FALGUNI BHAVESH JARIWALA V. INCOME TAX OFFICER, WARD 2(3)(5)

SCA/18528/2019

AI Insights

The case involves Falguni Bhavesh Jariwala, the petitioner, who challenged the notice issued by the Income Tax Officer under section 148 of the Income Tax Act, 1961, for reopening her income tax assessment for the Assessment Year 2012-2013. The notice was based on information received from the ADIT (Inv.)-2, Surat, which suggested discrepancies in the bank transactions of the petitioner. The Income Tax Officer believed that income had escaped assessment due to non-submission of true and correct details in the return filed by the petitioner. The petitioner argued that all transactions were disclosed and the income from the sale of property was correctly reported. The court examined the reasons for reopening the assessment and found that there was no new material to justify the reopening, leading to the quashing of the notice and the subsequent order.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 672199 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 03-10-2022
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (1) Ltd. vs. ITO, Calcutta Discount Co. Ltd. vs. ITO, Raymond Woollen Mills Vs. ITO, Central Provinces Manganese Ore Co. Ltd., Vs. ITO, ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NIKUNT RAVAL
• Assessee Lawyers: MANISH SHAH
• Keywords: Escaped income; Income tax reassessment; Long Term Capital Gain; Notice under section 148; Reopening of assessment
• Section: 147; 148; 143(3); 143(1); 139; 151

Judgement Text

"C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18528 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== FALGUNI BHAVESH JARIWALA Versus INCOME TAX OFFICER, WARD 2(3)(5) ========================================================== Appearance: MR MANISH J SHAH(1320) for the Petitioner(s) No. 1 MR NIKUNT RAVAL FOR MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 03/10/2022 ORAL JUDGMENT Page 1 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.Heard learned advocate Mr. Manish J. Shah for the petitioner and learned advocate Mr. Nikunt Raval for learned advocate Ms. Kalpana Raval for the respondents. 2.Having regard to the controversy involved in this petition, with the consent of the learned advocates for the respective parties, the petition is taken up for final hearing. 3.Rule returnable forthwith. Learned advocate Mr. Nikunt Raval waives service of notice of rule for the respondents. 4.By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 25.03.2019 issued under section 148 of the Income Tax Act, 1961 (For short “the Act”) proposing to reopen the Page 2 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 assessment for the Assessment Year 2012-2013 as well as order dated 18.09.2019 disposing of the objections raised by the petitioner against the impugned notice for reopening the assessment. 5.Brief facts of the case are that the petitioner filed return of income on 26.09.2012 for the Assessment Year 2012-2013, showing business income and long-term capital gain from sale of immovable property of Rs.50,00,000/-. 5.1) The respondent accepted this return under section 143(1) of the Act as no assessment was made under section 143(3) of the Act. The respondent thereafter, after a period of six years, issued a notice dated 05.02.2019 under section 133(6) of the Act stating that the department had information that there were debit entries in petitioner's Page 3 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 Kotak Mahindra Bank Account No.6211153580 reflecting short-term loan to M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles of Rs.50,00,000/- and therefore, various details were called for. 5.2) In reply thereto, the petitioner addressed a letter dated 11.02.2019 enclosing PAN Card therewith and further stated that she had filed the return on 26.09.2012 enclosing therewith copy of the return and acknowledgment, computation of income, profit and loss account, balance sheet and copy of bank statement reflecting the transactions with the above three parties along with ledgers accounts. 5.3) Thereafter, the respondent Assessing Officer issued a notice under section 148 dated 25.03.2019 for the year under consideration stating that he had reason to Page 4 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 believe that income has escaped assessment and asked the petitioner to file the income tax return within 30 days from receipt of the said notice. 5.4) The petitioner filed the same return on 10.05.2019 in response to the above notice as was filed on 26.09.2012 which she had filed under section 139 of the Act. 5.5) The petitioner thereafter addressed a letter dated 09.05.2019 requesting the respondent to supply the reasons recorded by the Assessing Officer for reopening the assessment. The reasons recorded by the Assessing Officer for reopening the assessment under section 147 of the Act read as under : “Brief Details of the Assessee: The assessee had filed return of Income In ITR-4 vide Acknowledgment No. 496020751260912 for the A. Y. 2012-13 on 26.09.2012 declaring total Income at Rs. 1,77,150/-. The return has been Page 5 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 processed U/s. 143(1) on 20.02.2013. The assessee is having Income from Salary from Fountainhead Education Trust, Business &Profession and other sources. 2. Brief Details of information collected/received by the AO: An Information has been received from ADIT (Inv.)-2, Surat on 28.12.2017. In this Information, it was mentioned that a savings account bearing number 6211153580 was opened in the name of Mrs. Falguni Bhavesh Jariwala on 04.01.2012 at Kotak Mahindra Bank, Cloth market, Surat. On verification of above bank account, it was noticed that cheques deposited amounted to Rs. 50,00,000/- and RTGS credits amounted to Rs. 40,00,000/- received from Mr. Ishaali F Lakda ((Rs. 22.98 Lakhs), Mrs. HamedabenEsaqbh (Rs. 7.Lakh) and-M/s.Parimal Fashion (Rs. 10 Lakhs). Against these credits, cash withdrawals amounted to Rs. 1.11 Lakhs, cheques issued amounted to Rs. 49.50 Lakhs and a single RTGS payment amounting to Rs. 30.00 Lakhs favouring M/s. Parimal Fashion. The ADIT(Inv.), Unit-2, Surat has issued summons U/s. 131 of the Act was issued to the assessee and her statement on oath was recorded on 21.09.2017 wherein it has been stated by her that she is a teacher by profession and doing business of grey trading in the name and style of firm M/s. Falguni Textiles. The assessee had stated that she has sold her flat at Rangeela Park to Shri Ishaqall Lakdawala, Smt. Hamida ishaqali Lakdawala and Shri Hatim Ishaqall Page 6 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 Lakdawala for a total consideration of Rs. 50,00,000/- and the same has been shown in the return of Income for the relevant period under consideration. Further, when inquired with respect to M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan-Textiles, it has been stated by the assessee that these entries are a short period of loan which has been received back by the assessee. The assessee has sold her property at Block No. 2, Flat No. E/5, Rangeela Park, GhodDod road, Surat for a total sale consideration of Rs. 50,00,000/- and the same amount is appearing in the bank account No. 6211153580 of the assessee maintained with Kotak Mahindra Bank. Moreover, the assessee apart from being a teacher in M/s. Fountainhead school is also running business of grey trading in the name and style of M/s. Falguni Textiles and has submitted copies of return of income along with Audit report for relevant period. The debit entries represent-short period loans given by the assessee to M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. The relevant details has not been submitted by the assessee. Therefore, the assessing Officer has to examine the Issue relating to loans given to these parties. 3. Analysis of Information collected/received:- After analysis of the above Information received from ADIT (Inv.)-2, Surat on 28.12.2017. In this Information, it was mentioned that a savings account bearing number 6211153580 was opened in the name of Page 7 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 Mrs. Falguni Bhavesh Jariwala on 04.01.2012 at Kotak Mahindra Bank, Cloth market, Surat. On verification of above bank account, It was noticed that cheques deposited amounted to Rs. 50,00,000/- and RTGS credits amounted to Rs. 40,00,000/- received from Mr. Ishaali F Lakda ((Rs. 22.98 Lakhs), Mrs. HamedabenEsaqbh (Rs. 7. Lakh) and M/s.Parimat Fashion (Rs. 10 Lakhs). Against these credits, cash withdrawals amounted to Rs. 1.11 Lakhs, cheques issued amounted to Rs. 49.50 Lakhs and a single RTGS payment amounting to Rs. 30.00 Lakhs favouring M/s. Parimal Fashion. The ADIT (Inv.), Unit-2, Surat has issued summons U/s. 131 of the Act was issued to the assessee and her statement on oath was recorded on 21.09.2017 wherein it has been stated by her that she is a teacher by profession and doing business of grey trading in the name and style of firm M/s. Falguni Textiles. The assessee had stated that she has sold her flat at Rangeela Park to Shri Ishaqall Lakdawala, Smt. Hamida ishaqall Lakdawala and Shri Hatim Ishaqall Lakdawala for a total consideration of Rs. 50,00,000/- and the same has been shown in the return of Income for the relevant period under consideration. Further, when Inquired with respect to M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles, it has been stated by the assessee that these entries are a short period of loan which has been Page 8 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 received back by the assessee. The assessee has sold her property at Block No. 2, Flat No. E/5, Rangeela Park, GhodDod-road, Surat for a total sale consideration of Rs. 50,00,000/- and the same amount is appearing in the bank account No. 6211153580 of the assessee maintained with Kotak Mahindra Bank Moreover, the assessee apart from being a teacher In M/s. Fountainhead school is also running business of grey trading in the name and style of M/s. Falguni Textiles and has submitted copies of return of Income along with Audit report for relevant period. The debit entries represent short period loans given by the assessee to M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. The relevant details has not been submitted by the assessee. Therefore, loans given to these parties requires to be verified. 4. Enquiries made by the AO as sequel to information collected/received:- Notice u/s 133(6) of the I.T. Act was issued to the assessee on 05/02/2019. Vide above notice, he was asked to provide the details of the above transactions alongwith all relevant documents during the year under consideration. In response to the same, the assessee had filed submission on 14.02.2019. In his submission, he had submitted copy of PAN card, copy of ROI filed along with computation of Income, Balance Sheet & Profit and Loss account of Falguni Textiles and only confirmation of M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. No any others detalls filed by the assessee. Page 9 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 5. Findings of the AO:- On verification of submission filed by the assessee, it was found that the assessee has shown Income from Salary from Fountainhead Education Trust Rs. 2,74,750/-, Profits and Gains from Business and Profession of Rs. Nil and Income from other sources at Rs. 24,939/-. It is also shown from the working of Capital gain that assessee has sold Immovable property for a sale consideration at Rs. 50,00,000/- and have taken cost of Acquisition of Rs. 28,76,708/- Further, the assessee have also claimed exemption of Rs. 21,23,292/-. Further, on verification of the details filed by the assessee, it is found that she has not submitted the transaction occurred between her and short term loans given to parties M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. Only confirmation of the said parties have been filed. Bank details and other relevant details have not been filed by the assessee. Therefore, the genuineness of the said transactions does not proved by the assessee. The assessee has also stated that these entries are a short period of loan which has been received back by the assessee from M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. From the above discussion, it is clear that the assessee has to shown Rs. 50,00,000/- as Its taxable income from Long Term Capital Gain and has to pay tax accordingly which the assessee has Page 10 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 not done. Hence, this leads to belief that during the year under consideration, the assessee has earned income from Long Term Capital Gain of Rs.50,00,000/- which represents income of the assessee which escaped assessment because of non-submission of true and correct details in ROI filed by her. The assessee has also not justified the transactions of the above said parties before the ADIT(Inv.)-2, Surat during the course of proceedings. 6. Basis of forming reason to believe and details of escapement of Income: On verification of submission filed by the assessee, it was found that the assessee has shown Income from Salary from Fountainhead Education Trust of Rs. 2,74,750/-, Profits and Gains from Business and Profession of Rs. Nil and Income from other sources at Rs. 24,939/-. It is also shown from the working of Capital gain that assessee has sold Immovable property for a sale consideration at Rs. 50,00,000/- and have taken cost of Acquisition of Rs. 28,76,708/-. Further, the assessee have also claimed exemption of Rs. 21,23,292/-. Further, on verification of the details filed by the assessee, it is found that she has not submitted the transaction occurred between her and short term loans given to parties M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. Only confirmation of the said parties have been filed. Bank details and other relevant details have not been filed by the assessee. Therefore, the Page 11 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 genuineness of the said transactions does not proved by the assessee. The assessee has also stated that these entries are a short period of loan which has been received back by the assessee from M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles. It shows that the assessee has knowingly and willful attempt to evade the tax. From the above discussion, it is clear that the assessee has to shown Rs. 50,00,000/- as Its taxable income from Long Term Capital Gain and has to pay tax accordingly which the assessee has not done. Hence, this leads to belief that during the year under consideration, the assessee has earned Income from Long Term Capital Gain of Rs.50,00,000/- which represents income of the assessee which escaped assessment because of non-submission of true and correct details in ROI filed by her. The assessee has also not justified the transactions of the above said parties before the ADIT(Inv.)-2, Surat during the course of proceedings. Therefore, I have reason to believe that the above Income of Rs. 50,00,000/- 15 chargeable to tax, has escaped the assessment for A.Y. 2012-13 by reason of failure on the part of the assessee to file his true and correct return of Income. Hence, notice u/s 148 r.w.s 147 of the I.T.Act 1961 is to be issued for the A.Y: 2012-13. 7. Escapement of income chargeable to tax in relation to any assets (Including Page 12 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 financial interest in any entity) located outside India:- No such Assets. Applicability of the provisions of section 147/151 to the facts of the case: In this case, a return of Income was filed for the year under consideration but no scrutiny assessment U/s. 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding U/s. 147 of the Act Is reason to believe which has been recorded above (refer paragraph 6). It is pertinent to mentioned here that in this case, the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s. 2(40) of the Act was made and the return of Income was only processed u/s. 143(1) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 of the Act are applicable to fact of this case and the assessment year under consideration is deemed to be a case where Income chargeable to tax has escaped assessment. In this case, more than four years have lapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue the notice U/s. 148 of the Act is being obtained separately from Principal Commissioner of Income-tax-2, Surat as per the provisions of section 151 of the Act.” Page 13 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 5.6) The petitioner filed detailed objections through his Chartered Accountant by a letter dated 29.05.2019 and requested the Officer to drop the reopening proceedings. 5.7) The Assessing Officer passed the order dated 18.09.2019 rejecting such objections raised by the petitioner towards reopening the assessment. 5.8) Being aggrieved by the impugned notice as well as the order rejecting the objections raised by the petitioner, the petitioner has preferred the present petition. 6.Learned advocate Mr. Manish Shah for the petitioner submitted that notice under section 148 of the Act and the order Page 14 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 disposing off the objections are bad in law and therefore, are required to be quashed and set aside. 6.1) It was submitted that the petitioner who has sold her residential property for Rs.50,00,000/- has computed capital gain at 'Nil' in her return under section 139 by deducting from the sale price, the indexed cost of acquisition of the said property at Rs.28,76,708/- and reinvestment into the purchase of a new residential property of Rs.21,23,292/- leaving 'Nil' result and from the receipt of Rs.50,00,000/- as deposited in the bank account therefrom, has advanced loan of Rs.49,50,000/- to three parties, which is also shown in the statement of bank account supplied to the Assessing Officer and also this happens in the month of March 2012 immediately after the petitioner received Rs.50,00,000/- of sale price of flat. It was Page 15 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 submitted that such evidence in the form of bank statement was annexed with letter dated 11.02.2019 and therefore, the respondent Assessing Officer could not have issued notice under section 148 of the Act. 6.2) It was submitted that the petitioner has also in his objections submitted a detailed account of entire transaction, which should have left no matter of doubt about fact that the petitioner has shown sale in the computation of capital gain from the sale and thereafter investment into purchase of flat under section 54F of the Act and that the advance of Rs.49,50,000/- was from the sale price of Rs.50,00,000/- as clearly shown in the bank account of the petitioner with Kotak Mahindra Bank, Surat, all in the month of March 2012. 6.3) It was submitted that the reasons Page 16 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 fall far short of the valid reasons to take proceedings under section 147 and the order rejecting objections falls far short of the decision of Hon'ble Supreme Court in case of GKN Driveshafts (1) Ltd. vs. ITO reported in (2003) 259 ITR 19. 6.4) It was submitted that the reasons are nothing more than totally relying on a borrowed opinion and there is no independent application of mind to the facts of the case. 6.5) The petitioner also placed reliance on the judgment of the Hon'ble Supreme Court in case of Calcutta Discount Co. Ltd. vs. ITO reported in 41 ITR 191, wherein it is held as under : \"That though the writ of prohibition of certiorari would not issue against an executive authority, the High Courts had power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority, Page 17 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 acting without jurisdiction subjected, or was likely to subject, a person to lengthy proceedings and unnecessary harassment, the High Courts would issue appropriate orders or directions to prevent such consequences. The existence of such alternative remedies as appeals and reference to the High Court was not, however, always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. When the constitution conferred on the High Courts the power to give relief it becomes the duty of the Courts to give such relief in fit cases and the courts would be failing to perform their duty if relief were refused without adequate reasons.\" 7.On the other hand, learned advocate Mr. Nikunt Raval for the respondent submitted that the assessee filed the return of income for Assessment Year 2012-2013 on 26.09.2012, declaring total return income of Rs. 1,77,150/-, however, such return was neither selected for scrutiny nor re-opened. It was submitted that subsequently, information has been received from the ADIT(Inv)-2, Surat Page 18 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 that a saving bank account bearing number 6211153580 was opened in the name of the petitioner assessee on 04.01.2012 at Kotak Mahindra Bank, Cloth Market, Surat and on verification of the bank account, it was noticed that an amount of Rs.50,00,000/- was deposited through cheque and RTGS credits amounted to Rs.40,00,000/- received from Mr. Ishali F. Ladawala (Rs.22.98 lacs) Mrs.Hamedaben Ishaqali (Rs.7 lakhs) and M/s. Parimal Fashion (Rs. 10 lakhs). Against these credits, cash withdrawal amounted to Rs.1.11 lakhs, cheques issued amounted to Rs.49.50 lakhs and a single RTGS payment amounting to Rs.30 lakhs favouring M/s. Parimal Fashion. It was submitted that in response to the summons issued by the ADIT(Inv)-2, Surat, the assessee has stated that she is teacher by profession and doing business of grey trading in the name and style of firm, M/s. Falguni Textiles. The assessee further stated that Page 19 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 she has sold her flat at Rangeela Park to Shri Ishaqali Lakdawala, Smt. Hamida Lakdawala and Shri Hatim Ishaqali Lakdawala for a total consideration of Rs.50,00,000/-. Regarding the other credits in the bank account, the assessee has stated that these entries are the short period loan given by the assessee which has been received back. However, on perusal of the records, it was noticed that the assessee had sold immovable property during the year under consideration for Rs.50,00,000/- and claimed indexed cost of acquisition and deduction under section 54F of the Act. Since there were no details of the claim of the indexed cost of acquisition and deduction under section 54F and the assessee failed to furnish the same in response to notice under section 133(6) of the Act issued by the Assessing Officer, the Assessing Officer was of the view that the assessee should have shown the capital gain Page 20 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 at Rs.50,00,000/- for the year under consideration. 7.1) Learned advocate Mr. Raval submitted that as per section 147 of the Act, at the time of reopening of assessment, the Assessing Officer had the reasons to believe that the income has escaped assessment before issuance of notice under section 148 of the Act on the basis of documentary evidence available on record and after due verification that the income for the year under consideration has escaped assessment, notice for reopening of assessment was issued. 7.2) It was submitted that though the assessee had submitted that the transactions regarding the advancement of loans and advances to M/s. Mamta Fab, M/s. Parimal Fashion and M/s. Mohan Textiles were genuine Page 21 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 but in absence of bank accounts of the parties to whom loans were advanced, the assessee failed to establish the genuineness of the transactions. It was submitted that the Investigation Wing, Surat had forwarded the information and after analysing the facts and independent inquiries carried out, it was prima facie inferred that the assessee had not shown the full sale consideration and failed to establish the genuineness of the Loans and Advances. 7.3) It was submitted that the Investigation Wing is the internal limb of the Department and not an external agency. After receiving the information, the same was analysed and reasons were recorded for reopening of assessee's case. Necessary approvals before the issue of notice u/s.148 of the Act taken from appropriate authority. It was submitted that the details available Page 22 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 on record at the time of reopening of assessment proceedings are sufficient for the Assessing Officer to form a belief that the income had escaped assessment. However, the reopened assessment proceedings would be finalized only after providing opportunities of being heard and therefore, reopening proceedings may not be interfered with. 7.4) It was submitted that deciding the issue of re-opening requires verification on the basis of details and submission, which is possible during the course of assessment proceedings only. If the points are to be decided at the stage of initiation, then there is no requirement of the assessment proceedings. The verification can surely be done under the provisions of section 147 of the Income-Tax Act, 1961. 7.5) Relying upon the judgment in case of Page 23 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 Raymond Woollen Mills Vs. ITO reported in (1999) 236 ITR 34 (SC), it was submitted that what is required to re-open a case is \"Reason to believe\" but not the established facts of escapement of income. The sufficiency or correctness of the material is not to be considered because it is open to the assessee to prove that the facts assumed by the Assessing Officer in the notice were erroneous. 7.6) Reliance was also placed on the decision of Hon'ble Supreme Court in case of Central Provinces Manganese Ore Co. Ltd., Vs. ITO (1991) 191 ITR 662, wherein it is held that for initiation of action under section 147, fulfillment of the two conditions is essential. At this stage, the final outcome of the proceeding is not relevant. In other words what is required is \"Reason to believe\" but not the established fact of escapement of Page 24 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 income. At the stage of issuance of notice the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the escapement is not of any concern at this stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. 7.7) Reliance was placed on the decision of the Hon'ble Supreme Court in case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt Ltd., reported in (2007) 292 ITR 500 (SC), wherein it is held that in order to invoke the provisions of section 147 of the Act, if the Assessing Officer for whatever reason has 'reason to believe' that income has escaped assessment, then jurisdiction is conferred on the Assessing Officer to reopen the assessment. Page 25 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 8.Having considered the submissions made by learned advocates of both the sides in order to reopen the assessment it is necessary to form the reason to believe on the basis of prima facie material that income has escaped assessment. The crucial link between the information made available to the AO and the formation of belief should be gathered. The reasons must be self evidenced and they must speak for themselves so as to enable on perusal of the reasons that tangible material which forms the basis for the belief that income has escaped assessment must be evident. 9.In the facts of the case, the original assessment is processed under section 143(1) of the Act and not under section 143(3) of the Act and therefore, provision to section 147 of the Act would not apply. Reopening of Page 26 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 the assessment under section 147 of the Act is a potent power and should not be lightly exercised and it can never be invoked casually or mechanically. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. 10. It is true that report of the investigation wing might constitute the material, on the basis of which, the AO forms reason to believe, however the process of arriving at such satisfaction should not be mere repetition of the report of the investigation. The AO must demonstrate some link between tangible material and formation of belief or reason to belief that income has escaped assessment. In the facts of the case merely certain material which is otherwise tangible and enables the AO to form a belief that income chargeable to tax has escaped Page 27 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 assessment, which form part of original assessment record per se would not bar the AO from reopening the assessment on the basis of such material. The expression “tangible material” does not mean material alien to the original record. 11. However, even if the decision to reopen assessment on the basis of report of investigation wing condemned or dubbed as a fishing or roving inquiry, AO has to act as a reasonable and prudent man on the basis of information secured by him that there is a case for reopening so as to form a reason to believe that income has escaped assessment but at the same time, in order to assume the jurisdiction under section 147 of the Act is not the ultimate result of inquiry but the test is whether the AO entertain a bona fide belief upon the definite information presented before him and the jurisdiction to Page 28 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 reopen the assessment cannot be exercised on mere rumor or suspicion. Therefore, in the facts of the case the AO could not have issued the impugned notice under section 148 of the Act considering the loan and advances given by the petitioner out of sale proceeds of the immovable property for a short period which ultimately has been received back by the assessee, so as to verify the debit entries representing the short period of loan. The assessee has disclosed all the material facts in the return which was processed under section 143(1) of the Act and therefore, formation of belief of the AO that income of Rs 50 lakhs is chargeable to tax, has escaped the assessment for AY 2012-2013 by reason of failure on part of the assessee to file true and correct return cannot be sustained. Page 29 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 12. On perusal of the reasons recorded, it is apparent that there is no new independent material available with the Assessing Officer which is relied upon to issue the impugned notice under section 148 of the Act. The impugned notice is issued only on analysis of the materials made available by the petitioner assessee during the course of regular assessment. The reasons recorded though discloses it is as per the information received, analysis made and inquiry conducted by the Assessing Officer on the basis of verification of case record and return of income, it appears that there is no new material available with the Assessing Officer and therefore, in facts of the case, the Assessing Officer could not have assumed any jurisdiction to reopen the assessment when the assessee has disclosed all material facts relevant for the assessment. Page 30 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 13. It is therefore apparent that the Assessing Officer has issued notice under section 148 of the Act only to make a roving inquiry into the facts which are already on record and in absence of any tangible new material to show that the income has escaped the assessment, the assessing officer could not have assumed jurisdiction to reopen the assessment though completed under section 143(1) of the Act. 14. For the foregoing reasons, the impugned notice dated 25.03.2019 issued under section 148 of the Act by the respondent exercising the powers to reopen the assessment for the Assessment Year 2012-2013 is illegal and hereby quashed and set aside. As a consequence, order dated 18.09.2019 of the Assessing Officer disposing of the objections of the petitioner against the impugned notice is also quashed and set aside. Page 31 of 32 C/SCA/18528/2019 JUDGMENT DATED: 03/10/2022 15. The petition succeeds and is accordingly allowed. Rule is made absolute to the aforesaid extent. No order as to costs. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 32 of 32 "