ANDERSON BIOMED PRIVATE LIMITED V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1)

SCA/21716/2019

AI Insights

Anderson Biomed Private Limited challenged the reopening of its income tax assessment for the year 2012-13, based on a notice issued under section 148 of the Income Tax Act, 1967. The notice was predicated on the belief that the company had received accommodation entries amounting to Rs.2,07,92,029 from AA Plus Shares Brokers Pvt. Ltd., a broker company linked to Shri Jignesh Shah, known for providing such entries. The petitioner argued that the transactions occurred in the previous financial year and that the reopening was based on incorrect facts. The respondent, represented by the Assistant Commissioner of Income Tax, contended that the reopening was justified based on new material and information obtained from investigations into the broker company's activities. The court, after examining the submissions and evidence, upheld the reopening of the assessment, emphasizing the prima facie material indicating that income had escaped assessment.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749705 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 31-07-2021
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (India) Ltd. v. ITO & Ors., Raymond Woollen Mills Ltd. v. ITO, Phool Chand Bajrang Lal v. ITO, Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income Tax, Aaspas Multimedia Ltd. v. Deputy Commissioner of Income Tax, Circle 1(1)
• Laws Referred To: Income Tax Act, 1967
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: NIKUNT RAVAL; KALPANAK RAVAL
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Accommodation entries; Income chargeable to tax escaped assessment; Reopening of assessment
• Section: 147; 148; 132; 131

Judgement Text

"C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 21716 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI ======================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ======================================= ANDERSON BIOMED PRIVATE LIMITED Versus THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) ======================================= Appearance: MR TUSHAR HEMANI, SR. ADVOCATE for MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR NIKUNT RAVAL for MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ======================================= CORAM: HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI Date : 31/07/2021 CAV JUDGMENT (PER : HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI) 1. This petition, under Article 226 of the Constitution of India, Page 1 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 is filed by the petitioner – Anderson Biomed Private Limited – assessee seeking to quash and set aside the Notice dated 30.03.2019 issued by the respondent authority under section 148 of the Income Tax Act, 1967 (herein after referred to as “the IT Act”) for the Assessment Year 2012-13, as it has reason to believe that the income chargeable to tax for the assessment year under consideration has escaped assessment within the meaning of section 147 of the IT Act. 2. The facts, as emerge from the record, are that the petitioner is a Company incorporated under the Companies Act, 1956. During the Financial Year 2010-11, relevant to Assessment Year 2011-12, the petitioner entered into certain commodities transactions through broker namely “AA Plus Shares Brokers Pvt. Ltd.” (herein after referred to as “the broker company”) in which, the petitioner incurred loss and eventually, an amount of Rs.2,07,92,029/- became payable to the broker company, which remained outstanding even on 31.03.2011 and was reflected in Schedule-9: Sundry Creditors forming part of the Audited Annual Accounts. Such amount was repaid by the petitioner company during the Financial Year 2011-12, relevant to the Assessment Year 2012-13 i.e. the year under consideration, in various installments through banking channel, as is evident from the ledger of the broker company. Thereafter, the petitioner filed its Return of Income (RoI) for the year under consideration on 24.09.2012, declaring total income of Rs.1,18,22,690/-. However, the respondent authority issued notice dated 30.03.2019 under section 148 of the IT Act seeking to reopen the case of the petitioner for the year under consideration. In response to the said notice, the petitioner company filed its RoI on 21.08.2019 and also requested to supply the reasons for reopening, which Page 2 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 were supplied vide letter dated 12.09.2019. A perusal of the same revealed that the respondent authority is of the view that the petitioner had transactions aggregating to Rs.2,07,92,029/- with the broker company during the year under consideration and hence, the petitioner has taken accommodation entries to the tune of Rs.2,07,92,029/- and the respondent authority has reason to believe that the petitioner has escaped assessment. Against the reasons accorded, the petitioner, vide letter dated 02.10.2019, raised objections against reopening on factual as well as the legal grounds, however, the respondent authority disposed of the said objections raised by the petitioner holding that the reopening is justified. Being aggrieved, the petitioner is before this Court by way of this petition. 3. We have heard, learned senior advocate Mr. Tushar Hemani for learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval for learned advocate Mrs. Kalpana Raval for the respondent. 3.1 The learned senior advocate for the petitioner, inviting attention to the reasons recorded, submitted that as is emerging from the reasons recorded, an inquiry was carried by the Deputy Director of Income Tax (Inv.), Unit-1(3), Ahmedabad in the case of various bogus concerns of Shri Jignesh Sudhirbhai Shah, who is engaged in the business of providing the accommodation entries. That, search under section 132 of the IT Act conducted on 11.09.2018, resulted into seizure of unaccounted cash of Rs.19.3 crores (related to accommodation entries and commission earned thereon) from the residential premises of Shri Jignesh Shah along with incriminating digital as well as documentary evidence. It was found that Shri Jignesh Shah is managing and controlling Page 3 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 multiple companies and concerns, which are not carrying out any genuine business activity. These concerns are involved in activity of providing accommodation entries of various kinds such as unsecured loans, share premiums, bogus gains, contrived losses etc. The concerns were found to be non-existent at their addresses. It is further recorded that on a perusal of the list of shell/paper companies, furnished by Shri Jignesh Shah, it is seen that M/s. Aa Plus Share Brokers Pvt. Ltd. (the broker company) is one of the shell/paper company, controlled by Shri Jignesh Shah and from the details of accommodation entries provided by the shell/paper companies controlled by Shri Jignesh Shah, it is seen that the petitioner company has taken accommodation entries from shell/paper company - M/s. Aa Plus Share Brokers Pvt. Ltd. (the broker company). The learned senior advocate for the petitioner further submitted that on the basis of such information received from Shri Jignesh Shah, it is recorded that it is proved that M/s. Anderson Biomed Pvt. Ltd. (the petitioner company) has taken accommodation entries to the tune of Rs.2,07,92,029/- from the shell/paper company namely M/s. Aa Plus Share Brokers Pvt. Ltd. (the broker company) during the Financial Year 2011-12, relevant to Assessment Year 2012-13. The learned senior advocate for the petitioner, with all vehemence at command, submitted that reopening has been made for wrong assessment year as the transactions with the broker company have been made in the previous year i.e. in the Assessment Year 2011-12 (Financial Year 2010-11) and no amount has been received from them in the year under consideration. He further submitted that, in fact, payment has been made to the broker company. Mr. Hemani, the learned senior advocate for the petitioner, then invited the attention of the Court to the date-wise details of accommodation entries, to the tune of Rs.2,07,92,029/-, taken by Page 4 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 the petitioner company from the broker company and submitted that if the dates of transactions are seen, they pertain to the year 2011 only. 3.2 The learned senior advocate for the petitioner submitted that, thus, two glaring mistakes are there in the reasons recorded viz. firstly the petitioner company has carried out transactions with the broker company in the previous year i.e. Assessment Year 2011-12 and no transaction has been carried out in the year under consideration i.e. Assessment Year 2012-13 and only the outstanding liability of the previous year stood cleared in the year under consideration. He submitted that in the Audit Report of the petitioner company for the previous year i.e. Assessment Year 2011-12, in Schedule-9: Sundry Creditors, the subject amount of Rs.2,07,92,029/- has been shown as payable as on 31.03.2011 to the broker company, which fact proves that the amount in question pertains to the previous year and not for the year under consideration. Secondly, he submitted that in the reasons recorded, it has been alleged that the amounts shown in the table totalling to Rs.2,07,92,029/- of different dates, are the accommodation entries received by the petitioner company from the broker company, however, in fact, the said amount is not received by the petitioner company but is paid by the petitioner company to the broker company for the transactions made for the Assessment Year 2011.-12. Accordingly, from the facts and documentary evidence, it is proved that the case of the petitioner company has been wrongly reopened alleging availment of accommodation entries from the broker company and the department has wrongly assumed the jurisdiction without any basis and tangible material. The learned senior advocate for the petitioner, relying upon the decision of the Apex Court in GKN Page 5 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 Driveshafts (India) Ltd. v. ITO & Ors., (2003) 259 ITR 19 (SC), submitted that in the absence of any new material or information, the reopening of the assessment is not permissible. 3.3 The learned senior advocate for the petitioner further submitted that even otherwise, no reliance could be placed and cognizance could not be taken from the material found from the third party premises, on borrowed information and therefore, the subsequent reopening is nothing but a change of opinion of the subsequent Assessing Officer and it cannot be said that the income chargeable to tax has escaped assessment. 3.4 Making above submissions, it is urged by the learned senior advocate for the petitioner to allow the present petition and to quash and set aside the impugned notice. 4. Per contra, learned advocate Mr. Nikunt Raval for the respondent authority, while opposing the present petition, drew our attention to the affidavit-in-reply filed on behalf of the respondent authority and submitted that upon tangible material found against the present petitioner, impugned notice under section 148 of the IT Act has been issued. He submitted that one of the Directors of the broker company namely Mrs. Shaluben Nikeshbhai Shah, in her affidavit dated 19.10.2018 has made declaration that the said company is engaged in the business of arranging / facilitating / providing accommodation entries to various parties and the transactions are carried out under the advice and consultation of Shri Jignesh Shah. He submitted that the petitioner company has taken accommodation entries to the tune of Rs.2,07,92,029/- from Shri Jignesh Shah through its managed and controlled company i.e. the broker company. He Page 6 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 further submitted that statements of Shri Jignesh Shah and Mrs. Shaluben Nikeshbhai Shah have been recorded under section 131 of the IT Act from which, it is revealed that Shri Jignesh Shah is managing and controlling multiple companies and concerns which are not carrying out any genuine business activity. It is also revealed that the then Director of the broker company was just a ‘dummy director’ (Mrs. Shaluben Nikeshbhai Shah) and said company (broker company) was providing and arranging for the accommodation entries. The learned advocate for the respondent submitted that thorough investigation was carried out and it was found that no genuine transaction was carried out by the broker company in the commodity exchange in the name of the petitioner company. The learned advocate for the respondent further submitted that in order to further verify the claim of the assessee, the financial details of the broker company were obtained from the RoC database and on perusal of its balance sheet, there appeared no liability as on 31.03.2011 and therefore, the contention of the petitioner that the payments were made to settle the outstanding liability pertaining to previous year, is incorrect and misguiding. He submitted that upon inquiry made by the Assessing Officer, the say of the petitioner that the transactions in question are related to previous year, did not get substantiated by any cogent proof and material, on the contrary, it was found that no transactions in the nature of commodity trading were carried out during the Financial Year 2010-11. Thus, all these transactions are in the nature of accommodation entries, which have escaped the assessment. 4.1 Relying upon the decision of the Apex Court in Raymond Woollen Mills Ltd. v. ITO, [1999] 236 ITR 34 (SC), he Page 7 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 submitted that, as held by the Court in the said decision, at the time of recording the reason for satisfaction of AO, there should be prima facie some material on the basis of which, the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. It will be open to the assessee to prove that the assumption of fact made in the notice was erroneous at the time of assessment proceedings. 4.2 Making above submissions, it is urged that the Court may not interfere in the impugned notice and requested to dismiss the petition. 5. Having regard to the submissions advanced by the learned advocates for the respective parties and having perused the material placed on record, it appears to us that the learned senior advocate for the petitioner has challenged the impugned notice mainly on the ground that when jurisdictional facts are not established, the department cannot assume the jurisdiction and reopen the assessment. The basis for such submission is that, according to the learned senior advocate for the petitioner, the petitioner has taken the accommodation entries in question in the previous year i.e. Assessment Year 2011-12 (Financial Year 2010-11) and not in the year under consideration i.e. Assessment Year 2012-13. His further contention is that there is no tangible material with the respondent authority for recording satisfaction and reopening the assessment for the year under consideration and accordingly, he submitted that the petitioner is not before the Court for sufficiency of reasons but for the absence of reasons for reopening the assessment. Page 8 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 5.1 At this juncture, it would be apt to refer to the observations made by us with regard to the scope and ambit of section 147 of the IT Act in paragraphs 7, 8, 9 and 10 of CAV Judgement dated 05.07.2021 rendered in Special Civil Application No. 19821 of 2019, which are as under: “7. At the outset, it may be noted that as per the settled legal position, two conditions have to be satisfied before the Assessing Officer invokes his jurisdiction to reopen the assessment under section 147 of the said Act after the expiry of four years from the end of the relevant assessment year – firstly, that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment for the concerned assessment year, and secondly, such escapement of assessment was by reason of failure on the part of the assessee to make the return under section 139, or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all the material facts necessary for his assessment for that assessment year. So far as the case of the present petitioner is concerned, the assessment for the A.Y. 2012-13 is sought to be reopened by the Assessing Officer under section 147/148 of the said Act, on his having arrived at a satisfaction that the income for the said assessment year had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 8. It is pertinent to note that as held by the Supreme Court in catena of decisions, the formation of belief by the Assessing Officer at the stage of initiation of action under section 147 of the Act is within the realm of subjective satisfaction. The Supreme Court in the case of Assistant Commissioner of Income Tax versus Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500(SC), had an occasion to deal with the scope and effect of section 147 as substituted w.e.f. April 1st, 1989, in which the Court has observed as under : - “Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word “reason” in the phrase “reason to believe” would Page 9 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, 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 by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal P. Ltd. [1996] 217 ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied : firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these Page 10 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147.” 9. In the case of Raymond Woollen Mills Ltd. Versus Income-Tax Officer and others reported in 1999 236 ITR 34(SC), the Supreme Court observed that the Court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 10. It is very pertinent to note that in the case of Phool Chand Bajrang Lal versus Income-Tax Officer reported in 203 ITR 456 (SC), it was observed that the acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment, which went to expose the falsity of the statement made by the assessee at the time of original assessment was different from drawing fresh inference from the same facts and material which was available with the Income-Tax Officer at the time of the original assessment proceedings. Where the transaction itself on the basis of the subsequent information was found to be a bogus transaction, the mere disclosure of that transaction at the time of original proceedings could not be said to be disclosure of the true and full facts, and the Officer would have the jurisdiction to reopen the concluded assessment in such a case. The precise observation made by the Supreme Court in the said case may be reproduced as under : - “In the present case as already noticed, the Income- Tax Officer, Azamgarh, subsequent to the completion of the original assessment proceedings, on making an enquiry from the jurisdictional Income-Tax Officer at Calcutta, learnt that the Calcutta company from Page 11 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 whom the assessee claimed to have borrowed the loan of Rs. 50,000/- in cash had not really lent any money but only its name to cover up a bogus transaction and, after recording his satisfaction as required by the provisions of section 147 of the Act, proposed to reopen the assessment proceedings. The present is thus not a case where the Income-Tax Officer sought to draw any fresh inference which could have been raised at the time of the original assessment on the basis of the material placed before him by the assessee relating to the loan from the Calcutta company and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment, which goes to expose the falsity of the statement made by the assessee at the time of the original assessment is different from drawing fresh inference from the same facts and material which were available with the Income-Tax Officer at the time of the original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself, on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the “true” and “full” facts in the case and the Income-Tax Officer would have the jurisdiction to reopen the concluded assessment in such a case.” 5.2 Further, the term “reason to believe”, however, is not defined in the Act but it can be gathered from the available information, leading the Assessing Officer to reopen the assessment. The term itself is suggestive of its prima facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer’s prima facie belief, of course, derived from the some material / information, etc. leading him to reopen the assessment. 5.3 The ambit and import of the term “reason to believe” has been examined in numerous cases, notably in ITO v. Lakhmani Page 12 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 Mewal Das [(1976) 103 ITR 437: 1976 (3) SCC 757]. The Apex Court held that the reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income Tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. 6. Adverting to the facts of the case on hand, as referred to herein above, it is the case of the petitioner that the accommodation entries upon which the respondent authority is relying are pertaining to the previous year and not of the year under consideration. It is also the case of the petitioner that there is no tangible material, even otherwise in the hands of the respondent to substantiate that the income chargeable to tax has escaped assessment qua the assessee. The department, in the Page 13 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 affidavit-in-reply filed by it, however, has replied to the said queries which go to the root of the matter. It is averred that on necessary inquiries made, it was found that no transactions in the nature of commodity trading were carried out during the Financial Year 2010-11 by M/s. AA Plus Commodity Broking Pvt. Ltd. [Previously known as AA Plus Share Brokers Pvt. Ltd.] i.e. the broker company. Further, the financial details of M/s. AA Plus Commodity Broking Pvt. Ltd. [Previously known as AA Plus Share Brokers Pvt. Ltd.] were obtained from the Registrar of Companies’ database and no such outstanding liability, as claimed by the petitioner, has been found on perusal of the balance sheet for the Financial Year 2010-11. So, the payments are not in the nature of clearing the outstanding dues as claimed by the assessee company as there was no outstanding liability on the part of the assessee company of any previous year but these transactions are only in the nature of the accommodation entries, which have escaped assessment and hence, there is escapement of income chargeable to tax. It is further averred that in the speaking order dated 21.11.2019 disposing of the objections raised by petitioner, it was informed to the petitioner that during the course of reassessment proceedings, a notice under section 133(6) of the Act was issued to M/s. Multi Commodity Exchange of India Ltd. And the response received was in negative. It stated that no such transactions were carried out by the client M/s. Anderson Biomed Private Limited (the petitioner company) in commodity trading and hence, the claim that the transactions were carried out in Financial Year 2010-11 is wrong and without any substance. Further, from the inquiry made with Indian Commodity Exchange (ICEX) clearly revealed that no such transactions are being carried out by the client. Thus, the tangible material / information on the basis of which the case of the petitioner was reopened within the meaning of section 147 of Page 14 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 the IT Act is information disseminated by the Investigation Wing, Ahmedabad in the case of Shri Jignesh Shah. Further, various inquiries were made and statements were recorded of the concerned persons, which revealed no transaction had been carried out for the client. Thus, in the case on hand, prima facie, there appears live link between the material coming to the notice of the Assessing Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the year under consideration because of his failure to disclose fully and truly all material facts. 6.1 So far as the contention of learned senior advocate for the petitioner as regards borrowed satisfaction is concerned, it is submitted in reply by the respondent that the case of the petitioner is reopened on account of the information and tangible material received from the Investigation Wing, Ahmedabad in the case of Shri Jignesh Shah. Further, it is averred that in the case of the petitioner, no scrutiny assessment was held for the year under consideration. Further, prior to initiating the proceedings under section 147 of the IT Act, the Assessing Officer has verified the case record and accordingly, has drawn satisfaction that income to the tune of Rs.2,07,92,029/- has escaped assessment. 6.2 Further, as it emerges from the record, the search and seizure under section 132 of the IT Act was carried out on 11.09.2018 in the case of Shri Jignesh Shah and during the investigation, it was found that Shri Jignesh Shah was managing and controlling multiple companies and concerns which were not carrying out any genuine business activity. These concerns were found to be involved in providing accommodation entries, which was stated to have been admitted by Shri Jignesh Shah in his Page 15 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 statement on oath under section 131 of the IT Act. Further, the then Director of the broker company was found to be just a dummy Director (Ms. Shaluben Nikeshbhai Shah), who, in her affidavit dated 19.10.2018 had made declaration that the said company was engaged in the business of arranging / facilitating / providing accommodation entries to various parties. 6.3 The gist of assailing by the learned senior advocate for the petitioner is the absenteeism of reasons and no tangible material with the department for reopening the assessment, however, considering the aforesaid facts and circumstances of the case, we are of the considered view that it cannot be said that there was no reason to believe for the Assessing Officer that the income chargeable to tax had escaped assessment, because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to herein above, and on having found prima facie material, impugned notice is issued to the petitioner. 6.4 The learned advocate for the respondent has relied upon the decision of this Court in Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income Tax, [2016] 76 Taxmann.com 106 (Gujarat), relevant of which is extracted herein below: “9. On the basis of aforesaid proposition laid by series of decisions, we are of the opinion that when the Authority is armed with the tangible material in the form of specific information received by the Investigation Wing, Ahmedabad is throughly justified in issuing a notice for reassessment. It is revealed from the said additional material available on hand a reasonable belief is formed by the Assessing Authority that income of the petitioner has escaped assessment and therefore, once the reasonable belief is formulated by the Authority on the basis of cogent Page 16 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 tangible material, the Authority is not expected to conclude at this stage the issue finally or to ascertain the fact by evidence or conclusion, we are of the opinion that function of the assessing authority at this stage is to administer the statute and what is required at this stage is a reason to believe and not establish fact of escapement of income and therefore, looking to the scope of Section 147 as also Sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen assessment. From the reasons which are recorded, it clearly emerges that the petitioner is the beneficiary of those entries by Kayan brothers, who are well known entry operators across the country and this fact has been unearthed on account of the information received by DGIT Investigation Branch and therefore, it cannot be said in any way that even if four years have been passed, it is not open for the Authority to reopen the assessment. In the present case, there was independent application of mind on behalf of the assessing authority in arriving at the conclusion that income had escaped assessment and therefore, the contentions raised by the petitioner are devoid of merits. Dealing with the contentions of the petitioner that the information received from DGIT, Investigation Branch, Ahmedabad, can never be said to be additional information. We are of the opinion that the information which has been received is on 26.3.2015 from the DGIT, Investigation Branch, Ahmedabad, whereby it has been revealed that present petitioner is also the beneficiaries of those Kayan brothers, who are in the activity of entry operation throughout the country and therefore, it cannot be said that this is not justifiable material to form a reason to belief by the Authority and therefore, this being a case, the Authority is justified in issuing notice under Section 148 of the Act to reopen the assessment and therefore, the challenge contained in the petition being devoid of merits, same deserves to be dismissed. As we found that for the exercise of power of reopening of assessment after a period of 4 years, a proper procedure is observed by the Authority, specific approval has been obtained from the competent Authority and upon perusal of original file, we have satisfied ourselves that the approval has been accorded in a proper manner by the competent Authority Page 17 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 and since the notice is issued based upon substantial compliance of statutory provision, the Authority has acted well within the bounds of his powers and the Authority has issued notice. We found that the order which has been passed of rejecting the objections raised by the petitioner is also a well reasoned order passed after due exercise of jurisdiction and therefore, same is not, therefore, required to be interfered with.” 6.5 Thus, the function of the assessing authority at this stage is to administer the statute and what is required is a reason to believe and not to establish fact of escapement of income and therefore, looking to the scope of Section 147 as also sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen the assessment. 6.6 Next is the decision in Aaspas Multimedia Ltd. v. Deputy Commissioner of Income Tax, Circle 1(1), [2017] 83 Taxmann.com 82 (Gujarat), relevant of which is extracted as under: “…In the present case the reassessment proceedings have been initiated by the Assessing Officer on the basis of material provided by the Principal Director (Investigation). It is also required to be noted that the genuineness of the various companies who made share applications are doubted. The assessee is alleged to have been engaged in bogus share applications from various bogus concerns operated by PKJ. The assessee is the beneficiary of the said transactions of share application by those bogus concerns. In the wake of information received by the Assessing Officer, when the Assessing Officer formed a belief that the investment made from the funding of such companies which are bogus, the Assessing Officer has rightly assumed jurisdiction of initiating the reassessment Page 18 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 proceedings. The Assessing Officer, on the basis of information subsequently having come to his knowledge, recognized untruthfulness of the facts furnished earlier. In the present case, since both the necessary conditions to reopen the assessment have been duly fulfilled, sufficiency of the reasons is not to be gone into by this Court. Information furnished at the time of original assessment, when by subsequent information received from the Principal Director (Investigation), itself found to be controverted, the objection to the notice of reassessment under section 147 must fail.” 6.7 In the case on hand also, the Assessing Officer has reason to believe that the petitioner company was providing accommodation entries for the shell/paper companies meaning thereby, bogus companies/concerns. The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. 6.8 The learned senior advocate for the petitioner has relied upon the decision of the Apex Court in GKN Driveshafts (India) Ltd. (supra). There cannot be any other view than what is taken in the said decision, however, in the case on hand, when the department has not considered the objections raised by the petitioner for the reason that the petitioner company has failed to disclose fully and truly all the material facts necessary for his assessment for the year under consideration and when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, we are of the view that the above Page 19 of 20 C/SCA/21716/2019 CAV JUDGMENT DATED: 31/07/2021 decision would be of no avail to the petitioner. 7. In the backdrop as aforesaid, present petition fails and is dismissed accordingly. Ad-interim relief is vacated forthwith. No order as to costs. [ Bela M. Trivedi, J. ] [ A. C. Joshi, J. ] hiren Page 20 of 20 "