Reopening based on borrowed satisfaction is invalid

Surani Steel Tubes Limited Vs ITO (Gujarat High Court)

High Court noted that the entire base for reopening assessment is on the premise that there was ‘information’ supplied by the Investigation Wing and the Assessing Officer has made cursorily reference to high value transaction of Rs.26,42,027/- as well as also referred to accommodation entry entered upon by the petitioner Company by way of bogus sales / purchases / fictitious loans etc. Thus, it appears that the reasons for reopening of the assessment in the case of petitioner Company for annual assessment year 2014-15/2015-16 by the Assessing Officer is based on the borrowed satisfaction and the Assessing Officer has not applied his independent mind to arrive at the conclusion that there was failure on the part of the assessee to disclose fully and truly all material facts.

In fact, the Assessing Officer is under obligation to arrive at such conclusion that the assessee has failed to disclose all material facts and has to form independent opinion resulting into “reason to believe” with regard to escapement of income chargeable to tax in case of the petitioner.

During the course of hearing, learned Senior Advocate for the Department has tried to improvise by referring to the original file of the Department to emphasize that there is tangible material on record to show that the petitioner Company has made purchase transaction of Rs.26,42,027/- and has availed accommodation entry by way of bogus sales / purchases / fictitious loans etc. with Disman Group of Company.

In our opinion, in absence of specific details as regards particulars of nature of transaction basic details of information, clarity with regard to name of person with whom such transaction has been entered into, goes to the very root of the matter. The sole object of providing reasons for reopening of the assessment is to prima facie supply the relevant material to the assessee to meet with his case and at the same time, it reflects the basic ingredients of “reason to believe” for Assessing Officer to assume the jurisdiction under Section 147 and 148 of the Income Tax Act. At the same time, such non-recording of specific details lead us to belief that without proper application of mind, the Assessing Officer has solely and mechanically relying upon the information received from Investigation Wing, has issued impugned notice. Thus we are not convinced with the manner in which satisfaction is arrived at by the respondent, as recorded in the reasons supplied to the petitioner Company, for assuming jurisdiction to reopen the assessment of relevant A.Y. 2014-15/2015-16.

In our opinion, the condition precedent for resorting to the reopening of assessment under Section 147 of the Act are not satisfied in the present case. In overall view of the matter, we are not convinced with regard to the satisfaction arrived at by the respondent Assessing Officer to make out the case for reopening of assessment under Section 147 of the Act for relevant A.Y. 2014- 15/2015-16.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. The petitioner herein has invoked extraordinary writ jurisdiction under Article 226 of the Constitution of India and has prayed for issuance of writ to quash and set aside the impugned notice dated 30.03.2021 (A.Y. 2015-16) and 31.03.2021 (A.Y. 2014-15) issued under Section 148 of the Income Tax Act, 1961 (for short “the Act”). The petitioner has also prayed for direction to stay the operation of said notice issued by the respondent Authority.

2. This Court had passed the following order on 14.09.2021 in Special Civil Application No.13245 of 2021:

“1. The challenge in this petition is made to the reopening of the income tax assessment of the petitioner for the A. Y. 2014- 15 under Section 148 of the Income-Tax Act, 1961 by challenging the notice dated 31st March, 2021 with the following prayers:

“(a) quash and set aside the impugned notice at Ann exure-A to this petition;

(b) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at Annexure-A to this petition and stay the further proceedings for the Assessment Year 2014-1 5;

(c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition.”

2. According to the petitioner, the reopening is beyond the period of four years where there is a requirement for the Assessing Officer to form a reason that the income chargeable to the tax has escaped assessment. The reasons supplied to the assessee are very vague. The scrutiny assessment has taken place at earlier point of time and in absence of any new material or the source from which he has formed this belief also is missing. This is nothing according to the petitioner but the change of opinion of the Assessing Officer.

3. We have heard Mr. Tushar P. Hemani, learned Senior Advocate assisted by Ms. Vaibhavi Parikh, learned advocate for the petitioner, who has drawn the attention of ours to the order dated 14th July, 2021 rejecting the objections against the reopening towards that none of the factual aspect has been dealt with or the aspect of the detailed order has been passed. He also has further urged that it is a borrowed satisfaction as could be culled-out from the material.

4. Issue Notice returnable on 28 th September, 2021. On a query raised by the Court, it is noticed that after the order dated 14th July, 2021, no notice so far has been issued on the part of the Assessing Officer. Before 28th September, 2021 if any notice is received, the learned advocate for the petitioner shall be at liberty to make a request for early hearing of the matter. Without insisting for any Civil Application for the said purpose, the office shall place the matter.”

3. At the outset, we clarify that in both these matters, the petitioner – assessee is same, in fact, the record reveals that both these matters have identical or almost similar facts and similar question of law is involved and therefore, we treat Special Civil Application No.13245 of 2021 as the lead matter. Since the challenge relates to notice issued u/s. 148 of the act upon the same assessee Company of two assessment years, we decide both these matters by this common oral order.

4. Before dealing with the controversy involved, it would be appropriate to reproduce the facts of the case summarized as under:

4.1 The petitioner Company is incorporated under the Companies Act and is engaged in the business of manufacturing of ERW-MS pipe. The petitioner during the course of its business, has made several purchases, sales and had also at the same time availed certain loans, which is reflected in annual account of the petitioner.

4.2 The petitioner Company had regularly filed return of income at the end of each relevant assessment year thereby declaring its total income. It is contended by the petitioner that during the financial year 201 3-14, the relevant assessment year 2014-15 was selected for scrutiny assessment whereby Assessing Officer had issued notice dated 15.06.2015 in exercise of power conferred under Section 148(1) of the Income Tax Act, thereby calling upon the petitioner Company to furnish various details which includes (i) the details related to copy of return of income provided and profit and loss account and balance sheet; (ii) mismatch in sales turnover reported in Audit Report; and (iii) the details of unsecured loans along with documentary evidences; (iv) details of purchase and sales exceeding Rs. One Lakh from a single party and (v) the details of interest received and interest paid by the petitioner.

4.3 In response to the aforesaid notice dated 15.06.2016, the petitioner Company had filed detailed reply dated 23.06.2016, whereby the petitioner Company had responded to almost all the issues raised in the notice dated 15.06.2016.

4.4 It is the case of the petitioner that the petitioner Company once again furnished various other details and information vide letter dated 15.07.2016, whereby the petitioner Company had also submitted relevant documents in support of the issues raised.

4.5 However, subsequently, the Assessing Officer had issued notice under Section 142(1) of the said Act dated 04.11.2016 thereby calling upon the petitioner Company to furnish further documentary evidence, more particularly, with respect to unsecured loans with identity proof with a copy of return of income filed as well as confirmation of sundry creditors duly signed along with details of PAN No. The Assessing Officer had also called upon the petitioner Company to furnish the bank statements and details as well as details of assets and to produce book of accounts along with bills / vouchers in response to the aforesaid notice dated 04.11.2016. The petitioner vide letter dated 15.11.2016, had drawn the attention of the Assessing Officer was drawn to the fact that the relevant documents are already produced on earlier occasion and had further placed on record the details as sought for, more particularly, with regard to the unsecured loans along with identity proof of the parties from whom unsecured loans were availed and had also placed on record the details of PAN No. of the creditors outstanding as on 31.03.2014.

4.6 Having considered the aforesaid material as well as after hearing the assessee, the Assessing Officer had passed assessment order under Section 143(3) of the Income Tax Act, 1961, vide order dated 16.11.2016 and the total income of the assessee was determined at Rs. 85,440/-, whereby the Assessing Officer had disallowed the expenses claimed by the petitioner Company and at the same time, was added to be total income of the assessee treating the same has incurred for non business purpose.

4.7 Though the case of the petitioner Company for the relevant assessment year was subjected to the scrutiny and the order was passed under Section 143(3) of the Income Tax Act. The respondent Authority for the reasons recorded in the notice issued under Section 143(2) read with Section 147 of the Income Tax Act, found it appropriate to reopen the assessment in the case of the petitioner Company for A.Y. 2014-15, by issuing notice dated 04.05.2021.

4.8 Aforesaid notice under Section 143(2) read with Section 147 of the Income Tax Act was duly served upon the petitioner Company and in response to the reopening notice, the petitioner Company had lodged the objections vide letter dated 27.05.2021, whereby the attention of the Assessing Officer as regards the allegations of accommodation entries by way of “bogus sales / purchaser/ fictitious loans” were sought to be absolutely vague, scanty and non-specific inasmuch as no basic details with regard to the information received for “nature of transaction and clarity” as regard to the “name of the person” with regard to the so called transaction was reflected in the impugned notice of reopening.

4.9 The Assessing Officer after taking into consideration the aforesaid objection raised by the petitioner Company against reopening, had rejected the said objection vide order dated 14.07.2021 without disclosing the basic detail with regard to the information received by the investigating agency, nature of transaction relating to the escapement of income otherwise chargeable to tax and clarity as regards the name of the person with whom said transaction was related.

5. Learned senior advocate Mr. Tushar Himani appearing with learned advocate Ms. Vaibhavi Parikh for the petitioner, has argued that the Assessing Officer has broadly relied upon “information” provided by the Investigation Wing, who have found that the assessee has entered in financial transaction and has made high value transaction of Rs. 26,42,027/- and has availed accommodation entry by way of bogus sales / purchases / fictitious loans etc., however, on detailed reading of reasons for reopening assigned in the notice dated 04.05.2021 as well as the order rejecting the objection against reopening dated 14.07.2021 the same is silent in respect to the basic details as to the person with whom said transactions of the petitioner Company have been found to be dubious or with regard to the “basic details of information received” as well as with regard to the “nature of transaction”. Mr. Hemani vehemently submitted that the reasons supplied by the Assessing Officer are vague, which is further reflected from the impugned order of the Assessing Officer rejecting the objections wherein none of the factual aspect as raised by the petitioner has been dealt with by the Assessing Officer. It is further submitted that the reopening assessment is based on “borrowed satisfaction” as can be reflected from the reasons supplied as well as bare reading of the order passed by the Assessing Officer rejecting the objection. Learned senior advocate Mr. Himani has further relied upon the decision of this Court in the case of Kantibhai Dharamshibhai Narola Vs. Assistant Commissioner of Income Tax, Ward 3(2)(4) reported in [2021] 125 taxmann.com 348 (Gujarat). Learned senior advocate has further drawn attention of this Court with regard to the law culled out by this Court in the case of reopening assessment under Section 147 of the Act as produced in para 32 reads as under:

“32. The law as regards the reopening of the assessment under Section 147 of the Act 1961 is well-settled.

(i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law.

(ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage.

(iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment.

(iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied-a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid.

(v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves.

(vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing.

(vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically.

(viii) If the original assessment is processed under Section 143(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment.

(ix) In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two conditions are required to be satisfied;

(i) The Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment;

(ii) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose.

(x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria.

(xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment.

(xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression “tangible material” does not mean the material alien to the original record.

(xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the “reasons to believe”.

(xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression “reason to believe” appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require.

(xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a “bona fide” belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions.

(xvi) The concept of “change of opinion” has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment.

(xvii) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assesee’s profits have escaped assessment or have been assessed at a low rate. However, nothing would preclude the Income Tax Officer from conducting any formal inquiry under Section 133(6) of the Act before proceeding for reassessment under Section 147 of the Act.

(xviii) The “full and true” disclosure of the material facts would not include that material, which is to be used for testing the veracity of the particulars mentioned in the return. All such facts would be expected to be elicited by the Assessing Officer during the course of the assessment. The disclosure required only reference to those material facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries.

(xix) The word “information” in Section 147 means “instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147.

(xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the A.O. regarding the escapement of the income but then, while recording the reasons for the belief formed, the A.O. is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd. ‘s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court.”

Thus, it was submitted that the Assessing Officer is bound to record the reasons to support the assumption of the jurisdiction and he cannot record only some of the reasons and keep the others upto his sleeves to reserve, if the action is challenged in the Court of law. It is further submitted that the tangible material which forms the basis for the belief that income has escaped assessment must be evident from a bare reading of the reasons supplied. It was further submitted that even in the case of the report of Investigation Wing, the Assessing Officer is under obligation to demonstrate some link between the tangible material with the income having escaped assessment which should be reflected in the reasons so supplied. In absence of the aforesaid settled legal procedure being not followed, it can be presumed that the respondent Authority has no valid grounds to assume the jurisdiction for reopening.

6. Per contra, learned Senior Advocate Mr. Manish Bhatt assisted by learned advocate Mr. Karan Sanghani for the respondents has referred to and relied upon the affidavit-in-reply filed by the Income Tax Officer, Ward -1, Gandhinagar and has vehemently objected the grant of any relief so prayed for by the petitioner Company. Principally responding to the aforesaid arguments canvassed by the learned advocate for the petitioner Company, has submitted that the respondent has received specific information from Investigating agency, more particularly with regard to the assessee Company wherein it was reported that during the investigation whereby search and survey operation was carried out at the business premise of one Dishman Group of Company. The present petitioner had entered into dubious transaction for the amount of Rs.26,42,027/- and had availed accommodation entry by way of bogus sales / purchases / fictitious loans. It was further submitted that pursuant to the outcome of such inquiry and upon detailed analysis of the new materials collected during such search and survey, it transpired that the transactions related to the assessee Company though were not conclusively proved but the Assessing Officer not only after considering the aforesaid information provided the Investigation Wing but upon appreciation of material available on record, was satisfied that the said amount of Rs.26,42,027/- was required to be brought under the taxnet. Learned senior advocate for the Revenue Department has further tried to refer to and relied upon the original file records in support of the aforesaid submission, however, aforesaid stand of the Revenue Department was never forming part of any reasons supplied or the order disposing the objections passed by the Assessing Officer neither is forming part of the affidavit in reply placed on record. This Court when inquired from the learned senior advocate about the same, learned senior advocate Mr. Bhatt has fairly conceded that the the same being papers related to investigation carried out by the investigating agency are not placed on record, however, the same may be permitted to be perused by the petitioner Company, if Court directs. It is further submitted by the learned senior advocate for the Department that though there is no specific reference to the name of Disman Group of Company nor there being any reference to any particular dubious transaction as submitted by the respondent Authority in the case of the petitioner Company, the original file of the Assessing Officer reflects that the Assessing Officer has assumed jurisdiction for reopening the assessment under Section 147 of the Income Tax Act only after analyzing the information supplied by the Investigation Wing as well as after appreciation of tangible material which is forming part of the original record. It is further submitted that though the reasons supplied does not disclose specific material and evidence, there exist sufficient material on original file for the Assessing Officer to satisfy himself on the existence of the condition precedent i.e. “reason to believe” to reach at the conclusion to reopen the assessment. Even otherwise at the stage of assumption, all the aspects of the petitioner Company shall be verified and after giving sufficient opportunity to the petitioner Company, case against the petitioner Company shall be finalized. Thus, it was submitted that the respondent is justified in its action and has further prayed to summarily dismiss the petition.

7. Having heard the learned advocates appearing for the respective parties and having perused the material placed on record. The only question, which arises for consideration of this Court is whether the Assessing Officer was justified in issuing the impugned notices dated 30.03.2021/31.03.201 in reopening the assessment in exercise of powers conferred under Section 147 of the Income Tax Act merely on the basis of information required from Investigation Wing and that too, based on search and survey carried out at premises of 3rd party?

8. The powers to reopen completed assessment under Section 147 of the Income Tax Act, 1961 is conferred upon the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for Assessment Year. A bare reading of Section 147 of the Income Tax Act lays down the condition precedent of “reason to believe” of the Assessing Officer to invoke the power under Section 147. It is well settled position of law that such belief that the income has escaped assessment has to be on the sole reasonable belief of the Assessing Officer himself and cannot be an opinion and / or belief of some other authority. This Court as well as the Supreme Court have on number of occasions held that a third party information is only an “information” and does not constitute “reason to believe” until and unless the third party information is subject to investigation and on the basis thereof, the Assessing Officer records independent reasons before issuing notice under Section 148 of the Act. Thus, it is expected of the Assessing Officer that though the information / material is received from other sources, the Assessing Officer is required to consider the material on record in case of assessee by applying his independent mind and upon appreciation of such information /material on record, the Assessing Officer is further expected to form his independent opinion to arrive at satisfaction which constitutes “reason to believe” that income of the assessee, which otherwise was chargeable to tax has escaped the assessment for any assessment year. It is equally established principle of law that such reason to believe of the assessing authority, who disclose that the Authority alone had applied his independent mind, has to record his satisfaction and further such satisfaction has to be “independent” and not borrowed or a dictated satisfaction.

9. In the facts of the present case, the assessee was called upon to show cause as to why the income chargeable to tax for A.Y. 2014-15/A.Y. 2015-16 should not be reopened in terms of power conferred upon Assessing Officer under Section 148 read with Section 147 of the Income Tax Act.

It is not in dispute that the assessment year under reconsideration are assessment years 2014-15 / 2015-16 and the impugned notice are dated 31.03.2021/30.03.2021, which is issued beyond the period of 4 years. In fact, the scrutiny assessment under Section 143(3) of the Act was made on 16.11.2016 determining the total income amounting to Rs.85,440/-. Attention of the respondent Assessing Officer of the aforesaid fact has been drawn by the petitioner assessee by filing objection, however, the Assessing Officer has taken shield off “information” supplied by the Investigation Wing to form “reason to believe” during relevant assessment year. In particular, it is recorded by the Assessing Officer that the assessee has entered in financial transaction and made high value transaction of Rs.26,42,027/- and availed accommodation entry by way of bogus sales / purchases/ fictitious loan, which has resulted into escapement of income and has thereby rejected the objection raised by the assessee against reopening of assessment. This Court has closely gone through the orders rejecting the objection against reassessment as well as has also examined the reasons recorded by the Assessing Officer for reopening of the assessment in the case of the petitioner for AY 2014-15/A.Y. 2015-16. The reasons recorded by the Assessing Officer in so far as A.Y. 2014-15 is concerned are reproduced as under:

“1. The assessee is an Company. The assessee has e-filed his return of income for A.Y. 2014-15 on 28.11.2014 declaring current year loss of Rs.1,30,17.641/-. The assessee’s case has selected / pushed through Insight Portal for reopening of assessment u/s. 147 of the Income Tax Act, 1961 for F.Y. 2013-14 relevant to A.Y. 2014-1 5.

2. In this case information has been received wherein it has been stated that the assessee has made high value transaction of RS .26,42,027/- availed accommodation entries by way of bogus sales/purchases/fictitious loans etc.

3. An information was received that during the year under consideration as per details available on records, it is noticed that the assessee has made Purchase transactions of Rs.26,42,027/- and availed accommodation entries by way of bogus sales/purchases/fictitious loans etc.

4. Analyzing of the information, it is seen that during the investigation by investigation wing found that the assessee has made transaction of Rs.26,42,027/- and availed accommodation entries by way of bogus sales/purchases/fictitious loans etc. As a outcome of enquiry/ perusal and analysis of details available on records, it is noticed that the genuineness of the transaction is not conclusively proved. After considering the materials available on records, I am satisfied that the said amount of Rs.26,42,027/- is required to be brought under the tax net.

5. From the information received, it is noticed that during the F.Y. 2013-14 relevant to A.Y. 2014-1 5, the assessee has made transaction of Rs.26,42,027/- and availed accommodation entries by way of bogus sales/purchases/ fictitious loans etc.

6. As per the information, it is seen that during F.Y. 2013-14 relevant A.Y. 2014-15, the assessee has made transaction of RS.26,42,027/- and availed accommodation entries by way of bogus sales/purchases/fictitious loans etc. In view of the above, I have reason to believe that the income chargeable to tax to the extent of More than 1 lakh for the year under reference has escaped the assessment within the meaning to section explanation 2(a) of 147 of the I.T. Act, 1961. I am, therefore, satisfied that the above assessee has not fully and truly disclosed his income for the assessment under the provisions of Section 147 of the Income Tax Act, 1961.

7. No information of assets located outside India is available.

8. In this case a return of income was filed for the year under consideration and scrutiny assessment u/s. 143(3) of the Act was made on 16.11.2016 determining the total income amounting to Rs.85,440/-.”

10. This Court has also taken into consideration the affidavit-in­reply filed by the Income Tax Officer, Ward -1, Gandhinagar. On appreciation of contents of the same, we could note that the entire base for reopening assessment is on the premise that there was “information” supplied by the Investigation Wing and the Assessing Officer has made cursorily reference to high value transaction of Rs.26,42,027/- as well as also referred to accommodation entry entered upon by the petitioner Company by way of bogus sales / purchases / fictitious loans etc. Thus, it appears that the reasons for reopening of the assessment in the case of petitioner Company for annual assessment year 2014-15/2015-16 by the Assessing Officer is based on the borrowed satisfaction and the Assessing Officer has not applied his independent mind to arrive at the conclusion that there was failure on the part of the assessee to disclose fully and truly all material facts. In fact, the Assessing Officer is under obligation to arrive at such conclusion that the assessee has failed to disclose all material facts and has to form independent opinion resulting into “reason to believe” with regard to escapement of income chargeable to tax in case of the petitioner. During the course of hearing, learned Senior Advocate for the Department has tried to improvise by referring to the original file of the Department to emphasize that there is tangible material on record to show that the petitioner Company has made purchase transaction of Rs.26,42,027/- and has availed accommodation entry by way of bogus sales / purchases / fictitious loans etc. with Disman Group of Company. In our opinion, in absence of specific details as regards particulars of nature of transaction basic details of information, clarity with regard to name of person with whom such transaction has been entered into, goes to the very root of the matter. The sole object of providing reasons for reopening of the assessment is to prima facie supply the relevant material to the assessee to meet with his case and at the same time, it reflects the basic ingredients of “reason to believe” for Assessing Officer to assume the jurisdiction under Section 147 and 148 of the Income Tax Act. At the same time, such non-recording of specific details lead us to belief that without proper application of mind, the Assessing Officer has solely and mechanically relying upon the information received from Investigation Wing, has issued impugned notice. Thus we are not convinced with the manner in which satisfaction is arrived at by the respondent, as recorded in the reasons supplied to the petitioner Company, for assuming jurisdiction to reopen the assessment of relevant A.Y. 2014-15/2015-16.

11. In our opinion, the condition precedent for resorting to the reopening of assessment under Section 147 of the Act are not satisfied in the present case. In overall view of the matter, we are not convinced with regard to the satisfaction arrived at by the respondent Assessing Officer to make out the case for reopening of assessment under Section 147 of the Act for relevant A.Y. 2014- 15/2015-16.