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TMI Blog2019 (7) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... requisitioned. From the material placed in the Paper Book, it is noted that before passing of the order u/s 143(3) on 19.12.2011, the AO made independent enquiries u/s 133(6) from the share subscribers in connection with the share capital of Rs. 86.27 crores subscribed by them. Upon verification of the material collected by him, the AO in his original scrutiny order passed u/s 143(3) on 19.12.2011, observed that "during the year the assessee company had raised paid up share capital of Rs. 86.27 crores including premium and it has been duly verified on test check basis". Thereafter, the case of the assessee was reopened after the expiry of four years vide notice u/s 148 dated 22.03.2016. In response, the assessee filed return of income on 18.05.2016 and requested the AO to supply the reasons recorded prior to reopening of the assessment. Vide letter dated 14.06.2016 the AO supplied the reasons recorded for reopening of the assessment which read as follows: "A survey operation u/s 133A was concluded in the case of M/s. Ashika Group. It is found from the evidence that M/s. Yaduka Financial Services Ltd. (Formerly known as M/s. PR Vanijya Pvt. Ltd.) raised Share Capital of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs attended the summons. The AO thereafter tabulated the details of 34 share subscribing companies which according to him were controlled by some entry operators. Based on the aforesaid enquiries and findings, the AO concluded that the assessee was unable to satisfactorily substantiate the identity & creditworthiness of the share subscribers and the genuineness of the transactions. The AO accordingly framed the assessment u/s 147/143(3) on 26.12.2016 adding sum of Rs. 86,24,30,000/- by way of unexplained cash credit u/s 68 of the Act in the hands of the assessee. Aggrieved by the order passed by the AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) observed that condition precedent for reopening of the assessment after expiry of four years was that the AO was required to point out the specific failure on the assessee's part to disclose true and correct particulars in the course of original assessment. The Ld. CIT(A) observed that the AO had failed to set out the omission or failure on the assessee's part to disclose true and correct particulars in his recorded reasons and for that reason he held that the reopening of assessment was invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure on the part of assessee and proceeding initiated after four years are bad in law. The CIT(A) observed that name of the share applicant and amount along with cheque detail was submitted by the assessee in the original assessment order. Whereas, as per the data/information gathered after a survey u/s 133A which was conducted by the investigation wing of the Income tax department in the Ashika Group of cases at the office premises at Trinity, 7th Floor, 226/1, AJC Bose Road, Kolkata700020 andon the basis of information available on record it is found by the AO that the assessee company raised share capital of Rs. 86,24,30,000/- by issuing shares to different companies which are paper/bogus/shell companies. Thus it was clearly held that the said amout Rs. 86,24,30,000/- was nothing but accommodation entry in the form of bogus share capital/entry provider routed through the jamakharchi/shell/paper companies. Thus it is crystal clear that there was failure on the part of the assessee company to submit the full and true information, the assessee company gave misrepresentation about the facts before the AO. Thus the AO clearly had the substantial new mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm a reasonable belief that income chargeable to tax had escaped assessment, merely because these transactions were scrutinised by Assessing Officer during original assessment would not preclude him from reopening assessment; thus, impugned reassessment notice was justified - Held, yes [Para 8] [In favour of revenue] 3. The jurisdictional Calcutta High Court in the case of Ballarpur Paper and Straw Board Mills Ltd. -v.- CIT (1975) 101 ITR 55 (Cal) has held that it is necessary that for reopening an assessment, there must be new information before the reopening is made. If it is a new look at the old facts, unprovoked by any knowledge of any fact or law coming to the possession of the department subsequent to the original assessment either from records or from any direction or decision, it would be nothing but mere change of opinion and such a change of opinion would not be justified. 4. In CIT-Kol-II v Eureka Stock and Share Stock & Share Broking Services Ltd.(2017) 291CTR313 (Cal), although the relevant issue had been examined by the Assessing Officer in the original assessment, the Hon'ble jurisdictional High Court held that there was no change of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid submission of the appellant observing that only the value of the land was stated and in support, a certificate from the registered Architect & Engineer was filed. It was held as under: ..... The Hon'ble Gujarat High Court in the case of Yogendrakumar Gupta v. ITO (2014) 366ITR186 (Guj) held that the law requires only formation of belief of the assessing officer on the basis of information in his possession that income had escaped assessment without the necessity to supply and specific documents to the assessee discussing the facts as under: "20. 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), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the Assessing Officer, when Assessing Officer formed a belief that the investment made from the funding of such companies which are bogus, the Assessing Officer has rightly assumed the jurisdiction of initiating the reassessment proceedings. Assessing Officer, on the basis of information subsequently having come to his knowledge, recognized untruthfulness of the facts furnished earlier. In the present case, since both the necessary conditions to reopen the assessment have been duly fulfilled, sufficiency of the reasons is not to be gone into by this Court. Information furnished at the time of original assessment, when by subsequent information received from the Principal Director of Income Tax (Investigation), Ahmedabad, itself found to be controverted, the objection to the notice of reassessment under section 147 of the Act must fail." Thus it can be argued that the reopening was justified where subsequent information proved that information furnished at the stage of original assessment was not correct. 7. In the case of DCIT Central Circle 1, Jodhpur v Sambhav Energy Ltd.(2017) 80 taxmann. Com389 (Raj), the original assessment was finalized u/s 153A read with section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the recorded reasons which vitiated the usurpation of jurisdiction by the AO. The ld. AR further submitted that in the course of proceedings u/s 143(3) the assessee was directed to furnish the particulars of monies received during the relevant year by way of share subscription amounts. In compliance the particulars as requisitioned were furnished which thereafter were examined by the AO not only with reference to the assessee's books of account but also by making independent enquiries u/s 133(6) as noted from the order u/s 143(3). The ld. AR therefore submitted that there was no failure on the part of the assessee to disclose true and full material facts prior to completion of order u/s 143(3). In the circumstances therefore the reopening of assessment after four years was claimed to be impermissible. The ld. AR drew our attention to the correspondence between the ACITCC2(1) and the DDIT(Inv) Unit 2(2), Kolkata to show that no tangible material was gathered by the Investigation Wing which in any manner could lead one to believe that income of the assessee for the AY 2009-10 to the extent of Rs. 86,27 Crs had escaped assessment. In the letter dated 23.02.2016 there was only a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / bogus / shell companies. Shares were allotted on 31.03.2009 at a premium of Rs. 190/ share. Considering the report of the DDIT, it was observed that it was nothing but unaccounted income entered in the books of assessee by way of accommodation entry in the form of bogus share capital routed through paper/ bogus / shell companies. The ld. AR submitted that the DDIT's letter dated 23.02.2016 was addressed to the ACIT, CC2(1), Kolkata who in turn forwarded the same to the DCIT, Circle 6(2), Kolkata on 28.02.2016 and within 8 days of the said letter, the DCIT, Circle 6(2), Kolkata recorded his satisfaction and sought sanction from the Pr.CIT-2, Kolkata. The ld. AR therefore submitted that the facts on record demonstrated that without objectively examining the information received and without conducting any worthwhile enquiry of his own the AO proceeded to initiate reassessment proceedings. The ld. AR further submitted that the fact that the assessee had issued fresh capital and thereby raised Rs. 86.27 crores during FY 2008-09 was known to the AO in the regular assessment proceedings u/s 143(3) which were completed in 2011. As such no new material or information came in AO's possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons."Their Lordships added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence....". Therefore, the reasons are to be examined only as they were recorded by the competent officer before the issue of the notice. 9. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment. The reasons should not merely disclose need for an inquiry which may result in detection of an income escaping assessment. Undoubtedly, at the stage of recording the reasons for reopening the assessment, all that is necessary is the formation of prima facie belief that an income has escaped the assessment and it is not necessary that the fact of income having escaped assessment is proved to the hilt. What is, however, necessary is that there must be something tangible which indicates, even if not establishes, the escapement of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the entire statute should be read as a whole and the same has to be considered thereafter chapter by chapter and then section by section and ultimately word by word. It is not in dispute that the Assessing Officer does not have any jurisdiction to review his own order. His jurisdiction is confined only to rectification of mistakes as contained in section 154 of the Act. The power of rectification of mistake conferred upon the Income-tax Officer is circumscribed by the provisions of section 154 of the Act. The said power can be exercised when the mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Income-tax Appellate Tribunal has limited jurisdiction under section 254(2) of the Act. Thus when the Assessing Officer or Tribunal has considered the matter in detail and the view taken is a possible view the order cannot be changed by way of exercising the jurisdiction of rectification of mistake. It is a well settled principle of law that what cannot be done directly cannot be done indirectly. If the Income-tax Officer does not possess the power of review, he cannot be permitted to achiev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong." 11. It is necessary to examine whether there was any "reason to believe" to have had such an exercise. The term "reason to believe" cannot be considered or evaluated in a water tight compartment and scope and applicability may vary from case to case, depending up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record we find that the entire edifice of the reassessment proceedings was based on the letter 23.02.2016 written by the DDIT(Inv), Unit 2(2), Kolkata to the ACIT, CC-2(1), Kolkata. The said letter was written in the context of survey conducted on 19.05.2015 in the case of Ashika Group. We note that at the relevant time when the letter was issued in February 2016, the ACIT, CC2(1), Kolkata did not have jurisdiction over the assessee's case and as such no proceedings could have been initiated by the said officer against the assessee who was not being assessed in his charge. From the letter dated 23.02.2016 which is at Pages 8 & 9 of the paper book, we note that the said survey proceedings were conducted by the Investigation Wing in May 2015 and the main focus of the investigation was the alleged bogus LTCG. In the said proceedings an effort was also allegedly made to find out the genuineness of the share allotments made by the concerned companies. It was allegedly found that during the investigation it was noted that allottee companies were bogus / paper/ shell companies. In the said letter the DDIT further stated that due to paucity of time, the cash/money trail could not be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the FY 2008-09 was conducted by the AO and therefore it was not a case where the AO was unaware about the material fact that the assessee had raised fresh equity capital of Rs. 86.27 crores during the relevant year. We therefore find that as a consequence of the letter either from the Investigation Officer or from the ACIT, CC-2(1), Kolkata; the AO of the assessee did not receive any fresh information in respect of the amounts received during FY 2008-09 by way of share subscriptions. We find that the survey u/s 133A was conducted in the case of Ashika Group in the month of May 2015 and in the course of the said survey certain information was allegedly gathered by the Investigation Wing in respect of transactions of the assessee during the FY 2008-09. However the letter of the DDIT(Inv) as well as the letter of the ACIT, CC-2(1), Kolkata is found to be conspicuously silent as to in what manner the information gathered in the case of Ashika Group was relatable to the assessee's transactions involving issue of shares. We find that the letter of the DDIT(Inv) is conspicuously silent with regard to identities of the persons who had subscribed to the capital of the assessee or the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on amount received from 34 companies out of total 94 companies to whom the assessee had allotted shares were paper / bogus / shell companies. We therefore find that even as per the information received it was not the Revenue's case that share subscription amounts received from all 94 share subscribers were having dubious antecedent. Even with regard to the 34 companies claimed by the DDIT(Inv) to be paper / bogus / shell companies, their identities and the amounts received from each of them was not revealed. In the circumstances therefore we find that even as per the letters relied upon by the AO no tangible material or information was available before the AO on the basis of which he could have formed reason to believe that the entire share subscription amount received represented income escaping assessment. We therefore find merit in the ld. AR's submission that after the completion of assessment, no tangible or credible information was received by the AO on the basis of which he could have validly formed reason to believe that income chargeable to tax had escaped assessment. We find that even though the identity, creditworthiness and genuineness of the share subscription transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." Further reliance can be placed on the detailed judgment in the case of Madhukar Khosla vs. ACIT 367 ITR 165 (Delhi) wherein it has been held by the Hon'ble High Court that the reopening is not permitted under the law unless it is based on fresh tangible material and that if the "reasons to believe" are not based on new, "tangible materials", the reopening amounts to an impermissible review. It has been further observed that : "The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "reasons to believe". Now this should have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the opinion was expressed that out of 97 share subscribers, 34 share subscribers were alleged to be bogus / shell companies. Except for making unverified allegation that DDIT's observation was based on the statements of identified entry operators, the letter of the DDIT(Inv) was silent with regard to the identities of the alleged entry operators and in what manner the said statements led him to believe that the capital contributed by unknown or unidentified 34 companies was in the nature of accommodation entries. We therefore find that except for making unverified and unsubstantiated averments, the DDIT's letter was bereft of any specific facts on the basis of which the AO could validly form his reasons to believe that assessee's income had escaped assessment. We also find that in the said letter, the DDIT had himself admitted that no enquiry with regard to cash trail was conducted by him in respect of allotment of shares due to paucity of time and had recommended in-depth enquiry by the AO. Yet treating the information so received from the DDIT(Inv) to be foundational fact, the AO without himself conducting any further enquiry and application of his own mind objectively, record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on the available material, no reasonable person could have any reason to believe that income had escaped assessment. Consequently, the Tribunal held that the proceedings under Section 147 of the said Act were invalid. 8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the same are reproduced:- "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named company was involved in giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all material facts and source of these funds routed throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we may rely upon the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate the source of the capital gain and nobody knew which shares were transacted and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decision discussed, the basic requirement that the A.O. must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case. 13. A perusal of the reasons recorded demonstrate total non application of mind by the A.O. Thus applying the proposition laid down by the Jurisdictional High Court in G&G Pharma India (supra) we hold that the reopening of assessment is bad in law" 21. The Hon'ble Delhi High Court in the case of Signature Hotels (P) Ltd. vs ITO and another, reported in 338 ITR 51 (Delhi) under similar circumstances held as follows: "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s 143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s 148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The A.O. did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The A.O. had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the A.O. as his 'reasons to believe' was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The A.O. had clearly substituted form for substance and therefore the action of the A.O. was not sustainable" 23. Useful reference in this regard is further made to the decision of the Hon'ble High Court of Delhi in ACIT Vs. Meenakshi Overseas (P) Ltd. (2017) 82 taxmann.com 300 (Del) wherein it has been held as under: "22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment. 28.1 In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a profo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." 28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes: 1. To plough back unaccounted black money for the purpose of business or for personal needs such as pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8 th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996-97, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 305002 5,00,000 Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi.Note: It is noted that there might be more such entries apart from the above.The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee‟s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction underSection 147 of the Act. " 34. Recently in Agya Ram v. CIT (supra), it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record..." It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments." 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasized that "even in cases where the AO comes across certain unverified information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons will also necessarily meet the same fate i.e. render the Assessment Order on re- opening notice bad. Therefore, on the aboveground itself, the question as proposed does not give rise to any substantial question of law as it is covered by the decision of this Court in Videsh Sanchar Nigam Ltd.' s case (supra) against the Revenue in the present facts. 10. Besides, the submissions made on behalf of the Revenue that in view of the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), the Assessing Officer is entitled to re-open the Assessment for whatever reasons and the same cannot be subjected to jurisdictional review, is preposterous. First of all, taking out a word or sentence from the entire judgment, divorced from the context and relying upon it, is not permissible (see CIT v. Sun Engg. Works (P) Ltd. [l992] 64 Taxman 442/198 ITR 297 (SC). It may be useful to reproduce the context in which the sentence in Rajesh Jhaveri Stock Brokers (P) Ltd. 's case (supra) being relied upon by the Revenue to support its case, was made. The context, is as under: "The scope and effect of section 147 as substituted with effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Brokers (P) Ltd. 's, case (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 (P) Ltd.'s, case (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. 12. The re-opening of an Assessment is an exercise of extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 15. Therefore, in the above facts, the view taken by the impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law. ' 16. Therefore, the question; as framed does not give rise to any substantial question of law. Thus, not entertained." 25. We also note that the coordinate bench of this Tribunal in ITA No. 660/Kol/2011 for AY 2002-03 in the case of DCIT Vs. Great Wall Marketing (P) Ltd. vide order dated 03.02.2016 has held as under: "9. We have given a careful consideration of the submissions made by the learned counsel for the assessee. It is clear from the reasons recorded by the AO that the AO acted only on the basis of a letter received from Investigation Wing, New Delhi. The reasons recorded does not give as to who has given the bogus entries to the assessee. The reasons recorded also does not mention as to on which dates and through which mode the bogus entries were made by the assessee. The reasons recorded which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment. We therefore find that there was not even remote connection between the fact that a survey u/s 133A was conducted in the case of Ashika Group and formation of AO's belief that as a consequence of the said survey he could form a reasonable belief that income chargeable to tax in the form of share subscription amount had escaped assessment. 27. We further note that in the second paragraph of the recorded reasons, the AO has made a reference to the letter of DDIT(Inv), Unit 2(2), Kolkata dated 23.02.2016 and states that with reference to the same he had found that the assessee had allotted shares to different companies which were bogus / paper/ shell companies. It is further claimed that the shares were allotted on 31.03.2009 to all the allotee companies at a premium of Rs. 190/share. Hence it was observed that it was nothing but accommodation entry in the form of bogus share capital routed through paper / bogus / shell companies. We however find that merely with reference to information passed on by the DDIT(Inv), Unit 2(2), Kolkata, the AO could not straightaway reach even prima facie conclusion that all the 94 allotee companies were paper / bogus / s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oregoing, in the given facts of the present case the DDIT(Inv) had not provided the identities of the 34 out of 97 share subscribers who according to him were paper / bogus / shell companies but had made general assertions in his correspondence. In fact the DDIT(Inv) himself admitted that he had not conducted any detailed enquiries on his own or prepared any cash/money trail but based on earlier statements of unnamed entry operators he had suspected the share subscription monies received by the assessee to be unexplained. We therefore find that the facts involved in the judgments of the Hon'ble Gujarat high Court were totally distinguishable from the facts of the present case and hence not applicable. 29. For the reasons set out above we find that the AO has simply gulped the information from DIT(Inv) to form a conclusion about escapement of income, which itself is flawed and cannot pass the test of 'reason to believe' as laid by judicial precedents as discussed above. We therefore hold that since there was no rationale nexus between the information received by the AO with formation of his belief, the initiation of reassessment proceedings stood vitiated and consequently th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. The Hon'ble Supreme Court in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369 upheld the judgment of the Allahabad High Court, wherein it was held by the Hon'ble High Court that in absence of failure on the part of the assessee in disclosure of material facts, the reassessment proceedings could not be initiated after expiry of four years. 33. The well settled law is that new tangible information which the AO got in his possession must have an inevitable link with escapement of income which triggers the AO to form a belief that there is an escapement of income, however, when this information is regarding an assessment year which is four years before then an additional requirement of law has to be also satisfied, i.e., even if there is an escapement of income, still it has to be seen whether the assessee has furnished true and full disclosure of the material facts before the AO during the original assessment. If the assessee has made true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the assessee to disclose fully and truly all facts necessary for his assessment for that assessment year. Thus in a case where assessment was made u/s. 143(3) of the Act and are sought to be reopened after the expiry of 4 years from the end of the relevant assessment year, in order to assume jurisdiction u/s. 147 of the Act, one of the condition precedents is that recorded reasons should point out the failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. So, once the AO comes to a finding of fact that there was a failure or there was an improper disclosure on the part of the assessee, he has to record the same by incorporating it in the reasons to believe that income chargeable to tax has escaped assessment. Then only the AO can assume jurisdiction or else he cannot. So while determining the validity of the action of AO when he intends to re-open a scrutinized assessment after the expiry of 4 years from the end of the relevant assessment year is concerned, one has to keep in mind the aforesaid condition precedent which is the jurisdictional fact, necessary for the successful usurpation of jurisdiction. For that we ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot satisfying the jurisdictional fact which is a condition precedent to legally assume jurisdiction to reopen assessment after 4 years from the end of the relevant assessment year. The judicial principle as set out in the foregoing finds support in the judgment of the Hon'ble Supreme Court in the case of Calcutta Discount Co Ltd (41 ITR 191)wherein the Apex Court had held as follows: "Both the conditions, (i) the Income-tax Officer having reason to believe that there has been under-assessment and (ii) his having reason to believe that such under- assessment has resulted from nondisclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry of four years." 36. Useful reference can also be made to the judgment of the Hon'ble Bombay High court in the case of Hindustan Lever Ltd. Vs. ACIT (supra). The relevant observations of the Hon'ble Court were as follows: "19. In the case in hand it is not in dispute that the assessment year involved is 1996- 97. The last date of the said assessment year was 31st March, 1997 and from that date if four years are counted, the period of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside." 37. This judgment of the Hon'ble Bombay High Court was followed with approval by the Hon'ble jurisdictional Calcutta High Court in the case of Amiya Sales & Industries Ltd Vs CIT (supra). In the said judgment, the Hon'ble High Court held as under: "In a case where assessment is made under section 143(3) and is sought to be reopened after the expiry of four years from the end of the relevant assessment year, in order to assume jurisdiction under section 147, one of the conditions precedent is that the recorded reasons should point out the failure on the part of the assessee to disclose fully and truly the material facts necessary for assessment. Once the Assessing Officer comes to a finding that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 were uncalled for and warranted interference by appearing orders. If an authority assumes jurisdiction illegally which is not vested under the law it would be fit and proper for the writ Court to intervene. In the instant case, as there was no omission or failure on the part of the assessee to disclose truly and fully all material facts in the return, as the Assessing Officer sought to reopen the assessments due to wrong interpretation of accounts by the Assessing Officer which was not permissible under section 147 to assume jurisdiction, the assessee was justified in invoking the writ petition. Thus, the instant petition was to be allowed and, consequently impugned notices under section 147/148 were to be quashed. 38. In the case of Assam Co. Ltd Vs Union of India (150 Taxman 571), the Hon'ble Gauhati High Court has held as under: "43. As noticed hereinabove, except in W.P. (C) No. 1163 and W.P. (C) No. 1258 of 2003, the impugned notices had been issued before the expiry of four years from the end of the relevant assessment year. The attempt made on the part of the respondents to contend that the omission on the part of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Court' s scrutiny. 46. The notices admittedly do not exhibit as to what material facts were not truly and fully disclosed by the assessees necessary for assessment for the assessment years in question. The returns admittedly mention about the cess on green leaves paid and deductions as permissible were allowed. In view of the exposition of law on the point mentioned hereinabove, the inescapable conclusion is that the impugned notices in W.P. (C) No. 1163 of 2003 and W.P. (C) No. 1258 of 2003 are also not sustainable being barred by time. 39. The Hon'ble Bombay High Court in the case of Tao Publishing Pvt Ltd Vs DCIT (370 ITR 115) has held that where the reasons supplied by the AO do not disclose that there was any failure on the part of the assessee to provide all the material facts, then it will have to be presumed that the assessee did not fail to make full and true disclosure of all material facts and hence the jurisdictional requirement set out in first proviso to Section 147 for initiating reassessment, after the expiry of period of four years, shall be held to be not fulfilled. The relevant observations of the Hon'ble High Court is extracted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant assessment year. The proviso stipulates three conditions. The Revenue is required to show from the record and the facts of the case that any one of the three conditions stands satisfied before the Assessing Officer can assume jurisdiction to issue notice for reassessment. 6. In the present case, admittedly, the conditions regarding non-filing of return and the condition regarding non-responding to statutory notice are not applicable. The third condition requires the Revenue to establish that there was any omission or failure on the part of the petitioner-assessee to disclose fully and truly all material facts relevant for the assessment of the assessment year in question. The reasons recorded read as under : "Reasons recorded for issue of notice under section 148 Reg. : Shri Nikhil K. Kotak, Ahmedabad. Assessment year 1992-93 The assessee had claimed exemption under section 54 of Rs. 11,36,477, i.e., l/3rd share of Rs. 34,09,430 for investment in new house against the income from long-term capital gain. The details of investment was as under : Rs. (1) Purchase cost of new house 23,62,500 (2) Cost of improvement on new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged escapement was resulted as a consequence of the assessee's omission or failure to disclose truly & fully all material facts necessary for its assessment. In fact we note that in the reasons recorded, the AO had not spoken any facts which would throw light that the disclosed facts of share subscription monies received during the year could be taken as false or untrue or from which it could be inferred that there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for the assessment of the assessee. We therefore do find any reasons to interfere with the findings of the ld. CIT(A) holding that the initiation of reassessment proceedings was bad in law as it did not satisfy the conditions precedent in proviso to Section 147 of the Act. 43. Now let us examine the sanction granted by the Commissioner of Income-tax u/s 151 of the Act was in a mechanical manner or upon due application of mind. 44. In the present case the AO recorded the reasons to reopen on 08.03.2016 and the Pr. CIT granted sanction on 17.03.2016.In the present case the assessment was reopened after expiry of four years from the end of the relevant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the formation of belief that income had escaped assessment was not furnished to the Pr. CIT along with the proforma and therefore it was quite apparent that the approval of the Pr.CIT was obtained mechanically even without there being relevant reasons made available to the supervising authority. In our considered view such mechanical manner of giving sanction, like in this case, cannot be approved of. In this regard the reference can be made to the decision of Hon'ble Supreme Court in the case in Chhugamal Rajpal vs. S.P. Chaliha & Ors. - 79 ITR 603 (SC) and Hon'ble High Court of Madhya Pradesh in Arjun Singh vs Asstt. Director of Income Tax (M.P.) reported in (2000) 246 ITR 363 (MP). 46. We also rely on the judgment of the Hon'ble Madhya Pradesh High Court in the case of CIT Vs S. Goyanka Lime & Chemicals Ltd[2015] 231 Taxman 703. The relevant extracts of the judgment is as follows: 3. A search was conducted at the residential and business premises of the assessee on 12.12.2002. Thereafter, notice for block assessment under section 158-BC was issued for the block period 1.4.1998 to 12.12.2002 and for each of the assessment years, returns were filed which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- 'The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.' 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9. As far as explanation to Section 151, brought into force by Finance Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT (68 SOT 205) held that a mere mention of 'approved' in the report by the Commissioner and thereby according sanction for reopening of assessment u/s 147 did not amount to recording of proper satisfaction u/s 151(1) of the Act and hence held the notice issued u/s 148 to be bad in law. The relevant findings of this Tribunal were as follows: 9. A simple reading of the provisions of Sec. 151(1) with the proviso clearly show that no such notice shall be issued unless the Addl. Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice which means that the satisfaction of the Commissioner is paramount for which the least that is expected from the Commissioner is application of mind and due diligence before according sanction to the reasons recorded by the AO. 10. In the present case the letter which is placed on record shows that the Addl. Commissioner has simply sanctioned the proposal for initiating proceedings u/s. 147 in group cases of beneficiaries of Mahasagar Securities P. Ltd. Nowhere the Addl. CIT has recorded his dissatisfaction. The Hon'ble Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval". 13. The observations of the Hon'ble High Court are very much relevant in the instant case as in the present case also the Commissioner has simply mentioned "approved" to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon'ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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