MADHAV GEMS PRIVATE LIMITED vs. INCOME TAX OFFICER

C/SCA/21119/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 21119 of 2019 ================================================================ MADHAV GEMS PRIVATE LIMITED Versus INCOME TAX OFFICER ================================================================ Appearance: MR OMKAR C DAVE(2003) for the Petitioner(s) No. 1 MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA

Date : 09/03/2021

ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this writ application  under Article  226, the writ applicant   seeks   to   challenge   the   notice   dated   31.03.2019 issued by the respondent under Section 148 of the Income Tax Act, 1961 (‘the  act’ for short) seeking to reopen the applicant’s income assessment for the A.Y 2012­13. 2. The brief facts can be summarized as under: 2.1 The writ applicant – assessee Company filed its return of Income for the A.Y. 2012­13 on 28.09.2012 declaring total income at Rs. 6,58,710/­ and an assessment under Section 143(3) of the Act was completed on 04.06.2014. 2.2 The Assessing Officer has reopened the assessment under Section 147 by issuing impugned notice dated 31.03.2019 Page 1 of 21

C/SCA/21119/2019 ORDER under Section 148 of the Act. 2.3At the request, the reasons recorded have been furnished to the assessee on 09.05.2019, which reads as under : “2. Since you have filed return of income in response to notice u/s.148 of the income­tax act, therefore reason for re­ opening is provided as under. “The assessee company filed its return of income for the A.Y. 2012­13 on28/09/212 declaring total income at   Rs.6,58,710/­.   The   assessee   was   engaged   in   the business of trading in rough and polished diamonds. The assessment U/s 143(3) of the income­tax act was completed on 04/06/2014. 2.1. In this case, an information has been received from   the   DCIT   Central   Circle­1(2)   vide   letter No.DCIT/CC­1(2)/Abd/Shripal­info./2018­19/1708 dated 28/02/2019. As per the information received a search   action   u/s   132   of   the   income­tax   act   was carried   out   in   the   case   of   Shree   Shivpal   Vora   on 16/12/2016.   During   the   course   of   search   action several   incriminating   documents   were   found   and seized which revealed that he was in control of affairs of 44 concerns which are in the business of giving accommodation entry and M/s Kalyan Exports Pvt Ltd is one such company. M/s. Madhav Gems Pvt Ltd has entered   into   transaction   of   Rs.4,24,500/with   M/s. Kalyan Exports Pvt Ltd durin the F.Y.2011­12, 3. Since from the search action of Investigation wing, it is established that M/s. Kalyan Exports Pvt Ltd was involved in providing accommodation entry and it was not doing any actual business activity, therefore it is apparent   that   the   assessee   is   beneficiary   of accommodation   entry   of   Rs.4,24,500/­   from   M/s. Kalyan Exports Pvt Ltd. Therefore I have reason to believe that the income to the tune of Rs.4,24,500/­ has escaped assessment within the meaning of section 147 of the income­tax act. 4, In this case the return of income was filed for the year   under   consideration   and   regular   assessment under section 143(3) was made on 04/06/2014. Since four   years   from   the   end   of   the   relevant   year   has Page 2 of 21

C/SCA/21119/2019 ORDER expired   in   this   case,   the   requirement   to   initiate proceeding under section 147 of the income­tax act is reason   to   believe   that   income   for   the   year   under consideration   has   escaped   assessment   because   of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year under consideration. It is pertinent to mention here that reason to believe that income has escaped assessment for the year under consideration have been recorded   above   in   para   1   to   3,   I   have   carefully considered   the   assessment   records   containing   the submission made by the assessee in response to the various notices issued during the assessment and noted that the assessee had not disclosed the fact that it had taken   accommodation   entry   of   Rs.4,24,500/­   from M/s.   Kalyan   Exports   Pvt   Ltd   which   is   one   of   the concern through which Shree Shivpal Vora was found to be providing accommodation entry and it was not doing   any   actual   business   activity.   Therefore   the assessee has not disclosed fully and truly all material facts necessary for his assessment. So I have reason to believe that Income for the year under consideration to the   tune   of   Rs.   424500/­   has   escaped   assessment within the meaning of section 147 of the income­tax act. 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice under Section 148 of the income­tax act has been obtained separately from Pr. Commissioner of Income­tax as per provision of section 151 of the income­tax act.” 3. Further it is pertinent to mention here that as per the guidelines   of   Hon’ble   Gujarat   High   Court   in   the   case   of Sahakari Khand Udyog Mandali Ltd Vs. ACIT you may file objection   if   desires   so,   within   60   days   of   receipt   of   the reason.” 2.4 The   writ   applicant   raised   the   objections   vide   its communication dated 04.07.2019, mainly on the following issues on facts and law: (i) Provision of Section 148(2) not complied with; (ii) No failure on the part of the assessee to disclose Page 3 of 21

C/SCA/21119/2019 ORDER fully and truly   all   material   facts   necessary   for   the assessment; (iii) Reopening is based on “borrowed satisfaction”; (iv) provision of Section 151(1) not complied with. 2.5   The objections came to be rejected by the respondent vide order dated 30.08.2019.

C/SCA/21119/2019 ORDER 5.2 It   was  further   pointed   out   that,  the   reopening   of   the assessment is beyond the period of 4 years, the approval by the competent authority is required to reopen the assessment. In   this   regard,   the   learned   counsel   pointed   out   that   the revenue failed to produce the copy of the sanction accorded by the authority nor was it provided along with the copy of the reasons recorded. Therefore, there is no approval in terms of Section 151 of the Act and on this ground, the notice is bad in law and required to be quashed and set aside. 5.3 The learned counsel vehemently argued that there was no failure on the part of the assessee to disclose the necessary materials   at   the   time   of   original   assessment   made   under Section   143(3)   of   the   Act   and   therefore,   the   condition precedent for reopening having not been satisfied. In this regard,   it   was   submitted   that   during   the   assessment proceedings, notices under Section 142(1) were served upon the assessee and  details regarding purchases and sales with the different entities including the transaction made with the Kalyan Exports Pvt. Ltd. were called for and the necessary materials and details were furnished including the alleged transaction   with   the   Kalyan   Exports   Pvt.   Ltd.  In   this circumstances, the precondition for reopening in the case of beyond 4 years having not been satisfied as there was no failure on the part of the assessee to disclose the material facts truly and fully. Page 5 of 21

C/SCA/21119/2019 ORDER 5.4 It was further contended that the Assessing Officer  has acted mechanically on the basis of the information received from   the   concerned   department   and   there   is   no   any independent application of mind by the Assessing Officer to arrive at the conclusion that the income chargeable to tax has escaped assessment. Therefore, reopening based on the third party   satisfaction   cannot   be   sustained   in   law   and   the proceedings initiated on borrowed satisfaction required to be quashed and set aside. 6. In view of the aforesaid contention, the learned counsel for the writ application submitted that, the impugned notice as well as the order of disposing off the objections are bad, illegal   and   without   jurisdiction   and   therefore,   the   same deserve to be quashed and set aside and accordingly, the writ application may be allowed. 7. On the other hand, Mrs. Kalpana K. Raval,  learned Standing Counsel appearing for the revenue has vehemently opposed the writ application, contending that the revenue is justified in reopening the assessment for the year under consideration. She has urged that the alleged transactions with M/s. Kalyan Exports   Pvt.   Ltd.   was   not   truly   disclosed   at   the   time   of original assessment, as in fact,  without any actual purchases, the   accommodation   entries   were   being   provided   by   the concerned entity for tax evasion. Referring to the reasons recorded, she pointed out that after final assessment made under   Section   143(3)   of   the   Act,   the   Assessing   Officer Page 6 of 21

C/SCA/21119/2019 ORDER received fresh information with regard to alleged transaction reflected   in   the   bank   account   of   the   assessee   and   upon verification, the Assessing Officer found that the information is   correct   and   the   assessee   is   the   beneficiary   of   the accommodation   entries   and   therefore,   he   has   reason   to believe that income has escaped assessment. 8. In view of the above contentions, the learned counsel for the revenue   urged   that   the   writ   application   may   not   be entertained.

C/SCA/21119/2019 ORDER of failure on the part of the assessee to make a return under Section 149 or to  disclose fully and truly all material facts necessary for the assessment of that year. 11. We take the notice of the fact that the assessee company filed its return of income for the A.Y. 2012­13 on 28.09.2012 and the   assessment   under   Section   143(3)  of   the   Act   was completed on 04.06.2014. It appears from the record that during the course of the assessment proceedings, a notice under   Section   142(1)   of   the   Act,   along   with   detailed questionnaire was served upon the assessee,  whereby, the names and addresses of all parties from whom purchases exceed Rs.1,00,000/­ were called for and accordingly, the assessee company had furnished all the details including bank accounts, stock registers, PAN no. etc. 12. We   have   examined   the   reasons   recorded   wherein   the Assessing Officer has noticed that in the case of Mr. Shivpal Vora, the search was carried out under Section 132 of the Act and several incriminating documents were found and seized and upon analysis of the same, reveals that Mr. Shivpal Vora was managing the affairs of 44 companies, which were in the business of providing the accommodation entries and out of 44 entities, one of the company was M/s. Kalyan Exports Pvt. Ltd.,   with   whom   the   assessee   –   M/s.   Madhav   Gems   had entered   into   transaction   of   Rs.4,24,500/­   during   the   year under consideration. Page 8 of 21

C/SCA/21119/2019 ORDER 13. We further take notice of the fact that while recording the reasons,    the Assessing Officer has verified the information received from the DCIT Circle­1(2) and applied his mind to the information received and after independent inquiries, he came to conclusion that   M/s. Kalyan Exports Pvt Ltd was providing   accommodation   entry   without   any   business activities and assessee is the beneficiary of accommodation entry of Rs.4,24,500/­ and formed his opinion that he has reasoned to believe that amount of Rs.4,24,500/­ has escaped assessment. 14. After   careful   examination   of   the   reasons   recorded   and materials on record, we are of the view that the Assessing Officer could be said to have applied his independent mind to the information received from the concerned department and after being duly satisfied, he reached to the conclusion that the assessee failed to disclose the true facts with regard to alleged accommodation entries provided by the M/s. Kalyan Exports   Pvt.   Ltd.  which   provides   a   link   between   his conclusion and materials gathered during the inquiry. 15. In view of the aforesaid discussion, it could be said that after framing of the assessment made under Section 143(3) of the Act,  tangible material came into the hands of the Assessing Officer through the investigation wing and upon perusal of the same, he made independent inquiries and applied his mind and upon due satisfaction, he formed an opinion that, the income has escaped assessment. Page 9 of 21

C/SCA/21119/2019 ORDER 16. The main contention advanced by the learned counsel that at the   final   assessment   proceedings,   all   the   material   facts including the transactions with M/s. Kalyan Exports Pvt. Ltd having been duly recorded in the books of accounts and same was thoroughly examined by the Assessing Officer and in this circumstances,   when   there   was   no   concealment   or suppression of any facts, the reopening beyond 4 years in the absence of any non­disclosure of material facts cannot be permitted. We are not agree with the above contention that subsequent   to   assessment,  the   true   facts   with   regard   to transaction made with M/s. Kalyan Exports Pvt. Ltd by the assessee having been discovered by the Assessing Officer on the  basis   of  the  information  received from  the  concerned department. In this context,  we may refer and rely on  the observations  made   by   the   Apex   Court   in   the   case   of Phoolchand Bajranglal  and  another   Vs.  ITO (2001)   10 SCC 189. The observations made in para­19 reads thus: “19. Acquiring fresh information, specific in nature and reliable   in   character,   relating   to   the   concluded assessment   which   goes   to   expose   the   falsity   of   the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the some facts and material which was available which   the   I.T.O.   at   the   time   of   original   assessment proceedings.   The   two   situations   are   distinct   and different. Thus, where the transaction itself on the basis of   subsequent   information,   is   found   to   be   a   bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the "true" and "full" facts in the case and the I.T.O. would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that   the   assessing   authority   could   have   deferred   the completion of the original assessment proceedings for further enquiry and investigation into the genuineness Page 10 of 21

C/SCA/21119/2019 ORDER to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would   not   take   away   his   jurisdiction   to   act under Section   147 of   the   Act,   on   receipt   of   the information subsequently. The subsequent information on the basis of which the I.T.O. acquired reasons to believe   that   income   chargeable   to   tax   had   escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or nonspecific. ” 17. In case of Yogendrakumar Gupta Vs. ITO (2014) 366 ITR, this Court while rejecting petition challenging the notice for reopening which was issued beyond a period of 4 years from the end of relevant assessment year, wherein, one of the ground was that the issue was previously scrutinized during the   assessment   proceedings.   We   may   reproduce   the observations made in paras 16, 17 and 21, which read thus: “16. Ostensibly, thus, there was disclosure and the occasion would not arise to term this as the assessee not having disclosed fully and truly all the material facts necessary for assessment. However, in essence, if the unsecured loans obtained from Basant Marketing Pvt. Ltd. From the material supplied by them, the DCIT, Kolkata reveals that the same was as a result of accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. To the tune of Rs.8.71 crore, the case of the assessee would surely be covered under the said provision of law as it would not amount to full and true disclosure on the part of the assessee. At this stage, the reasons recorded shall have to be regarded, which have been based on the information contained in the report of the DCIT, Kolkata, dated March 24, 2013, wherein it had been noticed that the assessee company obtained accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. And, therefore, the Assessing Officer based his reason to believe that the income chargeable to tax had escaped the assessment. Xxx 17. In the post notice correspondence dated March 05, 2014, it has been stated by the Assessing Officer that Basant Marketing Pvt. Ltd. Provided accommodation entry to various companies, where assessee company is one of them. Basant Page 11 of 21

C/SCA/21119/2019 ORDER Marketing Pvt. Ltd. Is a dummy company of one Shri Arun Dalmia and substantial material is found to base such reasons recorded during the search by CBI, Mumbai and, therefore, the Assessing Officer issued a notice to show cause as to why the said amount of Rs.8.71 crore received from Basant Marketing Pvt. Ltd. Should not be treated as cash credit under section 68 of the Act. 21. This Court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appear to be the case where the Assessing Officer on vague or unspecific information initiated the proceedings of reassessment, without bothering to form his own belief in respect of such material. We need to notice that the Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai. A case is registered against Mr.Arun Dalmia, Harsh Dalmia and during the search at their residence and office premises, the substantial material indicated that 20 dummy companies of Mr.Arun Dalmia were engaged in money laundering and the incometax evasion. The said entities included Basant Marketing Pvt. Ltd. Also. From the analysis of details furnished and the beneficiaries reflected, which are spread  across the country, the CIT, Koklata, suspected the accommodation entry related to the assessment year 200607 as well, this information has been provided to Director General of Incometax, Kolkata, who in turn, communicated to the Chief Commissioner of Incometax,Ahmedabad. Further revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition. Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. The proceedings initiated under section 147 of the Act would not be rendered void on nonsupply of such document for which confidentiality is claimed at this stage, following the decision of the Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. ((supra)). Assumption of jurisdiction on the part of the Assessing Officer is since based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference.” 18. In  Aradhna   Estate   (P)   Ltd   Vs.   DCIT,   (2018)   91 taxmann.com 119, this Court held that where reassessment proceedings were initaited on the basis of the information received   from   the   investigation   wing   that   assessee   had Page 12 of 21

C/SCA/21119/2019 ORDER received certain amount from the Shell Companies working as an accommodation entry provider merely because these transactions were scrutinized by the Assessing officer during original assessment proceedings, the reassessment could not be held unjustified. 19. In Aaspas   Multimedia   Ltd.   VS   DCIT   (2017)   78 taxmann.com, this Court while examining the validity of the notice, held that where assessment was made on the basis of information received from the Principal DIT, (Investigation), that assessee was beneficiary of accommodation entry by way of share application provided by a third party,  same was justified.

(2018)   91,   taxmann.com,  this   Court   held   that   the information from the investigation wing stating that the loan from the company working as an entry operator and earning bogus   firms   to   provide   advances   to   various   persons   was sufficient and would constitute genuine and bonafide reason to believe.

C/SCA/21119/2019 ORDER failed to disclose true and correct facts at the relevant time and   therefore,   the   Assessing   Officer  is   entitled   to   initiate reassessment proceedings on the basis of tangible material came in his hand, which stands to expose the untruthfulness of the entry of purchase made in the books of accounts.  In this context, we may refer the observation of the Apex Court in the case of  Honda Siel Power Products Vs. Dy. CIT, (2011) 10, taxmann.com,  wherein, it is held that assessee having not pointed out during assessment proceedings about exprenses incurred relatable  to tax free income  u/s. 14A, there was an omission and failure on its part to disclose fully and truly material facts, hence, reopening was justified.

C/SCA/21119/2019 ORDER incriminating   documents   and   other   such   relevant materials,   was   along   with   report   and   show­cause notice placed at the disposal of the Assessing Officer. These materials prima­facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that   income   chargeable   to   tax   had   also   escaped assessment. When thus the Assessing officer had such material   available   with   him   which   he   perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re­opening could not and should not have been declared as invalid, on the ground that he proceeded  on the  show­cause  notice  issued  by  the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd.   v.   Income   Tax   Officer,   Nagpur   (supra)   the Supreme   Court   noted   that   in   case   of   the   assessee which had an office in London, this Customs authority had come to know that the assessee had declared very low price in respect of the consignment of Manganese exported by them out of India. After due inquiries and investigations, the Customs authorities found that the assessee was systematically under­voicing the value of Manganese as compared with the prevailing market price. The Income Tax Officer on coming to know about the proceedings before the Customs Collector in this   respect   issued   notice   for   reopening   of   the assessment. In the reasons that the Assessing Officer relied   on   the   facts   as   found   by   the   Customs Authorities that the assessee had under­voiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under: "So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has   relied   upon   the   fact   as   found   by   the Customs   Authorities   that   the   appellant   had under invoiced the goods it exported. It is not Page 15 of 21

C/SCA/21119/2019 ORDER doubt correct that the said finding may not be binding upon the income tax authorities but it can   be   a   valid   reason   to   believe   that   the chargeable  income   has  been  under  assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied." 11. In case of Income Tax Officer v. Purushottam Das Bangur (supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from   Directorate   of   Investigation   giving   detailed particulars   collected   from   Bombay   Stock   Exchange which revealed earning of share and price of share increased   during   period   in   question   and   quotation appearing at Calcutta Stock Exchange was as a result of   manipulated   transaction.   On   the   basis   of   such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: "12.   Ms.   Gauri   Rastogi,   the   learned   counsel appearing for the respondents, has urged that the letter of Shri. Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information   sent   by   Shri.   Bagai.   Merely because the impugned notice was sent on the next   day   after   receipt   of   the   letter   of   Shri. Bagai   does   not   mean   that   the   Income   Tax Officer   did   not   apply   his   mind   to   the information contained in the said letter of Shri. Bagai.   On   the   basis   of   the   said   facts   and information contained in the said  letter, the Income   Tax   officer,   without   any   further Page 16 of 21

C/SCA/21119/2019 ORDER investigation, could have formed the opinion that   there   was   reason   to   believe   that   the income of the assessee chargeable to tax had escaped   assessment.  The  High  Court,  in our opinion, was in error in proceeding on the basis that it could not be said that the Income Tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment   years.   For   the   reasons aforementioned, we are unable to uphold the impugned   judgment   of   the   High   Court.   The appeal   is,   therefore,   allowed,   the   impugned judgment of the High Court is set aside and the Writ   Petitions   filed   by   the   respondents   are dismissed. No order as to costs." 12.   In   case   of   Income   Tax   Officer   v.   Selected Dalurband Coal Co. Pvt. Ltd.(supra), the assessment was   reopened   on   the   basis   of   the   information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of re­opening of assessment, the Supreme Court held and observed as under: "After   hearing   the   learned   counsel   for   the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute   relevant   material   or   that   on   that basis, the Income Tax Officer could not have reasonably   formed   the   requisite   belief.   The letter   shows   that   a   joint   inspection   was conducted in the colliery of the respondent on January 9,1967, by the officers of the Mining Department   in   the   presence   of   the representatives of the assessee and according to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department  and   that  too   after   conducting   a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true Page 17 of 21

C/SCA/21119/2019 ORDER or not is not the concern at this stage. It may be well   be   that   the   assessee   may   be   able   to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question   is   whether   there   was   relevant material,   as   stated   above,   on   which   a reasonable   person   could   have   formed   the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that   the   issuance   of   notice   was   invalid. Inasmuch   as,   as   a   result   of   our   order,   the reassessment proceedings have not to go on we don   not   and   we   ought   not   to   express   any opinion on the merits." 13.   In   case   of   AGR   Investment   Ltd.   v.   Additional Commissioner   of   Income   Tax   and   anr.   (supra),   a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus   accommodation   entries.   The   Court   while upholding   the   validity   of   reopening   observed   that sufficiency of reason cannot be considered in a writ petition. It was observed as under: "23   The   present   factual   canvas   has   to   be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned   counsel   for   the   petitioner   has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated   them   as   objections   and   made   a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a   very   careful   and   studied   manner.   He   has taken   note   of   the   fact   that   transactions involving Rs. 27 lakhs mentioned in the table in Annexure P­2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation   entries   provided   to   it   and represents   the   undisclosed   income.   The assessing officer has referred to the subsequent Page 18 of 21

C/SCA/21119/2019 ORDER information and adverted to the concept of true and full disclosure of facts. It is also noticeable that   there   was   specific   information   received from the office of the DIT (INV­V) as regards the transactions entered into by the assessee company with number of concerns which had made  accommodation entries and  they  were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a   particular   interpretation   of   a   specific provision   which   was   done   in   a   particular manner in the original assessment and sought to   be   done   in   a   different   manner   in   the proceeding under Section 147 of the Act. The reason   to   believe   has   been   appropriately understood by the assessing officer and there is material on the basis of which the notice was issued.   As   has   been   held   in   Phool   Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency   of   reasons   for   formation   of   the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible   whether the assessing officer had applied   his   mind   to   the   information   and independently arrived at a belief on the basis of material   which   he   had   before   him   that   the income   had   escaped   assessment.   In   our considered   opinion,   the   decision   rendered therein is not applicable to the factual matrix in the   case   at   hand.   In   the   case   of   Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage   of   original   assessment,   furnished   the names   of   the   companies   with   which   it   had entered   into   transactions   and   the   assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of  the   companies  was  not disputed   and   the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid   fact   situation,   this   Court   had Page 19 of 21

C/SCA/21119/2019 ORDER interfered.   Thus,   the   said   decision   is   also distinguishable on the factual score." 14. Learned Single Judge of Madras High Court in case   of   Sterlite   Industries   (India)   Ltd.   v.   Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was   based   on   information   from   enforcement directorate   showing   possible   inflation   of   purchases made by the assessee.” 23. The   learned   counsel   raised   the   contention   that   while according the sanction under Section 151 of the Act, the authority concerned has not applied his mind properly and mechanically accorded the sanction.   We have perused the papers   of   the   sanction   which   would   show   that   Assessing Officer   presented   the   reasons   recorded   for   approval   of Principal Commissioner in prescribed format on 29.03.2019 through Additional Commissioner of Income Tax. Both the officers have  perused the reasons recorded and opined that it is a fit case to issue notice under Section 148 of the Act. The Additional Commissioner of the Income Tax has expressed his satisfaction with regard to reasons recorded by the AO and found   that   it   is   a   fit   case   to   issue   notice.   The   Principal Commissioner   of   Income   Tax   was   also   satisfied   with   the reasons recorded and put his remarks of his own handwriting that “on the basis of the reasons recorded, I am satisfied that it is a fit case for issue of notice under Section 148 of the Act.” On 29.03.2019, the Additional Commissioner of Income Tax has expressed his opinion, whereas, on 30.03.2019, the Principal Commissioner has expressed his satisfaction with regard to reasons recorded and accord the sanction to issue Page 20 of 21

C/SCA/21119/2019 ORDER the impugned notice dated 31.03.2019. Thus, the sanction for reassessment   was   granted   on   31.03.2019   on   the   date   on which the impugned notice was issued. In this circumstances, it   is   evident   that   before   issuing   the   notice,   there   was compliance   of   Section   151   of   the   Act   and   the   authority concerned  had  expressed   their   satisfaction   with   regard   to reasons   recorded   and   accordingly,   accorded   the   sanction. Therefore, the contention raised by the learned advocate for the   writ   applicant   that   sanction   was   not   obtained   before issuance of the notice cannot be accepted. 24. In view of the discussions made hereinabove, it cannot be said that there was no tangible material before the Assessing Officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 of the Act. 25. For   the   foregoing   reasons,   no   case   is   made   out   and accordingly, present writ application deserves to be dismissed and is dismissed. No order as to costs. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S. JOSHI Page 21 of 21