KKP MARKETING (I) LTD. V. DY. COMMISSIONER OF INCOME TAX

SCA/20337/2018

AI Insights

KKP Marketing (I) Ltd. challenged the notice issued by the Deputy Commissioner of Income Tax, which sought to reopen the completed assessment for the Assessment Year 2011-12. The reopening was based on findings from a search operation and subsequent assessments for other years, which indicated unreported profits and unexplained investments. The company argued that the reopening was based on a mere change of opinion and lacked new evidence. However, the court upheld the reopening, citing the presence of tangible material and the need for a detailed examination of the reassessed income.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 768923 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 22-03-2022
• Assessment Year: misc
• Other Referred Cases: Central Provinces Manganese Ore. Co. Ltd. vs. Income Tax Officer, Coca Cola India Ltd. vs. ACIT, Phoolchand Bajranglal vs. ITO, Raymond Woollen Mills vs. ITO, Income Tax Officer, Calcutta & Ors. vs. Lakhmani Mewal Das, Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M R BHATT
• Assessee Lawyers: S N DIVATIA
• Keywords: Assessment Year 2011-12; Income Tax; Reopening of assessment; Search and seizure; Writ application
• Section: 148; 143(3); 132; 153A

Judgement Text

"C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 20337 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MS. JUSTICE NISHA M. THAKORE Sd/- ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 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 ========================================================== KKP MARKETING (I) LTD. Versus DY. COMMISSIONER OF INCOME TAX ========================================================== Appearance: MR SN DIVATIA(1378) for the Petitioner(s) No. 1 M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 22/03/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. By this writ application under Article 226 of the Page 1 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 Constitution of India, the writ applicant has prayed for the following reliefs; “(A) to issue a writ of certiorari or in the nature of certiorari or any other appropriate writ, orders or directions quashing and setting aside the impugned notice dated 29.03.2018 (Annex.-A) issued by the Respondent proposing to reopen the completed assessment of the Petitioner for A.Y.2011-12 and the order of objection dt.08.12.2018 (Annexure-B) as well as the reassessment order, if any passed in consequence to the impugned notice. (B) to call for the records of the proceedings, look into them and be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned notice as well as the order of objection dt.08.12.2018 (Annexure-B) (C ) pending the hearing and final disposal of this petition to maintain status quo in the matter and ask the Respondent and its subordinate not to take any action or to do anything in furtherance and pursuance of this impugned notice. (D) To allow this petition with cost. (E) to pass any further or other orders as the Hon’ble Court may deem proper in the interest of justice and in the circumstances of the case.’ 2. The writ applicant (assessee) seeks to challenge the legality and validity of the notice issued by the respondent dated 29.03.2018 under Section 148 of the Income Tax Act, 1961 (for short “the Act, 1961”) whereby the respondent has proposed to reopen the assessment which was earlier finalized under Section 143(3) read with Page 2 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 Section 153A of the Act for A.Y.2011-12. 3. The reasons for reopening as assigned by the Assessing Officer are as under; “1. The assessee is a Company, engaged in land development business incorporated on 24.05.2010. A search action u/s.132 of the Act was carried out at the premises of the assessee on 30.07.2013. Proceedings u/s.153A of the Act was initiated by issuing of notice dated 27.05.2014, which was duly served upon the assessee. The assessee was required to file return of income within 30 days of the receipt of the notice. The assessee filed a letter dated 03.07.2014, requesting this office to treat the return filed by it u/s.139(1) on 18.09.2011 showing income of Rs. NIL for the AY 2011-12 as return filed in response to notice u/s.153A. Order u/s.143(3) r.w.s 153A of the Income Tax Act, 1961 was passed on 14.03.2016 determining total income at Rs.NIL. 2. For the A.Y.2012-13, proceedings u/s.153A of the Act was initiated by issuing of notice dated 27.05.2014, which was duly served upon the assessee. The assessee was required to file return of income within 30 days of the receipt of the notice. The assessee filed a letter dated 03.07.2014, requesting this office to treat the return filed by it u/s.139(1) on 23.09.2012 showing income of Rs. NIL (for the AY 2012-13), as return filed in response to notice u/s.153A, Order u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961 was passed on 14.03.2016, determining total income of Rs.27,04,82,253/-. Following additions were made to the returned income: Profit from project KKP Township Rs.9,76,38,216/- Profit from Global City Rs.4,33,13,025/- Unexplained stock of Global City Rs.12,20,97,204/- Page 3 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 Unexplained investment in both the projects (protective addition0 Rs.9,74,40,652/- Unexplained investment in Plot No.409 Rs.24,33,808/- Unexplained investment in purchase of office Rs.50,00,000/- Being aggrieved by the said order, the assessee has preferred an appeal before CIT(A)-11, Ahmedabad. The CIT(A) has vide its order No.CIT(A)-11/C.C-2/RAJ/ 42-R/2016-17 dtd. 07.03.2018 decided the appeal. While deciding the appeal, CIT(A) has directed that some of the transactions pertains to AY 2012-13 and balance transactions pertains to AY 2011-12 and the same must be considered in AY 2011-12 in respect of addition made on account of profit from project KKP Township and Global City. He further directed that the explained investment in plot No.409, pertains to AY 2011-12 and the same should be taxed in AY 2011-12. it is worth to mention here that in respect of unexplained investment in Plot No.409, the assessee has never submitted the documents before this office and the same was submitted before the CIT(A) first time. 3. ANALYSIS OF INFORMATION COLLECTED/ RECEIVED During the course of assessment proceedings, the assessee has nowhere tried to explain the contents of the seized materials. It merely took the stand that the project has yet not started. No copies of purchase deeds were produced. Therefore, in the absence of details, the addition has been in the A.Y.2012-13. On perusal of the appellate order for the AY 2012-13, it is noticed that the assessee has submitted, the data/details of purchase deed and also working of year wise receipt and payment for the A.Y.2012-13 before the CIT(A). Accordingly, the CIT(A) has quantify the addition and restricted it to Page 4 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 Rs.3,05,70361/-. 4. ENQUIRIES MADE BY THE AO AS A SEQUEL TO THE INFORMATION COLLECTED/RECEIVED. Profit from project KKP Township Since, the assessee has during the course of assessment proceedings not furnished complete details/data, profit from the K.K.P Township project was taxed in the A.Y.2012-13 amounting to Rs.9,76,38,216/-. The CIT(A) has in his order in para no.5.3 has worked out profit of this project on the basis of details/data filed by the assessee. He has worked out the profit at Rs.2,77,14,778/-. For the balance of Rs.6,99,23,438/- (97638216-27714778), he has given direction to tax the same in the relevant assessment year. Since, out of profit of Rs.9,76,38,216/-, CIT (A) has taxed Rs.2,77,14,778/- in A.Y.2012-13, balance of 6,99,23,438/- is required to brought to tax in the A.Y.2011-12. Profit from Global City:- Since, the assessee has during the course of assessment proceedings not furnished complete details/data, profit from the Global City was taxed in the A.Y.2012-13 amounting to Rs.4,33,13,025/-. The CIT(A) has in his order at pg no.47 directed that as it is mentioned in the seized paper (page no.19) that the period cover is 01.04.2010 to 25.06.2010, the income should be taxed in the A.Y.2011-12 relevant to F.Y.2010-11. However, he subsequent to that quantify the same at Rs.28,55,583/- for the F.Y.2011- 12 relevant to A.Y.2012-13. Therefore, balance of Rs.4,04,57,442/- (43313025-2855583) is to taxed in the A.Y.2011-12. Unexplained investment in plot no.409 As regarding addition made on account of unexplained investment in plot no.409 amounting to Page 5 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 Rs.24,33,308/-, CIT (A) has stated that the assessee has filed/placed copies of sale deeds in respect of the said plots and the same is found to be registered in the F.Y.2010-11 (these are in the form of additional evidences and not referred to this office for comment). On the basis of CIT(A)’s findings, the amount of Rs.24,33,308/- ha to be taxed in the A.Y.2011-12 relevant to F.Y.2010-11. 5. FINDINGS OF THE AO The CIT(A) has while deciding the appeal for the A.Y.2012-13 (order no.CIT(A)-11/ C.C-2/RAJ/42-R/2016-17 dtd. 07.03.2018) has directed that some of the transactions pertains to AY 2012-13 and balance transactions pertains to AY 2011-12 and the same must be considered in AY. 2011-12 in respect of addition made on account of profit from project KKP Township and Global City. He further directed that the unexplained investment in plot no.409, pertains to AY 2011-12 and the same should be taxed in AY 2011-12. It is worth to mention here that in respect of unexplained investment in plot no.409, the assessee has never submitted the documents before this office and the same was submitted before the CIT(A) first time. From the above, it can easily be concluded that the assesseee failed to offer correct income for taxation for the relevant year (i.e. 2011-12). As discussed in para no.4 supra, the following amount has escaped assessment:- (I) Profit from KKP Township Rs.6,99,23,438/- (ii) Profit from Global City Rs.4,04,57,442/- (iii) Unexplained investment in Plot No.409 Rs.24,33,308/- _________________ Total Rs.11,28,14, 188/- 6. BASIS OF FORMING REASON TO BELIEVE AND DETAILS OF ESCAPEMENT OF INCOME Page 6 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 Profit from project KKP Township: Since, the assessee has during the course of assessment proceedings not furnished complete details/data, profit from the K.K.P Township project was taxed in the A.Y.2012-13 amounting to Rs.9,76,38,216/-. The CIT(A) has in his order at in Para No.5.3 has worked out profit of this project on the basis of details/data filed by the assessee. He has worked out the profit at Rs.2,77,14,778/-. For the balance of Rs.6,99,23,438/- (97638216-27714778), he has directed that the same should be taxed in the relevant assessment year. Since out of the profit of Rs.9,76,38,216/-, CIT(A) has taxed Rs.2,77,14, 778/- in A.Y.2012-13, balance of Rs.6,99,23,438/- (pertains to AY 2011-12) is required to brought to law in the A.Y.2011-12. Profit from Global City: Since, the assessee has during the course of assessment proceedings not furnished complete details/data, profit from the Global City was taxed in A.Y.2012-13 amounting to Rs.4,33,13,025/-. The CIT(A) has in his order at pg no.47 directed that as it is mentioned in the seized paper (page no.9) that the period cover is 01.04.2010 to 25.06.2010, the income should be taxed in the A.Y.2011-12 relevant to F.Y.2010-11. However, he subsequent to that quantify the same at Rs.28,55,583/-, for the F.Y.2011-12 relevant to A.Y.2012-13. Therefore, balance of Rs.4,04,57,442/- (43313025-2855583) is to taxed in the A.Y.2011-12. Unexplained investment in plot no.409 As regarding addition made on account of unexplained investment in plot no.409 amounting to Rs.24,33,308/-, CIT(A) has stated that the assessee has filed/placed copies of sale deeds in respect of the said plots and the same is found registered in the F.Y.2010-11 (these are in the form of additional Page 7 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 evidences not referred to this office for comment). On the basis of CIT(A)’s findings, an amount of Rs.24,33,300/- has to be taxed in the A.Y.2011-12 relevant to F.Y.2010-11. 7. FINDINGS OF THE AO ON THE TRUE AND FULL DISCLOSURE OF THE MATERIAL FACTS NECESSARY FOR ASSESSMENT UNDER PROVISO TO SECTION 147 In this case there are large number of incriminating materials found during search, which revealed that the assessee was full fledged into land development and plot selling business. However, the assessee has throughout the assessment proceedings denied having carried out such transactions. The years of activities are spread amongst couple of years however, A.Y.2012-13 is the year in which large chunk of the transactions has taken place. Hence the incomes from the projects were worked out for the A.Y.2012-13 year under consideration. This has to be done because the assessee has nowhere cooperated in the assessment proceedings, It has not given any bifurcation of expenses and receipts. The seized materials are largely in consolidated form for various years. The CIT(A) has while deciding the appeal for the AY 2012-13 (order no.CIT(A)-11/C.C-2/RAJ/42-R/2016-17 dtd. 07.03.2018), has directed that some of the transactions pertains to AY 2012-13 and balance transactions pertains to AY 2011-12 and the same must be considered in AY 2011-12 in respect of addition made on account of Profit from project KKP Township and Global City. He further directed that the unexplained investment in plot no.409, pertains to AY 2011-12 and the same should be taxed in AY 2011-12. It is worth to mention here that in respect of unexplained investment in plot no.409, the assessee has never submitted the documents before this office and the same was submitted before the CIT(A) first time. Page 8 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 The assessee has during the course of appellate proceedings filed details of receipt and payments for the A.Y. 2012-13 and on the basis of which the CIT(A) has confirmed the additions in part (i.e. pertains to A.Y.2012-13) and directed to the balance in relevant assessment year. Therefore, as discussed in para no.6 following amount has escaped assessment for the AY 2011-12. (I) Profit from project KKP Township Rs.6,99,23,438/- (ii) Profit from Global City Rs.4,04,57,442/- (iii) Unexplained investment in plot no.409 Rs.24,33,308/- _________________ Total Rs.11,28,14,188/- 8. APPLICABILITY OF THE PROVISIONS OF SECTION 147/151 TO THE FACT OF THE CASE. In this case, a search action u/s.132 of the Act was carried out at the premises of the assessee on 30.07.2013. Proceedings u/s.153A of the Act was initiated by issuing of notice dated 27.05.2014, which was duly served upon the assessee. Assessment u/s.143(3) r.w.s. 153A was finalised on 14.03.2016. Since 4 years from end of the relevant year expired in this case, the requirements to initiate proceedings u/s.147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all materials facts necessary for its assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above n para no.4 . I have carefully considered the assessment records containing the submissions made by the assessee in response to the various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the following material Page 9 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 facts necessary for its assessment for the year under consideration. (I) Profit from project KKP Township Rs.6,99,23,438/- (ii) Profit from Global City Rs.4,04,57,442/- (iii) Unexplained investment in plot no.409 Rs.24,33,308/- _________________ Total Rs.11,28,14,188/- It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for its assessment for the year under consideration thereby necessitating reopening u/s.147 of the Act. It is true that the assessee has filed a copy of audited P&L A/c and balance sheet along with return of income, however, the requisite full and true disclosure ofall material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that through the assessee has filed written omission, the requisite material facts noted above in the reasons for reopening are embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly, attracting provisions of Explanation 1 of section 147 of the Act. It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment. This fact is corroborated from the contents of notices issued by the AO u/s.143(2); detailed notice 142(1) dtd. 27.07.2015; final show cause notice 18.02.2016 and corresponding order sheet entries recorded during the 143(3) proceedings. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the Page 10 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 course of assessment proceeding and is not a part of audited P&L A/C; balance sheet etc.” 4. To the aforesaid, objections were lodged by the writ applicant on 13.10.2018. Broadly, the objections lodged are as under; “1. There is no reason to believe for escapement of same income after assessing income in any of the one assessment year. 2. There is no additional or new evidences in possession of the A.O. to form reason to believe. 3. Reopening based on mere change of opinion with respect to year of assessment year, particularly after finalising assessment u/s.143(3) r.w.s 153A of the year intended to be re-opened cannot be considered as valid reason to reopen assessment. 4. According to section itself, (Provided (also) that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. 5. Reopening on the basis of finding of other is invalid and bad in law. 6. Reopening beyond 4 years is time barred and invalid.” 5. The aforesaid objections came to be disposed of by the Assessing Officer vide order dated 08.12.2018 as under; “The case was reopened by issue of notice u/s.148. The assessee vide its letter dated 28.04.2018 Page 11 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 received in this office on 28.04.2018 has files its return of income in response to the notice u/s.148. Further the assessee had asked for the reasons for reopening and issuance of notice u/s.148 vide letter dated 18.08.2018 received in this office on 20.08.2018. Accordingly, reasons for reopening provided to the assessee. The assessee vide letter dated 13.10.2018 received in this office on 06.12.2018 has raised objection to reopening of the assessment for A.Y.2011-12. Assessee stated that assessment u/s.143(3) was completed in this case. There is no fresh material which may have lead the AO to reason to believe that income has escaped assessment and it is simply based on account of change of opinion. Assessee also relied on certain case laws, in support of his claim. 2. The contention of the assessee is not acceptable. In this case assessment u/s.143(3) r.w.s. 153A was completed on 14.03.2016 determining the total income at Rs.Nil. The case was reopened and notice u/s.148 was issued on 23.03.2018 i.e, within 6 years from the end of the relevant A.Y after taking prior approval of Pr. Commissioner of Income Tax, Central, Ahmedabad. 3. During the course of assessment proceedings, the assessee has nowhere tried to explain the contents of the seized materials. It merely took the stand that the project has yet not started. The assessment was completed u/s.143 r.w.s 153A of the Act on 14.03.2016. Subsequently, it was noticed that assessee earned profit from various projects and made unexplained investment in immovable property during the F.Y.2010-11 remain to taxed. To tax the above profit in relevant period the case was reopened u/s.147. Further, the reopening was made within 6 years from the end of the relevant assessment year. 4. The AO should have only reason to believe Page 12 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 about the escapement of income. Further explanation 2 to section 147 contains list of various events, which can be deemed to be cases where income chargeable to tax has escaped assessment and this list indicates that if in the case of an assessee, income has been made the subject of excessive relief under this Act or excessive allowance have been computed, it would amount to escapement of income from assessment. It is further to be noted that the reopening have been made within six years from the end of the relevant assessment year. If the AO prima facie finds or discovers that the case falls in any of the clauses of explanation 2, then those cases will be deemed cases of income that has escaped assessment and without anything more beyond such findings or discovery he can initiate the proceedings under section 147 of the Act. 5. The Hon’ble Supreme Court in the case of Central Provinces Manganese Ore. Co. Ltd. In which held that, two conditions are required to confer jurisdiction on the Income Tax Officer under section 147(a) of the Income Tax Act, 1961. The first is that the Income Tax Officer must have reason to believe that income chargeable to income tax has been under assessed and the second that such under assessment has occurred by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the year 1953-54. In the present case, during the course of assessment proceedings, the assessee has nowhere tried to explain the contents of the seized materials. It merely took the stand the project has yet not started. 6. The Hon’ble High Court of Punjab & Haryana in the case of Coca Cola India Ltd. vs. ACIT (2009) that requirement of section 147 is fulfilled if AO can legitimately form an opinion that income chargeable to tax has escaped assessment and forming such a belief any relevant material can be considered. Page 13 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 7. The Hon’ble Supreme Court in the case of Phoolchand Bajranglal vs. ITO (1993) 203 ITR 456 (SC) has laid down that Courts have held that while there must exist reasons for holding a belief of of escapement of income, the question whether the reasons were adequate or sufficient is not for the Court to decide. 8. The Hon’ble Supreme Court in the case of Raymond Woollen Mills (199) 236 ITR 34 (SC) has held that at the stage of reopening, only prima facie escapement is required, whether the same has escaped assessment or not is the matter to be decided during the course of assessment proceedings. In this regard I would like to further state that merits of the case could be decided only based on documents and evidences, which will be furnished during the course of reassessment proceedings and based on law prevailing at that time. Hence you are requested to cooperate with the reassessment proceedings. 9. In view of the above, the objections raised by the assessee challenging the reopening of the assessment proceedings are hereby rejected and disposed off accordingly.” 6. Being dissatisfied with the aforesaid, the writ applicant is here before this Court with the present writ application. 7. We have heard Mr. Divatia, the learned counsel appearing for the writ applicant and Ms. Kalpana Raval, the learned senior standing counsel appearing for the Revenue. 8. It appears from the materials on record that the writ applicant-Company was incorporated on 24.05.2010 and Page 14 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 filed its return for the assessment year 2011-2012 on 18.09.2011. A search was conducted under section 132A of the Act at the premises of the writ applicant on 30.07.2013, which was followed by issuance of notice under Section 153A which proceedings culminated in an assessment order dated 14.03.2016 passed under Section 153A read with section 143(3) of the Act. Orders were passed for the assessment year 2010-11 till assessment year 2014-15. For the assessment year 2012-13, the income was assessed at Rs.27,04,82,253/-. Such order was carried in appeal before the Commissioner, who vide his order dated 07.03.2018 while partly allowing the appeal of the assessee also directed the Assesesing Officer to initiate appropriate proceedings for intimation of appropriate proceedings by the AO for the assessment year 2011-12. 9. Accordingly, after recording reasons, the Assessing Officer issued the impugned notice dated 29.03.2018 under section 148 of the Act for the Assessment Year 2011-12. In the reasons, the Assessing Officer has clearly stated that the documents had been produced for the first time before the CIT(A), which reveal the existence of uncleared income. 10. Section 147 of the Act authorizes the re-opening of any assessment of a previous year. Section 148, which contains the conditions for re-opening assessments, including the limitation period within which notices can be Page 15 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 issued, by its proviso, enacts that: “Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.” 11. Almost six decades back, the Supreme Court, in its decision in the case of Calcutta Discount Company Ltd. vs. Income Tax Officer, reported in 1961 (2) SCR 241 had underscored the obligation of every assessee to make a true and full disclosure and said that: “There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assesses.” 12. The Supreme Court further held that once the duty is discharged, it is upto the assessing officer to inquire further and draw the necessary inferences while completing the assessment. 13. As to what can be the valid grounds for re-opening an assessment has been the subject matter of several decisions of the supreme court. In Income Tax Officer, Calcutta & Ors. vs. Lakhmani Mewal Das, 1976 (3) SCR 956, the Supreme Court held that the “reasons to believe” must be based on objective materials, and on a reasonable view. The court held as follows: Page 16 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 “The grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the Court to investigate. The sufficiency of grounds which induce the income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression \"reason to believe\" does not mean a purely subjective satisfaction on the part of the Income-tax Officer. 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.” 14. In Phool Chand Bajrang Lal & Ors. vs. Income Tax Officer & Ors., 1993 Supp (1) SCR 28, after reviewing the previous case law, and concluding that a valid re-opening is one, preceded by specific, reliable and relevant information, and that the sufficiency of such reasons is not subject to judicial review- the only caveat being that the court can examine the record, if such material existed, it was held that the facts disclosed in the Page 17 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 return, if found later to be unfounded or false, can always be the basis of a re-opening of assessment: “appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say \"you accepted my lie, now your hands are tied and you can do nothing\". It would be travesty of justice to allow the assessee that latitude.” 15. A three judge Bench, of the Supreme Court, in the Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd., 2010 (1) SCR 768, after considering its previous decisions, re-stated the position of law as follows: “5....where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words \"reason to believe\"..… Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of \"mere change of opinion\", which cannot be per se reason to re-open. 6. We must also keep in mind the conceptual difference between power to review and power to re- assess. The Assessing Officer has no power to review; he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if the concept of \"change of opinion\" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 7. One must treat the concept of \"change of opinion\" Page 18 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is \"tangible material\" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.” 16. It is therefore, clear that the basis for a valid re- opening of assessment should be the availability of tangible material, which can lead the AO to scrutinize the returns for the previous assessment year in question, to determine, whether a notice under Section 147 is called for. 17. Prima facie, it appears that the profit derived by the writ applicant from the KKP Township Project was taxed in the A.Y.2012-13 to the tune of Rs.9,76,38,216/-. According to the Assessing Officer, the writ applicant, during the course of the assessment proceedings under Section 153A of the Act, had not furnished complete details/information in relation to the KKP Township Project. No bifurcation of the expenses and receipts were furnished by the writ applicant. Out of the profit of Rs.9,76,38,216/-, an amount of Rs.6,99,23,438/- pertains to A.Y.2011-12. 18. In the same manner, so far as the Global City Project is concerned, the profit was taxed in the year A.Y.2012-13 to the tune of Rs.4,33,13,025/-. From the aforesaid amount, the profit of Rs.4,04,57,442/- relates to A.Y.2011- 12. So far as the unexplained investment in Plot No.409 is concerned, it appears that the writ applicant had not Page 19 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 filed any sale deeds before the Assessing Officer during the course of the original assessment proceedings under Section 153A of the Act. The sale deeds were produced, for the first time, in the form of additional evidence during the proceedings before the CIT(A). 19. All these facts were not before the Assessing Officer at the time of finalization of the search assessment. It is a settled position of law that the adequacy of the reasons provided by the Assessing Officer fall outside the review powers and remains within the domain of the Assessing Officer at this stage of the proceedings where only a preliminary finding under section 147/148 has been made. It is necessary to reiterate that we are at the stage of the validity of the notice under section 148/147. The inquiry at this stage is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind. (See Shri Krishna (P.) Ltd. vs. ITO (1996) 221 ITR 538/87 Taxman 315). 20. Having regard to the materials on record it cannot be said that there is a total non-application of mind on the part of the Assessing Officer while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the observations and information received from the Investigation Wing. The Assessing Officer could be said to have applied his mind to Page 20 of 21 C/SCA/20337/2018 JUDGMENT DATED: 22/03/2022 the same. The Assessing Officer could not be said to have merely concluded without verifying the facts that it is the case of reopening of the assessment. We do not find merit in the vociferous submission of the learned counsel appearing for the writ applicant that the contents of the reasons recorded by the Assessing Officer for the reopening of the assessment is merely an introduction about the investigations conducted by the Investigation Wing, the modus operandi of the entry provided, the summing up of inquiry of the Investigation Wing, the information received from the Investigation Wing etc. We have examined the belief of the Assessing Officer to a limited extent to look into whether there was sufficient material available on record for the Assessing Officer to form a reasonable belief and whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one where it could be argued that the Assessing Officer, on absolutely vague or unspecific information, initiated the proceedings of reassessment without taking the pains to form his own belief in respect of such materials. 21. In the result, this application fails and is hereby rejected. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Vahid Page 21 of 21 "