1 Court No. 7 Case : WRIT TAX No. 1313 of 2019 Petitioner : Deepak Gupta Respondent : Assistant Commissioner Income Tax And 2 Others Counsel for Petitioner : Suyash Agarwal Counsel for Respondent : S.S.C. Hon'ble Biswanath Somadder,J. Hon'ble Ajay Bhanot,J. 1. Revenue drew proceedings against petitioner assessee for reassessment of income which had allegedly escaped assessment for Assessment Year 2012 13. petitioner has assailed various orders taken out by Revenue at different stages in pursuance of reassessment proceedings initiated under relevant provisions of Income Tax Act, 1961 (hereafter referred to as (I.T. Act, 1961) 2. petitioner has assailed notice issued under Section 142 (1) of I.T. Act, 1961 dated 22.10.2019 requiring petitioner to furnish details, documents and accounts which were necessary to process case under relevant provisions of law. petitioner has also impugned reasons to believe recorded on 22.03.2019 by assessing officer to support formation of opinion of Revenue as required under Section 147 of I.T. Act, 1961. Lastly petitioner has laid challenge to orders dated 28.10.2019 and 26.11.2019 disposing of objections of petitioner against issuance of notice under Section 148 of I.T. Act, 1961 for Assessment Year 2012 13. 2 3. Sri R.R. Agarwal, learned Senior Counsel assisted by Sri Suyash Agarwal, learned counsel for petitioner contends that only submission made on behalf of petitioner is that mandatory prior approval required under Section 151 of I.T. Act, 1961 from Principal Commissioner, Income Tax, Noida, was not obtained before initiation of aforesaid reassessment proceedings. In absence of such approval under Section 151 of I.T. Act, 1961 from competent authority proceedings against petitioner which are assailed in instant writ petition, have no legs to stand on and are devoid of jurisdiction. This is sole submission made by learned Senior Counsel for petitioner. 4. Per contra, learned counsel for Revenue, Sri Subham Agarwal calls attention to various assertions made in orders impugned dated 28.10.2019 and 26.11.2019 to contend that requisite approval from competent authority under Section 151 of I.T. Act, 1961 was taken prior to initiation of proceedings in manner contemplated by law. He further contends to material on basis of which satisfaction was arrived at by authorities to come to conclusion that income of petitioner had escaped assessment for Assessment Year 2012 13 was credible and duly considered by Revenue before initiating reassessment proceedings. 5. Heard learned counsel for parties. 6. sole contention of petitioner assessee that prior approval required from competent authority under Section 151 of I.T. 3 Act, 1961 was not obtained before issuing notice under Section 148 of I.T. Act, 1961 will be considered first. objection in this regard was also taken by assessee before authorities below. It was raised in objections against issuance of notice under Section 148 of I.T. Act, 1961. 7. assessing authority dealt with aforesaid objection regarding grant of prior approval by competent authority under Section 151 of I.T. Act, 1961 before issuance of notice under Section 148 of I.T. Act, 1961. assessing authority in its order dated 28.10.2019 specifically recorded Further, notice u/s 148 was issued after taking prior approval u/s 151 from Ld. Pr. Commissioner of Income Tax, Noida. 8. Similarly order dated 19.11.2019 disposing of self same objection of petitioner assessee against issuance of notice under Section 148 of I.T. Act, 1961 stated as follows: In this regard, please find copy of approval taken from higher authorities and copy of statement of Shri Ashok Kumar Kayan. 9. findings returned by authorities in orders disposing of objections of petitioner under Section 148 of I.T. Act, 1961 are official acts and hence attract presumption of correctness in their favour. This legal presumption of correctness is prop and pillar of legitimacy of all official acts. presumption is rebuttable. However, burden lies upon petitioner to rebut presumption. petitioner on his part has taken following plea in writ 4 petition to rebut said presumption: That order of respondent no.1, dated 28.10.2019 in para 3.2 as stated that it is supplying copy of approval of respondent no. 2, granted u/s 151 (1) of Act, after accepting objection of petitioner relating to decision of Sabh Infrastructure Ltd. (Supra) & Godawari Saraf (Supra) but no such approval was appended along with objection dated 26.11.2019, as such petitioner has reason to believe that no such mandatory approval as provided u/s 151 (1) of Act, has been granted by respondent no. 2, in pursuance of guidelines of Sabh Infrastructure Ltd. (supra). 10. We are afraid aforesaid pleading is deficient and does not at all discharge burden of proof which lay squarely upon petitioner to reverse presumption of correctness of findings in orders passed by revisional authorities in discharge of their official duties. There is no reason or basis to decline presumption of correctness in favour of said findings so recorded in orders passed by revisional authorities regarding approval under Section 151 of I.T. Act, 1961 before initiation of proceedings under Section 148 of I.T. Act, 1961. This Court has not been shown any reason or material to doubt correctness of finding recorded in orders dated 28.10.2019 and 26.11.2019 that notice under Section 148 of I.T. Act, 1961 was issued after taking prior approval under Section 151 of I.T. Act, 1961 from Ld. Pr. Commissioner of Income Tax, Noida. This finding has not been shown to be perverse in any manner and is not liable to be interfered with by this Court. argument on behalf of petitioner is accordingly rejected. 11. There is more to controversy. 5 12. reasons to believe of Assessing Officer that income had escaped assessment have been recorded in meticulous detail on 22.03.2019 by assessing authority. material on which such reasons to believe were founded are also disclosed in order. order dated 22.03.2019 passed by Deputy Commissioner of Income Tax, Circle 1, Noida, regarding sufficiency of reasons to believe on which foot proceedings under Section 147 of I.T. Act, 1961 are liable to be initiated, contains recital regarding information from credible sources regarding tax fraud in case of M/s DLS Exports Pvt. Ltd. and related beneficiaries. 13. enquiry made in pursuance of aforesaid information revealed that one Devesh Upadhyay well known Kolkata based entry operator admitted that he used bank accounts of companies which were under his sole control and management for layering funds and providing accommodation entries in form of bogus Share Capital/Premium, bogus LTCG/STCG. Statements of Ashok Kayan, Bikash Surekha and Sunil Kayan were also recorded on oath under Section 131 of I.T. Act, 1961. said persons in their statements admitted that their bank accounts were used for layering funds and providing accommodation entries in form of bogus Share Capital/Premium, bogus LTCG/STCG to several beneficiaries. name of petitioner appeared in list of beneficiaries. 14. In face of such statements and evidences it was recommended that during assessment proceedings Assessing Officer is required to 6 record statements again for corroborating evidences so collected. 15. In wake of such material emanating from said enquiry Deputy Commissioner of Income Tax, Circle 1, Noida recorded his satisfaction and set forth his reasons to believe regarding escapement of tax in following manner: I have perused above information and it is seen that name of assessee Shri Deepak Gupta is appearing at Sr. No. 125 and it is seen that assessee is one of beneficiaries and received Rs. 49,10,240/ from sale proceeds of shares of M/s DLS Exports Pvt. Ltd. From enquiries conducted, it has been established that M/s DLS Exports Pvt. Ltd, was involved in layering of funds and providing accommodation entries in form of bogus LTCG/STCL to several beneficiaries and assessee is one of them. I have analysed details from return filed by assessee for A.Y. 2012 13 and it is seen that assessee has not declared any Capital Gain in his return of income. It is clear from details available on record that assessee has concealed capital gain of Rs. 40,10,240/ has escaped assessment for AY 2012 13 with meaning of provisions of Section 147 of I.T. Act, 1961. 16. Accordingly proceedings under Section 147 of I.T. Act, 1961 were initiated to assess escaped income for Assessment Year 2012 13. 17. At this stage it would be apposite to reflect on some relevant aspects of statements given by Ashok Kumar Kayan under Section 131 of I.T. Act, 1961 under oath before income tax authority at Kolkata which was part of investigations which led to unearthing of surreptitious transactions which facilitated escapement of assessment. In telling of said Ashok Kumar Kayan under oath modus of operandi of parties to bogus transactions to 7 facilitate escapement of income was thus described: Q.7 Please state modus of operandi in respect to providing bogus LTCG/STCL through Penny Stock. Ans. I would like to state that there was syndicate working in Penny Stock. At first level, client with unaccounted cash approach to entry operators for getting LTCG. entry operator in turn approach set of broker who are in their network. brokers work in co ordination with each other so that trades are time synchronised and scrips remains with cartel of broker and entry operator only. share prices are rigged so that penny stock gets high value over period of one year. Once, scrips are retain beyond period of one year in clients accounts they are sold to some jammakharchi company which are operated by same set of entry operator so client get LTCG. Further, since jammakharchi client has purchased scrips at higher rate, rates are lowered over period of time so that they get capital losses which they can claim in their return of income. Hence, while individual clients incur long term capital gain, jamma kharchi company clients earns short term capital loss and there is tax evasion at both levels. 18. perusal of reasons to believe required under Section 147 of I.T. Act, 1961 and stated in order dated 22.03.2019 establishes fact that escapement of income of petitioner from assessment for relevant assessment years was part of larger network which facilitated defrauding of Revenue on organised and systematic basis. authority had credible material before it to come to this conclusion. Further authority while recording its reasons under Section 147 of I.T. Act, 1961 on 22.03.2019 duly applied its mind to all relevant materials in record. 19. scope of expression reason to believe and nature of belief formed by assessing officer that income for any assessment year has escaped assessment arose for consideration before 8 Hon'ble Supreme Court in Assistant Commissioner of Income Tax Vs Rajesh Jhaveri Stock Brokers (P) Ltd. reported at (2007) 291 ITR 500. Hon'ble Supreme Court in Asstt. CIT Vs Rajesh Jhaveri Stock Brokers (P) Ltd (supra) held thus: Section 147 authorises and permits Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year 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........At that stage, final outcome of proceeding is not relevant. In other words, at initiation stage, what is required is 'reason to believe', but not established fact of escapement of income. At stage of issue 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. This is so because formation of belief by Assessing Officer is within realm of subjective satisfaction. 20. Dealing with scheme of Section 147 to 163 in composite fashion was considered by Hon'ble Bombay High Court in Prashant S. Joshi Vs Income Tax Officer, Ward 19 (2)(4), reported at (2010) 324 ITR 154. Hon'ble Bombay High Court elucidated scope of provisions as under: 9. Section 147 provides that if Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to provisions of Sections 148 163, 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 section. first proviso to Section 147 has no application in facts of this case. basic postulate which underlines 9 Section 147 is formation of belief by Assessing Officer that any income chargeable to tax has escaped assessment for any assessment year. Assessing Officer must have reason to believe that such is case before he proceeds to issue notice under Section 147. reasons which are recorded by Assessing Officer for reopening assessment are only reasons which can be considered when formation of belief is impugned. recording of reasons distinguishes objective from subjective exercise of power. requirement of recording reasons is check against arbitrary exercise of power. For it is on basis of reasons recorded and on those reasons alone that validity of order reopening assessment is to be decided. reasons recorded while reopening assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when reasons for reopening assessment were recorded. principle of law, therefore, is well settled that question as to whether there was reason to believe, within meaning of Section 147 that income has escaped assessment, must be determined with reference to reasons recorded by Assessing Officer. reasons which are recorded cannot be supplemented by affidavits. imposition of that requirement ensures against arbitrary exercise of powers under Section 148. 21. Similarly Division Bench of Hon'ble Bombay High Court in N.D. Bhatt, IAC Vs I.B.M. World Trading Corporation reported at (1995) 216 ITR 811, construed ambit of Section 148 and observed as under: It is also well settled that reasons for reopening are required to be recorded by assessing authority before issuing any notice under section 148 by virtue of provisions of section 148 (2) at relevant time. Only reason so recorded can be looked at for sustaining or setting aside notice issued under section 148. In case of Equitable Investment Co. (P.) Ltd. vs. ITO [1988] 174 ITR 714 Division Bench of Calcutta High Court has held that where notice issued under section 148 of IT Act, 1961, after obtaining sanction of CIT, is challenged, only document to be looked into for determining validity of notice is report on basis of which sanction of CIT has been obtained. IT Department cannot rely on any other material apart from report. 10 22. same principal was reiterated in another Division Bench judgment of Hon'ble Bombay High Court in Hindustan Lever Ltd. Vs R.B. Wadkar reported at (2004) 268 ITR 332. ...the reasons are required to be read as they were recorded by AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for AO to disclose open his mind through reasons recorded by him. He has to speak through his reasons.... reasons recorded should be clear and unambiguous and should not suffer from any vagueness. reasons recorded must disclose his mind. Reasons are manifestation of mind of AO. reasons recorded should be self explanatory and should not keep assessee guessing for reasons. Reasons provide link between conclusion and evidence. reasons recorded must be based on evidence. AO, in event of challenge to reasons must be able to justify same based on material available on record.... That vital link is safeguard against arbitrary reopening of concluded assessment. reasons recorded by AO cannot be supplemented by filing affidavit of making oral submission, otherwise, reasons which are lacking in material particulars would get supplemented, by time matter reaches to Court, on strength of affidavit or oral submissions advanced. 23. In light of facts found in earlier part of judgment and position of law distilled in immediately preceding paragraphs, this Court finds that satisfaction arrived at by authority satisfies all requirements of law as contemplated under Section 147 of I.T. Act, 1961 and explained by judicial pronouncements in that regard. 24. petitioner was granted full opportunity to state his case before authorities in his objections against issuance of notice under Section 148 of I.T. Act, 1961 for Assessment Year 2012 13. petitioner duly availed aforesaid remedy. authorities 11 while deciding objections of petitioner passed detailed speaking orders which again reflect due application of mind on facts and material in record. 25. Deputy Commissioner of Income Tax, Circle 5(1) (1), Gautam Buddh Nagar while disposing of aforesaid objection of petitioner against issuance of notice under Section 148 in its order dated 26.11.2019 considered objections of petitioner. objections of petitioner were dealt with on point to point basis. While passing order dated 26.11.2019 competent Revenue Authority found that necessary pre requisite of Section 147 that there should be escapement of income stood fulfilled. reasons recorded in that regard were found to be valid. authority also noticed admission of assessee that he had incurred Long Term Capital Gain of Rs. 47,43,264/ during Financial Year 2011 12, however, same has not been disclosed in his ITR. 26. validity of refusal of request of petitioner to cross examine Ashok Kumar Kayan, Sunil Kumar Kayan, Devesh Kumar Kayan whose statements were part of material, was also affirmed in following terms; In this regard, it is clarified that undersigned cannot compel any other person for such cross examination as all these persons are not residing within 200 km. From office of undersigned. Therefore they cannot be summoned/called upon for such cross examination. Income Tax Act, 1961 does not have any provision which may empower undersigned to enforce cross examination of third party by assessee. However, statements of Shri Ashok Kumar Kayan are being provided to assessee for 12 ready reference. 27. No provision was pointed out during course of argument which could compel us to take differing view from that of authority passing order dated 26.11.2019. 28. Before parting, we would like to deal with another issue in interest of justice. We have already found as matter of fact that recital in order dated 28.10.2019 as well as order dated 26.11.2019 that due approval under Section 151 of I.T. Act, 1961 was taken from competent authority is not liable to be interfered with in light of insufficient pleadings. However, nature of right of assessee to be provided copy of order of prior approval under Section 151 of I.T. Act, 1961 as understood by authority passing order dated 28.10.2019 has to be adverted to. authority denied copy of approval granted by competent authority under Section 151 of I.T. Act, 1961 to petitioner for following reasons: However, AR of assessee has contested that copy of approval was not provided with reasons recorded. In this regard, it is informed that approvals taken from higher authorities are internal matter of department for communication hence, same cannot be provided. Further, assessee has cited case law of Hon'ble Delhi High Court in support of his claim. It is hereby clarified that case law of Hon'ble Delhi High Court is not binding on undersigned. However, if assessee has case laws of jurisdictional High Court or Hon'ble Supreme Court, same may be communicated accordingly. Therefore, above ground of assessee is not acceptable hence rejected. 29. aforesaid finding of Revenue authority is unsustainable in law. Approval under Section 151 of I.T. Act, 1961, prior to initiation 13 of proceedings under Section 148 of I.T. Act, 1961 is jurisdictional pre requisite. In absence of such approval proceedings would fall to ground for want of jurisdiction. As such, assessee is fully entitled to copy of order passed under section 151 of I.T. Act, 1961 and correspondingly, Assessing Officer is obliged to hand over copy of same, as and when assessee seeks for it. 30. There is no infirmity in reassessment proceedings and same are not liable to be interfered with. 31. writ petition is accordingly disposed of finally. 32. Let copy of this judgment and order be transmitted by Registry to Principal Commissioner of Income Tax, Uttar Pradesh, for circulation. Order Date : 17.01.2020 Pravin (Biswanath Somadder,J.) (Ajay Bhanot,J.) Deepak Gupta v. Assistant Commissioner Income-tax and 2 Other