Source: https://taxcaselaw.com/income_tax_case_laws/section-149/gujarat-h-c-where-assessing-officer-while-placing-reasons-recorded-for-approval-of-commissioner-prior-to-issuance-of-notice-under-section-148-recorded-in-form-no-itns-10-that-income-which-escaped/
Timestamp: 2019-04-21 18:57:15+00:00

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Ms. Sonia Gokani, J. – Challenging the notice of reopening for the A.Y 2006-2007 issued under Section 148 of the Income-tax Act, 1961 [“the Act” for short] dated 28th March 2013, the present petition is preferred under Article 227 of the Constitution of India, in the following factual background.
2. The assessee is in the share trading business. For the year under consideration, the return of income was filed on 6th December 2006. Notice under section 143 (2) of the Act was issued by the respondent on 30th July 2007, which was replied to and the Assessing Officer, after making certain additions, passed original assessment order on 1st July 2008. The assessee’s income was assessed at Rs. 1,51, 892/=.
3. The impugned notice came to be issued after four years from the end of the relevant assessment year under consideration for reassessing the income of the assessee. The Assessing Officer, on having reason to believe that the income of the petitioner has escaped the assessment on account of non-disclosure of all material facts truly and factually, has issued such a notice.
“In the statement recorded on oath u/s. 131 (1A) of the Act on 8/2/2013, Shri Ashwin C. Jain admitted that all the transactions had been undertaken by him in the name of his family members. Upon being enquired, about New Generation Finvest Private Limited, SRS Vijay Sales Private Limited and M/s. Ami Securiteis, he contended that he had been only in contact with one Shri RajeshJain of Delhi and one Shri Amrutlal of Mumbai who in turn introduced him to the said companies for the purpose of providing him with marginal funding for IPO applications. When asked about the whereabouts of Shri Rajesh Jain and Shri Amrutlal and also about contact person for the said purposes, the assessee feigned ignorance. When asked to furnish complete details of how the loan amounts, refunds and profit were extended by the said parties to him, the assessee failed to comply”.
5. In response to such notice, the objections have been raised by the petitioner herein vide communication dated 6th June, 2013 inter alia contending that any notice issued beyond the period of four years is invalid unless the income has escaped assessment on account of non-disclosure of all material facts truly and fully by the petitioner. It is also contended that the very issue has been in detail scrutinized by the Assessing Officer, and therefore, the notice is nothing but a change of opinion, which is impermissible under the law. It is further contended that the reasons recorded also did not reflect that there is any reason to believe that the income has escaped the notice inasmuch as the only source reflected in the reasons is the investigation.
7.1 Affidavit-in-rejoinder has been filed by the petitioner urging strongly that the petitioner has challenged the jurisdiction of the Assessing Officer in issuing the notice under Section 148 of the Act and such issue is long ago settled by the Supreme Court in case of Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC 372. It is also further urged that the belief of the Assessing Officer that the investments were not recored in the books of account and were squared off during the financial year itself is totally on the wrong footing, as such investment continued to remain in the books of account, they would not be reflected in the balance sheet. Moreover, it is urged that the details of investments were called for during the scrutiny assessment as investment in shares were for more than rupees one lakh, which was a part of AIR information. The assessee had produced ledger accounts and vouchers in response to the AIR information which shows the investment in the profit made therefrom. Therefore, to say that the investment was not recorded in the books of account is contrary to the material on record.
8. Learned counsel Shri H.V Vora appearing for the petitioner has strenuously and fervently submitted in support of the averments set out in the petitions. He urged that in a matter of scrutiny assessment originally made in case of the petitioner, when the Assessing Officer has chosen not to make any additions and when the very issue was duly considered in a proceeding under Section 147 beyond the period of four years from the end of the relevant assessment year, in absence of anything to indicate that disclosure was not full and true on all material facts necessary for the purpose of assessment, no jurisdiction is available to the Assessing Officer. He urged that despite alternative remedy available to the petitioner, he cannot be allowed to undergo the hazards of reopening when the very basis of such proceeding is absent. He urged that the Supreme Court in case of Calcutta Discount Co. Ltd. (supra) had quashed the notice on the ground of lack of jurisdiction. Identical are the facts in the instant case where the petitioner has disclosed fully and truly all material facts. He urged the Court that in the reasons recorded, the Assessing Officer has solely relied on the material produced by the investigating team and there is no independent application of mind on his part. The Assessing Officer himself has no reason to believe that the income has escaped assessment. He also urged that the petitioner had not dealt with other two companies mentioned in the statement given by the husband of the petitioner, who is a separate entity in the eye of law. The books of account of the petitioner, according to the learned counsel, reflected entire transactions, and therefore, the order rejecting the objection wrongly states that these transactions were not reflected in the books of account and were squared off. He further urged that there has to be a rationale nexus of reasons recorded with the escapement of income. The objections raised by the petitioners were disposed of mechanically and therefore, Court’s indulgence is required.
8.1 It is also further contended that no funding for investment was received from either SRS Vijay Sales or Messrs. Ami Securities, and therefore, the information that these two companies have funded the investment is totally false, misleading and contrary to the record. According to the petitioner during the inquiry, at the time of original assessment, a detailed reply has been furnished by the petitioner where all the ledgers reflected the investment, its sources and profit arrived therefrom. If no reference of the inquiry is made in the assessment order, that would not mean that no opinion is formed, as held by this Court in case of Gujarat Power Corpn. Ltd. v. Asstt. CIT 350  350 ITR 266/ 211 Taxman 63/26 taxmann.com 51.
8.2 It is further urged that on completion of four years from the end of relevant assessment year, Section 149 (1)(b) provides that the notice can be issued only if the income chargeable to tax, which has escaped the assessment or likely to amount to rupees one lakh or more for that year under consideration. In absence of anything in reason recorded to suggest in the reasons recorded that income chargeable to tax, which has escaped assessment is rupees one lakh or more, notice itself deserves to be quashed, as held by this Court in case of Bakulbhai Ramanlal Patel v. ITO  56 DTR 212 (Guj). It is further urged that Section 151 desires satisfaction of the Commissioner to be recorded while permitting the re-assessment proceedings on the reasons recorded by the Assessing Officer that it is a fit case for issuance of a notice under Section 148, if such notice is issued after expiry of four years from the end of the relevant assessment year. However, merely writing ‘Yes’ to the proposal would mean a mechanical nod which would be contrary to the settled principal as rendered in case of Central India Electric Supply Co. Ltd. v. ITO  333 ITR 237/202 Taxman 86/10 taxmann.com 169 (Delhi) .
(e) Bakulbhai Ramanlal Patel (supra).
10. Upon thus hearing both the sides and on examination of the material on record, at the outset, the law on the subject deserves consideration.
11. Section 148 permits the Assessing Officer to reopen the assessment if he has a reason to believe that the income chargeable to tax has escaped the assessment. It authorizes him to make re-assessment even beyond the period of four years, if the income chargeable to take has escaped the assessment for such assessment year on account of the failure on the part of the assessee to make a return under section 139 or in respect to a notice under sub-section (1) of Section 142 or Section 148 or he has failed to disclose fully and truly all material facts necessary for such assessment.
11.1 In various judicial pronouncements, it has been established that when the assessment is framed under section 143 (3) of the Act, the reopening beyond the period of four years is permissible only if the income chargeable to tax has escaped the assessment on account of failure on the part of the assessee to make a return under section 139 or in response to the notice under sub-section (1) of Section 142 or Section 148 or if a person has failed to disclose fully and truly all material facts necessary for the assessment. The requirement of the proviso to Section 147 deserves to be satisfied, and therefore, in absence of any satisfaction having been recorded by the Assessing Officer that the income has escaped the assessment by reason of failure on the part of the petition/assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the assumption of jurisdiction under section 147 of the Act would be invalid.
’15. In the present case, as already noticed, the I.T.O. Azamgarh, subsequent to completion of the original assessment proceedings, on making an enquiry from the jurisdictional I.T.O. at Calcutta, learnt that the Calcutta Company from whom the assessee claimed to have borrowed the loan of Rs. 50,000 in cash, had not really lent any money but only its name, to cover up a bogus transaction and after recording this satisfaction as required by the provisions of Section 147 of the Act proposed to reopen the assessment proceedings. The present is, thus, not a case where the Income Tax Officer sought to draw any fresh inference, which could have been raised at the time of original assessment on the basis of the material placed before him by the assessee relating to the loan from the Calcutta Company and which he failed to draw at that time. 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 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 non-specific.
19. Again, in A.LA. Firm v. CIT  189 ITR 285, a three Judges bench of this Court, to which one of us (S.C. Agrawal, J.,) was a party, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied.
20. From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income-tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the” Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealer’s case (Supra) as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly.
21. We are not persuaded to accept the argument of Mr. Sharma that the question regarding truthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not at any stage subsequent thereto. The argument is too broad and general in nature and does violence to the plain phraseology of Sections 147(a) and 148 of the Act and is against the settled law by this Court. We have to look to the purpose and intent of the provisions. One of the purposes of Section 147, appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say “you accepted my lie, now your hands are tied and you can do nothing”. It would be travesty of justice to allow the assessee that latitude.
11.3 In case of P. Manirathnam Chetty & P. Satyanarayana Chetty v. ITO  101 ITR 385 (AP), the Income-tax Officer in a proceedings under Section 147 of the Act accepted the book results of the assessee-firm. However, later on, from the order of the Sales Tax authorities, the Assessing Officer noticed that the assessee had failed to disclose fully and truly all material facts as the turnover of the assessee was at much higher figure and penalty also was levied by the Sales Tax authorities for such suppression of turnover and therefore, the proceedings under Section 147 of the Income-tax Act were initiated. The Commissioner also granted sanction by saying “yes”. The Court held that this was not a case where the I.T.O thought that it was a case for investigation nor was there any documentary evidence to support his report. Merely because the Commissioner said ‘yes’ against the question as to whether such was a fit case for issuance of the notice under Section 148, he was alleged of having acted mechanically. The Court, therefore, observed and held that in order to obviate such impression and to infuse more confidence in the assessee, the Commissioner ought to have at least briefly stated the reasons as to why the sanction was accorded for proceedings under section 147 of the Act.
11.4 In case of K.C.P Ltd. (supra), the assessee had sold certain machinery and had shown three-fourths of sale price as profits. The assessment was accordingly finalized. Depreciation also was allowed at the time of original proceedings. However, later on, it was realized that the same was in excess due to assessee’s failure to disclose availment of initial depreciation. Therefore, the reassessment proceedings were initiated for withdrawing excess depreciation. The Court held that the assessee’s contention that it was under no obligation to disclose the factum of availment of initial depreciation since the form of return prescribed at the relevant time did not contain any column requiring the assessee to furnish such information could not be accepted. Every assessee is expected to know the law that it was not entitled to claim normal depreciation above the prescribed ceiling. If that was done and if that had crossed the ceiling by availing the depreciation, he could be said to have omitted or failed to disclose fully and truly all material facts necessary for the purpose of assessment.
12. At this juncture, some of the judgments sought to be relied upon by the petitioner deserve consideration.
12.1 In case of Bakulbhai Ramanlal Patel (Supra), the reasons recorded in the proceedings of reassessment were found to be vague or non-existent and in light of these facts, the Court held that for the purpose of invoking the provisions of Section 147 of the Act, formation of requisite belief precedes the initiation of the proceedings. The Assessing Officer is required to record reasons for the formation of belief that income chargeable to tax has escaped assessment and in absence of any such belief appearing on the record, it could be stated that the Assessing Officer reopened the assessment for the purpose of making a roving and fishing inquiry to verify as to whether any income has in fact escaped the assessment, which is impermissible. Thus, in absence of basic requirement of Section 147 of the Act, the assumption of jurisdiction by the Assessing Officer was held to be invalid. The Court in this case also has held and observed that in reassessment proceedings the income escaped must exceed rupees one lakh as per the limitation set out under the provisions of Section 149(1)(b). When the reasons do not reflect that the income having escaped assessment was more than rupees one lakh or likely to be more than rupees one lakh, the assumption of jurisdiction under Section 147 itself would be invalid, as such averment came in the affidavit-in-reply and there was no other material on record to indicate the extent of income which escaped assessment.
12.2 In case of Mahesh Kumar Gupta (supra), the Allahabad High Court was considering the case of reassessment after expiry of four years from the end of relevant assessment year on the ground that the assessee sold his property within three years of conversion, which would result into accrual of short term gain. In absence of anything in the reasons recorded to suggest that income chargeable to tax which has escaped assessment was rupees one lakh or more, the reassessment notice issued after four years from the end of the relevant assessment year was held to be invalid .
12.3 The Apex Court in case of Chhugamal Rajpal (Supra) noticed that the Income-tax Officer initiated reassessment proceedings seeking to include certain cash credits appearing in the books of account of assessee’s income on suspicion that the creditors were mere name-lenders though assessee had produced its books of account and also statement giving full particulars of creditors at the time of original assessment. The Court held that when the Income-tax Officer did not even come to a prima facie conclusion that the transactions were not genuine transactions and conclusion arrived were on a vague feeling that they might be bogus transactions, would not amount to fulfilling the requirements of the provisions of Section 151(2). In the case before the Apex Court, the Commissioner also mechanically accorded permission, and therefore, the Court held that the important safeguards provided in Sections 147 and 151 were lightly treated by the Income-tax Officer and the Commissioner, and therefore, the notice was held invalid.
12.4 The Apex Court in case of Lakhmani Mewal Das (supra) held that in case of reassessment proceedings, the reasons recorded for formation of belief, as contemplated under Section 147(a) must have rational connection with or relevant bearing on the formation of belief and rational connection postulates that there must be direct nexus or live link between material coming to Income-tax Officer’s notice and formation of his belief that there has been escapement of assessee’s income from assessment in a particular year because of his failure to disclose fully and truly all material facts.
12.5 In a case before the Apex Court, the Income-tax Officer had completed original assessment by allowing deduction of interest paid to certain creditors. However, when one of the creditors had confessed that he was doing only name-lending and that other creditors were only name-lenders, the reopening proceedings were initiated. There was absence of any material to indicate that the confession made by the creditor related to the loan to the assessee and not to someone else. In absence of such confession related to the period which was subject-matter of assessment, the Court found absence of live link or close nexus with the material and the belief of the Income-tax Officer, and therefore, the Apex Court quashed the order of the High Court by holding that such material could not have led to formation of belief that the income of the assessee had escaped assessment on account of assessee’s failure or omission to disclose fully and truly all material facts.
12.7 Delhi High Court in case of Central India Electric Supply Company Ltd. (Supra) was dealing with a case of reopening. Such reassessment proceedings were initiated alleging that there was non-disclosure of primary facts on the part of the assessee company which was engaged in generation and supply of electricity from its unit. Its unit were acquired by the State Government in 1964 and compensation thereof was paid in the same year. The assessee had made claim for higher compensation and the matter was finally settled by the Supreme Court nearly after 10 years and the enhanced compensation was availed to the assessee in the assessment year 1979-80.
12.8 The Assessing Officer was of the belief that since the income had accrued to the assessee under the head of Long-term capital gain given on transfer of assets in respect of its two units, such income was to be taxed in the very assessment year ie., 1964 when the transfer took place. Considering the fact that the Supreme Court pronounced its judgment which settled the dispute of enhanced compensation, the Delhi High Court held that there was no lack of disclosure by assessee with respect to enhanced compensation and therefore, reopening of assessment for the relevant assessment year was held without jurisdiction.
12.9 In this very judgment, on the issue of sanction for issuance of the notice as contemplated under Section 151, the Court held and observed that mere rubber stamping of underlying material would suggest that there was no application of mind and such endorsement was taken in a mechanical manner and even if the authority agreed upon the reasonings set out by the Income-tax Officer, what is expected is that appropriate endorsement is made in this regard setting out brief reasons.
13. In light of the discussion held hereinabove, the twin conditions required for the satisfaction of the Income-tax Officer, in the event of reopening of assessment beyond the period of four years is that (i) there must be a reason to believe that income chargeable to tax had escaped assessment; and (ii) he also must have reason to believe that such escapement of income is on account of omission or failure on the part of the assessee to disclose fully and truly all material facts for assessment of the income of the assessee for the year under consideration.
14. Once the Assessing Officer has a reason to believe that such income has escaped assessment, the same as per the statutory requirement under Section 147(1)(b) has to be more than rupees one lakh or should likely to be more than rupees one lakh. And on having formed such belief, sanction of the Commissioner for reopening needs to be obtained under Section 151 (2) of the Act, who also is required to apply his mind to such proposal before according sanction, rather than acting mechanically. For examining the application of these statutory provisions, in the present case, it is necessary to revert to the facts. Admittedly, the assessee had made disclosure in respect of the investment made in three companies and the assessment was completed under Section 143 (3) on 1st July, 2008, after scrutiny. In the reasons recorded for reopening assessment under Section 147, the Assessing Officer has noted the fact that the return of the assessee for the A.Y 2006-07 was filed on 6th December, 2006 where he declared his income at Rs. 1,46,710/=, such return was processed under Section 143(1) and her case was selected for scrutiny through CASS and accordingly, the assessment order was passed on 1st July, 2008 assessing her income at Rs. 1,51,890/=. From the sources of investment, the Assessing Officer is of the belief that the companies who funded the investment were found to be bogus. The investments were not found to be recorded in the books of account of the assessee as they were squared off during the financial year itself and the explanation offered by the assessee was not found to be satisfactory, inasmuch as, the statement recorded under Section 131(1)(a) of Shri Ashwin C. Jain-husband of the petitioner on 8th February, 2013 wherein he admitted that such name-sake transactions had been undertaken by him were in the name of his family members. With regard to the three companies viz., New Generation Finvest Private Limited; SRS Vijay Sales Private Limited and M/s. Ami Securities, he stated inter alia that he was in contact with one Shri Rajesh Jain of Delhi and one Shri Amrutlal of Mumbai who introduced him to the said companies for the purpose of providing him with margin funding for I.P.O applications. However, he had no clue with regard to the whereabouts of both these persons. He also failed to furnish details of loan amounts, refunds and profit extended by the said parties to him. The Income-tax Officer on the basis of these details formed his belief that the assessee’s income had escaped assessment within the meaning of Section 147 of the Act. This was thus a case where there were no full and true disclosures by the assessee.
14.1 It is also to be noted that for approval to be obtained of Additional Commissioner of Income-tax, form I.T.N.S-10 had also been furnished for such approval being a must under Section 151 wherein the quantum of income which had escaped assessment is mentioned. In Column No.6, amount mentioned is Rs. 33,40,980/= and in column No. 11, “the reason for the belief that income has escaped assessment” annexure was enclosed therewith. The Commissioner of Income-tax, of course while according sanction has written ‘yes’ on the reasons recorded by the Assessing Officer that it was a fit case for issuance of notice under Section 148 of the Act.
14.2 Therefore, at this juncture, all the three grounds raised by the petitioner viz., (i) absence of any failure on the part of the assessee to disclose fully and truly any material facts necessary for the purpose of assessment for the year under consideration and the income chargeable to tax having escaped assessment for that year on account thereof; (ii) absence of anything in the reasons recorded to suggest that income chargeable to tax which has escaped assessment was rupees one lakh or more; and (iii) absence of any application of mind on the part of the Commissioner, while exercising his power to grant sanction, are required to be dealt with in the light of the discussion made hereinabove.
15. Taking firstly the last two grounds raised by the petitioner, it is true that in the reasons recorded, the Assessing Officer has not specifically recorded that income chargeable to tax which had escaped assessment for the year under consideration was rupees one lakh or more. The impugned reassessment notice issued after four years of the close of the relevant assessment year, since is attacked on the ground of invalidity, it needs to be noted here that in the decision of this Court in case of Bakulbhai Ramanlal Patel (Supra), the reasons did not reflect that the income having escaped assessment was more than rupees one lakh or likely to be more than rupees one lakh, as is required to be done under the provisions of Section 149 (1)(b). The Court therefore held that while reopening the assessment beyond the period of four years from the end of relevant assessment year, such recordance is inevitable. Since there is a statutory bar against reopening the assessment, in case where the amount of income escaping the assessment does not amount to rupees one lakh or more. The Assessing Officer is required to record finding to that effect and when no such finding had been recorded, except for a bare averment made in the affidavit-in-reply stating therein that income which had escaped assessment was more than rupees one lakh, and thus, in absence of any material on record to indicate that extent of income which had escaped assessment, the Court held that the assumption of jurisdiction on the part of the Assessing Officer under 147 was invalid.
16. In the present case, the reasons recorded clearly suggest that income escaped assessment due to assessee not disclosing true and full facts.
17. With regard to satisfaction recorded by the Commissioner which is alleged to have not been recorded as required under section 151 of the Act, it is contended by the petitioner that merely writing ‘yes’ and signing thereon suggest that the decision was mechanical.
17.1 This of course is a very valid and additional safeguard to check against the exercise of powers of reassessment in arbitrary fashion. Section 151 of the Act requires an Assessing Officer to seek approval of the Joint Commissioner, in a case where assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year and “the notice is to be issued after expiry of four years from the end of the relevant assessment year.” Thus, while issuing notice of reopening on expiry of four years period from the end of the relevant assessment year, in a case assessment was previously framed under Section 143(3) or 147, seeking approval of the Joint Commissioner by the Assessing Officer is a must. Requirement under the law is that the Joint Commissioner needs to be satisfied on the reasons recorded by the Assessing Officer.
17.2 Of course, in the judicial pronouncements discussed hereinabove, the Courts have time and again emphasized that the Income-tax Officer when proposes to reopen the assessment under Section 147(a) and requests the Commissioner to accord necessary sanction for reopening the assessment, the Commissioner so as to obviate any impression that he had not applied the mind and also to infuse more confidence in the assessee should state brief reasons while sanctioning such proceeding under section 147 of the Act.
17.3 The reference needs to be made at this stage of Circular No. 1 of 2009 dated 27th March, 2009 of CBDT sought to be relied upon by the Revenue which is a self-explanatory note to the provisions of Finance Act 2008 where Note No. 29 concerns amendment in respect of reassessment proceedings. It is meant to clarify the correct legislative intention in respect of the amendment relating to Section 151 which has been made applicable w.e.f 1st October, 1998. It has been stated that the legislative intent is very clear that the Joint Commissioner is only required to be satisfied on the reasons recorded by the Assessing Officer and no notice is required to be issued by him. Possibly this was necessitated as some pronouncements on this issue insisted upon the issuance of notice at the end of Joint Commissioner. Here, of course, that is neither the case nor insistence of the petitioner.
17.4 However, so as to aver such allegations of non-application of mind all that is desirable is that the Joint Commissioner should briefly state his reasons. However, only because he has nodded in favour of Assessing Officer by writing ‘yes’ to the reasons recorded and accorded permission for reopening of the assessment, the notice of reopening on that count alone cannot fail holding that the assumption of jurisdiction under Section 147 is invalid, if application of mind is demonstrable from the material on record. From the record, it emerges that the reasons recorded were placed before the Assistant Commissioner along with other details in prescribed format. It was only after perusing such details that the Assistant Commissioner agreed that it was a fit case for issuing notice under Section 148 of the Act. Thus, this is not a case where such permission can be stated to have been granted without application of mind. We are satisfied from the overall facts and circumstances that the provisions of the Act are duly complied with in the action of the Joint Commissioner.
17.5 Considering the main ground of challenge whether in the circumstances reflected in the reasons recorded would lead this Court to hold that there was no suppression on the part of the assessee in disclosing fully and truly all material facts. This aspect has two limbs – firstly, whether in fact there was a full and true disclosure on the part of the assessee, and secondly, whether from the material the Assessing Officer had with him, he in fact had formed a reason to believe that the income chargeable to tax had escaped the assessment.
17.6 The assessee at the time of original assessment in a scrutiny provided details of all the three companies. And as per the reasons recorded, the investment made by the assessee were funded by the companies which were found to be bogus. These details were culled out from the statement on oath given by the husband of the petitioner under Section 131(1)(a) on 8th February, 2013. The assessment as noted hereinabove was concluded on scrutiny on 1st July, 2008. Undoubtedly, the assessee provided details of companies since the investment was funded by such companies at the time of assessment. However, later on very existence of the companies was in doubt inasmuch as one Shri Rajesh Jain of Delhi and Shri Amrutlal of Mumbai were the persons through whom the husband of the petitioner was introduced to such companies and when whereabouts of these two persons were inquired, he had pleaded ignorance. The Assessing Officer, therefore, noted that the source of investment in such circumstances remained unexplained as the companies are found to be bogus and in the books of account of the assessee, such investments were not found and were squared off during the financial year itself.
17.7 To such last portion of reasons recored ie., absence of reflection of such investment in the books of account and the same having been squared off during the finance year itself has been rigorously challenged by the petitioner. It as contended that this is completely bereft of facts, and therefore assumption of jurisdiction should be held invalid.
17.8 In our mind, even if the assessee is in a position to point out that such investments were part of his books of account and were not squared off in the years itself, the far more vital in the reasons recorded is the aspect of the companies from whose fund investments were made in the Assessing Officer’s belief are bogus, such details had been culled out from the statement recored by none other than husband of the petitioner who also had stated that he had carried out the transactions in the name of his family members. It is not being disputed by the petitioner that her husband – Mr. Ashwin Jain who gave his statement was not truthful in so contending.
17.9 As held by the Apex Court in Phool Chand Bajrang Lal (supra) where transaction itself on the basis of subsequent information is found to be a bogus transaction, the Court held that mere disclosure of such transaction at the time of original assessment proceedings, cannot be said to be a disclosure of ‘full’ and ‘true’ facts and the Assessing Officer surely would have jurisdiction to reopen concluded assessment in such a case. The Apex Court also had observed in the said case that the Assessing Officer may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed, or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but is is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by him and further whether that material had any rational connection or a live link with the formation of the requisite belief .
18. In the instant case also, these observations and findings would have a direct bearing. The Assessing Officer, at the time of making original assessment though made an enquiry, could not have found by further inquiry or investigation whether such transactions were genuine or not. However, on the basis of subsequent informations, he arrived at such conclusion after satisfying both the conditions prescribed under Section 147 that the assessee failed to disclose fully and truly all material facts at the time of original assessment and therefore, the income chargeable to tax had escaped assessment. The Assessing Officer certainly would assume jurisdiction under Section 147.
19.2 Thus, where the information furnished is found to be false, there could not be possibly any objection to the notice under section 148. Till completion of scrutiny assessment, the information provided mentioned clearly that investments made by the petitioner were from the funds of the companies and therefore, there was no question of treating them as bogus. However, subsequently when an investigation, after completion of assessment under sub-section (3) of Section 143, the same is found to be bogus, notice under section 148 of the Act deserves to be held to valid. To a limited extent, this Court has looked into the conclusion arrived at by the Assessing Officer in examining whether there was any material available on the record for the Assessing Officer to form a requisite belief and whether such material had any rational link with the income that escaped assessment and from such scrutiny, we conclude that no inference is called for at this juncture. Proceedings of reassessment initiated by the Assessing Officer on the basis of subsequent information which is found to be relevant and specific and when the Assessing Officer after recording the reasons for formation of his belief that in the original assessment, the assessee failed to disclose fully and truly facts, and therefore, the income chargeable to tax to the extent of Rs. 33.90 lakh (rounded off) escaped assessment has correctly exercised jurisdiction provided under section 147, and therefore, this petition must fail with an observation that in the reassessment proceedings, nothing observed by this Court hereinabove shall come in the way of either side in putting forth their respective case and uninfluenced by such observations, the Revenue authorities shall decide the reassessment proceedings.
20. In the result, Special Civil Application fails. Notice discharged with no order as to costs.
This entry was posted in Section 147, Section 149, Section 151, Section 69 and tagged 363 ITR, Gujarat High Court, In favour of Revenue, notice for reassessment, reassessment of income.

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