MADHAV GEMS PRIVATE LIMITED V. INCOME TAX OFFICER

SCA/21119/2019

AI Insights

Madhav Gems Private Limited challenged a notice issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961, which sought to reopen their income assessment for the Assessment Year 2012-13. The notice was based on information received from a search operation related to Shree Shivpal Vora, which implicated Madhav Gems in transactions with a company involved in providing accommodation entries. The High Court dismissed the writ application, agreeing with the Income Tax Officer that the assessee had not fully disclosed material facts necessary for a proper assessment, thus justifying the reopening of the assessment.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 771478 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 09-03-2021
• Assessment Year: misc
• Other Referred Cases: Sahakari Khand Udyog Mandali Ltd Vs. ACIT, Phoolchand Bajranglal and another Vs. ITO, Yogendrakumar Gupta Vs. ITO, Aradhna Estate (P) Ltd Vs. DCIT, Aaspas Multimedia Ltd. VS DCIT, Jayant Security Finance Ltd Vs. Asst. CIT, Principal Commissioner of Income Tax, Rajkot Vs. Gokul Ceramics, Central Provinces Manganese Ore Co. Ltd. v. Income Tax Officer, Nagpur, Income Tax Officer v. Purushottam Das Bangur, Income Tax Officer v. Selected Dalurband Coal Co. Pvt. Ltd., AGR Investment Ltd. v. Additional Commissioner of Income Tax and anr., Sterlite Industries (India) Ltd. v. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: KALPANA RAVAL
• Assessee Lawyers: OMKAR DAVE
• Keywords: Accommodation entry; Bogus Transaction; Failure to disclose; Mechanical reopening; Income Assessment Reopening
• Section: 147; 148; 143(3); 151

Judgement Text

"C/SCA/21119/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 21119 of 2019 ================================================================ MADHAV GEMS PRIVATE LIMITED Versus INCOME TAX OFFICER ================================================================ Appearance: MR OMKAR C DAVE(2003) for the Petitioner(s) No. 1 MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 09/03/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this writ application under Article 226, the writ applicant seeks to challenge the notice dated 31.03.2019 issued by the respondent under Section 148 of the Income Tax Act, 1961 (‘the act’ for short) seeking to reopen the applicant’s income assessment for the A.Y 2012­13. 2. The brief facts can be summarized as under: 2.1 The writ applicant – assessee Company filed its return of Income for the A.Y. 2012­13 on 28.09.2012 declaring total income at Rs. 6,58,710/­ and an assessment under Section 143(3) of the Act was completed on 04.06.2014. 2.2 The Assessing Officer has reopened the assessment under Section 147 by issuing impugned notice dated 31.03.2019 Page 1 of 21 C/SCA/21119/2019 ORDER under Section 148 of the Act. 2.3At the request, the reasons recorded have been furnished to the assessee on 09.05.2019, which reads as under : “2. Since you have filed return of income in response to notice u/s.148 of the income­tax act, therefore reason for re­ opening is provided as under. “The assessee company filed its return of income for the A.Y. 2012­13 on28/09/212 declaring total income at Rs.6,58,710/­. The assessee was engaged in the business of trading in rough and polished diamonds. The assessment U/s 143(3) of the income­tax act was completed on 04/06/2014. 2.1. In this case, an information has been received from the DCIT Central Circle­1(2) vide letter No.DCIT/CC­1(2)/Abd/Shripal­info./2018­19/1708 dated 28/02/2019. As per the information received a search action u/s 132 of the income­tax act was carried out in the case of Shree Shivpal Vora on 16/12/2016. During the course of search action several incriminating documents were found and seized which revealed that he was in control of affairs of 44 concerns which are in the business of giving accommodation entry and M/s Kalyan Exports Pvt Ltd is one such company. M/s. Madhav Gems Pvt Ltd has entered into transaction of Rs.4,24,500/with M/s. Kalyan Exports Pvt Ltd durin the F.Y.2011­12, 3. Since from the search action of Investigation wing, it is established that M/s. Kalyan Exports Pvt Ltd was involved in providing accommodation entry and it was not doing any actual business activity, therefore it is apparent that the assessee is beneficiary of accommodation entry of Rs.4,24,500/­ from M/s. Kalyan Exports Pvt Ltd. Therefore I have reason to believe that the income to the tune of Rs.4,24,500/­ has escaped assessment within the meaning of section 147 of the income­tax act. 4, In this case the return of income was filed for the year under consideration and regular assessment under section 143(3) was made on 04/06/2014. Since four years from the end of the relevant year has Page 2 of 21 C/SCA/21119/2019 ORDER expired in this case, the requirement to initiate proceeding under section 147 of the income­tax act is reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year under consideration. It is pertinent to mention here that reason to believe that income has escaped assessment for the year under consideration have been recorded above in para 1 to 3, I have carefully considered the assessment records containing the submission made by the assessee in response to the various notices issued during the assessment and noted that the assessee had not disclosed the fact that it had taken accommodation entry of Rs.4,24,500/­ from M/s. Kalyan Exports Pvt Ltd which is one of the concern through which Shree Shivpal Vora was found to be providing accommodation entry and it was not doing any actual business activity. Therefore the assessee has not disclosed fully and truly all material facts necessary for his assessment. So I have reason to believe that Income for the year under consideration to the tune of Rs. 424500/­ has escaped assessment within the meaning of section 147 of the income­tax act. 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice under Section 148 of the income­tax act has been obtained separately from Pr. Commissioner of Income­tax as per provision of section 151 of the income­tax act.” 3. Further it is pertinent to mention here that as per the guidelines of Hon’ble Gujarat High Court in the case of Sahakari Khand Udyog Mandali Ltd Vs. ACIT you may file objection if desires so, within 60 days of receipt of the reason.” 2.4 The writ applicant raised the objections vide its communication dated 04.07.2019, mainly on the following issues on facts and law: (i) Provision of Section 148(2) not complied with; (ii) No failure on the part of the assessee to disclose Page 3 of 21 C/SCA/21119/2019 ORDER fully and truly all material facts necessary for the assessment; (iii) Reopening is based on “borrowed satisfaction”; (iv) provision of Section 151(1) not complied with. 2.5 The objections came to be rejected by the respondent vide order dated 30.08.2019. 3. Being aggrieved by the disposal of the objections against the notice for reopening of the assessment, the writ applicant has come up before this Court with the present writ application. 4. We have heard Mr. Sunit Shah, the learned Senior counsel assisted by Mr. Omkar C. Dave, the learned advocate appearing for the writ applicant and Mrs. Kalpana K. Raval, the learned Standing Counsel appearing for the revenue. 5. Mr. Sunit Shah, the learned Senior Counsel appearing for the writ applicant raised the following contentions: 5.1 It was submitted that the respondent authority failed to comply with the provisions of Section 148(2) of the Act, as before issuing the notice, the AO should record his reasons for reopening of the assessment. Referring to the letter, the learned counsel invited the attention of this Court that no date being mentioned on the reasons recorded, which evident that reasons for issuing notice under Section 148 of the Act were not recorded before issuing the notice and therefore, notice lacks validity. Page 4 of 21 C/SCA/21119/2019 ORDER 5.2 It was further pointed out that, the reopening of the assessment is beyond the period of 4 years, the approval by the competent authority is required to reopen the assessment. In this regard, the learned counsel pointed out that the revenue failed to produce the copy of the sanction accorded by the authority nor was it provided along with the copy of the reasons recorded. Therefore, there is no approval in terms of Section 151 of the Act and on this ground, the notice is bad in law and required to be quashed and set aside. 5.3 The learned counsel vehemently argued that there was no failure on the part of the assessee to disclose the necessary materials at the time of original assessment made under Section 143(3) of the Act and therefore, the condition precedent for reopening having not been satisfied. In this regard, it was submitted that during the assessment proceedings, notices under Section 142(1) were served upon the assessee and details regarding purchases and sales with the different entities including the transaction made with the Kalyan Exports Pvt. Ltd. were called for and the necessary materials and details were furnished including the alleged transaction with the Kalyan Exports Pvt. Ltd. In this circumstances, the precondition for reopening in the case of beyond 4 years having not been satisfied as there was no failure on the part of the assessee to disclose the material facts truly and fully. Page 5 of 21 C/SCA/21119/2019 ORDER 5.4 It was further contended that the Assessing Officer has acted mechanically on the basis of the information received from the concerned department and there is no any independent application of mind by the Assessing Officer to arrive at the conclusion that the income chargeable to tax has escaped assessment. Therefore, reopening based on the third party satisfaction cannot be sustained in law and the proceedings initiated on borrowed satisfaction required to be quashed and set aside. 6. In view of the aforesaid contention, the learned counsel for the writ application submitted that, the impugned notice as well as the order of disposing off the objections are bad, illegal and without jurisdiction and therefore, the same deserve to be quashed and set aside and accordingly, the writ application may be allowed. 7. On the other hand, Mrs. Kalpana K. Raval, learned Standing Counsel appearing for the revenue has vehemently opposed the writ application, contending that the revenue is justified in reopening the assessment for the year under consideration. She has urged that the alleged transactions with M/s. Kalyan Exports Pvt. Ltd. was not truly disclosed at the time of original assessment, as in fact, without any actual purchases, the accommodation entries were being provided by the concerned entity for tax evasion. Referring to the reasons recorded, she pointed out that after final assessment made under Section 143(3) of the Act, the Assessing Officer Page 6 of 21 C/SCA/21119/2019 ORDER received fresh information with regard to alleged transaction reflected in the bank account of the assessee and upon verification, the Assessing Officer found that the information is correct and the assessee is the beneficiary of the accommodation entries and therefore, he has reason to believe that income has escaped assessment. 8. In view of the above contentions, the learned counsel for the revenue urged that the writ application may not be entertained. 9. Having heard the learned counsel appearing for the respective parties and having gone through the materials on record, the only question that falls for our consideration is whether the revenue is justified in reopening the assessment. 10. It is a settled position of law that reopening of case under Section 147 of the act, after expiry of 4 years, cannot be justified unless the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose all the true and material facts necessary for his assessment. In other words, to confer jurisdiction under Clause (a) of Section 147 of the Act, beyond the period of 4 years, two conditions are required to be fulfilled viz. (i) the Assessing Officer must have reason to believe that the income, profits or gains chargeable to tax had been under­ assessed or escaped assessment, and (ii) the Assessing Officer must have reason to believe that such escapement or under­assessment was occasioned by reason of the omission Page 7 of 21 C/SCA/21119/2019 ORDER of failure on the part of the assessee to make a return under Section 149 or to disclose fully and truly all material facts necessary for the assessment of that year. 11. We take the notice of the fact that the assessee company filed its return of income for the A.Y. 2012­13 on 28.09.2012 and the assessment under Section 143(3) of the Act was completed on 04.06.2014. It appears from the record that during the course of the assessment proceedings, a notice under Section 142(1) of the Act, along with detailed questionnaire was served upon the assessee, whereby, the names and addresses of all parties from whom purchases exceed Rs.1,00,000/­ were called for and accordingly, the assessee company had furnished all the details including bank accounts, stock registers, PAN no. etc. 12. We have examined the reasons recorded wherein the Assessing Officer has noticed that in the case of Mr. Shivpal Vora, the search was carried out under Section 132 of the Act and several incriminating documents were found and seized and upon analysis of the same, reveals that Mr. Shivpal Vora was managing the affairs of 44 companies, which were in the business of providing the accommodation entries and out of 44 entities, one of the company was M/s. Kalyan Exports Pvt. Ltd., with whom the assessee – M/s. Madhav Gems had entered into transaction of Rs.4,24,500/­ during the year under consideration. Page 8 of 21 C/SCA/21119/2019 ORDER 13. We further take notice of the fact that while recording the reasons, the Assessing Officer has verified the information received from the DCIT Circle­1(2) and applied his mind to the information received and after independent inquiries, he came to conclusion that M/s. Kalyan Exports Pvt Ltd was providing accommodation entry without any business activities and assessee is the beneficiary of accommodation entry of Rs.4,24,500/­ and formed his opinion that he has reasoned to believe that amount of Rs.4,24,500/­ has escaped assessment. 14. After careful examination of the reasons recorded and materials on record, we are of the view that the Assessing Officer could be said to have applied his independent mind to the information received from the concerned department and after being duly satisfied, he reached to the conclusion that the assessee failed to disclose the true facts with regard to alleged accommodation entries provided by the M/s. Kalyan Exports Pvt. Ltd. which provides a link between his conclusion and materials gathered during the inquiry. 15. In view of the aforesaid discussion, it could be said that after framing of the assessment made under Section 143(3) of the Act, tangible material came into the hands of the Assessing Officer through the investigation wing and upon perusal of the same, he made independent inquiries and applied his mind and upon due satisfaction, he formed an opinion that, the income has escaped assessment. Page 9 of 21 C/SCA/21119/2019 ORDER 16. The main contention advanced by the learned counsel that at the final assessment proceedings, all the material facts including the transactions with M/s. Kalyan Exports Pvt. Ltd having been duly recorded in the books of accounts and same was thoroughly examined by the Assessing Officer and in this circumstances, when there was no concealment or suppression of any facts, the reopening beyond 4 years in the absence of any non­disclosure of material facts cannot be permitted. We are not agree with the above contention that subsequent to assessment, the true facts with regard to transaction made with M/s. Kalyan Exports Pvt. Ltd by the assessee having been discovered by the Assessing Officer on the basis of the information received from the concerned department. In this context, we may refer and rely on the observations made by the Apex Court in the case of Phoolchand Bajranglal and another Vs. ITO (2001) 10 SCC 189. The observations made in para­19 reads thus: “19. Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the some facts and material which was available which the I.T.O. at the time of original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the \"true\" and \"full\" facts in the case and the I.T.O. would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness Page 10 of 21 C/SCA/21119/2019 ORDER to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under Section 147 of the Act, on receipt of the information subsequently. The subsequent information on the basis of which the I.T.O. acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or nonspecific. ” 17. In case of Yogendrakumar Gupta Vs. ITO (2014) 366 ITR, this Court while rejecting petition challenging the notice for reopening which was issued beyond a period of 4 years from the end of relevant assessment year, wherein, one of the ground was that the issue was previously scrutinized during the assessment proceedings. We may reproduce the observations made in paras 16, 17 and 21, which read thus: “16. Ostensibly, thus, there was disclosure and the occasion would not arise to term this as the assessee not having disclosed fully and truly all the material facts necessary for assessment. However, in essence, if the unsecured loans obtained from Basant Marketing Pvt. Ltd. From the material supplied by them, the DCIT, Kolkata reveals that the same was as a result of accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. To the tune of Rs.8.71 crore, the case of the assessee would surely be covered under the said provision of law as it would not amount to full and true disclosure on the part of the assessee. At this stage, the reasons recorded shall have to be regarded, which have been based on the information contained in the report of the DCIT, Kolkata, dated March 24, 2013, wherein it had been noticed that the assessee company obtained accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. And, therefore, the Assessing Officer based his reason to believe that the income chargeable to tax had escaped the assessment. Xxx 17. In the post notice correspondence dated March 05, 2014, it has been stated by the Assessing Officer that Basant Marketing Pvt. Ltd. Provided accommodation entry to various companies, where assessee company is one of them. Basant Page 11 of 21 C/SCA/21119/2019 ORDER Marketing Pvt. Ltd. Is a dummy company of one Shri Arun Dalmia and substantial material is found to base such reasons recorded during the search by CBI, Mumbai and, therefore, the Assessing Officer issued a notice to show cause as to why the said amount of Rs.8.71 crore received from Basant Marketing Pvt. Ltd. Should not be treated as cash credit under section 68 of the Act. 21. This Court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appear to be the case where the Assessing Officer on vague or unspecific information initiated the proceedings of reassessment, without bothering to form his own belief in respect of such material. We need to notice that the Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai. A case is registered against Mr.Arun Dalmia, Harsh Dalmia and during the search at their residence and office premises, the substantial material indicated that 20 dummy companies of Mr.Arun Dalmia were engaged in money laundering and the incometax evasion. The said entities included Basant Marketing Pvt. Ltd. Also. From the analysis of details furnished and the beneficiaries reflected, which are spread across the country, the CIT, Koklata, suspected the accommodation entry related to the assessment year 200607 as well, this information has been provided to Director General of Incometax, Kolkata, who in turn, communicated to the Chief Commissioner of Incometax,Ahmedabad. Further revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition. Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. The proceedings initiated under section 147 of the Act would not be rendered void on nonsupply of such document for which confidentiality is claimed at this stage, following the decision of the Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. ((supra)). Assumption of jurisdiction on the part of the Assessing Officer is since based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference.” 18. In Aradhna Estate (P) Ltd Vs. DCIT, (2018) 91 taxmann.com 119, this Court held that where reassessment proceedings were initaited on the basis of the information received from the investigation wing that assessee had Page 12 of 21 C/SCA/21119/2019 ORDER received certain amount from the Shell Companies working as an accommodation entry provider merely because these transactions were scrutinized by the Assessing officer during original assessment proceedings, the reassessment could not be held unjustified. 19. In Aaspas Multimedia Ltd. VS DCIT (2017) 78 taxmann.com, this Court while examining the validity of the notice, held that where assessment was made on the basis of information received from the Principal DIT, (Investigation), that assessee was beneficiary of accommodation entry by way of share application provided by a third party, same was justified. 20. In the case of Jayant Security Finance Ltd Vs. Asst. CIT (2018) 91, taxmann.com, this Court held that the information from the investigation wing stating that the loan from the company working as an entry operator and earning bogus firms to provide advances to various persons was sufficient and would constitute genuine and bonafide reason to believe. 21. In view of the law laid down by this Court as well as the Apex Court and considering the facts of the present case, we are of the view that, the assessee was aware that the transaction with M/s. Kalyan Exports Pvt Ltd was not business transaction but in the form of bogus purchase, it was only an accommodation entries and the company was one of the beneficiaries of the transactions, despite of this, the assessee Page 13 of 21 C/SCA/21119/2019 ORDER failed to disclose true and correct facts at the relevant time and therefore, the Assessing Officer is entitled to initiate reassessment proceedings on the basis of tangible material came in his hand, which stands to expose the untruthfulness of the entry of purchase made in the books of accounts. In this context, we may refer the observation of the Apex Court in the case of Honda Siel Power Products Vs. Dy. CIT, (2011) 10, taxmann.com, wherein, it is held that assessee having not pointed out during assessment proceedings about exprenses incurred relatable to tax free income u/s. 14A, there was an omission and failure on its part to disclose fully and truly material facts, hence, reopening was justified. 22. The next contention raised by the learned counsel is that the reassessment proceedings could be said to have been initiated mechanically on the basis of third party information. We have examined the reasons as indicated above, and we are of the view that the Assessing Officer has verified the information and after application of mind and upon due satisfaction, he formed an opinion that income has escaped assessment. In this regard, it would be profitable to refer the decision of Principal Commissioner of Income Tax, Rajkot Vs. Gokul Ceramics reported in (2016) Taxman 1 (Gujarat), wherein, similar contention was raised and while rejecting the contention, this Court made the following observations. Paras 9 to 14 read thus: 9. It can thus be seen that the entire material collected by the DGCEI during the search, which included Page 14 of 21 C/SCA/21119/2019 ORDER incriminating documents and other such relevant materials, was along with report and show­cause notice placed at the disposal of the Assessing Officer. These materials prima­facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re­opening could not and should not have been declared as invalid, on the ground that he proceeded on the show­cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd. v. 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 under­voiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under: \"So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under invoiced the goods it exported. It is not Page 15 of 21 C/SCA/21119/2019 ORDER 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 v. Purushottam Das Bangur (supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: \"12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri. Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri. Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri. Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri. Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further Page 16 of 21 C/SCA/21119/2019 ORDER 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 v. Selected Dalurband Coal Co. Pvt. Ltd.(supra), the assessment was reopened on the basis of the information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of re­opening of assessment, the Supreme Court held and observed as under: \"After hearing the learned counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income Tax Officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted in the colliery of the respondent on January 9,1967, by the officers of the Mining Department in the presence of the representatives of the assessee and according to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true Page 17 of 21 C/SCA/21119/2019 ORDER or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the merits.\" 13. In case of AGR Investment Ltd. v. Additional Commissioner of Income Tax and anr. (supra), a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: \"23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful and studied manner. He has taken note of the fact that transactions involving Rs. 27 lakhs mentioned in the table in Annexure P­2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income. The assessing officer has referred to the subsequent Page 18 of 21 C/SCA/21119/2019 ORDER information and adverted to the concept of true and full disclosure of facts. It is also noticeable that there was specific information received from the office of the DIT (INV­V) as regards the transactions entered into by the assessee company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had Page 19 of 21 C/SCA/21119/2019 ORDER interfered. Thus, the said decision is also distinguishable on the factual score.\" 14. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. v. 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.” 23. The learned counsel raised the contention that while according the sanction under Section 151 of the Act, the authority concerned has not applied his mind properly and mechanically accorded the sanction. We have perused the papers of the sanction which would show that Assessing Officer presented the reasons recorded for approval of Principal Commissioner in prescribed format on 29.03.2019 through Additional Commissioner of Income Tax. Both the officers have perused the reasons recorded and opined that it is a fit case to issue notice under Section 148 of the Act. The Additional Commissioner of the Income Tax has expressed his satisfaction with regard to reasons recorded by the AO and found that it is a fit case to issue notice. The Principal Commissioner of Income Tax was also satisfied with the reasons recorded and put his remarks of his own handwriting that “on the basis of the reasons recorded, I am satisfied that it is a fit case for issue of notice under Section 148 of the Act.” On 29.03.2019, the Additional Commissioner of Income Tax has expressed his opinion, whereas, on 30.03.2019, the Principal Commissioner has expressed his satisfaction with regard to reasons recorded and accord the sanction to issue Page 20 of 21 C/SCA/21119/2019 ORDER the impugned notice dated 31.03.2019. Thus, the sanction for reassessment was granted on 31.03.2019 on the date on which the impugned notice was issued. In this circumstances, it is evident that before issuing the notice, there was compliance of Section 151 of the Act and the authority concerned had expressed their satisfaction with regard to reasons recorded and accordingly, accorded the sanction. Therefore, the contention raised by the learned advocate for the writ applicant that sanction was not obtained before issuance of the notice cannot be accepted. 24. In view of the discussions made hereinabove, it cannot be said that there was no tangible material before the Assessing Officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 of the Act. 25. For the foregoing reasons, no case is made out and accordingly, present writ application deserves to be dismissed and is dismissed. No order as to costs. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S. JOSHI Page 21 of 21 "