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TMI Blog2016 (8) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... th audited financial statement. The petitioner company received a notice under Section 143(2) of the Act dated 23.9.2013 and also received another notice under Section 142(1) dated 27.11.2014 along with questionnaire running into 20 questions calling for varied information. 2.2 The petitioner under a letter dated 12.12.2014 supplied the details called for by the respondent authority and extensive scrutiny is undertaken by the authority and in the said scrutiny assessment, an assessment order under Section 143(3) of the Act dated 3.10.2013 came to be passed accepting the total income written by the petitioner. 2.3 It is the case of the petitioner that subsequently, the petitioner received a notice under Section 148 of the Act dated 31.3.2015, inter-alia, stating that there is a reasonable belief of the authority that income chargeable to tax had escaped the assessment and thereby, asked the petitioner to submit the return in the prescribed form within 30 days. The petitioner under a letter dated 25.4.2015 submitted before the authority that return of the petitioner company had been thoroughly scrutinized and scrutiny assessment order also came to be passed and in the said letter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there reflects no independent satisfaction arrived at by the authority. It is merely on the basis of some third party information, the authority has come to the conclusion that assessment which has become final deserves to be reopened and therefore, for forming a belief of reopening, no independent application of mind is reflecting. Learned counsel further submitted that TDS which has been deducted on the payments made and also the address, permanent account number and the amount of commission given to the party have been submitted before the Income-Tax Department at the time of previous scrutiny assessment and those materials have been examined in detail by the Assessing Officer and only thereafter, the scrutiny assessment culminated finally. It is in this background, learned counsel for the petitioner submitted that the information received by some another agency can never be a subject matter of reopening of assessment once having been finalized. Learned counsel also submitted that the order passed by the respondent authority rejecting the objections of the petitioner is also not in the right spirit nor in consonance with the decision reported in 259 ITR 19 and thereby, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt material on which a reasonable person could have formed a reasonable belief and therefore, since this is merely a stage where a reasonable belief is formed, the authority may not be allowed to be intercepted in exercise of its statutory function and thereby learned counsel for the Revenue submitted that no interference be made in exercise of writ jurisdiction. 6. Having heard learned counsel appearing for the respective parties, before dealing with the submissions made before the Court, first and foremost consideration to deal with is as to whether a reasonable belief formed by the authority is based upon some material or not. To deal with this, we may reproduce the reasons which are recorded by the authority while issuing notice under Section 148 of the Act. Relevant extract of the said reasons read as under : "3. The assessee is engaged in the business of manufacturing of textile machinery and spare parts. The assessee has filed his return of income on 4.2.2014 declaring total income at Rs. 4,80,87,320/-. The case was selected for scrutiny and assessment was completed u/s.143(2) dated 23.2.2015 accepting return of income. 4. In this case, information has been received by DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able amount, the petitioner has also been benefited and this part of the income appears to have been escaped assessment in the belief of the authority, the said belief cannot intercepted by exercising extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. 9. In the background of aforesaid circumstance available and reflected on record, it appears to this Court that the authority has applied its mind and has rightly relied upon the information available before it while exercising the power to reopen the assessment. We may recall the proposition of law on the issue in question in a well known decision of Apex Court in case of Assistant Commissioner of Income-Tax V/s. Rajesh Jhaveri Stock Brokers Pvt. Ltd., reported in 2007 (291) ITR 500. The Apex Court, dealing with the said case, has dealt with statutory provisions prior to amendment as well as post amendment and after analyzing the provisions of Sections 147 and 148 of the Act, the Apex Court has opined that Section 147 authorizes and permits the Assessing Officer to assess or re-assess the income chargeable to tax if he has reason to believe that income for any assessment year as escaped the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovinces Manganese Ore Co. Ltd. [1991 (191) ITR 662], for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)] ; Raymond Wollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment and on the basis of said material provided by the Excise Department, the Assessing Officer has reopened the assessment of the assessee by issuing notice under Section 148 of the Act. The assessee of that case in the similar manner in this case has contended that the information provided by a different Investigating Team may not be ipso facto utilized to re open the assessment which has become final by the Income-tax authority. It was also contended by the assessee of that case that there was no independent application of mind on the part of Assessing Officer and just based upon said information provided by the Excise Department, the authority resorted to Section 148 of the Act to reopen the assessment. This issue in extenso dealt with by the Division Bench of this Court and by a detailed judgment, came to conclusion that the Assessing Officer has merely relied upon the show cause notice issued by the Excise Department and has not concluded finally and therefore, there is no illegality or irregularity in arriving at a belief that assessment deserves to be reopen. Relying upon the decision delivered by the Apex Court, it is held that action of reopening of assessment was foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 vs 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 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 req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 existe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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