JUDGMENT judgment of court was delivered by S. C. Dharmadhikari J.-On earlier occasion, we had heard both sides extensively and referred to pleadings. matter was placed today for passing orders. Rule. respondents waive service. Since extensive arguments were canvassed and pleadings are complete, that by consent of both sides, we make rule returnable forthwith. By this writ petition under article 226 of Constitution of India, petitioner prays for issuance of writ of certiorari or any other appropriate writ, order or direction calling for records of petitioner's case pertaining to notice dated January 24, 2014, issued by respondent No. 2 invoking section 148 of Income-tax Act, 1961 (for short "the IT Act") and order dated January 21, 2015 (annexure B) and further relief is that upon scrutiny thereof, this court should quash and set aside same. other relief is that respondents be restrained and prohibited from proceeding in furtherance of this notice and impugned order and reassessing alleged income escaping assessment. We are required to refer to very few facts to appreciate arguments of both sides. petitioner is private limited company having its registered office at address mentioned in cause title. For assessment year 2010-11, return of income was filed on September 15, 2010, declaring business loss of Rs. 1,61,793 under section 28 of Income-tax Act and booking loss amounting to Rs. 1,22,95,221 under section 115JB of Income-tax Act. relevant and material aspect of this return is that in it Rs. 1,21,33,429 was shown as book value of shares transferred by way of gift. case of petitioner was that in terms of memorandum of association of petitioner, it gifted 9,39,980 equity shares of United Phosphorus Ltd. and 93,400 shares of Uniphos Enterprises Ltd. Both being companies, in which public are substantially interested. These shares were transferred to one M/s. Nerka Chemicals P. Ltd. There was transfer agreement dated February 26, 2010. book value of said shares was Rs. 1,21,33,429. As consequence of gift, this sum was debited to profit and loss account for year ended March 31, 2010. However, petitioner's case is that book value of these shares was added back to total income and not claimed as deduction while computing income chargeable under head "Profits and gains of business or profession". petitioner is relying upon point No. 23 of column of schedule BP at page 13 of return of income. This return was initially processed under section 143(1) of Income-tax Act. Assessing Officer accepted loss computed by petitioner in return. There was communication dated February 24, 2011. However, no regular assessment order was made under section 143(3) of Income-tax Act. Subsequently, on January 28, 2014, notice under section 148 of Income-tax Act proposing to reassess income of petitioner, for assessment year 2010-11, was issued alleging that income has escaped assessment within meaning of section 147 of Income-tax Act. petitioner addressed letter on February 3, 2014, requesting second respondent to provide reasons recorded and which led to issuance of notice. On April 22, 2014, communication was addressed by second respondent to petitioner, under which, reasons were communicated. Annexure G is copy of this letter. claim of petitioner is that no opportunity to raise objections came to be provided and notice under section 143(2) of Income-tax Act dated May 2, 2014, calling upon petitioner to furnish information and attend office of second respondent, was issued. petitioner filed detailed objections and pointed out that income accrued to it as consequence of gift cannot be termed as transfer within meaning of section 47(iii) of Income-tax Act. petitioner objected to reopening of assessment by pointing out that there has been no understatement of income nor is there any claim of excessive loss, deduction by which it can be alleged that there is income which is chargeable to tax escaping assessment. In circumstances, it prayed that proceedings be dropped. petitioner submitted that without these objections being dealt with, dropped. petitioner submitted that without these objections being dealt with, notice under section 142(1) of Income-tax Act dated November 20, 2014, was issued, calling upon petitioner to submit books of account and other documents. That is in support of return of income. Some information was also called for. Subsequently, on January 21, 2015, impugned order came to be passed rejecting objections. Mr. Pardiwalla, learned senior counsel appearing for petitioner, submits that respondents could not have invoked this power of reopening assessment on mere change of opinion. Apart from that, he invited our attention to contents of notice and submits that notice does not indicate any reasons and for belief that income chargeable to tax for assessment year 2010-11 has escaped assessment within meaning of section 147 of Income-tax Act. Mr. Pardiwalla would submit that purported reasons, copy of which is at page 89 of paper book, are nothing but reiteration of position emerging from return. It is clear from reasons supplied that return of income filed by assessee for assessment year 2009-10 was verified. In that, long-term capital gains from investment in shares amounting to Rs. 1,54,81,620 and dividend income of Rs. 9,74,420 was disclosed. However, for assessment year 2010-11, assessee has shown long-term capital gain of Rs. 33,48,191 and dividend income of Rs. 14,44,763. It also showed sum of Rs. 1,21,33,429 as gift. Mr. Pardiwalla states that this is nothing but reiteration of figures and statements made in return of income. Mr. Pardiwalla then submits that Department-Revenue proceeded on footing that assessee had gifted these shares without any consideration. All that reasons supplied indicate is that Revenue wants to verify this fact and in terms of section 47(iii) of Income-tax Act. It also wants to verify whether value of these shares has been computed on market rate as on date of such transfer. Mr. Pardiwalla submits that this cannot be termed as reasons for belief and enabling reopening of assessment. mere communication and asking for some clarification so also proposing verification of what has been already supplied and is on record cannot be enough to resort to powers under section 147 of Income-tax Act. Mr. Pardiwalla submits that principal condition for invoking section 147 of Income-tax Act is that during assessment year in question income chargeable to tax has escaped assessment. This principal condition is not satisfied and it is apparent from reading of these reasons. If respondents failed to indicate as to how acceptance of assessee's version on gift without any consideration, results in any income chargeable to tax escaping assessment then they could not have resorted to above power. There is no reason to believe that any income chargeable to tax has escaped assessment for respondents themselves refer to section 47(iii) of Income-tax Act. In circumstances, attempt of Revenue should not be sustained. Mr. Pardiwalla places strong reliance upon two Division Bench judgments of this court in case of CIT v. Smt. Maniben Valji Shah reported in [2006] 283 ITR 453 (Bom) and Prashant S. Joshi v. ITO reported in [2010] 324 ITR 154 (Bom). Our attention is also invited to order passed in Writ Petition No. 11911 of 2013 on March 25, 2014. In such circumstances, Mr. Pardiwalla would submit that writ petition be allowed, as issuance of notice is not in accordance with law. notice is ex facie bad in law and proceedings are wholly without jurisdiction. petitioner there should not be forced to go through process and await outcome of reassessment. Mr. Pardiwalla would submit that once principal condition is not satisfied then at threshold notice be quashed. On other hand, Mr. Vimal Gupta, learned senior counsel appearing for Department-respondents, would submit that there is no merit in this writ petition. In affidavit-in-reply as also prior thereto in communications referred to in writ petition, it has been pointed out that no regular assessment order was made under section 143(3) of Income-tax Act. Intimation issued under section 143(1) cannot be treated as order of assessment. Once intimation was received from Assistant Commissioner of Income-tax, Central Circle 38, Mumbai, by letter dated December 19, 2003, that petitioner had transferred 10,33,380 shares, whose market value on date of transfer was 14,86,85,700, without consideration to M/s. Nerka Chemicals Ltd. by way of transfer deed dated February 26, 2010, then balance-sheet of petitioner transfer deed dated February 26, 2010, then balance-sheet of petitioner was scrutinised. On scrutiny and perusal thereof and which is of year ended March 31, 2009, and March 31, 2010, it was noticed that long-term investment of M/s. Nivi Trading Ltd. had reduced. assessee debited amount of Rs. 1,21,33,429 as gift in its profit and loss account. Thus, these facts cumulatively prove that assessee has transferred capital asset without any consideration and, hence, avoided resultant capital gains culminating in escapement of income. Thereafter, procedural formalities and of obtaining approval, recording of satisfaction were completed and assessment was reopened. In response to this notice under section 148 of Income-tax Act, petitioner, by its letter dated February 3, 2014, requested Assessing Officer to treat original return of income filed as return of income filed under section 147 of Income-tax Act and also made request to Assessing Officer to provide reasons for reopening assessment. Mr. Gupta would, therefore, submit that objections raised by petitioner to reopening could not have been accepted and have been rightly rejected or disallowed. so-called gift made by petitioner is nothing but transaction for purpose of avoiding capital gains tax. It is common ground that transferee, M/s. Nerka Chemicals P. Ltd., is also private limited company. Thus, this transfer was nothing but avoiding paying tax on income which is chargeable as such. That is why assessment was reopened. Mr. Gupta relied strongly upon language of section 147 and prior thereto provisions of sections 142 and 143 to submit that once there has been no assessment in this case then question of same being reopened really does not arise. Without prejudice and in alternative, it is submitted that income chargeable to tax has escaped assessment and that is factor on which belief is based. reasons supplied fully disclose as to how income chargeable to tax shall also be deemed to be escaping assessment. In this case, return of income was furnished by assessee but no assessment has been made and it is noticed by Assessing Officer that assessee has understated income. Therefore, reopening of assessment was fully permissible. Mr. Gupta, therefore, justified issuance of notice and by relying upon law laid down by hon'ble Supreme Court in case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. reported in [2007] 291 ITR 500 (SC). He would, therefore, submit that writ petition be dismissed, as petitioner can appear before Assessing Officer; produce requisite material and in event adverse order is passed, challenge it in accordance with law. At this stage, this court should not interfere. With assistance of learned senior counsel appearing for both sides, we have perused writ petition, relevant annexures and decisions brought to our notice. In judgment of hon'ble Supreme Court, which has been relied upon by Mr. Gupta Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra), hon'ble Supreme Court was concerned with case where private limited company filed its return of income for assessment year 2001-02. That was filed on October 30, 2001, declaring loss at certain figure. return was processed under section 143(1) of Income-tax Act and loss returned was accepted. notice under section 148 of Income-tax Act was issued on ground that claim of bad debts as expenditure was not acceptable. return of income was filed under protest declaring loss at same figure as in original return by assessee. He sought for copy of reasons recorded and they were supplied to assessee in November, 2004. assessee raised various objections, both on jurisdiction and merits of reasons recorded. These objections were disposed of and because they were rejected that notice under section 148 of Income-tax Act was challenged by assessee before Gujarat High Court. said writ petition was allowed by Division Bench of that High Court and that is why Revenue approached hon'ble Supreme Court in appeal. argument of both sides and reliance upon case law have been noted in judgment of hon'ble Supreme Court up to paragraph 8. In paragraph 9, section 143(1) as stood before and after amendment with effect from June 1, 1999, and sections 147 and 148 (after amendment) of Income- tax Act have been reproduced together with Explanations. In paragraphs 12 and 13, hon'ble Supreme Court has held as under (page 508 of 291 ITR): "What were permissible under first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical error in return, accounts or documents accompanying return, (ii) loss carried forward, deduction, allowance or relief, which was prima facie admissible on basis of information available in return but not claimed in return, and similarly (iii) those claims which were on basis of information available in return, prima facie inadmissible, were to be rectified/allowed/disallowed. What was permissible was correction of errors apparent on basis of documents accompanying return. Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, Assessing Officer had no power to go behind return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief. One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to provisions of section 143(2). Though technically intimation issued was deemed to be demand notice issued under section 156, that did not per se preclude right of Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between period from April 1, 1989, and March 31, 1998, second proviso to section 143(1)(a), required that where adjustments were made under first proviso to section 143(1) (a), intimation had to be sent to assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, second proviso to section 143(1)(a) was substituted by Finance Act, 1997, which was operative till June 1, 1999. requirement was that intimation was to be sent to assessee whether or not any adjustment had been made under first proviso to section 143(1) and notwithstanding that no tax or interest was found due from assessee concerned. Between April 1, 1998, and May 31, 1999, sending of intimation under section 143(1)(a) was mandatory. Thus, legislative intent is very clear from use of word'intimation' as substituted for'assessment' that two different concepts emerged. While making assessment, Assessing Officer is free to make any addition after grant of opportunity to assessee. By making adjustments under first proviso to section 143(1)(a), no addition which is impermissible by information given in return could be made by Assessing Officer. reason is that under section 143(1)(a) no opportunity is granted to assessee and Assessing Officer proceeds on his opinion on basis of return filed by assessee. very fact that no opportunity of being heard is given under section 143(1)(a) indicates that Assessing Officer has to proceed accepting return and making permissible adjustments only. As result of insertion of Explanation to section 143 by Finance (No. 2) Act of 1991 with effect from October 1, 1991, and subsequently with effect from June 1, 1994, by Finance Act, 1994, and ultimately omitted with effect from June 1, 1999, by Explanation as introduced by Finance (No. 2) Act of 1991 intimation sent to assessee under section 143(1)(a) was deemed to be order for purposes of section 246 between June 1, 1994, and May 31, 1999, and under section 264 between October 1, 1991, and May 31, 1999. It is to be noted that expressions'intimation' and'assessment order' have been used at different places. contextual difference between two expressions has to be understood in context expressions are used.'Assessment' is used as meaning sometimes'the computation of income', sometimes 'the determination of amount of tax payable' and sometimes'the whole procedure laid down in Act for imposing liability upon taxpayer'. In scheme of things, as noted above, intimation under section 143(1)(a) cannot be treated to be order of assessment. distinction is also well brought out by statutory provisions as they stood at different points of time. Under section 143(1)(a), as it stood prior to April 1, 1989, Assessing Officer had to pass assessment order if he decided to accept return, but under amended provision, requirement of passing of assessment order has been dispensed with and instead intimation is required to be sent. Various circulars sent by Central Board of Direct Taxes spell out intent of Legislature, i.e., to minimise Departmental work to scrutinise each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D. K. Jain J.) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under first proviso to newly substituted section 143(1), with effect from June 1, 1999, except as provided in provision itself, acknowledgment of return shall be deemed to be intimation under section 143(1) where (a) either no sum is payable by assessee, or (b) no refund is due to him. It is significant that acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any'assessment' is done by them? reply is emphatic'no'. intimation under section 143(1)(a) was deemed to be notice of demand under section 156, for apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in intimation became permissible. And nothing more can be inferred from deeming provision. Therefore, there being no assessment under section 143(1)(a), question of change of opinion, as contended, does not arise." hon'ble Supreme Court thus held that section 147 authorises and permits Assessing Officer to assess or reassess income chargeable to tax, if he has reason to believe that income chargeable to tax has escaped assessment. word "reason" in phrase "reason to believe" would mean cause or justification. If Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. expression cannot be read to mean that Assessing Officer should have finally ascertained fact by legal evidence or conclusion. Thus, at that stage, what is required is "reason to believe" but not established fact of escapement of income. At stage of issuance of notice, only question is whether there was relevant material on which reasonable person could have formed requisite belief. Whether materials would conclusively prove escapement is not concern at that stage. substantive satisfaction in that case of Assessing Officer was, therefore, wrongly interfered with by Gujarat High Court is view taken by hon'ble Supreme Court. All these legal principles are undisputed. They go to show, as Mr. Gupta emphasises, that there should be reason to believe that in relevant assessment year income chargeable to tax has escaped assessment. We are of view that in present case, reasons recorded fall short of this test. There is no dispute that return of income was filed by petitionerassessee. return of income so filed could have been subjected to verification and scrutiny and in terms of applicable law and sections in Income-tax Act, 1961, itself. However, if this notice has been issued in Income-tax Act, 1961, itself. However, if this notice has been issued in present case and on footing that income chargeable to tax has escaped assessment during course of assessment proceedings then we would not go by stand taken by Revenue and on affidavit and reiterated by Mr. Gupta. It is too late now to urge that there was no assessment and, therefore, no question arises of reopening thereof. In light of language of notice itself, it would not be proper for us and to permit Revenue to raise such plea. notice impugned in this case reads as under: "Notice under section 148 of Income-tax Act, 1961 No. ITO 7(1)(1)/148/2013-14 Office of Income-tax Officer, Ward 7(1)(1), Room No. 670, Aayakar Bhavan, M. K. Road, Mumbai - 400 020 Date 24-1-2014 To, Principal Officer, M/s. Nivi Trading Ltd. 4th Floor, Ready Money Terrace, 167, Dr. A. B. Road, Mumbai - 400 018. PAN: AAACN2703L Whereas I have reason to believe that your income in respect of which you are assessable chargeable to tax for assessment year 2010-11 has escaped assessment within meaning of section 147 of Income-tax Act, 1961. I, therefore, propose to assess for said assessment year and I hereby require you to deliver to me within 30 days from date of service of this notice, return in prescribed form of your income in respect of which you are assessable for said assessment year. Tanvi S. Savant, Income-tax Officer 7(1)(1), Mumbai." When this was objected to by petitioner-assessee and sought reasons, what petitioner was provided with are reasons and which read as under: "Reasons for reopening under section 147 in case of M/s. Nivi Trading Ltd. assessment year 2010-11 It is verified from return of income filed by assessee for assessment year 2009-10 that it had shown LTCG from investments in shares amounting to Rs. 1,54,81,620 and had shown dividend of Rs. 9,74,420. During assessment year 2010-11, assessee had shown LTCG of Rs. 33,48,191 and dividend income of Rs. 14,44,763 and shown Rs. 1,21,33,429 as gift. Hence, it is seen that assessee had gifted these shares without any consideration. This fact needs to be verified as per section 47(iii) of Income- tax Act. Also it has to be verified whether value of these shares have been computed on market rate as on date of such transfer. Hence, I have reason to believe that income chargeable to tax amounting to Rs. 1,21,33,429 as per provision under section 147 of Act has escaped assessment in this case for assessment year 2010-11. Issue notice under section 148 of Income-tax Act. Dated: 24-1-2014 Tanvi S. Savant, Income-tax Officer 7(1)(1), Mumbai." In light of this factual position, it would not be proper for us to permit Revenue to take contrary stand. We are of opinion that in present case, contents of notice as reproduced above and reasons recorded, objections and order rejecting them are enough to turn down first submission of Mr. Gupta. In so far as second aspect is concerned and which has really arisen for our determination and consideration, we find that return of income was filed. There was processing and verification thereof. In return of income and on own showing of respondents, on its verification, long-term capital gains and dividend income in sum came to be disclosed and equally another sum (Rs. 1,21,33,429) as gift. Revenue proceeds on footing that these shares were gifted without consideration. It is this fact which it wants to verify and particularly whether value of these shares has been computed on market value. petitioner objected to this and pointed out that all material facts were disclosed truly and fully. All amounts, as reflecting in return, were set out and with explanations. This is nothing but version given by petitioner that no income accrued or has arisen from transfer of shares since that has been made voluntarily and without any consideration. assessee pointed out in its objections and on merits that voluntary transfer of shares without any consideration would qualify as gift and it would be treated as exempt transfer. It relied upon clause (iii) of section 47 of Income-tax Act. Apart therefrom and without in any manner giving up its challenge to jurisdiction of Assessing Officer, it pointed out that there is no understatement of income or claim of loss, deduction allowance in return of income. Thus, there is no question of any income chargeable to tax escaping assessment. More so, when amount of Rs. 1,21,33,429 had been added back while computing total income. It is this stand of petitioner and which to our mind would fall within parameters of principles and emerging from reading of judgment of this court. In case of Smt. Maniben Valji Shah (supra) this court emphasised that important words in section 147 of Income-tax Act are "has reason to believe" and they are stronger than words "is satisfied". belief entertained by Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. While court cannot investigate into adequacy or sufficiency of reasons which have weighed with Incometax Officer in coming to belief but court can certainly examine whether reasons are relevant and have bearing on matter in regard to which he is required to entertain belief before he can issue notice under section 147(a). If there is no rational and intelligible nexus between reasons and belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain belief then exercise undertaken by Income-tax Officer can be interfered with. In said case as well notice was issued under said provision for reopening of assessment because return of income showed certain income declared. However, capital gain of assessee revealed purchase of flat, for which no details were filed along with details of income, namely, purchase agreement, source of funds and, therefore, in absence thereof, assessment was proposed to be reopened. It is in that regard that this court has held as under (page 457 of 283 ITR): "Having heard Shri Desai, learned senior counsel for appellant, as well as Shri Bhujale, learned counsel for respondent, it is admitted position that assessee had invested sum of Rs. 2,50,000 for purpose of purchasing flat and what was sought to be investigated was source of income. bare perusal of aforesaid notice dated October 10, 1991, clearly indicates that officer was wanting to know details with regard to source of funds with regard to purchase of said flat for sum of Rs. 2,50,000. Obviously in above, there is no question of Assessing Officer having any basis to reasonably entertain belief that any part of income of assessee had escaped assessment and that such escapement was by reason of omission or failure on part of assessee to disclose fully and truly all material facts." Thus, if more details are sought or some verification is proposed that cannot be substitute for reasons and which led Assessing Officer to believe that income chargeable to tax has escaped assessment. We are not in agreement with Mr. Gupta because clear language of section 147 of Income-tax Act reveals that if Assessing Officer has reason to believe that any income has escaped assessment then he can resort to such power. While it is true, as Mr. Gupta argued, that sub-section (1) of section 148 of Income- tax Act enables issuance of notice before assessment, reassessment or recomputation under section 147 of Income-tax Act but that is dealing with service of notice. principal condition for issuance of notice is to be found in section 147 of Income-tax Act and that is on reason to belief that any income chargeable to tax has escaped assessment for any assessment year then Assessing Officer may, subject to provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section, or recompute loss or depreciation allowance or any other allowance, as case may be. In present case, respondents do not state that any income chargeable to tax has escaped assessment. All that Revenue desires is verification of certain has escaped assessment. All that Revenue desires is verification of certain details and pertaining to gift. That is not founded on belief that any income which is chargeable to tax has escaped assessment and, hence, such verification is necessary. That belief is not recorded and which alone would enable Assessing Officer to proceed. Thus, reasons must be founded on satisfaction of Assessing Officer that income chargeable to tax has escaped assessment. Once that is not to be found then we are not in position to sustain impugned notice. Having reproduced same and contents thereof being clear, it is not possible to agree with Mr. Gupta that this court should not interfere at threshold. We find additionally that in affidavit-in- reply Revenue has stated that concept of gift prevails between two individual persons out of love and affection, which does not prevail in case of companies. In case of companies, financial transaction exists to earn profit and transaction of so-called gift made by assessee is only for purpose of avoiding capital gains tax. This is stand taken in affidavit-in-reply but what we find is that gift without any consideration and as noted in reasons recorded and supplied has not been termed as one which attracts any tax or which is chargeable to tax and, therefore, there is any income which has escaped assessment. In other words, amount of Rs. 1,21,33,429 shown as gift has not been termed as income and which is chargeable to tax and which has escaped assessment. All that is required from assessee is verification and in terms of section 47(iii) of Income-tax Act and for enabling it, assessee was called upon to appear before Assessing Officer. Thus, it is for verification of value of these shares and whether computation is on market rate on date of such transfer. This, to our mind, would not in any manner enable Revenue- respondents to resort to section 147 of Income-tax Act. In view that we have taken above, it is not necessary to refer to other judgments relied upon by Mr. Pardiwalla and which also reiterate settled principle that reasons ought to be recorded on date of issuance of notice and which must disclose requisite satisfaction. reasons as recorded cannot then be substituted or supplemented by filing affidavit in court. Thus, additional reasons cannot be supplied and on affidavit. We are of view that it is not necessary to refer to this principle any further in facts and circumstances of present case. As result of above discussion, this writ petition succeeds. Rule is made absolute in terms of prayer clause (a). notice under section 148(1) is quashed and set aside. There would be no order as to costs. *** Nivi Trading Ltd. v. Union of India