CEMACH MACHINERIES LTD. V. THE INCOME TAX OFFICER

SCA/20161/2019

AI Insights

Cemach Machineries Ltd. challenged the notice of re-opening of their income tax assessment for the assessment year 2012-13, issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961. The re-opening was based on information that the company had received substantial amounts through bogus billing activities linked to accommodation entries. The Assessing Officer, after receiving this information, verified the company's bank statements and other details, leading to the belief that income had escaped assessment. The High Court dismissed the writ application, agreeing with the Assessing Officer's findings and reasoning.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 682428 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 05-02-2021
• Assessment Year: misc
• Other Referred Cases: S. Khader Khan, 352 ITR 480 (SC), Saumya Construction, 387 ITR 529 (Guj.), Jay Infrastructure (Tax Appeal No.740/2006), Devangi, 394 ITR 184, (Guj.), Meeta Ghutghtia, 96 taxmann.com 468 (SC), New Kaiser Hind Spg. Mill, 107 ITR 760 (Bom.), NU Power Renewable Energy, 2018 94 taxmann 29 (Bom.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT; KUNAL SANGANI
• Assessee Lawyers: AMAN SHAH
• Keywords: Accommodation entries; Bogus billing; Income escaped assessment; Re-opening of assessment
• Section: 147; 148; 143(1); 139(1); 131(1A)

Judgement Text

"C/SCA/20161/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 20161 of 2019 ===================================================== CEMACH MACHINERIES LTD. Versus THE INCOME TAX OFFICER ==================================================== Appearance: MR. AMAN K SHAH(9992) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) ASSISTED BY MR. KUNAL SANGANI, ADVOCATE for the Respondent(s) No. 1 ===================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 05/02/2021 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 notice of re- opening of the assessment dated 19.03.2019 issued under Section 148 of the Income Tax Act, 1961 (for short “The Act, 1961”) for the A.Y 2012-13, on the ground that, it is illegal and without jurisdiction inasmuch as the conditions precedent as laid under Section 147 of the Act are not fulfilled. 2. The brief facts can be summarized as under: 2.1 The assessee viz. Cemach Machineries had filed its return of income on 29.09.2012 for the A.Y. 2012-13 declaring total income as Nil and claimed loss of Rs.10,57,484/-. The same was processed without any scrutiny by the Revenue under Section 143(1) of the Act. Page 1 of 19 C/SCA/20161/2019 ORDER 2.2 The Assessing Officer has issued notice under Section 148 of the Act based on the reasons recorded dated 06.03.2019. In response to the said notice, the assessee requested the Department to treat the original return under Section 139(1) of the Act filed on 29.09.2012 as the return of income. Notice under Section 142(1) of the Act was issued calling for the necessary particulars. As per the case of the Revenue, the Assessing Officer had received information from the ITO, Ward 6(1), Ahmedabad, vide letter dated 11.04.2014, that during the scrutiny assessment under Section 143(1) for the A.Y. 2011-12 in the case of Smt. Harshaben Rasikbhai Gosai, who is the proprietor of Mahavir Enterprise, it was found that, there was a high value financial transaction in her bank account and in connivance with one Mr. Kundan Mudaliar, whose statement was recorded on oath under Section 131(1A) of the Act, they are alleged to have provided accommodation entries through bogus billing activities to many business concerns and the assessee company was also one of the beneficiaries. Smt.Harshaben Gosai, Mr.Kundan Mudaliar and Mr.Rasikbhai Gosai and other entities like P & M Co. R.S Enterprise, and J.K Enterprise provided accommodation entries to the business concerns without any business activities. 2.3 After receiving the information, the Assessing Officer verified the return of the assessee and other details. The Assessing Officer had verified the bank statements of three main entities namely R.S Enterprise, P & M Co and J.K Enterprise and found that, without any actual sale or purchase, the assessee company had received Rs.14,82,79,492/- and after making independent inquiry and application of mind, the Assessing Page 2 of 19 C/SCA/20161/2019 ORDER Officer formed a belief that the amount of Rs.14,82,79,492/- is liable to be taxed and has escaped assessment within the meaning of Section 147 of the Act. The reasons for re-opening recorded by the assessing officer reads thus: R easons for re-opening : “1. In this case, the information was received from erstwhile ITO Ward-12(4), now ITO, Ward-6(1)(5), Ahmedabad vide letter No. Wd12(4)/ Information / CML/ 2014-15 dated 11.04.2014. The scrutiny assessment u/s 143(3) for A.Y. 2011-12 was completed in case of Smt. Harshaben Rasikbhai Gosai, Porp. of Mahavir Enterprise by then ITO, Ward-12(4) Ahmedabad. During the course of assessment proceedings, it was established that Smt. Harshaben [Prop. of Mahavir Enterprise] had no business, activity at all but its bank statement showed high value financial transactions. Further, statement of Kundan Mudaliar recorded in the case of Smt. Harshaben Rashikbhai Gosai, Prop. of Mahavir Enterprise was received in this office on 21.02.2018. It was also established through a statement under oath u/s 131(1A) of the Income Tax Act, 1961, of Shri Kundan Mudaliar, Prop. of Marshall Enterprise residing at 75/76 Gujarat Housing Board, Khokhra, Ahmedabad, that he in connivance with Smt. Harshaben Rashikbhai Gosai managed accommodation entries through bogus billing activities for many business concerns who are the beneficiaries. The assessee company i.e. Cemach Machineries Ltd is one of the beneficiaries that feature in the list of such companies. 2. The disseminated information available on record, the ITD system and ITBA portal/ ITS details of the assessee have been verified and it is observed from the return of the assessee company for A.Y. 2012-13 that the assessee company has filed Page 3 of 19 C/SCA/20161/2019 ORDER returned income at Nil and shown profit from business or profession amounting to Rs. 1,49,207/-. Gross purchase during the year is Rs.27,95,31,686/-, which is 126.3% of immediate previous year and sales amounting to Rs.30,02,13,272/- is approximately 114% of previous assessment year i.e. 2011-12. Opening stock is Rs. 7,75,32,193/-. From the bank statement of R S Enterprise, P M & Company and J K Enterprise, it is seen that the assessee had made transaction with these concerns. It has ‘been established during the assessment proceedings of Smt. Harshaben Rashikbhai Gosai [Prop. of Mahavir Enterprise] that these companies provided accommodation entry to the assessee company through bogus billing. The assessee company i.e. Cemach Machineries Limited has received Rs. 3,13,25,643/- from R S Enterprise Rs. 7,07,10,072/- from P M & Company and Rs. 4,64,43,777/- from J K enterprise. Thereby aggregating a total sum of Rs. 14,82,79,492/- which is received through fraudulent means [i.e. by way of bogus billings] which has escaped assessment. 3. Findings : It is observed fro the table as mentioned in para 4 above, that high value financial transactions were made through various concern. Also, whatever the amount is received on a date is simply transferred/NEFT to Cemach Machineries Ltd. On the very date itself. This very facts establishes the authenticity of the statement made by Shri Kundan Mudaliar which he confessed under oath u/s. 131 (1A) of the Income Tax Act, 1961, during the assessment proceedings of Smt. Harshaben Rashikbhai Gosai. 4. From the discussion made above, it is apparently clear that the asessee company I.e Cemach Machineries Ltd has made bogus sale amounting to Rs.14,82,79,492/-. The nexus providing accommodation entries, of these various concerns (as discussed in above para (s) has been clearly brought out. Page 4 of 19 C/SCA/20161/2019 ORDER Therefore, I have reason to believe that income earned through these transactions i.e. Rs.14,82,79,492/- has escaped assessment in the case of Cemach Machineries Ltd. For the A.Y. 2012-13 within the meaning of Section 147 of the I.T Act and it is a fit case for issuing notice u/s. 148 of the Act. 5. Regarding escapement of income chargeable to tax in relation to assets (including financial interest of any entity) located outside India, the same is not applicable as no such assets are identified so far in this case.” 2.4 The assessee had submitted its written objections dated 07.10.2019 and accordingly, after considering the same, by reasoned order, the respondent has disposed off the objections upholding the reasons recorded by the Assessing Officer for re- opening of the assessment for the year under consideration. 3. Being aggrieved with the proceedings of re-opening of the assessment, the writ applicant has come up before this Court by filing this writ application. 4. We have heard Mr. K.M. Shah, the learned counsel appearing for the writ applicant and Mrs. Mauna Bhatt, the learned Sr. Standing Counsel assisted by Mr. Kunal Sangani, the learned counsel appearing for the Revenue. 5. Mr. A.K. Shah, the learned counsel appearing for the writ applicant has raised the following contentions : (a) It was submitted that, the respondent has acted illegally and without jurisdiction, has issued the impugned notice. In this regard, referring to Section 147 of the Act, it was submitted that, Page 5 of 19 C/SCA/20161/2019 ORDER the statutory notice under Section 148 of the Act can be issued if the Assessing Officer has reason to believe that any income chargeable to tax has escaped income and the satisfaction of the officer must be recorded with regard to income chargeable to tax has escaped assessment. On the facts of the case, it was pointed out that, the respondent has merely relied upon the information received from the concerned ward of the Income Tax office for the purpose of re-opening of the assessment. Referring to the reasons for re-opening, Mr. Shah submitted that, the Assessing Officer has not at all applied his mind independently, so as to reach a conclusion that any income has escaped assessment. Therefore, in absence of any such exercise at the end of the respondent, it is evident that, the assessment has been re- opened merely based on the borrowed satisfaction. (b) It was further pointed out that, the Assessing Officer has recorded the reasons for re-opening only for investigation and verification purpose. Therefore, on the basis of suspicion as to escapement of income chargeable to tax, the Assessing Officer has recorded the reasons for further verification of the issues, which cannot be permissible. In this regard, it was pointed out that, all the transactions were made through the cheques and necessary entries had been mentioned in the sales and ledger accounts. Therefore, for further scrutiny, re-opening of the assessment without any tangible material in the hands of the Assessing Officer cannot be sufficient reason for re-opening the assessment. (c) It was further pointed out that, there is a discrepancy in the Page 6 of 19 C/SCA/20161/2019 ORDER figure mentioned in the reasons for reassessment. The amount of Rs.14,82,79,492/- determined by the Assessing Officer is factually incorrect. In this regard, it was pointed out that, there was no sale transaction with the J.K Enterprise as the company had made the payment to this party during the year, out of their credit balance. Therefore, at the relevant time, there was a purchase by the assessee. Therefore, the reasons recorded with respect to an income has escaped assessment based on the bank statements, are factually incorrect. (d) It was argued that, Smt. Harshaben Rasikbhai Gosai and Mr. Kundan Mudaliar have no locus to allege that, the transactions with the three firms as referred in the reasons were in the form of accommodation entries as the assessee did not have any business relation either with Smt. Harshaben Gosai or Mr. Kundan Mudaliar. It was urged that, there is no any seized material during the proceedings in the case of Smt. Harshaben Rasikbhai Gosai. It was pointed out that, the statement of third party has no evidentary value so far the case of the assessee is concerned. Therefore, the foundation on which the reasons recorded are fundamentally erroneous and illegal and it shows non-application of mind as the same is based on the information received from the Department. (e) It was seriously contended that, the sanction for issuance of notice by the authority seems to be without any satisfaction on the part of the authority. Referring to the letter dated 09.03.2019, it was pointed out that, nowhere it is mentioned that, the authority satisfied with the reasons recorded. Therefore, the sanction was Page 7 of 19 C/SCA/20161/2019 ORDER accorded in mechanical manner and on this ground, the impugned notice is required to be quashed and set aside. 6. In support of the above contentions, Mr. Shah, has placed reliance on the following judgments : (i) S. Khader Khan, 352 ITR 480 (SC) (ii) Saumya Construction, 387 ITR 529 (Guj.) (iii) Jay Infrastructure (Tax Appeal No.740/2006) (iv) Devangi, 394 ITR 184, (Guj.) (v)Meeta Ghutghtia, 96 taxmann.com 468 (SC) (vi) New Kaiser Hind Spg. Mill, 107 ITR 760 (Bom.) (vii) NU Power Renewable Energy, 2018 94 taxmann 29 (Bom.) 7. In view of the above submissions and contentions, Mr.K.M.Shah, learned counsel appearing for the writ applicant prays that, present writ application may be allowed. 8. Mrs. Mauna Bhatt, learned Sr. Standing Counsel appearing for the Revenue would submit that, the authority is justified in re- opening of the assessment as they had having enough material to substantiate the re-opening and for forming a reasonable belief that, the income has escaped the assessment. She was pointed out that, after receiving the information in relation to the assessee with regard to accommodation entries through the bogus billing, the Assessing Officer had verified the details of the assessee with regard to sales and purchase made during the year under consideration and also made scrutiny about the bank statements of three entities and prima facie of the view that, the assessee had received the amount of Rs.14,82,79,492/- by way of bogus sales through fake bills/vouchers and on that basis, after making Page 8 of 19 C/SCA/20161/2019 ORDER independent inquiry and application of mind, he has reason to believe that, the income for the year under consideration has escaped assessment within the meaning of Section 147 of the Act. 9. In view of the above contentions, the learned counsel appearing for the Revenue urged that, the writ application may not be entertained. 10. We have carefully considered the rival submissions and also perused the materials on record. 11. After perusal of the records, it appears that, return of income for the year under consideration was filed on 29.09.2012 declaring total income as Rs. Nil and claimed total loss of Rs.10,57,484/-. It is an undisputed fact that, the return of income was processed under Section 143(1) of the Act without any scrutiny. The assessee has challenged the impugned notice mainly on the ground that, the Assessing Officer has mechanically without application of his mind and without further independent inquiry and materials, has formed a belief that there was an escapement of income. 12. It is statutory requirement that, the assessing Officer has to form reasons to believe that, income has escaped assessment on the basis of the material before him. The expression reason to believe has been explained by this Court as well as the Apex Court in various decisions. We may refer to and rely some of the following decisions :- Page 9 of 19 C/SCA/20161/2019 ORDER (i) In Narayanappa Vs. Commissioner of Income Tax, Bangalore, (1967) 63 ITR 219, wherein, a Constitution Bench (Five Judge) judgment in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta, AIR 1961 SC 372, a Three- Judge Bench of the Apex Court has been observed as under : “the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. Again the expression “reason to believe” in S. 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it differently it is open to the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the Section. To this limited extent, the action of the Income- tax Officer in starting proceedings under S. 34 of the Act is open to challenge in a Court of law”. (ii) In Ganga Saran & Sons Pvt. Ltd. Calcutta, Vs. Income Tax Officer (1981) 3 SCC 143, wherein, the Apex Court has observed thus : “.....The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147 (a). (iii)In Principal Commissioner of Income Tax, Rajkot -3, Vs. Gokul Ceramics, (2016) 241 taxmann 341 (Guj.), wherein, this Court has observed thus: “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 show cause 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 Page 10 of 19 C/SCA/20161/2019 ORDER 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 show cause 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 Ltd. vs. Income Tax Officer, Nagpur (Supra) the Supreme Court noted that 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 under-voiced 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 Page 11 of 19 C/SCA/20161/2019 ORDER 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 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 re-opening 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 Page 12 of 19 C/SCA/20161/2019 ORDER 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 & (Supra), 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 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 P-2 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 (INV-V) 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, Page 13 of 19 C/SCA/20161/2019 ORDER 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.” 13. 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.” (iv) In Inductotherm (India) Pvt. Ltd. vs. M. Gopalan, Deputy Commissioner of Income Tax, reported in (2013) 356 ITR 481, wherein, it was held as under: “even in case of reopening of an assessment which was previously accepted under Section 143(1) of the Act without scrutiny, the Assessing Officer would have the power to reopen the assessment provided, he had some tangible material, on the basis of which he could form a reason to believe that the income chargeable to tax had escaped assessment.” (v) In Assistant Commissioner of Income tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd . , (2007) 291 ITR 500, wherein it has been observed thus : “19. …...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. “20.………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 Page 14 of 19 C/SCA/20161/2019 ORDER 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.” (vi) In Jayant Security & Finance Vs. ACIT , (2018) 254 taxmann 81 (Guj.), wherein, this Court observed thus: “the information from the Investigation Wing stating that the loan from the company working as an entry operator and earning bogus funds to provide advances to various persons was sufficient and would constitute genuine and bona fide reason to believe. Reassessment was held to be valid”. (vii) In Ankit Agrochem (P) Ltd. Vs. JCIT , (2018) 253 taxmann 141 (Raj. Hc), wherein it was held as under: “the reassessment on the basis of the information for the DIT stating that the assessee had received share application money from several entities which were only engaged in the business of providing bogus accommodation entries to the beneficiary concerns, the reassessment on the basis of said information was justified”. 13. It is an undisputed fact that, the return of income of the assessee was processed under Section 143(1) of the Act and was accepted without any scrutiny and no assessment stipulated under Section 2(40) of the Act was made. In this background, the proviso to Section 147 of the Act will not apply and therefore, though the reopening initiated after expiry of four years, it would not be necessary for the assessing officer to show that, there was failure to disclose fully and truly the material facts necessary for the assessment by the assessee. The record indicates that, notice under Section 142(1) of the Act was served upon the assessee and he was asked to furnish necessary details for the verification, however, the assessee failed to submit necessary details. Page 15 of 19 C/SCA/20161/2019 ORDER 14. We have examined the reasons for re-opening in details, more particularly paras 2 to 7 as referred to above. The reasons are self-explanatory. The Assessing Officer has observed that, the information with regard to one Smt. Harshaben Rasikbhai Gosai, Prop. Of Mahavir Enterprise and her companion Mr. Kundan Mudaliar, it was found that their main business was to provide accommodation entries by way of bogus sales and purchase through fake bills/vouchers without any actual business activities and the fact reveals from the statement of Mr. Kundan Mudaliar, 53 business companies including the assessee, who were beneficiaries. The Assessing Officer has further observed that, after receiving the information, had verified the return of income and other details of the assessee and from the bank statements of Harshaben Rasikbhai Gosai, it was found that, Mr. Rasik Gosai being a prop. of R.S Enterprise had provided accommodation entries to the assessee in tune of Rs.3,13,25,643/-. After further scrutiny of the bank statement, the Assessing officer found that, the three entities namely R.S Enterprise, P M & Co. And JK Enterprise having no any business activities and they are providing accommodation entries by way of bogus sales and purchase without any actual transaction. 15. In view of the reasons recorded and the materials relied upon by the Assessing Officer, it appears that, the Assessing Officer himself was satisfied with regard to the information and the other materials available with him and came to the conclusion that, the transactions reflected in the bank statements as well as books of accounts were false and bogus and the three entities had routed the money in tune of Rs.14,82,79,492/-. Page 16 of 19 C/SCA/20161/2019 ORDER 16. Having regard to the materials on record, we are of the view that, the Assessing Officer has initiated the proceedings not only on the basis of the information received from the concerned Department, but based upon his independent satisfaction and other available materials to form a belief with regard to the escaped assessment of income. The reasons recorded further establish that, the prop. of R S enterprise is the husband of Smt. Harshaben Gosai having financial transactions with the R.S Enterprise and Marshal Enterprise and all these entities including JK enterprise and P M & Co. have no business activities and were managed to provide accommodation entries and routed the money through bank transactions showing the transactions as sale and purchase issuing bogus invoices without actual delivery of goods. Therefore, on facts, there was live link or direct nexus between the material which suggested the escapement of income and information on the basis of which, it could be said that, the income has escaped assessment. Therefore, the Assessing Officer has acted on specific information and after collecting the available material as referred to above has opened his mind through reasons and formed a belief that, the income has escaped assessment. 17. It is settled law that, at the stage of Section 148 of the Act, what is required is “reason to believe”, but not the established fact of escapement of income. This aspect has been considered by the Apex Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri (2008) 14 SCC 208, wherein, the Apex Court has observed that, “at the stage of issue of notice, the only question is whether there was relevant material on which a Page 17 of 19 C/SCA/20161/2019 ORDER reasonable person could have formed a requisite belief and whether the material would conclusively prove the escapement is not the concern at that stage”. 18. In view of the aforesaid discussions made hereinabove and considering the facts and circumstances of the case, it cannot be siad that there was no material before the assessing Officer to reopen the assessment and he proceeded mechanically based on the information received from the Income Tax Department, Ahmedabad. The information of Smt. Bhavnaben Gosai has some relevance with the transactions reflected in the bank account of the assessee. Therefore, it cannot be said that, the Assessing Officer has mechanically relied on the third party information and the proceedings being initiated for verification and inquiry. 19. The second contention raised is that, the proceeding has been initiated after four years and the sanction accorded by the authority as contemplated under Section 151 of the Act is not legal and valid as it has been accorded without any satisfaction on the part of the authority and mechanically consolidated sanction for 53 entities being issued and the impugned notice is without jurisdiction and contrary to Section 147 of the Act. This issue raised is without any basis or laying any foundation for the same and hence, rejected. 20. On this aspect, we are of the view that, the assessee has produced the letter of intimation (at page 19 to the writ application). The sanction order has n ot been placed on record by the assessee. The intimation letter cannot be termed as Page 18 of 19 C/SCA/20161/2019 ORDER approval given by the authority. Therefore, in absence of any other evidence indicating that, the authority concerned has mechanically accorded the sanction as contemplated under Section 151 of the Act, the contention raised by the writ applicant cannot be accepted. 21. We have also examined the order of disposing the objections by the authority. By going through the said order, we find that, the objections submitted by the assessee has been extensively dealt with and detailed order came to be passed. Therefore, the decision arrived at by the authority to reopen the assessment is just and proper. 22. In view of the aforesaid reasons and considering the peculiar facts and circumstances of the case, it cannot be said that, the impugned notice issued under Section 148 of the Act is without jurisdiction and contrary to Section 147 of the Act and/or bad in law. 23. For the foregoing reasons, no case is made out and accordingly, this writ application deserves to be dismissed and is hereby dismissed. Notice is discharged. Ad-interim relief, granted earlier, stands vacated. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT Page 19 of 19 "