assistant Commissioner of IncomeTax Circle1(1) [Special Civil Application No.18921/2017, order dated 12.2.2018], this Court observed as under : “8. The question of change of opinion and failure on the part of the assessee to disclose truly and fully all material facts, in the present case are closely connected. Undoubtedly, as noted earlier, the Assessing Officer during the original assessment had examined the transactions. However, such examination would necessarily be on the basis of disclosures made by the assessee in the return filed and during the scrutiny assessment. If the Assessing Officer has information to form a reasonable opinion that prima facie the entire transaction itself was sham and bogus, as reference to such transaction during the original assessment and raising certain queries in this respect would not prevent him from reopening the assessment on the principle of change of opinion. As noted, the opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opinion formed earlier would not prevent Assessing Officer from examining the issue. In the present case, as noted, Assessing Officer received additional information after the original assessment was over, on the basis of which he formed a belief that the entire transaction was a sham transaction. At this stage, where the Court is examining the validity of notice of reopening, it is not necessary that the Assessing Officer must have conclusive evidence to hold that invariably additions would be made in the income of the assessee. What is required is the reason to believe that income chargeable to tax as escaped assessment. Sufficiency of the materials in the hand of the Assessing Officer which enabled him to form such a belief would not be examined. A reference in this respect is made to a decision of the Supreme Court in the case of Asstt.Commissioner of Incometax v. Rajesh Jhaveri Stock Brokers P. Limited, reported in [2007] 291 ITR 500.” Page 15 of 22 C/SCA/19545/2018 ORDER 13. The next contention that the Assessing Officer did not demonstrate any material enabling him to form a belief that income chargeable to tax has escaped assessment is fallacious. The Assessing Officer recorded detailed reasons pointing out the material available which had a live link with formation of belief that the income chargeable to tax had escaped assessment. At this stage, as is often repeated, we would not go into sufficiency of such reasons. In this context, reference can be made to decision of Supreme Court in case of Raymond Woolen Mills Ltd. ((supra)). In case of Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500(Hon'ble Supreme Court), it was observed as under : “The expression reason to believe in section 147 would mean cause or justification. If the Assessing Officer has cause or 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. What is required is reason to believe but not the established 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 materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief is within the realm of subjective satisfaction of the Assessing Officer.” 14. Section 68 of the Act, as is well known, provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited maybe charged to incometax as the income of the assessee of that previous year. That the share application money received by the assessee from abovenoted companies was only by nature of accommodation entries and in reality, it was the funds of the assessee which was being rerouted. Undoubtedly. Section 68 of the Act would have applicability. Proviso added by the Finance Act 2012 with effect from 1.4.2013, does not change this position. Proviso reads as under : “68.... Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assesseecompany shall be deemed to be not satisfactory, unless ( a) the person being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of sum so credited; and Page 16 of 22 C/SCA/19545/2018 ORDER (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory;..... 15. As per this proviso, where the assessee is a company and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, explanation offered by the assessee company shall be deemed to be not satisfactory, unless the person in whose name such credit is recorded in the books of the company also offers an explanation about the nature and source of sum so credited and such explanation in the opinion of the Assessing Officer has been found to be satisfactory. Essentially, this proviso eases the burden of proof on the Revenue while making addition under section 168 with respect to non genuine share application money of the companies. Even in absence of such proviso as was the case governing the periods with which we are concerned in the present case, if facts noted by the Assessing Officer and recorded in reasons are ultimately established, invocation of section 68 of the Act would be called for. 16. The contention that the Assessing Officer had merely and mechanically acted on the report of the investigation wing also cannot be accepted. We have reproduced the reasons recorded by the Assessing Officer and noted the gist of his reasons for resorting to reopening of the assessment. We have recorded that the Assessing Officer had perused the materials placed for his consideration and thereupon, upon examination of such materials formed a belief that income chargeable to tax had escaped assessment. In case of Principal Commissioner of Incometax, Rajkot3 v. Gokul Ceramics reported in (2016) 241 Taxman 1 (Gujarat), similar contention was raised by the counsel for the assessee contending that the Assessing Officer had acted mechanically on the investigation carried out by the Excise department and not formed his independent belief. Such a contention was rejected making the following observations : “9. It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and showcause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the showcause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd.vs. Income Tax Officer, Nagpur ((supra)) the Supreme Court noted that Page 17 of 22 C/SCA/19545/2018 ORDER in case of the assessee which had an office in London, this Customs authority had come to know that the assessee had declared very low price in respect of the consignment of Manganese exported by them out of India. After due inquiries and investigations, the Customs authorities found that the assessee was systematically undervoicing the value of Manganese as compared with the prevailing market price. The Income Tax Officer on coming to know about the proceedings before the Customs Collector in this respect issued notice for reopening of the assessment. In the reasons that the Assessing Officer relied on the facts as found by the Customs Authorities that the assessee had undervoiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under: “So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under invoiced the goods it exported. It is not doubt correct that the said finding may not be binding upon the income tax authorities but it can be a valid reason to believe that the chargeable income has been under assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee’s income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied.” 11. In case of Income Tax Officer vs Purushottam Das Bangur ((supra)) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: “12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax Page 18 of 22 C/SCA/19545/2018 ORDER had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the Income Tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned judgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. No order as to costs.” 12. In case of Income Tax Officer vs Selected Dalurband Coal Co. Pvt. Ltd.((supra)), the assessment was reopened on the basis of the information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of reopening of assessment, the Supreme Court held and observed as under: “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 January 9,1967, 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 be 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 reassessment proceedings have not to go on. we don not and we ought not to express any opinion on the merits.” 13. In case of AGR Investment Ltd. vs. Additional Commissioner of Income Tax and anr ((supra)), a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: “23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner Page 19 of 22 C/SCA/19545/2018 ORDER had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful and studied manner. He has taken note of the fact that transactions involving Rs.27 lakhs mentioned in the table in Annexure P2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income. The assessing officer has referred to the subsequent information and adverted to the concept of true and full disclosure of facts. It is also noticeable that there was specific information received from the office of the DIT (INVV) as regards the transactions entered into by the assessee company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal ((supra)), Bombay Pharma Products ((supra)) and Anant Kumar Saharia ((supra)), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. ((supra)), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. ((supra)), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score.” 14. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee.” Page 20 of 22 C/SCA/19545/2018 ORDER 14. In view of the aforesaid observations made by this Court in the case of Aaradhna Estate Pvt. Ltd. (supra), and considering the facts and circumstance of the present case, we are of the view that, the true facts with regard to the transactions made with M/s. Brown Pharmaceuticals by the assessee, having been discovered by the assessing officer on the basis of the information received from the investigation wing, the assessing officer could be said to be justified in forming an opinion that the income has escaped assessment. Therefore, the contention with regard to change of opinion and that there was full disclosure at the previous assessment lacks merit. We are of the firm opinion that, there is prima facie tangible material to form an opinion that the income has escaped assessment and the assessee failed to disclose truly and fully all primary facts at the time of the previous assessment, as a result, the assessing officer could not draw proper legal inferences with regard to the alleged transaction. Therefore, as at the relevant time, there was no formation of opinion with regard to the alleged transaction, the assessing officer is not prohibited to form an opinion on the basis of the tangible material that came in his hands by way of information. 15. In view of the discussions made hereinabove, it cannot be said that, there was no tangible material before the assessing officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 of the Act. Page 21 of 22 C/SCA/19545/2018 ORDER 16. For the foregoing reasons, no case is made out and accordingly, present writ application deserves to be dismissed and is hereby dismissed. No order as to costs. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT Page 22 of 22 "