SHRI MANOJ MADANLAL CHHAJED,PUNE V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), PUNE

ITA 1178/PUN/2023

AI Insights

The case involves two appeals by Shri Manoj Madanlal Chhajed against the orders of the Ld. CIT(A), Pune-11, related to the assessment year 2011-12. The primary contention revolves around the re-assessment proceedings initiated under section 147 of the Income Tax Act, 1961, following a search operation and subsequent findings of alleged accommodation entries and unexplained loans. The Tribunal examined the validity of the re-assessment, considering the principles laid down by various High Courts and the Supreme Court regarding the 'reason to believe' and the necessity of tangible material for re-opening an assessment. The Tribunal concluded that the re-assessment was not justified as it was based on a change of opinion rather than new tangible material, leading to the allowance of the appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37842 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Assessee Lawyers: SUHAS P BORA; H G SHARMA
• Keywords: Set aside; Business income; Difference of opinion; change of opinion; reassessment proceedings; Peak credit; Bonafide belief; Capital receipt; Period of limitation; Retraction; Reopening of assessment; Capital Gains; Search and seizure; Valuation report; Accommodation entries; reason to believe; Time period of passing order; Revision of order; Benefit of exemption; Tangible material; borrowed satisfaction; Penny stocks; bogus
• Section: 147; 148; 143(3); 142(1); 143(2); 143(1); 263; 48; 153; 132; 153A; 68; 69C; 139; 153C; 44AB; 44BB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.1178/PUN/2023 Assessment Year : 2011-12 Shri Manoj Madanlal Chhajed Flat No.601, A-8, Karishma Housing Society, Near Sangam Press, Kothrud, Pune – 411029 Vs. ACIT, Central Circle-1(1), Pune PAN: AALPC4991M (Appellant) (Respondent) ITA No.2017/PUN/2024 Assessment Year : 2011-12 Shri Manoj Madanlal Chhajed Flat No.601, A-8, Karishma Housing Society, Near Sangam Press, Kothrud, Pune – 411029 Vs. ACIT, Central Circle-1(1), Pune PAN: AALPC4991M (Appellant) (Respondent) Assessee by : Shri Suhas P Bora, H G Sharma, Sampada S Ingale CAs & Saukhya D Lakade, Adv. Department by : Shri Amol Khairnar, CIT-DR Date of hearing : 18-12-2024 Date of pronouncement : 19-02-2025 O R D E R PER R. K. PANDA, VP : The above two appeals filed by the assessee are directed against the common order dated 10.10.2023 of the Ld. CIT(A), Pune-11 relating to assessment year 2011-12. 2 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 ITA No.1178/PUN/2023 2. First we take up ITA No.1178/PUN/2023. Facts of the case, in brief, are that the assessee is an individual and is engaged in real estate / construction business as well as lottery business. He filed his return of income on 30.09.2011 declaring total income of Rs.12,66,372/- and agricultural income of Rs.7,22,800/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟). Subsequently, the case was selected for scrutiny through CASS. Accordingly, statutory notice u/s 143(2) of the Act was issued and served on the assessee and thereafter the Assessing Officer issued a notice u/s 142(1) of the Act along with a questionnaire which was duly served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) of the Act on 31.01.2014 determining the total income of the assessee at Rs.13,17,230/- and agricultural income of Rs.7,22,800/-. 3. Subsequently, a search action u/s 132 of the Act was conducted in the premises of the assessee on 04.11.2017. Thereafter, the Assessing Officer reopened the assessment u/s 147 of the Act on 26.03.2018 by recording the following reasons: “02. In response to notices issued, Shri H.G. Sharma, CA Authorized Representatives attended from time to time and explained the return. During the course of assessment proceeding, the assessee has requested to provide the reasons for reopening of the case u/s 148 of the Act. The reasons recorded for reopening have been forwarded to assessee on 12/09/2018 which is reproduced as under: 3 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 “Shri Manoj Chhajed is engaged in the business of construction, real estate, land development etc. He is also involved in lottery business and also partner in dabba trade with Shri Ashok Jain. The assessee has filed his return of income for AY 2011-12 on 29/09/2011 declaring total income at Rs.12,66,372/. The return was processed u/s 143(1) on 23/12/2011 accepting the return income. Subsequently, order u/s 143(3) was passed on 31/01/2014 assessing total income at Rs.13,17,230/-. Search u/s 132(1) of the IT Act, 1961 was conducted on 04/11/2017 in the case of Ashok B Jain & Others. The case of Shri Manoj M Chhajed is one of the cases belonging to Ashok B Jain & Others group. During the course of search conducted at the residential premises of the assessee on 04/11/2017 located at A8-601, Karishma Housing Society, Kothrud, Pune as well at the office premise at 4-7, A J Crystal, Tilak Road, Pune, various incriminating documents were found and seized. Shri Manoj Chhajed is found to be maintaining bank account with Axis Bank bearing account no. 350010100056665. Оn examination of said bank account, it is noticed that there are many credit entries from Kolkata based shell companies. The details of such credits pertaining to FY 2010-11 relevant to AY 2011-12 are as under: Date Name of the company Amount in Rs 14.09.2010 Divyadrishti Traders Pvt Ltd 1,00,00,000/- 22.09.2010 60,00,000/- 22.09.2010 90,00,000/- 12.10.2010 1,50,00,000/- 12.10.2010 1,75,00,000/- 23.10.2010 Divyadrishti Merchants Pvt Ltd 40,00,000/- 23.11.2010 Parmeshwar Merchandise Pvt Ltd 1,04,00,000/- 23.11.2010 Sampark Advisory Services Pvt Ltd 51,00,000/- 25.11.2010 Abhilasha Exports Pvt Ltd 40,00,000/- 25.11.2010 30,00,000/- 29.11.2010 Pushpanjali Commotrade Pvt Ltd 30,00,000/- 29.11.2010 30,00,000/- 29.11.2010 30,00,000/- 29.11.2010 30,00,000/- 30.11.2010 Abhilash Exports Pvt Ltd 40,00,000/- 30.11.2010 40,00,000/- 31.03.2011 Divyadrishti Traders Pvt Ltd 2,46,375/- Total 10,42,46,375/- The Income Tax Directorate, Kolkata has conducted massive investigation on Kolkata based shell companies and statement of Directors, Controllers of those companies were recorded wherein they have accepted that companies controlled by them are not doing any business and they are used 4 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 to provide bogus accommodation entries. These companies are paper companies incorporated for making an arrangement so that unaccounted cash can be brought back in the books of accounts of beneficiary without paying any taxes. The details of these companies are as under: Sr. No Name of the Company Address PAN Controller Director 1 M/s. Divyadrishti Traders Pvt Ltd 163, M G Road, 3rd Floor, Kolkata AABCD8146J Anuj Agarwal 1. Kinkar Bhattacharya 2. Sukanata Chatterjee 2 M/s. Divyadrishti Merchants Pvt Ltd AABCD8147K Parveen Agarwal 1. Umesh Singh 2. Ranjit Gupta 3 M/s. Abhilasha Exports Pvt Ltd. 95A, C R Avenue, Kolkata AAHCA5909J 4 M/s. Pushpanjali Commotrade Pvt Ltd 3, Saklat Place, Kolkata AAECP9727C 5 M/s. Parmeshwar Merchandise Pvt Ltd AAECP9821B 6 M/s. Sampark Advisory Services Pvt Ltd 2B, Grant Lane, Kolkata AAJCS1019D The investigation report revealed that the Directors of above said companies are of no means and they are residing in some chawl and not aware about said companies. They are known to the controllers of the companies and the controllers of the companies are key persons who are handling day to day affairs of these companies. In their statements before Investigation Directorate, Kolkata, they admitted that companies controlled by them are paper companies and no actual business activity is run by them. The main purpose to incorporate those companies were to give accommodation entries to beneficiaries in lieu of equal amount of cash and the transactions done through these companies are complex and layered transactions. During the course of search, statement of Shri Manoj Chhajed was recorded on oath u/s 132(4) of the IT Act, 1961 on 04/11/2017. The assessee was confronted vide Q. No. 24 with the statement of controllers of shell companies. In response to Q. No. 24, the assessee accepted that he has taken accommodation entries in the form of unsecured loans from said companies by giving back equal amount of cash to the controllers of said companies through Sushil Agarwal by hawala channel. The relevant portion of his statement is reproduced as under: \"Q. 23 How do you know these companies? 5 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Ans. I know companies from my friend Shri Sushil Agarwal who is from Kolkata. Whenever we wanted finance we used to approach him for arranging unsecured loans. Q.24 I am now showing you're the statement recoded of Shri Parveen Agarwal, Shri Anuj Agarwal and Shri jeevendra Mishra recorded by the Investigation Wing, Kolkata. In these statements your attention is invited to the fact that the above unsecured lenders have been declared as bogus shell companies providing accommodation entries. You are required to peruse the same and offer your comments. Ans. I have examined the statements of the above individuals. I agree that the above loans from the unsecured lenders are in the nature of accommodation entries. We have obtained these entries in our balance sheet after giving cash to the Shri. Sushil Agarwal who acted as the mediator for providing the accommodation entries. In this regard, I wish to mention that there has been both receipt and payment in respect of the unsecured loans. Therefore I may be permitted time to furnish a detailed reconciliation of the accommodation obtained from these companies. However, today wish to write off the unsecured loans and the year-wise break up of the same is as under: Year Amount of accommodation 2010-11 3 2011-12 2 2014-15 3 Q. 25 What is the modus operandi in respect of the obtaining of accommodation entries from the bogus Kolkata Companies. Ans: For obtaining these accommodation entries we used to give cash to the Sushil Agarwal through angadias or any third person and as advised by him. For equal amount they used to sent the RTGS. Q.26 You are regularly paying interest on such accommodation entries. Do you receive back in cash the interest paid? Ans: The interest amount paid by cheque was received back in cash after deducting some commission by them. Q.27 Why were you obtaining unsecured loans from such bogus companies? Ans: The accommodation entries by way of unsecured loans were taken to purchase properties. I did not have the amounts in the bank accounts but had the cash. Therefore to purchase the properties, I had to do this exercise.” 6 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 The return of income for AY 2011-12 filed on 29/09/2011 by the assessee is in Form ITR-4. On going through the return, the assessee is found to be carrying on proprietary business in the name and style of M/s Siddhi Agency. The Balance-sheet as on 31/03/2011 of the proprietary business forming part of the return shows balance against Unsecured loans of Rs. 56,81,448/-. From the facts discussed herein above, I am satisfied that the assessee has routed his undisclosed income through the paper companies and Credit entries appearing in the bank account of Shri Manoj Chhajed from Kolkata based paper companies are in the form of accommodation entries taken by giving equal amount of cash. Therefore, I have reason to believe that the amounts credited in the books of accounts aggregating to Rs.10,42,46,375/- during the previous year 2010-11 relevant to AY 2011-12 is undisclosed income of the assessee which has escaped assessment. I am satisfied that the case of the assessee is a fit case for issue of notice u/s 148 of the IT Act for assessing the income for AY 2011-12. As regards time limit for issue of notice u/s 148 of the I T Act, the case of the assessee falls under the provisions of section 149(1)(b) of the I T Act, 1961. Sd/- (Naganath B Pasale, IRS) Dy. Commissioner of Income Tax, Central Circle-1(1), Pune\" 4. Accordingly, a notice u/s 148 of the Act was issued on 26.03.2018. The assessee in response to the same vide letter dated 11.09.2018 requested the Assessing Officer to consider the return of income filed on 30.09.2011 as return of income filed in response to the notice u/s 148 of the Act. The Assessing Officer supplied the reasons for reopening the assessment to the assessee as requested. Subsequently, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) / 147 of the Act on 20.12.2018 determining the total income of the assessee at 7 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Rs.2,92,96,142/- wherein he made addition of Rs.2,79,78,912/- by observing as under: “07. Therefore, considering the facts and circumstances of the case as discussed above it is held that there was no real transaction in nature of unsecured loan in the case of assessee from above said Kolkata based companies. Therefore, the net credit amounting to Rs.2,79,78,912/- (Rs.10,42,46,375 – Rs.7,62,67,463) remains unexplained in hands of the assessee. Hence, same is disallowed and held as income from unexplained sources u/s 68 of the Act, 1961. Accordingly, an amount of Rs.2,79,78,912/- is added back to the total income of the assessee. Penalty u/s 271(1)(c) of Income-tax Act, 1961 initiated separately for concealment of income.” 5. The assessee filed an appeal before CIT(A) on 11.02.2020. In the meantime, the Ld. PCIT examined the records and noted that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. He noted that during the year under consideration the assessee has taken unsecured loans from various persons including individuals and the outstanding balance of unsecured loan was Rs.12,16,17,647/-. Further, during the course of search action in the case of Ashok B. Jain and others on 04.11.2017, the case of the assessee was also covered. It was found that the assessee has obtained accommodation entries in the form of unsecured loans from shell companies based in Kolkata and such unsecured loan entries are to the tune of Rs.10,42,46,375/-. It was proved by the Investigation Wing that these companies from whom the assessee obtained loans are shell companies and are not doing any business. Therefore, the case of the assessee was reopened u/s 147 of the Act. However, the Assessing Officer in the order passed u/s 143(3) / 147 of the Act had not made the addition of Rs.7,62,67,463/- which was returned back to these shell companies. Since the 8 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 assessee in his statement recorded /s 132(4) of the Act at the time of search u/s 132 had admitted to the fact that he had taken accommodation entries from the Kolkata based companies by providing unaccounted cash and the assessee had explained the detailed modus operandi through which such accommodation entries were taken by him, the Assessing Officer, instead of making addition to the tune of Rs.10,42,46,375/-, has made addition only of Rs.2,79,78,912/-. Therefore, the order of the Assessing Officer has become erroneous as well as prejudicial to the interest of Revenue. Further, the assessee must have paid commission which is not less than 2% of the total amount for providing accommodation entry which must be paid from unaccounted cash and which is required to be disallowed u/s 69C of the Act. Since the Assessing Officer failed to make addition of the same, the PCIT was of the opinion that the order passed by the Assessing Officer has become erroneous and prejudicial to the interest of Revenue. He, therefore, issued a show cause notice to the assessee to explain as to why the order passed by the Assessing Officer should not be set aside by invoking the provisions of section 263 of the Act. Rejecting the various explanations given by the assessee, the Ld. PCIT set aside the order by invoking the provisions of section 263 of the Act by observing as under: “5. However, there was no response from the assessee to the second notice either. As there was no response to these notices, I am constrained to decide the issue on merits based on the available records. 6.1 I have carefully considered the facts of the case. As stated above, the AO while passing the order u/s 143(3) of the Act dated 28/12/2018 failed to verify and scrutinize all the issues mentioned herein under. 1. 1. Accommodation loan entries 9 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 6.2.1 The AO passed the assessment order under section 143(3) rws 148 of the act on 28/12/2018 by making a total addition of Rs 2,79,78,912/-. The addition of this amount has been made by the assessing officer by arriving at the figure of net credit in the bank account from such Kolkata based paper companies. The net figure has been arrived at difference between the total credit of Rs.10,42,46,375/- which was received by the assessee in the form of unsecured loans and amount of Rs.7,62,67,463/- which was returned back to these companies The AO held that these are mere accommodation entries and considerable amount of money has gone back to these companies. Since the amount of Rs 7.62 crore has gone back to these companies, the addition has been made in the form of net credit available to the assessee during the Financial year 2010-11 by considering the totality of facts and circumstances. 6.2.2 However, during the course of search action under section 132 of the act in the case of assessee, the statement of the assessee was recorded u/s 132(4) of the Act. In the statement recorded under oath the assessee admitted to the fact that he had taken accommodation entries from Kolkata based companies by providing unaccounted cash to them through the mediators by Hawala Channels. In the statement recorded (reproduced in supra in para 3), the assessee explained the detailed modus operandi through which such accommodation entries were taken by routing the unaccounted cash. 6.2.3 Thus, it is clearly seen from the facts revealed in the statement that the assessee has duly admitted to the fact that it was in possession of unaccounted cash which was routed through the Kolkata entry operators as unsecured loans in its books of account. This means that the assessee was in possession of such cash at the time of credit of such entries in the books of account. This unaccounted cash ought to be brought to tax by making the addition equivalent to the total credits received in the books of account. 6.2.4 Further, it is also noted that the assessee has returned the amount of Rs.7,62,67,463/- to these Kolkata based companies. Considering the modus operandi of the assessee, it can also be reasonably inferred that when these so called unsecured loans are returned, an equivalent amount of cash would be received back by the assessee. Eventually it can be seen that the assessee was in possession of unaccounted cash to the tune of Rs.10,42,46,375/- in the FY 2010- 11. This amount was to be added to the total income of the assessee during the course of reassessment proceedings which remained to be done. 6.2.5 Furthermore, the issue of routing unaccounted cash in the form of unsecured loans through Kolkata based companies is also part of the reasons recorded under section 148 of the act. The amount of Rs 10,42,46,375- was held as unaccounted income to be brought to tax in the form of escapement of income. This was the basis on which reopening of the case was carried out in view of the above, it is clearly noted that the assessee has itself admitted in the statement recorded on oath under section 132(4) of the act that the amount of Rs.10,42,46,375 is an 10 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 accommodation entry in the form of unsecured loans and equivalent amount of cash has been given to these companies to facilitate this transaction. This amount of Rs.10,42,46,375/- being unaccounted cash generated by the assessee ought to have been brought to tax. This amount of Rs.10,42,46,375/- shall be restricted to the peak balance shown as outstanding at any given point of time during the previous year. The subsequent repayment/reduction of this entry, shall not alter the fact and quantum of concealed income in the form of cash paid for buying the accommodation entries by the assessee. 6.2.6 However, the AO has made an addition of Rs.2,79,78,912/- only on the same issue in the assessment order dated 27/12/2018. Hence it can be seen that there is an underassessment to the tune of Rs.7,62,67,463/- 6.3 Payment of Commission to the entry provider: 6.3.1 As discussed above, it can be seen from the statement of the assessee (replies to question no. 25 & 26) that the accommodation entries were taken by him from Kolkata based entities by paying equivalent amount in cash. Since, these transactions are arranged through entry providers, the same would have been done for a commission to be paid in cash. This was confirmed by the assessee in his statement recorded on oath, in response to question no.26. 6.3.2 Hence, it is a fact that the assessee has paid commission to these Kolkata based shell companies. However, as a quantum was not specified it can be assumed that atleast an amount equivalent to not less than 2% of the total entry amount, would have been paid from unaccounted cash for providing accommodation entry. Thus, the assessee would have incurred this commission expenditure calculated at the rate of 2% on the amount of accommodation entry taken of Rs.10,42,46,373/-, which comes to Rs.20,84,927/-. The same is also required to be added to the total income of the assessee. 6.4 Interest Expenditure claimed thereon: Further, it was also observed that the assessee has claimed interest expenditure on these accommodation loan entries in its ITR returns. This was confirmed by the assessee in his statement recorded on oath, in response to question no.26 (reproduced supra). It was confirmed by the assessee that the interest amount paid by cheque was received back by him in cash from the entry providers after deducting the agreed commission. Since, these accommodation, loan funds in reality represent assessee's own money, the so called interest expenditure claimed to have been incurred on these entries, become fictitious. Hence, the same needs to be disallowed and added to the taxable income. 7.0 Considering the above, it is apparent that the A.O has failed to apply his mind to the case in all perspectives and the order passed by him was erroneous and in result prejudicial to the interest of the revenue. 11 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 7.1 In the case of CIT v. Jawahar Bhattacharjee [2012] 341 ITR 434 (Gauhati) (HC) (FB) it has been held that non-application of mind to relevant material or an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of order being erroneous. 7.2 It is now a settled law that an order passed by the A.O. become erroneous and prejudicial to the interest of Revenue as per the provisions of Section 263 of the Income Tax Act in following cases – a) The order sought to be revised contains error of reasoning of law or of fact on the face of it, b) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law or without application of mind, c) The order passed by the A O is a stereotype order or where he has failed to make the requisite enquiries and examine the genuineness of the claim, which is called for in the circumstances of the case. 8.0 The facts of the case under consideration are duly covered under the yardstick discussed above. Hence in the light of the discussions that have preceded and for the reasons alluded in the show cause notice, I am of the opinion that this is a fit case for exercise of the suo-motu revision powers of the CIT under Section 263 of the (IT) Act. Accordingly, after considering the totality of facts & circumstances of the case and for the detailed reasons discussed herein above, I hold that the assessment order u/s 143(3) of the Act dtd. 28/12/2018 for AY 2011-12, passed by the Assessing Officer as erroneous & prejudicial to the interest of revenue. 9.0 Accordingly, the assessment order u/s 143(3) dtd. 28/12/2018 for AY 2011-12, is hereby set aside to the file of assessing officer to be framed de-novo. While making fresh assessment order the Assessing officer shall take into account the issues already considered/additions made in the order dated 28/12/2018 and complete the assessment after making necessary verification of the issues discussed in para 6 Supra in this order, after giving reasonable, opportunity of being heard to the assessee.” 6. The Assessing Officer thereafter passed the order u/s 143(3) r.w.s. 263 of the Act on 23.03.2022 determining total income of the assessee at Rs.10,78,45,690/-, the details of which are as under: 12 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Income assessed as per order u/s 143(3) r.w.s. 147 dated 28/12/2018 Rs. 2,92,96,142/- Add: (i) Addition u/s 68 on account of accommodation entries (ii) Addition u/s 69C on account of commission paid being unexplained (iii) Addition on account of interest expenditure Rs. Rs. Rs. 7,62,67,463/- 20,84,927/- 1,97,159/- Assessed Total Income 10,78,45,691/- Rounding off u/s 288A Rs. 10,78,45,690/- 7. The assessee filed an appeal before the Ld. CIT(A) against this order also. The Ld. CIT(A) in the consolidated order dated 10.10.2023 passed the order i.e. in respect of order passed u/s 143(3) r.w.s. 147 and u/s 143(3) r.w.s. 263 of the Act and dismissed both the appeals. 8. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: Grounds raised by the assessee in ITA No.1178/PUN/2023 1. Ld. Assessing Officer erred in disallowing the loans in the reassessment proceedings although all necessary details relating to such disallowances were already brought on record and which was duly examined by the Assessing Officer when the original scrutiny assessment proceedings were made u/s 143(3) of the Income Tax Act, 1961 and further, in an appeal to the Commissioner of Income Tax (Appeals) erred in confirming the Re- Assessment Order. 2. Ld. Assessing Officer erred in re-opening the matter on the basis of information gathered from ITD system and the information received from the Investigation Wing, Pune on the search and seizure proceedings in the Appellant's own matter which seems to be a change of opinion and there is no reason to believe for re-opening the concluded matters and further, Ld. Commissioner of Income Tax (Appeals) erred in confirming the Re- Assessment Order. 13 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 3. Ld. Assessing Officer erred in passing a Re-Assessment Order after 4 years although all information was brought during the original scrutiny assessment proceedings made u/s 143(3) in relation to the transactions in dispute and Ld. Commissioner of Income Tax (Appeals) further erred in confirming the same and in not appreciating the arguments made by the Appellant in respect of the limitation of 4 years. 4. Ld. Assessing Officer erred in re-opening the concluded assessment although he has relied upon the search materials gathered by the Investigation Wing, Pune over and above the preceding 7 years' proceedings which was concluded u/s 153A by the Assessing Officer and further, the Commissioner of Income Tax (Appeals) erred in confirming the said Re-Opening Assessment Order. 5. Ld. Assessing Officer erred in enhancing the assessment made in the Re- Assessment Order as per the directions issued by the Commissioner u/s 263 of the Income Tax Act, 1961 and further, the Commissioner of Income Tax (Appeals) erred in confirming such enhancement. 6. Ld. Assessing Officer erred in making an addition of Rs.10,42,46,375/- (Rs.2,79,78,912/- (original reopening order) and Rs.7,62,67,463/- (fresh order in pursuance of 263 order) which are genuine loan transactions and erred in holding the transactions as accommodation entries. Further, Ld. Commissioner of Income Tax (Appeals) erred in confirming the same. 7. Ld. Assessing Officer erred in making an estimation of commission expenditure on loans and erred in making an addition of Rs.20,84,927/- and further, Ld. Commissioner of Income Tax (Appeals) erred in confirming the same. 8. Ld. Assessing Officer erred in disallowing the interest expenditure claimed in the returns amounting to Rs.1,97,159/- and further, Ld, Commissioner of Income Tax (Appeals) erred in confirming the same. 9. The Appellant craves leave to add, alter, amend, vary or delete any of the aforesaid grounds. 9. The assessee has also filed an additional ground in ITA No.1178/PUN/2023 which reads as under: “The reassessment order passed by the Ld AO U/Sec. 143(3) r.w.s.147 of the Income Tax Act 1961 is bad in law and void ab-initio as once reassessment proceedings are initiated on the basis of report of Investigation wing Kolkata and incriminating material found in the search of appellant and then the provisions of Sec.153C of the Act are applicable which override the applicability of Sec. 147 and Sec. 148 of the Act.” 14 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 10. The ld. Counsel for the assessee submitted that the additional ground raised is purely legal in nature which goes to the root of the matter and all necessary facts are already available on record and no new facts are required to be investigated. Referring to the decision of Hon‟ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (1991) 187 ITR 688 he submitted that the additional ground raised by the assessee should be admitted. 11. After hearing both the sides and considering the fact that the additional ground raised by the assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon‟ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional ground raised by the assessee is admitted for adjudication. 12. The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the amendment to provisions of section 153A w.e.f. 01.04.2017 and submitted that the same mandates the Assessing Officer to assess or re-assess the income for four earlier years beyond the 6 assessment years subject to certain conditions. He submitted that in the present case, a search and seizure action u/s 15 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 132 of the Act was carried out in the case of the assessee on 04.11.2017, therefore, the case of the assessee is squarely covered by the amendment to the provisions of section 153A of the Act which came into force w.e.f. 01.04.2017 as the clause (c) specifically refers that the amendment is applicable in respect of search initiated on or after 01.04.2017. Therefore, the Assessing Officer by re-assessing the income of the assessee u/s 147 of the Act and not following the mandatory statutory provisions of section 153A has clearly violated the provisions of law. Since the issue involved in the present case is to assess/re-assess the income as per provisions of section 153A of the Act is a jurisdictional issue and it is mandatory to assume the said jurisdiction u/s 153A of the Act where the assessment / re- assessment is consequent to a search action, therefore, the re-assessment proceedings initiated by the Assessing Officer u/s 147 of the Act instead of u/s 153A of the is viod ab initio. For the above proposition, the Ld. Counsel for the assessee relied on the decision of Mumbai Bench of the Tribunal in the case of Nilesh Bharani vs. DCIT vide ITA No.612/MUM/2020, order dated 28.02.2023. 13. The Ld. Counsel for the assessee in his second plank of argument submitted that the additions were based entirely on the basis of the investigation report from the Kolkata Investigation Wing dt 27.04.2015 on the basis of searches on some shell companies which covers the year under consideration as per the provisions of section 153C of the Act as it fell within the 6 year limitation period. Referring to question No.24 of the statement of the assessee recorded u/s 132(4) of the Act, he 16 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 drew the attention of the Bench to the same and submitted that the assessee was confronted with the statement of Shri Praveen Agarwal, Shri Anuj Agarwal and Shri Jeevendra Mishra recorded by the Investigation Wing, Kolkata. Referring to page 923 of the paper book-2, the Ld. Counsel for the assessee drew the attention of the Bench to the statement of Shri Praveen Agarwal, wherein there is a reference of search and seizure action u/s 132 of the Act on 10.11.2012. Therefore, the case of the assessee is re-assessed on the basis of search in case of other person and therefore, the provisions of section 153C of the Act should have been adopted and not the provisions of section 147 of the Act. The Ld. Counsel for the assessee drew the attention of the Bench to the provisions of section 153C of the Act and submitted that a bare perusal of the above provisions would show that it is mandatory where any information is found during the course of any search anywhere in respect of a person not searched, then for the purpose of re-assessment of income on the basis of the same, it can only be considered by taking recourse to the provisions of section 153C of the Act to make a re-assessment of the income and not u/s 148 of the Act. Since the Assessing Officer has initiated re-assessment proceedings u/s 147 instead of 153C which is clearly applicable to the facts of the present case, therefore, such action of the Assessing Officer being not in accordance with law has to be quashed. For the above proposition, he relied on the following decisions: i) ITO vs. Narendra Sampatlal Bafna vide ITA No.688/PUN/2024, order dated 19.08.2024 ii) Vijaykumar Mangilalji Chordiya vs. NFAC vide ITA No.1075/PUN/2024, order dated 19.09.2024 17 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 iii) Jagjeet Singh vs. DCIT (2024) 164 taxmann.com 324 (Amritsar – Trib.) iv) Nilesh Bharani vs. DCIT vide ITA No.612/MUM/2020, order dated 28.02.2023 v) Smt. Samanthapudi Lavanya vs. ACIT vide ITA No.704/VIZ/2019, order dated 27.04.2021 14. The Ld. Counsel for the assessee in his next plank of argument submitted that the assessment involved in the present case is assessment year 2011-12 and the original assessment was completed u/s 143(3) on 31.01.2014. The issue of loans was already scrutinized during the course of original assessment proceedings. Referring to the reasons recorded, the Ld. Counsel for the assessee submitted that there is no reference by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment. Since the notice u/s 148 of the Act was issued on 26.03.2018, the same is beyond a period of four years from the end of the relevant assessment year. Since there is no allegation of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment, therefore, such re-assessment notice which is issued beyond a period of four years from the relevant assessment year, is bad in law. For the above proposition, he relied on the following decisions: i) ITO vs. Kayathwal Estates Pvt. Ltd. (2022) 442 ITR 507 (SC) ii) Vibrant Securities Pvt Ltd. vs. ITO (2023) 455 ITR 58 (Bom) iii) Gateway Leasing Pvt. Ltd. vs. ACIT (2020) 426 ITR 228 (Bom) 18 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 15. The Ld. Counsel for the assessee in his fourth plank of argument submitted that the re-assessment order u/s 143(3) r.w.s. 147 of the Act is invalid since the same is mere change of opinion and the same cannot be reopened without independent verification and application of mind to the information received. Referring to the original assessment order u/s 143(3) dated 31.01.2014, he submitted that the issue of loans has already been scrutinized during the original assessment proceedings, therefore, in absence of any fresh tangible material, the re-assessment proceedings initiated are merely based on change of opinion. He submitted that the Assessing Officer in the instant case has relied solely upon the Investigation Wing report, which is mainly talking about the long term capital gain on penny stocks and nowhere the issues are reported regarding loans / accommodation entries. Therefore, it is clear that the Assessing Officer has not applied his mind to the information received and simply reproduced the information as contained in pages from 720 to 996 of the paper book-2. 16. Referring to the decision of the Pune Bench of the Tribunal in assessee‟s own case vide IT(SS)A Nos.91 to 98/PUN/2022, he drew the attention of the Bench to para 23 of the said order and submitted that the Tribunal had observed that the department failed to produce evidence of any incriminating material providing that the assessee has accepted the accommodation entries. Therefore, the entire case is solely based on the investigation report and no direct linking is 19 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 established by the Assessing Officer to form the „reason to believe‟ to reopen the assessment. He also relied on the following decisions: a. Vibrant Securities Pvt Ltd vs ITO (Bombay HC) (2023) (455 ITR 58) b. Gateway Leasing Pvt. Ltd vs ACIT (Bombay HC) (2020) (426 ITR 228) c. PCIT vs M/s Shodiman Investments Pvt Ltd. (Bombay HC) (2018) d. PCIT vs Meenakshi Overseas Pvt Ltd (Delhi HC) (2017) (395 ITR 677) e. Harikishan Sunderlal Vimani vs DCIT (Gujarat HC) (2016) 394 ITR 146 f. PCIT vs Hitesh Ashok Vaswani (Gujarat HC) (2023) 459 ITR 610 17. He accordingly submitted that since the Assessing Officer instead of initiating proceedings u/s 153A or 153C of the Act, has resorted to the provisions of section 147 of the Act, therefore, the same being not in accordance with law, has to be quashed. Even otherwise also, the re-assessment proceedings being initiated beyond a period of four years from the end of the relevant assessment year where the original assessment was completed u/s 143(3) of the Act and in the reasons recorded there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of the assessment, such re-assessment proceedings being not in accordance with law, has to be quashed. Even otherwise also, since the re- assessment proceedings initiated without any tangible material and merely on the basis of report of the Investigation wing, Kolkata, therefore, the same is also not in accordance with law and has to be quashed. 20 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 18. The Ld. DR on the other hand strongly relied on the orders of the Assessing Officer and Ld. CIT(A) in conforming the validity of re-assessment. Referring to the decision of the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that while examining the requirement of the issue of notice u/s 148 of the Act all that is required for issue of such notice u/s 147 of the Act is “reason to believe” that the income has escaped assessment. He submitted that in the instant case the reasons recorded by the Assessing Officer clearly suggests that the reopening was on the basis of investigation carried out by the Investigation wing at Kolkata as well as the admission of the assessee during search proceedings carried out in his case. The Assessing Officer has reproduced the relevant portion of the assessee‟s statement recorded u/s 132(4) of the Act wherein the assessee has accepted that he gave equivalent amount of cash through one Shri Sushil Agarwal in lieu of RTGS in his bank account. He had also stated that he was having cash with him but he needed amount in bank accounts for purchasing the properties and therefore, he obtained accommodation entries. 19. So far as the issue of change of opinion is concerned, the Ld. DR drew the attention of the Bench to the decision of Hon'ble Supreme Court in the case of M/s. Techspan India Pvt. Ltd. (2018) 404 ITR 10 (SC) and drew the attention of the Bench to para 18 of the order which reads as under: “18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary 21 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address, itself to a given aspect sought to be examined in the reassessment proceedings.” 20. So far as the argument of the assessee that the reopening of the assessment is beyond a period of four years where the original assessment was made u/s 143(3) of the Act is concerned, he submitted that the mandatory requirement is the „non- disclosure of material facts necessary for assessment by the assessee‟. He submitted that in the instant case the assessee did not disclose the true nature of unsecured loan transactions taken by him during the original assessment and the same were disclosed by him only when the statements of accommodation entry operators were confronted with him during the search proceedings where he has accepted that the true nature of loans was accommodation entries. Therefore, it is clear that at the time of original assessment the assessee had withheld the true facts which were within his exclusive knowledge. 21. So far as the argument of the Ld. Counsel for the assessee that the reasons so recorded does not contain any failure on the part of the assessee to fully and truly disclose all material facts necessary for completion of assessment is concerned, the Ld. DR drew the attention of the Bench to the decision of the Hon‟ble Bombay High Court in the case of Kalsha Builders (P.) Ltd. vs. ACIT vide Writ Petition No.3656 of 2018, order dated 08.02.2019 and submitted that the Hon‟ble High 22 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Court in the said decision has held that if the reasons sufficiently indicate that there was no full and true disclosure by the assessee, same is sufficient for meeting the requirement provided u/s 147 of the Act. 22. So far as the argument of the Ld. Counsel for the assessee that the Assessing Officer could have issued notice u/s 153A or 153C of the Act instead of u/s 147 of the Act is concerned, he submitted that the year under consideration falls beyond the block period of six years prior to year of search as prescribed u/s 153A of the Act and therefore, the Assessing Officer could have issued notice u/s 153A of the Act only for the assessment year 2012-13 and onwards. Therefore, the only option available with the Assessing Officer for assessment year 2012-13 was to reopen the assessment u/s 147 of the Act. He also relied on the following decisions: (i) CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del) (ii) PCIT vs. Abhisar Buildwell P. Ltd. vide MA No.680 of 2023 in Civil Appeal No.6580 of 2021, judgment date 12.05.2023 (iii) Smt. Samanthapudi Lavanya vs. ACIT vide ITA No.704/VIZ/2019, order dated 27.04.2021 (iv) Nilesh Bharani vs. DCIT vide ITA No.612/MUM/2020, order dated 28.02.2023 23. The Ld. Counsel for the assessee in his rejoinder submitted that the assessee has challenged the validity of re-assessment u/s 147 of the Act on the ground that the same should have been framed u/s 153A / 153C of the Act. He submitted that the Ld. DR relied on the decision of Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) wherein it has been held that there should be only “reason to believe”. Referring to the decision of Hon'ble 23 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (2010) 187 Taxman 312, he drew the attention of the Bench to the following written submission: Comments of the appellant on the written submission made by the Department dated 30.07.2024: a. The appellant is challenging reassessment u/s 147 on the basis that assessment should have been framed u/s 153A/153C of the Act. b. The DR has relied upon the decision of Hon‟ble SC in the case of Rajesh Jhaveri Stock Brokers (P) Ltd that there should be only „reason to believe‟. However, the following decisions delivered after above decision have analyzed the term “reason to believe” in the following manner, Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. (SC) (2010) (187 Taxman 312) \"4...However, one needs to give a schematic interpretation to the words \"reason to believe\" failing which, we are afraid, 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 reopen. 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 reassess. But reassessment has to be based on fulfilment of certain precondition 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. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, 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.\" Bombay HC in the case of PCIT vs M/s Shodiman Investments Pvt Ltd. (2018) \"11. Further, a reading of the entire decision, it is clear that the reasonable belief on the basis of tangible material could be, prima facie, formed to conclude that income chargeable to tax has escaped assessment. Mr. Mohanty, learned Counsel is ignoring the fact that the words 'whatever reasons' is qualified by the words 'having reasons to believe that income has escaped assessment. The words whatever reasons only means any tangible material which would on application to the facts on record lead to reasonable belief that income chargeable to tax has escaped assessment. This material which forms the basis, is not restricted, but the material must lead to the formation of reason to believe that income chargeable to tax has escaped Assessment. Mere obtaining of material by itself does not result in reason to believe that income has escaped assessment. In fact, this would be evident from the fact that in para 16 of the decision in Rajesh Jhaveri Stock 24 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Brokers Pvt., Ltd., (supra), it is observed that the word 'reason' in the 'reason to believe' would mean cause or justification. Therefore, it can only be the basis of forming the belief However, the belief must be independently formed in the context of the material obtained that there is an escapement of income. Otherwise, no meaning is being given to the words 'to believe' as found in Section 147 of the Act. Therefore, the words 'whatever reasons' in Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra), only means whatever the material, the reasons recorded must indicate the reasons to believe that income has escaped assessment. This is so as reasons as recorded alone give the Assessing Officer power to re-open an assessment, if it reveals/indicate, reasons to believe that income chargeable to tax has escaped assessment\" c. Even if the assessment order does not clearly address the issue, the fact cannot be denied that the appellant had submitted all the documents with respect to loan during the original assessment proceedings. d. The DR has stated in accordance with the decision of Hon'ble Pune ITAT in the case of Abhishek Ashok Lohade v, ITO, that \"Principal of Fraud\" can be applied to the cases where the assessee has received accommodation entries. However, the said decision is delivered by the Hon'ble Bench stating that \"10. The appellant deliberately withheld the information from the Assessing Officer as well as the Id CIT(A) which is within exclusive knowledge of appellant to establish the genuineness of transactions of purchase of shares of that company\". However, in the present case there is no such issue of deliberately withholding the information from AO or CIT(A), in fact the assessee has submitted the documents during the original proceedings only. Therefore, the above referred decision will not apply to the present case. e. With respect to the admission in the statement about the acceptance of accommodation entries, the appellant has already retracted from the statement on 07.03.2018, much before the passing of assessment order. However, the AO has completely ignored the retraction filed by the assessee. f. Gajjam Chinna Yellappa v. Income-tax Officer (2014) (Telangana and Andhra Pradesh HC) \"12... The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine. We do not hesitate to observe that an Assessing Officer does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force.\" 8. The appellant has discharged the primary onus as the appellant has filed the required details before AO, CIT(A) as well as the Hon'ble ITAT. h. The entire case is based on the findings as per the investigation report of Kolkata, which has detailed reporting about the capital gains in Penny Stocks. Nowhere, the report talks about the issue of unsecured loans on account of which 25 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 additions in the year under consideration are made in the present case. Hence, it cannot be said that the AO was in possession of tangible material to have reason to believe that the income has escaped the assessment.” 24. He accordingly submitted that the re-assessment proceedings being not in accordance with law have to be quashed. 25. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the assessee in the instant case had filed the original return of income on 30.09.2011 which was selected for scrutiny through CASS. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. During the course of such assessment proceedings, the Assessing Officer vide notices u/s 143(2) and 142(1) of the Act dated 26.08.2023 had asked for various details, in response to which the assessee filed the requisite details including the ledger account of the parties concerned including their confirmations on 15.10.2013 and 31.01.2014, the details of which are as under: “a) Reply to notice dated 15.10.2013 u/s 143(2) and 142(1) – Documents enclosed are: a) ITR Return Acknowledgement b) Computation Statement c) Advance Tax Challan d) Self Assessment tax paid challan e) Profit & Loss Account f) Balance Sheet along with Audit Report u/s 44AB g) Personal Accounts (Manoj Chhajed Capital Account, Balance Sheet, Income and Expenditure Statement) 26 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 b) Reply to notice dated 31.01.2014 u/s 143(2) and 142(1) – Documents enclosed are: i. Ledgers in our books a) Ledger of Abhilasha Exports Pvt. Ltd. b) Ledger of Divyadrishti Merchants Pvt. Ltd. c) Ledger of Divyadrishti Traders Pvt. Ltd. d) Ledger of Parmeshwar Merchandise Pvt. Ltd. e) Ledger of Pushpanjali Commotrade Pvt. Ltd. f) Ledger of Sampark Advisory Services Pvt. Ltd. ii. Confirmation from parties g) Ledger of Divyadrishti Traders Pvt. Ltd. h) Ledger of Divyadrishti Merchants Pvt. Ltd. i) Ledger of Parmeshwar Merchandise Pvt. Ltd. j) Ledger of Pushpanjali Commotrade Pvt. Ltd. k) Ledger of Sampark Advisory Services Pvt. Ltd. iii. Quarterly Return Statements and Challans and Interest Ledger” 26. We find on the basis of various replies given by the assessee, the Assessing Officer passed the order u/s 143(3) of the Act on 31.01.2014 determining the total income at Rs.13,17,230/- and agricultural income of Rs.7,22,800/-. We find the Assessing Officer reopened the assessment u/s 147 and the notice u/s 148 of the Act dated 26.03.2018 was issued and served on the assessee, in response to which the assessee submitted that the original return filed may be treated as in response to the notice issued u/s 148 of the Act. The assessee thereafter asked for the reasons and the Assessing Officer supplied the same which has already been reproduced in the preceding paragraphs. A perusal of the reasons so recorded, nowhere shows that there is any allegation of any failure on part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. 27 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 27. It is an admitted fact that the assessment year involved in the instant case is assessment year 2011-12 and the original assessment was completed u/s 143(3) of the Act. As mentioned earlier, it is also an admitted fact that in the entire set of reasons, there is no allegation by the Assessing Officer of any failure on the part of assessee to disclose fully and truly all material facts necessary for completion of the assessment. Under these circumstances, we have to see as to whether the reopening of the assessment u/s 147 of the Act is valid when the original assessment was completed u/s 143(3) of the Act, the reasons recorded do not contain any allegation by the Assessing Officer of any failure on the part of assessee to disclose fully and truly all material facts necessary for completion of the assessment and such reopening is beyond a period of four years from the end of the relevant assessment year. 28. We find the Hon'ble Supreme Court in the case of ITO vs. Kayathwal Estate (P.) Ltd. reported in (2022) 442 ITR 507 (SC) while dismissing the SLP filed by the Revenue against the order of Hon‟ble Gujarat High Court has observed as under: “Having heard Shri Balbir Singh, learned ASG and in the facts and circumstances of the case more particularly at the time of Scrutiny Assessment under Section 143(3), the Assessing Officer had asked for the details regarding the unsecured loan taken by the Assessee during the year under consideration and the Assessee furnished the details as asked for and thereafter, after perusing the details so furnished by the Assessee, the Assessing Officer passed an order under Section 143(3) of the Act. Therefore, it cannot be said that there was any suppression on the part of the Assessee in not disclosing true and correct facts. It is required to be noted that even the re-assessment proceeding were initiated beyond the period of four years. Under the circumstances, the High Court is absolutely justified in quashing the re-assessment proceedings and the notice under Section 148 of the 28 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Income Tax Act. No interference of this Court is called for in exercise of powers under Article 136 of the Constitution of India. With this, the Special Leave petition stands dismissed of.” 29. We find the Hon‟ble Bombay High Court in the case of Vibrant Securities Pvt Ltd vs ITO (supra) has observed as under: “9. We have heard learned counsel for the parties. 10. It is settled law that the validity of reassessment proceedings have to be tested on the touchstone of the reasons recorded by the Assessing Officer, which reasons can neither be added nor substituted by pleadings. 11. Admittedly, the assessment is sought to be reopened beyond the period of four years from the end of the relevant assessment year 2014-15. Since this is a case where an order under section 143(3) of the Act had been passed for the relevant assessment year, the Assessing Officer, in addition to satisfying the jurisdictional conditions of 'reason to believe' that income chargeable to tax had escaped assessment, had to show that there was failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings. 12. A reference to the reasons recorded would clearly show that not a whisper has been made by the Assessing Officer that there was any such failure on the part of the assessee. The consequence is clear that the Assessing Officer had not satisfied himself on this important jurisdictional aspect and therefore must be deemed to have arbitrarily proceeded to initiate the reassessment proceedings by issuing the notice impugned, which makes it unsustainable. 13. In Hindustan Lever Ltd. V/s. R. B. Wadkar, Assistant Commissioner of Income- Tax and Ors. 1, it was held : \"......The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. 29 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 That vital link is the safeguard against arbitrary reopening of the concluded assessment.\" 14. This Court in the aforementioned judgment proceeded to allow the petition and set aside the notice impugned therein only on this ground that the jurisdictional requirement of proviso to Section 147 of the Act had not been complied with by the Assessing Officer. In the judgment Supra, this Court had noticed that the Assessing Officer had nowhere stated that there was failure on the part of the assessee to disclose fully and truly all material facts necessary of assessment for that assessment year. The notice impugned under section 148 of the Act is thus liable to be set aside on this ground alone. 15. Apart from above, it is clear that the material which was referred to in the reasons recorded in the shape of transactions, securities, etc. do not reflect that the said material was not available with the Assessing Officer during the scrutiny assessment proceedings. The Assessing Officer appears to have relied solely upon the said information obtained from the Investigation Wing of the department without, in the least, verifying as to whether the said issue had been gone into or disclosed by the assessee during the scrutiny assessment proceedings. The petitioner, on the other hand, has placed on record details of notices and the replies submitted thereto, as referred to in the preceding paragraphs which would show that the information with regard to all transactions had been sought for and supplied by the petitioner. 16. In Aroni Commercials Ltd. Vs. Deputy Commissioner of Income-tax-2(1)2, it was held : \"14..........We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contained reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head 30 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/ or reasons to believe that income chargeable to tax has escaped assessment.\" 17. Since an order under section 143(3) had been passed after eliciting various information from the petitioner, which was responded to by the petitioner, it must be presumed that the Assessing Officer, while passing the order under section 143(3) of the Act, had considered all issues pertaining to the queries raised as also issues in regard to which the information was sought and therefore, if the matter is deemed to have been considered, any subsequent reassessment on the same issue would be nothing but a 'change of opinion'. 18. The Assessing Officer in the reasons recorded was also supposed to establish the live link between the information received by him and the formation of his belief that income had escaped assessment which is conspicuously missing in the present case. What was held by the Supreme Court in Commissioner of Income Tax V/s. Kelvinator of India Ltd. 3 is as under : \" ....The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition 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. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, 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.\" 19. In our opinion, the jurisdictional conditions have not been met with in the present case and that reassessment proceedings are nothing but a 'change of opinion', and therefore, would not furnish a sound basis to the Assessing Offcer in the formation of his belief that income had escaped assessment. 20. Be that as it may, the present petition is allowed. Order impugned, dated 8th February 2022 rejecting the objections so also the impugned notice dated 31st March 2021 under section 148 of the Act are held to be unsustainable and are accordingly set aside. No order as to costs.” 31 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 30. We find the Hon‟ble Bombay High Court in the case of Gateway Leasing Pvt. Ltd vs ACIT (supra) has observed as under: “27 At this stage, we may briefly refer to the relevant legal provisions. 28 Section 147 of the Act deals with “income escaping assessment”. Section 147 says that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147 of the Act 28.1 The first proviso to section 147 is important. As per this proviso, where an assessment under subsection (3) of section 143 or section 147 has been made for the relevant assessment year, no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 28.2 Section 149 deals with time limit for notice under section 148. As per clause (a) of sub-section (1), no notice under section 148 shall be issued for the relevant assessment year, if four years have elapsed from the end of the relevant assessment year unless the case falls under clause (b) or clause (c). Clause (b) says that no notice shall be issued if four years have elapsed but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. Clause (c) deals with a situation where limitation is extended upto sixteen years but the escaped income must relate to any asset located outside India. 29 Insofar the present case is concerned, the assessment year is 2012-13. The assessment year ends on 31.03.2013. In this case impugned notice under section 148 of the Act was issued on 31.03.2019. Therefore, it is a case of re-opening of assessment under section 149 (1) (b) of the Act after expiry of four years but before expiry of six years. 29.1. Of course the limitation point though pleaded in the writ petition, has been given up by the Petitioner following filing of affidavit by the Respondents which clearly shows that the re-opening notice was issued within the limitation period of six years. 30 In such a case, the first condition for invoking section 147 is that the Assessing Officer must have reason to believe that income chargeable to tax has escaped 32 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 assessment for the relevant assessment year. The second condition is that the Assessing Officer must arrive at the satisfaction that income chargeable to tax has escaped assessment for the said assessment year by reason of the failure on the part of the assessee to make a return under section 139 or to respond to a notice under section 142(1) or section 148 or due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. 31 The key or crucial expressions appearing in section 147 are “reason to believe” and “failure to disclose fully and truly all material facts necessary for assessment”. 31.1 Before dilating on these two expressions, it would be apposite to refer to section 148 of the Act, which deals with issue of notice where income has escaped assessment. As per sub-section (1), before making the assessment, re-assessment or recomputation under section 147, a notice in the prescribed form is required to be served upon the assessee by the Assessing Officer, calling upon him to file return of income in terms of such notice within the period specified and in such event the return so filed would be construed to be a return filed under section 139. As per sub-section (2) of the said section, the Assessing Officer shall before issuing any notice under section 148, record his reasons for doing so. 31.2 In GKN Driveshafts (India) Ltd. (supra), Supreme Court held that when a notice under section 148 of the Act is issued, the proper course of action for the assessee is to file the return and if he so desires, to seek the reasons for issuing the notice. If sought for, Assessing Officer is bound to furnish the reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to the notice in which event the Assessing Officer would be under an obligation to dispose off the same by passing a speaking order 32 Reverting back to the two expressions as noticed above, we may mention that these two expressions were examined and interpreted in great detail by the Supreme Court in Income Tax Officer vs. Lakhmani Mewal Das, reported in 103 ITR 437. That was also a case where notice under section 148 of the Act was put to challenge. Though provisions of section 147 of the Act as it existed then have since been reconstructed and have undergone change, the two key expressions continue to retain their relevance in so far section 147 of the Act is concerned. It may further be noticed that in Lakhmani Mewal Das (supra), Supreme Court was considering validity of notice under Section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year. Supreme Court observed that in such a case, two conditions would have to be satisfied before an Income Tax Officer acquires jurisdiction to issue notice. These two conditions are – 1. He must have reason to believe that income chargeable to tax has escaped assessment; and 2. He must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a 33 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 return under section 139 for the asessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. 32.1 Both the two conditions must co-exist in order to confer jurisdiction on the Income Tax Officer. Supreme Court observed that duty is cast upon the assessee to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income Tax Officer the books of accounts or other evidence from which material evidence with due diligence could have been discovered by the Income Tax Officer will not necessarily amount to disclosure contemplated by law but the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that, his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. If the Income Tax Officer draws an inference, which appears subsequently to be erroneous, it would amount to change of opinion and mere change of opinion with regard to that inference would not justify initiation of action for re-opening assessment. 32.2 The grounds or reasons which led to formation of the belief that income chargeable to tax has escaped assessment 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 exists reasonable grounds for the Income Tax Officer to form the above belief that would be sufficient to clothe him with jurisdiction to issue notice. However, sufficiency of the grounds is not justiceable. 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. To this limited extent, initiation of proceedings in respect of income escaping assessment is open to challenge in a court of law. 32.3 Dilating further, Supreme Court held that reasons for formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. But it has to be borne in mind that it is not any and every material howsoever vague and indefinite or distant, remote and far- fetched which would warrant formation of the belief relating to escapement of income. Moreover, powers of the Income Tax Officer to reopen assessment, though wide are not plenary. The words of the statute are “reason to believe” and not “reason to suspect”. Reopening of assessment after the lapse of many years is a serious matter. 34 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 33 It may be mentioned here that the proposition of law enunciated in Lakhmani Mewal Das (supra) has withstood the test of time and is being consistently applied while examining challenge to a notice issued under section 148 of the Act 34 In Prashant S. Joshi -vs- ITO, 324 ITR 154, this Court observed that the basic postulate which underlines section 147 is formation of the belief by the Assessing Officer that any income chargeable to tax has escaped assessment for any assessment year. In other words, the Assessing Officer must have reason to believe that income chargeable to tax for a particular assessment year has escaped assessment for the relevant assessment year before he proceeds to issue notice under section 148. The reasons which are recorded by the Assessing Officer for re-opening an assessment are the only reasons which can be considered when the formation of the belief is impugned. Recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. The reasons which are recorded cannot be supplemented subsequently by affidavits. The question as to whether there was reason to believe within the meaning of section 147 that income has escaped assessment must be determined with reference to the reasons recorded by the Assessing Officer. Even in a case where only an intimation is issued under section 143(1), the touchstone to be applied is as to whether there was reason to believe that income had escaped assessment. 35 Having discussed the above, we may once again revert back to the reasons furnished by Respondent No. 2 for re-opening of assessment under section 147 of the Act. After referring to the information received following search and seizure action carried out in the premises of Shri Naresh Jain, it was stated that information showed that Petitioner had traded in the shares of M/s. Scan Steels Ltd., and was in receipt of Rs. 23,98,014.00 and therefore, Respondent No. 2 concluded that he had reasons to believe that this amount had escaped assessment within the meaning of section 147 of the Act. 36 First of all it would be evident from the materials on record that Petitioner had disclosed the above information to the Assessing Officer in the course of the assessment proceedings. All related details and information sought for by the Assessing Officer were furnished by the petitioner. Several hearings took place in this regard where-after the Assessing Officer had concluded the assessment proceedings by passing assessment order under section 143 (3) of the Act. Thus it would appear that Petitioner had disclosed the primary facts at its disposal to the Assessing Officer for the purpose of assessment. He had also explained whatever queries were put by the Assessing Officer with regard to the primary facts during the hearings. 37 In such circumstances, it cannot be said that Petitioner did not disclose fully and truly all material facts necessary for the assessment. Consequently, Respondent No. 2 could not have arrived at the satisfaction that he had reasons to believe that income chargeable to tax had escaped assessment. In the absence of the same, Respondent No. 2 could not have assumed jurisdiction and issued the impugned notice under section 148 of the Act. 35 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 38 That apart, Respondents have tried to traverse beyond the disclosed reasons in their affidavit which is not permissible. The same cannot be taken into consideration, while examining validity of notice under section 148. As has been held in Prashant S. Joshi (supra), the reasons which are recorded by the Assessing Officer for re-opening an assessment are the only reasons which can be considered when the formation of the belief is impugned; such reasons cannot be supplemented subsequently by affidavit (s). 39 Therefore, in the light of the discussions made above, we are of the view that the attempt made by Respondent No.2 to reopen the concluded assessment is not at all justified and consequently the impugned notice cannot be sustained.” 31. We find the Co-ordinate Bench of the Tribunal in the case of DCIT vs. Vista Nirman Pvt. Ltd. vide ITA No.1340/PUN/2023 and CO No.21/PUN/2024, order dated 05.08.2024 has observed as under: “30. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed by both the sides. We have also considered the various decisions cited before us. Before deciding the appeal of the Revenue challenging the order of CIT(A) deleting the addition of Rs.24,11,50,000/- made by the Assessing Officer u/s 68 of the Act, we would first like to adjudicate the grounds raised by the assessee in the CO challenging the validity of re-assessment proceedings. It is an admitted fact that the original assessment was completed u/s 143(3) of the Act on 21.03.2014 and the Assessing Officer in the order passed u/s 143(3) of the Act has observed as under: “1.3 The assessee company is engaged in investments in shares & securities, during the relevant previous year. On perusal of its Profit & Loss Account and Balance Sheet for the F.Y. 2010-11, it revealed that as on 31.03.2011, it had paid up capital amounting to Rs.25,78,300/-, and share premium reserve amounting to Rs.23,86,71,700/-. Information were also sought for, by issuing letters to various parties by invoking Section 133 (6) of the I.T. Act. Replies received in response to the same are placed on record. On examination of accounts, supporting details / documents furnished in respect of assessee company‟s accounts and computation disclosed in the return of income one area has been noted, which is enumerated below” 31. We find the Assessing Officer reopened the assessment by recording reasons which have already been reproduced in the preceding paragraphs. A perusal of the reasons recorded by the Assessing Officer nowhere shows that there is any allegation of any failure on the part of the assessee to disclose fully and 36 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 truly all material facts necessary for completion of the assessment. Since the assessment year involved in the instant case is 2011-12 and the original assessment was completed u/s 143(3) of the Act and there is no allegation of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment in the reasons recorded for reopening of the case, therefore, the proviso to section 147 of the Act is clearly applicable which reads as under: “147….. Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: ……” 32. We find the Hon‟ble Bombay High Court in the case of Akshar Anshul Construction LLP vs. ACIT (supra) while quashing the re-assessment proceedings on account of reasons not having any allegation of any failure on the part of the assessee to disclose fully and truly all the material facts for completion of assessment for reopening of the assessment has observed as under: “7. It is a settled position in law that where assessment has been completed by scrutiny under Section 143(3) of the Act, an assessment cannot be reopened beyond a period of four years from the end of the relevant assessment year in the absence of any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. This is the mandate of the first proviso to Section 147 of the Act. In the present case, it is undisputed position that the regular assessment for Assessment Year 2010-11was completed under Section S.R.JOSHI 5 of 8 wp-14302- 2018 143(3) of the Act. The impugned notice has been issued on 27 th March, 2018 i.e. admittedly, beyond a period of four years from the end of the relevant Assessment Year 2010-11. Thus, the reasons in support of the impugned notice in cases where assessments sought to be re-opened is beyond a period of four years from the end of the relevant assessment year where assessment is completed u/s. 143(3) of the Act, must spell out the exact failure on the part of the assessee which resulted in escapement of income. The reasons recorded in support of the impugned notice, alleges that the Petitioner is not entitled to the benefit of exemption under Section 80 IB (10) of the Act as from index II of the flats sold registered with the Registrar show that three flats have been sold to the same family. It is on the basis that, this sale was post insertion of section 80IB(10)(f) of the Act w.e.f. 1st April, 2010. However, we find that during regular assessment proceedings, for the subject Assessment Year 2011-12, the Petitioner had at the instance of the Assessing Officer given complete details with regard to 37 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 the purchase of the flat, the date of agreement of purchase of the flats and also date of possession to the Assessing Officer. The same was examined by the Assessing Officer. At that time, the Assessing Officer was satisfied that the flats were sold prior to the amendment of 2010. It is consequent to the above that the Assessing Officer passed an order dated 26th March, 2014 under Section 143 (3) of the Act and accepted Petitioner's claim for deduction under Section 80 IB (10) of the Act. Thus, in view of the above, the full and true disclosure at the time of regular assessment, the impugned notice is without jurisdiction. 8. It may be pointed out that at the hearing, the Respondent contended that the assessment was re-opened on the basis of the S.R.JOSHI 6 of 8 wp- 14302-2018 assessment order for Assessment Year 2015-16 where it was found that the commencement certificate for the project was received only on 21 st September, 2010 in the name of the Petitioner. Therefore, there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for amendments. We find that, the reasons in support of the impugned notice, merely mentions about the Assessment for Assessment Year 2015-16. However, it does not mention of any failure to disclose the correct date of commencement being a fact which came to the knowledge of the Revenue while passing the Assessment Order for Assessment Year 2015-16. This fact, according to Mr. Mohanty is evident from the Assessment Order for Assessment Year 2015-16 and it has to be read into the reasons given in support of the impugned notice. This, submission is contrary to the decision of this Court in Hindustan Lever v/s. R. B. Wadkar 268 ITR 332 - wherein this Court has held as under:- \" The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assesssee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or declaration is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusions as to whether there was failure on the part of the assessere to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons S.R.JOSHI 7 of 8 wp-14302-2018 provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge 38 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safe-guard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced.\" Thus, the submission of Mr. Mohanty not being a part of the reasons recorded, cannot be read into them, in the facts of this case. 9. Therefore, in facts of this case, the reasons in support of the impugned notice not having alleged/ particularized any failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment, the impugned notice is without jurisdiction. 10. Accordingly impugned notice is quashed and set aside. Petition allowed in the above terms.” 33. We find the Hon'ble Supreme Court in the case of CIT vs. Foramer France (supra) has observed as under: “Section 148 read with sections 147 and 153 of the Income-tax Act, 1961 – Income escaping assessment – issue of notice for – Assessment years 1988- 99 to 1990-91 – Petitioner-foreign company was engaged in business of oil exploration and providing expertise and assistance in said field – Proceeds from manning and management contracts received by petitioner were originally assessed in February, 1991 under section 143(3) treating same as business income in terms of section 44BB – However, following Tribunal‟s decision rendered in case of petitioner‟s expatriate employee, Assessing Officer issued a notice under section 148 in November, 1998 seeking to reassess same income as fees for technical services – Whether law prevailing on date of issue of impugned notice would apply to instant case, and since new section 147 had come into force with effect from 1-4- 1989, provisions of that section were applicable – Held, yes – Whether since admittedly there was no failure on part of petitioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to new section, which bars issue of notice under section 148 after expiry of four years from end of relevant assessment year, squarely applied to fact of instant case and, therefore, impugned notice was barred by limitation – Held, yes – Whether since notice under section 148 was without jurisdiction, there was no merit in plea that petitioner was to be relegated to alternative remedy – Held, yes.” 39 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 34. We find the Hon‟ble Bombay High Court in the case of Multiscreen Media (P.) Ltd. vs. Union of India (2010) 324 ITR 48 (Bom) has observed as under: “10) In dealing with the merits of the rival contentions, it must at the outset be noted that during the course of the proceedings under section 143(3), the Assessing Officer was duly apprised of the circumstance that the petitioner was acting as an agent for the collection of subscriptions and for procuring advertisements for the benefit of its foreign principal. The order of assessment makes a reference to the nature of business of the petitioner in the following terms. \" The assessee is a private limited company incorporated on 18-9- 95. The company is engaged in the business of production / acquisition and sale of television programmes / files, distribution of satellite channels and acting as advertising agent of SET Satellite (Singapore) Ple. Ltd. for canvassing for sale of advertisement time slots to Indian advertisers. \" 11) During the course of the assessment proceedings, the petitioner was called upon to furnish details specifically with reference to the expenditure incurred by it on advertisements, sales promotion and market research by a communication dated 3rd December, 2004 of the Assessing officer. In response to the communication, the petitioner by a letter dated 28th December, 2004 furnished details of the selling and distribution expenses, including those incurred on marketing research and studies. A copy of those communications together with the details submitted by the petitioner have been annexed to the proceedings before the Court. Hence during the course of the assessment proceedings, the Assessing Officer was apprised of the circumstance that the business of the petitioner consisted in the collection of subscriptions from subscribers of television channels and for procuring advertisements. The fact that the petitioner was acting as an agent for a foreign principal was disclosed. 12) The notice issued by the Assessing Officer under section 148 does not state that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment for assessment year 2002-03. The assessment was sought to be reopened after the expiry of a period of four years from the end of the relevant assessment year. In such a case the jurisdictional condition precedent stipulated by the proviso to Section 147 is a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment for that assessment year consequent upon which income chargeable to tax has escaped assessment. That has not been fulfilled. The notice does not even purport to state so. The ground furnished in the notice for reassessment would at the highest indicate that according to the Assistant Commissioner of Income Tax, 40 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 allocation of expenses as between the petitioner and the foreign principal ought to have been originally considered by the Assessing Officer when the order of assessment was passed under section 143(3). That however would not give a valid reason to reopen the assessment beyond a period of four years, even assuming that the Assessing Officer had erred in not doing so, unless there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. Absent the existence of the jurisdictional condition precedent, assessment cannot be reopened beyond a period of four years after the expiry of the relevant assessment year, as has been done in the present case. In the circumstances, the notice for reassessment is liable to be quashed and set aside solely on the ground that the Revenue has failed to establish the existence of the jurisdictional condition precedent to the exercise of the power to reopen an assessment beyond a period of four years of the expiry of the relevant assessment year. 13) The petition would accordingly have to be allowed. Rule is made absolute in terms of prayer clause (a), by quashing and setting aside the notice dated 25th March, 2009 and the order dated 29th September, 2009. 12) The facts of this Writ Petition, it is common ground between both the learned counsel, are the same as in Writ Petition No.8719 of 2009, which has been allowed for the reasons recorded in the judgment. In the present case also, assessment is sought to be reopened beyond a period of four years from the end of expiry of the relevant assessment year, A.Y. 2003-04. For the reasons already recorded while allowing the companion Writ Petition, the present Writ Petition is made absolute in terms of prayer clause (a) by quashing and setting aside the notice dated 25th March, 2009 and the order dated 29th September, 2009.” 35. We find the Hon‟ble Bombay High Court in the case of Marico Ltd. vs. ACIT in Writ Petition No.1917 of 2019, order dated 21.08.2019 from para 10 of the order has observed as under: “10. It is undisputed position before us, that query was raised on the very issue of reopening during regular Assessment proceedings. The parties have responded to it and the Assessment Order dated 30 January 2018 makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, as held by our Court that the Assessing Officer has accepted the Petitioner‟s/Assessee‟s submissions, so as to not deal with that issue in the assessment order. In fact, our Court in GKN Sinter Metals Ltd. V/s. Ms. Ramapriya Raghavan, Assistant Commissioner of Income Tax, Circle 2(1) (371) ITR 225 had occasion to dealt with the similar/identical submissions on behalf of the Revenue viz. that an assessment order passed under Section 143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the Assessing Officer in the 41 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 regular assessment proceedings. This submission was negatived by this Court by observing as follows :- 14. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6 th August, 2007 addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate distribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 80IA/IB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 200203 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27th December, 2004 and the Petitioner's response to the same on 25th January, 2005 explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80IA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9 th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v/s. Nirma Chemicals Ltd. 305 ITR 607, the order would result into an epic tome. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to under gone scrutiny at its hand. In the 42 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 above view, it is clear that once a query has been raised during the assessment proceedings and the Petitioner has responded to the query to the satisfaction of the Assessing Officer as is evident from the fact that the Assessment Order dated 9 th March, 2005 accepts the Petitioner's claim for deduction under Section 80IA/IB of the Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised. The above observations apply on all fours to this Petition, so far as the Revenue‟s submission of no change of opinion is concerned. 11. The further submission of Mr. Walve that in the absence of the Assessing Officer adjudicating upon the issue it cannot be said that the Assessing Officer had formed an opinion during the regular assessment proceedings leading to the order dated 30 January 2018. An adjudication would only be on such issue where the assessee‟s submissions are not acceptable to the Revenue, then the occasion to decide a lis would arise i.e. adjudication. However, where the Revenue accepts the view propounded by the assessee in response to the Revenue‟s query, the Assessing Officer has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non-rejection of the response of the assessee, would necessarily mean that the Assessing Officer has formed an opinion accepting the view of the Assessee. Thus an opinion is formed during the regular Assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view. 12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set aside. 13. Petition allowed.” 36. The various other decisions relied on by the Ld. Counsel for the assessee in the case law compilation also support the case of the assessee to the proposition that the re-assessment proceedings initiated beyond the period of four years from the end of the relevant assessment year is invalid where the original assessment was completed u/s 143(3) of the Act and there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for 43 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 completion of assessment in the reasons recorded. In this view of the matter, we are of the considered opinion that the re-assessment proceedings initiated by the Assessing Officer are not in accordance with law. 37. We further find during the course of original assessment proceedings, various details were called for from the nine shareholder companies who have filed the requisite details and the Assessing Officer on the basis of their replies such as their PAN, bank statements, confirmations, audited financial statements, etc. has completed the assessment u/s 143(3) accepting the genuineness of such investments by them in the shares of the assessee company. We find an identical issue had come up before the Hon‟ble Bombay High Court in the case of Godrej Projects Development Pvt. Ltd. vs. ITO & Ors. In Writ Petition No.804 of 2015, judgment dated 01.02.2024. In that case the assessee was in the business of development of real estate and assessed to income tax for the assessment year 2009-10 had filed its return of income on 07.09.2009 and the assessment was completed u/s 143(3) of the Act on 21.12.2011. While passing the order, the Assessing Officer had called for various details such as details of shareholding pattern of the company. In the Cash Flow statement filed it was stated that the assessee has received share premium of Rs.21,50,11,618/- which was used for redemption of preference shares. The assessee was also called upon to furnish various other details which were submitted and the Assessing Officer completed the assessment accepting loss Rs.87,362/-. Subsequently, the case of the assessee was reopened on the ground that the assessee is a new company incorporated on 15.03.2007 only. It is not clear that how can a newly incorporated company with no proven track record command such a huge share premium in the open market that too at 1284.2 times of the face value of a share. The intrinsic value of shares is in fact much less than what it has got. The assessee objected to the reasons recorded which were rejected by the Assessing Officer. The assessee therefore, filed a Writ Petition before the Hon‟ble High Court challenging the validity of re- assessment. The Hon‟ble High Court quashed the re-assessment holding that the assessment was reopened on account of mere change of opinion which is not in accordance with law. The relevant observations of the Hon‟ble High Court read as under: “4. It is petitioner's case that the return of income having been thoroughly scrutinised and an order under section 143 of the Act having been passed, there is no fresh material for reopening and assessment proceedings are initiated on the same set of facts and, therefore, is based on mere change of opinion. It would amount to a review of the assessment order, which is impermissible. It is also petitioner's case that the issue sought to be reopened is wholly without jurisdiction since the receipt of share premium at the time of fresh issue of shares by the company does not constitute income chargeable to tax under the Act so as to escape assessment. It is also petitioner's case that the reasons recorded are vague indicating that there is no material on record whereof a valid belief could be formed 44 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 that income chargeable to tax has escaped assessment and the reassessment proceedings have been initiated merely to make fishing and roving enquiries which is not permissible under the Act. It is settled law that if, the jurisdictional conditions are not satisfied, the assessment cannot be reopened. 5. Mr Pardiwalla submitted as under: (a) It is a well settled principle of law that the existence of a valid \"reason to believe\" is a sine qua non for the exercise of jurisdiction under section 147 of the Act. The courts have held that the expression \"reason to believe\" postulates a bonafide belief that there must exist objective reasons for that belief. (b) The reasons as recorded do not disclose any tangible material on the basis of which a prudent person could have formed a reasonable belief and come to a conclusion that any income has escaped assessment as there is no live link between the reasons as recorded and the material on record for forming a belief that any income chargeable under the Act has escaped assessment. (c) The issue of shares and the receipt of share premium were examined during the course of regular assessment proceedings by respondent no.1 by raising specific queries. Petitioner furnished all the details relating to the receipt of share premium and the issue of shares during the year in the course of the assessment proceedings and also justified the valuation by producing the report of a valuer. The statutory compliance documents relating to the issue of shares and receipt of share premium were filed during the course of the assessment proceedings with respondent no.1. The same have been examined in the course of the assessment proceedings and hence, there is no fresh material coming into existence in relation to issue of shares and receipt of share premium. Therefore, the reopening is based on a mere change of opinion. Respondent no.1 has no power of review by engaging in a roving or fishing inquiry under the Act. (d) The charge of tax under the Act is on income. The receipt of share premium on the issue of fresh shares is on capital account and constitutes a capital receipt, which is not chargeable to tax under the Act. There is no provision under the Act to tax the receipt of share premium for the assessment year under consideration. As held in Vodafone India Services (P) Ltd. Vs. Union of India the amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of income during the relevant period. Thus, capital account transaction not falling within the statutory explanation cannot be brought to tax. 45 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 As held in SLS Energy (P) Ltd. Vs. Income Tax Officer 2 where a similar situation was considered and the Division Bench of this court came to a conclusion that there was neither any basis for the AO in his reason to believe that income had escaped assessment or there was been any tangible material, which would have otherwise given jurisdiction to reopen the assessment. What is tangible material, the Division Bench of this court in Export Credit Guarantee Corporation of India Ltd. Vs. Additional Commissioner of Income Tax3 held is something which is not illusory, hypothetical or a matter of conjecture. (e) A bare perusal of the reasons recorded indicates that it is an admitted position that the re-opening is initiated at the behest of the higher authority and is not based on the formation of a belief by respondent no.1. Respondent no.1 himself has not formed any belief that any income has escaped assessment. As held in Principal Commissioner of Income Tax -5 Vs. Shodiman Investments (P) ltd. the settled position in law is that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. The reasons indicate that the AO has not applied his mind but has merely issued the reopening notice on the basis of letter dated 27th March 2014 issued by him for taking necessary action as the time limit of four years for issue of notice u/s 148 of the Act will expire on 31 st March 2014, and relied on a list in respect of companies who have received the share premium during AY 2009-10. (f) The AO in the reasons to believe only says that when assessee has been incorporated only on 15th March 2007 and assessee company not having proven track record, could not command such a huge share premium in the open market particularly when it has returned income of (-) Rs.87,362/-. According to the AO, there has been underassessment of income received in the garb of share application money. The AO has not considered the valuation report or the balance sheet of the company and, therefore, the basis to reopen is purely hypothetical or a matter of conjecture or speculative. The reasons to believe does not dispute that this is a share premium that the company received but seeks justification for charging the share premium over and above intrinsic value of the share. 6 Mr. Suresh Kumar submitted as under:- (a) As held in Commissioner of Income Tax Vs. Sophia Finance Ltd. this would amount to cash credit under Section 68 of the Act and whenever the same is found credited in the books of account of assessee, then irrespective of the colour and nature of the sum received which is sought to be given by assessee, the ITO has the jurisdiction to enquire from assessee the nature and source of the amount. 46 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 (b) We have to reject this submission because this is not the basis on which the reasons to believe has been arrived at. It is settled law that the reasons to believe cannot be improved upon. In the affidavit in reply opposing the petition also there are no specific denials. FINDINGS 7 Petitioner's case can be split into three parts:- a) The AO having raised the queries during the course of scrutiny assessment regarding share premium charged and petitioner having explained vide its replies, the issue of share premium, was the subject of consideration during the assessment proceedings even though, it has not been discussed in the assessment order and therefore, re-opening on the same issue of share premium is based on change of opinion. b) Whether the reasons to believe that income has escaped assessment for exercising power under Section 147 of the Act has to be that of the AO and not based on dictates of superior officers. Since admittedly, it is based on dictates of superior officers respondent no.1 has himself not formed any belief that any income has escaped assessment. c) Whether the receipt of share premium by issuing fresh shares is on the capital account and constitutes a capital receipt which is not chargeable to tax under the Act? 8 Admittedly, petitioner's case for AY-2009-10 was taken up for scrutiny. During the course of scrutiny assessment, petitioner was called upon by respondent no.1, vide letters dated 21 st February 2011 and 12th August 2011, to provide for certified copy of the annual report alongwith balance sheet, profit and loss account schedule and annexures, details of shareholding patterns of the company and securities premium / share premium received and to justify charging of the same with separate documentary evidences. Petitioner, vide its letters dated 19th July 2011 and provided all the documents and materials. In its letter dated 12th September 2011, petitioner also stated that it had charged share premium of Rs.12841.86 per equity share of face value of Rs. 10/- each on 16,730 equity shares that was issued to a Mauritius resident. Petitioner also provided the documents relating to Foreign Inward Remittance Certificate and forms filed with RBI. After considering all those documents, the assessment order dated 21st December 2011 came to be passed. 9 As held by the Division Bench of this Court in Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax2(1) the settled law is once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The only requirement is that the AO ought to 47 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 have considered, the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. In the case at hand, the AO having raised a query and the petitioner having replied to it, it follows that the query raised was subject of consideration of the AO while passing the assessment order dated 21 st December 2011. In our view, the re-opening of assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Paragraph 14 of the Aroni Commercials Ltd. (Supra) reads as under: 14) We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No.4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007). It would therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen the assessment for assessment year 2008-09 was considered by the Assessing Officer while originally passing assessment order dated 12 October 2010. This by itself demonstrates the fact that notice dated 28 March 2013 under Section 148 of the Act seeking to reopen assessment for A.Y. 2008-09 is based on mere change of opinion. However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 2008-09. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised 48 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, following that the Meera Jadhav 13/18 203-wp-804-15(judgment).doc reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.\" (emphasis supplied) 10. In SLS Energy Ltd. (Supra) the reasons for reopening were similar. In that case also the balance sheet indicated that the assessee had issued paid up capital of Rs. 77,00,000/- and Charged Security Premium at Rs. 6,79,32,00,000/- during the year under consideration. According to the AO an analysis of the details and information of the balance sheet shows that Share Premium and value of the shares cannot be justified on the basis of 'intrinsic valuation of shares' and 'Net Asset Value Method', i.e., Share Premium charged is found excessive as the worth of the company is not found in that extent. Hence, there was no justification for issue of shares at such a huge premium. In that case also, petitioner had argued that the very basis for reopening was misconceived inasmuch as, the receipt of premium on issuance of shares was not 'receipt of income', but was a 'capital receipt', and, therefore, could never become the basis for reopening on the ground that income had escaped assessment. It was argued that the definition of income as then prevailed did not include capital receipts. It was also sub- mitted that there was no tangible material with the AO which would give him reasons to believe that income has escaped assessment and that the AO was in fact trying to conduct a roving enquiry, which is therefore without jurisdiction. The court came to a finding that the receipt of share capital including the premium was on capital account and gave rise to no income and, therefore, there was neither any basis for the AO for reason to believe that income had escaped assessment, nor was there any tangible material which would have otherwise given jurisdiction to re-open the assessment even when the re-opening was sought to be made within a period of four years. Paragraphs 24 to 30 of SLS Energy (Supra) read as under: 49 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 \"24. In the present case neither the reasons recorded nor the order disposing of the objections in any manner reflects that there was any doubt with regard to existence of the entities in whose favour the allotment of shares had been made upon receipt of share money as also the amount of premium paid on the said shares. 25. By virtue of the impugned notice dated 23rd March, 2015, the assessing officer seeks to reopen the assessment for the assessment year 2010-11, which is within a period of four years. Admittedly, no scrutiny assessment under section 143(3) of the Act has taken place in the present case. Even in a case where no scrutiny assessment has taken place, reassessment can be ordered only if the assessing officer has reason to believe that income chargeable to tax had escaped assessment. The Apex Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers(P.)Ltd.[2007] 161 Taxman 316/291 ITR 500 (SC) has clearly held that notice for reopening an assessment under section 148 of the Act could only be justified if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. 26. The reason for the assessing officer to reopen the assessment is his belief that the share premium charged by the Petitioner was excessive and further that the transaction of the so called share premium was not established. In other words, the assessing officer apart from questioning the excessive share premium also is doubting the transaction, whereby the share premium had been received. Whether in the aforementioned facts the assessing officer could be said to have his reason to believe that income had escaped assessment and whether the material with the said assessing officer could be said to have any tangible material justifying the reopening is the issue that falls for our consideration. 27. There is no dispute that in Vodafone India Services ( P.)Ltd.'s case (supra) it stands concluded that receipt of share capital including the premium was on capital account and gave rise to no income. The amendments incorporated in the definition of income under section 2(24)(xvi) and Section 56(2)(viib) of the Act were amendments which were to apply only from 01st April, 2013 i.e. assessment year 2013-14. The amendment to Section 68 by incorporation of the first Meera Jadhav 15/18 203-wp-804- 15(judgment).doc proviso also came into effect by virtue of the Finance Act, 2012 w.e.f. 1st April, 2019 and was to apply for the assessment year 2013-14 and onwards, and, therefore, since the amendments were not applicable to the assessment year in question i.e. 2010-11, there would be no basis for the assessing officer's reason to believe that income had escaped assessment for the said assessment year. From the record it can also be seen that the preference shares allotted to M/s. Pony Infrastructure & 50 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 Contractors Ltd. (formerly known as M/s. Dynamix Balwas Infrastructure Pvt. Ltd.) was assessed under section 143(3) of the Act and an order of assessment dated 22nd February, 2013 was passed. 28. Reassessment proceedings were initiated against the said entity and the appeal allowed vide order dated 11th October, 2018. We therefore agree with the contention of Mr. Shridharan, learned Counsel for the Petitioner that this was not a case where there could be any suspicion with regard to the factum of transaction having taken place between two companies. In any case the assessing officer appears to have not been in doubt regarding the transaction having taken place between the said two companies with regard to allotment of preference shares and receipt of the share premium amount inasmuch as what was sought to be questioned, was not in fact the transaction, but only the receipt of the share premium amount which was said to be excessive and much beyond the intrinsic value of the shares of the Petitioner company. 29. This can be guessed from the fact that the assessing officer had only flagged the share premium amount of Rs.6,79,32,00,000/- which according to him was chargeable to tax that had escaped assessment and did not question the amount of Rs. 68 lakhs received by the Petitioner company representing the value of Rs. 68 lakhs shares of the face value of rupee 1 per share. Had the Assessing Officer any real doubts regarding the transaction itself, then there was no justification for him to question only the transaction with regard to the extent of the amount of premium charged for the said shares. 30. We therefore of the opinion that there was neither any basis for the assessing officer for his reason to believe that income had escaped assessment nor was there any tangible material which would have otherwise given jurisdiction to reopen the assessment even when the reopening was sought to be made within a period of four years.\" (emphasis supplied) 11 Even in the case at hand, the reasons recorded for reopening does not dispute that during the year assessee had issued 16730 shares of face value of Rs.10/- at premium of Rs.12842/- per share. The AO is only questioning the excessive share premium but not doubting the transaction itself Meera Jadhav 16/18 203-wp-804-15(judgment).doc whereby the share premium had been received. On this ground alone, the impugned notice and order on objections have to be quashed and set aside. 51 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 12 In any event, the amendments incorporated in the definition of in- come under section 2(24)(xvi) and Section 56(2)(viib) of the Act were amendments which were to apply only from 1st April, 2013, i.e., assessment year 2013-14. The amendment to Section 68 of the Act by incorporation of the first proviso also came into effect by virtue of the Finance Act, 2012 w.e.f. 1st April, 2019 and was to apply for the assessment year 2013- 14 and onwards. Therefore, since the amendments were not applicable to the assessment year in question, i.e., 2009-10, there would be no basis for the AO to form a reason to believe that income had escaped assessment for the said assessment year. 13 Moreover, if one considers the reasons recorded, the AO simply says how a company with no proven track record incorporated on 15 th March 2007 command such a huge share premium. The AO has not bothered to read the balance sheet or the valuation report. AO's reason to believe, therefore, is purely hypothetical and a matter of conjecture. That cannot be a tangible material for arriving at reason to believe escapement of income. In view thereof, the jurisdictional requirement of Section 147 of the Act also is not fulfilled and hence, the proposed reopening is without jurisdiction. 14 Further, as held in Shodiman Investments (P) Ltd. (Supra) there is clear breach to the settled position in the law that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. Admittedly, notice has been issued in view of a communication received from his superior officer. It is rather obvious that the AO has not applied his mind and arrived at his own satisfaction but on borrowed satisfaction. Paragraphs 12 to 14 of Shodiman Investments (P) Ltd. (Supra) read as under: \"12. The re-opening of an Assessment is an exercise of extra- ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before re- opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re- opening Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v. Lakhmani Merwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 52 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 13.In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14.Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the Meera Jadhav 18/18 203-wp-804-15(judgment).doc DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction.\" (emphasis supplied) 15 In the circumstances, the Rule is made absolute in terms of prayer clause (a) which reads as under: \"(a) this Hon'ble Court may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner's case and after examining the legality and validity thereof quash and set aside the undated notice (received on 29th March 2014) (Exhibit A) issued by respondents under Section 148 of the Act seeking to reopen the assessment for the assessment year 2009-10 and the order rejecting the objections (Exhibit O) dated 2nd February 2015.\" 38. Since in the instant case also the Assessing Officer has called for various details during the course of original assessment proceedings and no new tangible material exist for coming to bonafide belief as contemplated u/s 147 of the Act, therefore, such reopening of the assessment in our opinion was merely based on change of opinion which is not in accordance with law as contemplated by the recent decision of the Hon‟ble Bombay High Court in the case of Godrej Projects Development Pvt. Ltd. Vs. ITO (supra). In view of the detailed reasoning given by the Hon‟ble Bombay High Court in this case, which is squarely applicable to the facts of the present case, we hold that the re-assessment proceeding initiated by the Assessing Officer is merely on account of change of opinion and therefore, is 53 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 not sustainable. Accordingly, on this ground also, the re-assessment proceedings are quashed.” 32. Since the assessment year involved is assessment year 2011-12 where the original assessment was completed u/s 143(3) of the Act and the reasons so recorded do not contain a whisper of any failure on the part of assessee to disclose fully and truly all material facts necessary for completion of the assessment and such reopening is beyond a period of four years from the end of the relevant assessment year, therefore, in view of the proviso to section 147 of the Act and in view of the decisions cited (supra), the re-opening of the assessment u/s 147 of the I T Act, 1961 is not in accordance with law and is liable to be quashed. We, therefore, quash the re-assessment proceedings. Since the assessee succeeds on this legal ground, the other legal grounds and the ground challenging the addition on merit are not being adjudicated. The appeal filed by the assessee in ITA No.1178/PUN/2023 is accordingly allowed. ITA No.2017/PUN/2024 33. There is a delay of 291 days in filing of this appeal before the Tribunal, for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication. 54 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 34. The grounds raised by the assessee are as under: 1. The ld CIT(A) has erred in confirming the action of the AO in the assessment order passed u/s 143(3) r.w.s.147 r.w.s.263 without appreciating the fact and contention of the appellant that order passed by the AO u/s 143(3) r.w.s. 147 is bad in law and void ab initio. 2. The Id AO erred in enhancing the assessment made in the reassessment order as per the directions issued by the CIT u/s 263 of the Income Tax Act 1961 and further the CIT(A) erred in confirming such enhancement. 3. The Id CIT(A) has erred in confirming addition of Rs.7,62,67,463/-made by the AO in the assessment order passed u/s 143(3) r.w.s.147 r.w.s.263 of the Act holding that the transactions of loan are accommodation entries without appreciating the contention of the appellant that these are genuine loan transactions. 4. The Id CIT(A) has erred in confirming the addition of Rs.20,84,927/-as estimated commission expenditure on loans made by the AO in the assessment order passed u/s 143(3) r.w.s.147 r.w.s.263 of the Act only on the ground of presumption and surmises. 5. The Id CIT(A) has erred in confirming the addition of Rs.197159/- on account of disallowance of interest expenditure made by the AO in the assessment order passed u/s 143(3) r.w.s.147 r.w.s.263 of the Act only on the ground of reasons given in the appeal against order of the AO passed u/s 143(3) r.w.s.147 of the Act. 6. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 35. After hearing both sides, we find the Ld. PCIT invoked the jurisdiction u/s 263 of the Act on the ground that the Assessing Officer in the order passed u/s 143(3) / 147 of the Act has made addition of Rs.2,79,78,912/- being the net amount of accommodation entries instead of making addition of Rs.10,42,46,375/- which was the total accommodation entries obtained. Further, the commission @ 2% of such accommodation entries which comes to Rs.20,87,927/- and which the assessee would have incurred for obtaining the accommodation entries was not 55 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 added by the Assessing Officer u/s 69C of the Act. Since we have already quashed the re-assessment proceedings in the preceding paragraphs, therefore, the order passed u/s 263 of the Act by the Ld. PCIT becomes infructuous and therefore, the same is liable to be dismissed. We, therefore, hold that the order passed by Ld. PCIT u/s 263 has become infructuous. Accordingly, the grounds raised by the assessee are allowed. 36. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open Court on 19th February, 2025. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 19th February, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, „A‟ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune 56 ITA No.1178/PUN/2023 ITA No.2017/PUN/2024 S.No. Details Date Initials Designation 1 Draft dictated on 12.02.2025 Sr. PS/PS 2 Draft placed before author 17.02.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "