* IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 30.10.2019 Pronounced on: 13.02.2020 + W.P.(C) 11302/2019, CM APPL. 46536/2019, CM APPL. 46537/2019& CM APPL. 46538/2019 EXPERION DEVELOPERS PVT LTD. Petitioner Through: Mr. Ajay Vohra, Senior Advocate with Ms. Kavita Jha and Mr. Vaibhav Kulkarni Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX & ORS. Respondents Through: Mr. Ruchir Bhatia, Senior Standing Counsel. + W.P.(C) 11303/2019, CM APPL. 46539/2019, CM APPL. 46540/2019, CM APPL. 46541/2019 & CM APPL. 46542/2019 EXPERION HOSPITALITY PVT LTD Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Ms.Kavita Jha and Mr. Vaibhav Kulkarni Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX & ORS. Respondents Through: Mr. Ruchir Bhatia, Sr. Standing counsel for Revenue. CORAM: JUSTICE VIPIN SANGHI JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 1 of 47 Brief Factual Background 1. present petitions under Article 226 /227 of Constitution of India are directed against two separate notices both dated 31.03.2019 issued by respondent No.1 under Section 148 of Income Tax Act (hereinafter referred to as Act ), for assessment year (AY) 2012-13 and orders dated 25.09.2019 disposing of objections filed by respective petitioners and also proceedings emanating therefrom. grounds for reopening assessment in both cases are result of very same investigation and inquiry carried out by DIT (Intell. & Cr. Inv.), New Delhi. reasons recorded for reopening assessment in respect of both petitioners are also similar, except for certain distinguishing facts. Besides, petitioners raise similar grounds of challenge, and therefore it is considered appropriate to dispose of both petitions by way of common judgment. 2. For purpose of disposal of present petitions, facts in W.P.(C)11302/2019 are being noted extensively. essential differences are noted separately. W.P.(C) 11302/2019 3. Petitioner is private limited company engaged in business of construction-development projects. Pursuant to scheme of amalgamation approved by this Court vide order dated 20.12.2012, M/s. Experion Developers International Pvt. Ltd [hereinafter referred to as EDIPL , erstwhile assessee], amalgamated with M/s. Experion Developers Pvt. Ltd. [hereinafter referred to as EDPL , successor-in-interest and Petitioner W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 2 of 47 herein] with effect from 01.04.2012. During financial year relevant to assessment year under consideration i.e. AY 2012-13, (FY 2011-12) Petitioner and erstwhile-assessee, EDIPL, were separate/independently assessable assessees. For assessment year under consideration, i.e., AY 2012-13, as Petitioner (EDPL) was only surviving entity, it alone filed return of income declaring loss of Rs.7,82,95,075/-. return of income was selected for scrutiny and after making certain disallowances, total income was assessed at Rs. 90,15,239/- and assessment order dated 19.03.2015 was passed under Section 143(3) of Act. said order is presently subject matter of pending appeal. 4. Subsequently, Respondent No.1 issued impugned notice dated 31.03.2019 under section 148 of Act along with copy of reasons recorded, proposing to reassess income of Petitioner for assessment year 2012-13. In response to aforesaid notice, Petitioner filed letter dated 29.04.2019 submitting copy of return e-filed on 25.04.2019 declaring loss of Rs.7,82,95,075/-. recorded reasons are primarily based on ground that investing / parent company, M/s. Gold Hotels & Resort Pte. Ltd. (also referred to as Gold Singapore ), had made investment of Rs.36.91 crores in Petitioner Company (EDPL) and Rs.183 crores in erstwhile EDIPL, though said investing company did not appear to be carrying out any regular business activities in Singapore and has been floated to act as conduit to funnel funds into Indian companies. source of investment in assessee company raises serious doubts and suspicion regarding genuineness of investments. assessee is beneficiary of these credits and has failed to disclose material W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 3 of 47 facts earlier. Therefore, there are reasons to believe that Petitioner s income has escaped assessment. 5. Petitioner vide letter dated 10.05.2019 filed legal objections to initiation of impugned reassessment proceedings, that were rejected vide impugned order dated 25.09.2019 (received on 25.09.2019). W.P.(C)-11303/2019 6. petitioner in this case (Experion Hospitality Pvt Ltd, hereinafter, EHPL ), also private limited company engaged in business of construction/development projects, filed return of income declaring loss of Rs.3,93,181,429/-, for assessment year under consideration (AY-2012- 13). case was selected for scrutiny and assessment order dated 19.03.2015 was framed under Section 143 (3) of Act. After making certain disallowances, total income was assessed as Rs.23,60,539/- and said order is also presently subject matter of pending appeal. In this case as well, respondent no. 1 has issued notice dated 31.03.2019 under section 148 of Act, assuming jurisdiction to reopen assessment, which forms subject matter of challenge in petition. Reasons for reopening 7. Along with notice issued under Section 148 of Act, respondent also furnished copy of recorded reasons which disclose that information has been received from DIT (Intell. & Cr. Inv.), New Delhi on 30.03.2015 regarding funds received by assessee from foreign entity. DIT (Intell. & Cr. Inv.), New Delhi has carried out investigation and W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 4 of 47 detailed inquiry regarding funds received by Experion Group Company in India from it s parent company which did not have sufficient funds of its own to make such investments. recorded reasons for reopening assessment in W.P.(C) 11303/2019 are as under; 1. Brief Details Inv), New, Delhi on 30.03.2015 regarding funds received by assessee from foreign entities DIT has carried out investigation and detailed enquiry regarding funds received by, Experion Group companies in India, From their parent company, which did not have sufficient funds of its own to make such investments. These inquiries were conducted after commercial intelligence was received by Jt. secy. (Ft & TR)- II, CBDT from First Secretary (Economic) in High commission of India, at Singapore, vide letter dated 31/10/2011, that entity M/s Gold Hotels & Resort Pte. Ltd, Singapore based company, had made large investments in Indian entity namely, M/s. Experion Developers Pvt. Ltd. and M/s. Experion Developers International Pvt. Ltd. (formerly known as Gold Developers International .Pvt. Ltd.)(Now merged with M/s. Experion Developers Pvt. Ltd.) According to report, it was observed that: 1. During year under consideration, company M/s Gold Hotels & Resort Pte. Ltd , hereinafter referred as Gold Singapore has made alleged investment of Rs. 36.910 crores in assessee company EDPL and Rs. 183 crores in company that has amalgamated into this company namely, EDIPL. 2. As per information, Gold Singapore is owned by only one share holder M/s Gemwood lnvest Holdings Ltd. having address in British Virgin Island. 3. Directors of Gold Singapore include following: Name Nationality Address W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 5 of 47 Arvind Indian 329, River Valley Road, # 25- Tiku 02, Yong Ann Park, Singapore-238361 Yap Singapore 77, Marine Drive, #9-48, Chee Citizen Singapore-440077 Keong Michael 4. equity of investing company i.e. M/s Gold Hotels & Resort Pte Ltd., Singapore is around 50,00,000 USD as against investment made by it of about 180 Million USD over many years, in Indian companies namely Gold Developers Pvt. Ltd (now known as M/s. Experion Developers Pvt. Ltd), Gold Resorts & Hotels Pvt. Ltd (Now known as M/s. Experion Hospitality Pvt. Ltd) and GoldDevelopers International Ltd (Earlier known as M/s. Experion Developers International Pvt Ltd & Now merged with M/s Experion Developers Pvt Ltd). equity of company is very small compared to amount invested. 5. Gold Singapore does not have sufficient funds or creditworthiness to make such investments and its business premises consisted of just one room which vas found closed most of times. 6. It is stated in information that amounts may have been shown as credits. / loans/ share application money raised from other countries mostly tax heavens to form circuitous route, and on analysis by Assessing officer, it is actually found that over period of time, credits into books of accounts of investing entity have been made as share application money or advances and fact that share application money remains outstanding over long time itself is not how genuine investment is normally made, because shares are normally issued after application is made, or amount is refunded back. On basis of enquiries conducted by DIT (Intell. & Cr. Inv.), New Delhi, observations are as follows:- W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 6 of 47 1. movement in share capital in Gold Singapore shows that in initial years, funding came from Darley Investment Service Inc, (Darley) and Merix International Ventures Limited. Darley and Merix. Subsequently transferred their share in Gold Singapore through complex series of financial arrangments involving many entities finally to M/s. Gemwood Invest Holdings Ltd. 2. When Directorate issued summons to Sh. Arvind Tikoo Director and main person behind group, reply was evasive in most of his replies, on plea that he is NRI, foreign assets were not disclosed. His PAN No. is AONPT3527L and he had not filed any return of income in India. On analysis of report received, it can be noted that Singapore Company (Gold Singapore) apparently does not appear to be carrying out any regular business activities in Singapore and has been floated to act as conduit to funnel funds into Indian Companies. Therefore, source of investment into assessee company (which is wholly owned subsidiaries of Gold Singapore) raises serious doubts and suspicion on genuineness of these invtesments. series of transactions have been undertaken through complex legal arrangements among entities spread across various jurisdictions to fund investments made in India. origin of fund in hands of companies located in tax heavens with dubious antecedents and background of shareholders / promoters needs to be further investigated. Moreover, assessee company is beneficiary of these credits which have been made in their books of accounts. From above detailed and specific information, pertaining to assessee company, and independent examination of entire material available on record and application of mind, I have reason to believe that amount at least of Rs.31.834 Crores has escaped assessment in case of M/s. Experion Developers Pvt. Ltd. (formerly known as Gold Developers Private Ltd) and amount of Rs.183 crores has escaped assessment in case of M/s. Experion Developers International Pvt. Ltd. (formerly known W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 7 of 47 as Gold Developers International Private Ltd) (Now merged with M/s. Experion Developers Pvt. Ltd.) for AY 2012-13 within meaning of section 147/148 of Income Tax Act, 1961. This information is new material which has been brought on record. As per data on ITD case of assessee company was assessed u/s 143(3) of Act for A.Y. 2012-13. Since then assessing officer was not aware of fact that investments into assessee companies has been made from entity which does not have funds of its own to invest such huge amounts, and that investing entity has only been used as conduit to route funds through complex transactions via low tax jurisdiction like Dutch Antilles, British Virgin Islands, Luxemburg etc., income has escaped assessment due to failure of assessee to disclose fully and truly all material facts necessary for its assessment. Thus, this specific condition for reopening is hereby fulfilled in instant has failed to disclose such material facts on its own earlier. case is square & covered under provisions of section 147 of income tax Act, 1961. It is also stated that reassessment proceedings are proposed to be initiated in case of Experion Developers Private Limited, for funds received by it as independent entity as well as successor in interest of amalgamated company Experion Developers International Private Limited, which in AY 2012-13 was separate entity. In this case, since more than four years have elapsed from end of assessment year under consideration. Hence, necessary sanction to issue notice under section 148 of act is being obtained separately from Pr. Commissioner of Income Tax, Delhi- 03, New Delhi as per provisions of section 151 of Act. (Emphasis supplied) 8. recorded reasons in respect of W.P.(C) 11303/2019 are identical, except for differences noted hereinbelow: 1. During year under consideration, company M/s Gold Hotels & Resort Pte. Ltd, hereinafter referred as Gold Singapore W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 8 of 47 has made alleged investment of Rs. 5.75 crores in assesse company M/s Experion Hospitality Pvt Ltd. 2. As per information, Gold Singapore is owned by only one share holder M/s Gemwood lnvest Holdings Ltd. having address in British Virgin Island. On analysis of report received, it can be noted that Singapore Company (Gold Singapore) apparently does not appear to be carrying out any regular business activities in Singapore and has been floated to act as conduit to funnel funds into Indian Companies. Therefore, source of investment into assessee company (which is wholly owned subsidiaries of Gold Singapore) raises serious doubts and suspicion on genuineness of these investments. series of transactions have been undertaken through complex legal arrangements among entities spread across various jurisdictions to fund investments made in India. origin of fund in hands of companies located in tax heavens with dubious antecedents and background of shareholders/promoters needs to be further investigated. Moreover, assessee company is beneficiary of these credits which have been made in their books of accounts. xxxxxxxxxxx From above detailed and specific information, pertaining to assessee company, and independent examination of entire material available on record and application of mind, I have reason to believe that amount at least of Rs.5.75 Crores has escaped assessment in case of M/s. Experion Hospitality Pvt. Ltd. (formerly known as Gold Resorts & Hotels Private Ltd for AY 2012-13 within meaning of section 147/148 of Income Tax Act, 1961. This information is new material which has been brought on record. As per data on ITD case or assessee company was assessed u/s 143(3) of Act for A.Y. 2012-13. Since then assessing officer was not aware of fact that investments into assessee companies has been made from entity which does not have funds of its own to invest such huge W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 9 of 47 amounts, and that investing entity has only been used as conduit to route funds through complex transactions via low tax jurisdiction like Dutch Antilles, British Virgin Islands, Luxemburg etc., income has escaped assessment due to failure of assessee to disclose fully and truly all material facts necessary for its assessment. Thus, this specific condition for reopening is hereby fulfilled in instant has failed to disclose such material facts on its own earlier. case is square & covered under provisions of section I47 of income tax Act, 1961. In this case, since more than four years have elapsed from end of assessment year under consideration. Hence, necessary sanction to issue notice under section 148 of act is being obtained separately from Pr. Commissioner of Income Tax, Delhi-03, New Delhi as per provisions of section 151 of Act. Common submissions of Petitioners in W.P.(C) 11302/2019 & 11303/2019 9. Petitioners contend that reassessment proceedings have been initiated on basis of reasons to believe that are invalid, without reference to any fresh tangible material and are shorn of independent application of mind. Under scheme of Act, assessing officer can initiate proceedings under section 147 of Act only if he has reason to believe that any income of assessee has escaped assessment. Such belief has to be arrived at by assessing officer on basis of tangible/ reliable information in possession of assessing officer. In terms of section 148 of Act, assessing officer is required to record reasons on basis of which proceedings under section 147 of Act are initiated. reasons recorded must, therefore, show application of mind by assessing officer. It has been alleged that Respondent No.1 proceeded solely on sketchy, vague, W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 10 of 47 unsubstantiated information received from Intelligence Wing, ignoring response received from Singapore Tax Authority and without gathering any further tangible material/information and/ or applying his mind to information received and/ or carrying out any independent investigation/ enquiry of facts, before forming belief that income of Petitioner had escaped assessment. Reliance has been placed on case in G.S. Engineering & Construction Corporation v DDIT 357 ITR 335 (Del), Chhugamal Rajpal v SP Chaliha 79 ITR 603 (SC). 10. It is further case of petitioners that present reassessment proceedings are merely change of opinion and attempt by respondent no.1 to reappraise material which was already on record and in respect whereto, after due examination, opinion was formed in course of original proceedings, which is now sought to be substituted. It is alleged that issue of share application money received from Gold Singapore was not only duly disclosed, but was specifically examined/ gone into by Respondent No.1 during original assessment proceedings. 11. It is also submitted that reassessment proceedings initiated beyond four years from end of relevant assessment year are invalid in terms of proviso to section 147 of Act as there was no failure on part of assessee to disclose fully and truly all material facts necessary for assessment. Reliance was placed on decision in NuPower Renewables (P.) Ltd. vs. ACIT: 264 Taxman 27, wherein High Court has held that when during course of original assessment under section 14(3) of Act, assessee had duly supplied certificate of foreign inward remittance W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 11 of 47 of funds, tax residence certificate of foreign company, copy of ledger account showing share application money being credited in bank account and source thereof, then initiation of reassessment proceedings to bring to tax share application money received by assessee company is liable to be quashed. It is submitted that in respect of EDPL, erstwhile EDIPL as well as EHPL, share application money received from Gold Singapore and subscription to share capital by Gold Singapore is fully disclosed in audited financial statement and income tax return form of relevant financial year. Further, relying on decision of Supreme Court in CIT vs Kelvinator of India Ltd: 320 ITR 561 (SC), it is argued by petitioner that there can be no review of assessment in guise of reopening and that bare review without any tangible material would amount to abuse of power. There was no fresh/ tangible material with AO and for said reason, too, assumption of jurisdiction by Respondent No.1 to reopen proceedings for assessment year 2012-13 is invalid and unsustainable. 12. Furthermore, it was submitted that in present case, sanction has been obtained from Additional Commissioner of Income Tax , i.e. respondent no. 2, which is not as per mandate of section 151 of Act. In this regard, it was submitted that obtaining sanction from officer who does not have jurisdiction over matter is not justified and thus vitiates legality of proceedings. Further, sanction was granted mechanically, without any application of mind, and hence, cannot be regarded as valid sanction as required to be obtained under section 151 and, therefore, proceedings initiated under section 147 of Act are without jurisdiction, illegal and bad in law. Reliance was placed on decision of this Court in W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 12 of 47 case of United Electrical Co.Pvt. Ltd: 258 ITR 317 wherein it has been held as under: What disturbs us more is that even Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if Additional Commissioner had cared to go through statement of said V. K. Jain, perhaps he would not have granted his approval, which was mandatory in terms of proviso to sub-section (1) of section 151 of Act as action under section 147 was being initiated after expiry of four years from end of relevant assessment year. As highlighted above, Legislature has provided certain safeguards to prevent arbitrary exercise of powers by Assessing Officer, particularly after lapse of substantial time from completion of assessment. power vested in Commissioner to grant or not to grant approval is coupled with duty. Commissioner is required to apply his mind to proposal put up to him for approval in light of material relied upon by Assessing Officer. said power cannot be exercised casually and in routine manner. We are constrained to observe that in present case there has been no application of mind by Additional Commissioner before granting approval. For foregoing reasons, we allow petition and quash impugned notice dated April 30, 2002. Additional submission of Petitioner in W.P.(C) 11302/2019 13. grounds of challenge and submissions of petitioner in both petitions, as noted above are exactly same. However additional grounds are urged in W.P.(C) 11302/2019 to effect that impugned notice for reopening of assessment proceedings is bad in law as common notice has been issued in respect of both EDPL as well as EDIPL, in name of Experion Developers Pvt. Ltd , when during relevant assessment year, W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 13 of 47 two existed as unamalgamated/separate entities. It has been argued that for assessment year 2012-13, (financial year 2011-12), two entities were separate and distinct having different Permanent Account Numbers (PAN) and had filed separate returns of income and were assessed separately, and thus issuance of single notice is jurisdictional error. In reasons recorded, name of assessee is recorded as M/s. Experion Developers Pvt. Ltd. (Earlier known as Gold Developers Pvt. Ltd.), including its role as successor in interest of Experion Developers (International) Pvt. Ltd. which has amalgamated into M/s Experion Developers Pvt. Ltd. It was argued that pursuant to amalgamation, if amalgamating company and amalgamated company both are intended to be assessed by Revenue then, in such case, as per provisions of section 170(2) of Act, separate notices are required to be issued viz. one in name of amalgamated company in its independent capacity and another in name of amalgamated company as successor in interest of amalgamating company, so that same culminate into separate assessment orders, qua income of amalgamated company and amalgamating company. In this regard, reliance has been placed on decision of this Court in PCIT v Maruti Suzuki India Ltd. 397 ITR 681 (Del) and CIT v K Adinarayana Murty 65 ITR 607 (SC). Contentions of Respondent 14. Per contra, learned counsel for Respondent submitted that if new facts, material or information comes to knowledge of Assessing Officer, which was not on record and available at time of assessment order, principle of change of opinion will not apply and factual W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 14 of 47 information or material which was incorrect or was not available with AO at time of original assessment would justify initiation of reassessment proceedings. requirement in such cases is that information or material available should relate to material facts. [Commissioner of Income Tax v Usha International Ltd [2012] 348 ITR 485 (Delhi)]. Reliance was also placed upon OPG Metals & Finsec Ltd v Commissioner of Income Tax [2014] 41 taxmann.com 21 (Delhi) to contend that where information regarding all transactions, including undisclosed investments, was not subject matter of earlier reassessment proceedings and there was fresh material for AO, it would not be case of change of opinion. He further argued that onus to establish creditworthiness of investor companies is on assessee and same is not discharged merely because assessee company has filed all primary evidence. [Reliance has been placed on Principal Commissioner of Income Tax (Central) -1 v NRA Iron & Steel (P) Ltd. [2019] 103 taxmann.com 48 (SC)]. Countering argument relating to issue of one notice in respect of reassessment proceedings pertaining to EDPL and EDIPL (now amalgamated into EDPL), he placed reliance on Marshall Sons & Co. (India) Ltd. v Income-Tax Officer [1997] 223 ITR 809 (SC), to argue that where court does not prescribe any specific date but merely sanctions scheme presented to it, date of amalgamation/date of transfer is date specified in scheme as transfer date , and not date of court order. plea of requirement of separate notices is misconceived, as on date of issuance of notice, only surviving entity was Petitioner- EDPL. W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 15 of 47 Analysis & Findings 15. crucial questions that arise for our consideration are: (a). Whether re-assessment proceedings have been initiated without any valid reasons to believe , without reference to any fresh tangible material and without any independent application of mind. (b) Whether initiation of re-assessment proceedings is merely on basis of change of opinion which is impermissible in law. (c) Whether initiation of re-assessment proceedings is barred by limitation, as prescribed in proviso to Section 147 of Act. (d) Whether proper sanction as required under Section 151 of Act was obtained or not. 16. In addition to aforesaid questions, in W.P. (C) 11302/2019, additional question (e) that arises for our consideration is as to whether common reassessment notice issued in name of EDPL for reopening of assessment proceedings in respect of both EDPL and EDIPL is bad in law, in as much as whether separate notices were required to be issued in name of (i) EDPL in its individual capacity and, (ii) EDPL, as successor-in- interest of EDIPL . 17. Having summed up grounds of challenge, we now proceed to deal with each of them comprehensively. (a). WHETHER RE-ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED WITHOUT ANY VALID REASONS TO BELIEVE ; WITHOUT REFERENCE TO ANY FRESH TANGIBLE MATERIAL, AND; WITHOUT ANY INDEPENDENT APPLICATION OF MIND W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 16 of 47 18. We have perused reasons recorded by Revenue to re-open assessment for assessment year 2012-13; objections to reopening filed by assessee/petitioner to notice for reopening assessment, as well as order dated 25.09.2019 disposing of said objections preferred by petitioner, and also carefully considered respective submissions of counsels and decisions relied upon by them. 19. Section 147 of Act empowers AO to initiate proceedings under said provision to assess or re-assess any income of assessee that may have escaped assessment. power to initiate proceedings under said provision is not unfettered and unrestricted and law mandates AO to comply with provisions of Sections 148 to 153 of Act. Identifying and recording of reasons to believe is pre-requisite for AO to assume jurisdiction under Section 147 of Act, as per scheme of Act. For harboring belief that there are cogent reasons to reopen assessment, AO is necessarily required to have some basis in nature of tangible/reliable information in his possession. This is ensured by language of Section 148 of Act which obligates AO to record reasons on basis whereof proceedings under Section 147 of Act are initiated. This is safeguard mechanism to ensure that discretion exercised by AO is not fanciful or without reasonable cause, and is not based merely on suspicion, conjectures and surmises. recording of reasons must show application of mind to relevant and germane facts, on basis whereof action initiated under Section 147 of Act is to be adjudged. question as to whether it is fair and just to nip W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 17 of 47 reassessment proceedings at this stage, arises before us every now and then. There is aversion to reassessment, and that is predictable. No assessee would want tax authority to reopen what has been closed. Even Court would not countenance casual, mindless and unjustified original reopening, lest original assessment proceedings lose their conclusiveness and certainty. Reopening of assessment is time consuming and burdensome for assessee. Since discretionary power is vested with AO, assesees are entitled to challenge reopening by way of writ petition. This is safety measure, to warrant that exercise of power is done with circumspect and with comprehension of facts. This is precise reason that there is plethora of judgments on this issue that are cited by both parties, and we have to repeatedly navigate through various views expressed by court. 20. In light of above judicial principles, crux lies in recorded reasons which shed light on mind of AO and having perused same in instant case, we are not persuaded with Mr. Vohra s submission that observations of AO are based purely on conjunctures and surmises, without reference to any tangible material. At this stage, we may refer to our decisions in Vedanta Ltd v. Assistant Commissioner of Income Tax in W.P. (C) 13036/2019 decided on 20.12.2019 and also in RDS Project Ltd. in W.P. (C) 11274/2019 decided on 23.10.2019 wherein we have extensively examined case law on this issue. 21. In above judgments, we have noted views of Supreme Court in Assistant CIT v. Rajesh Jhaveri Stock Broker Pvt. Ltd. (2008) 14 SSC W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 18 of 47 208, wherein it has been held that expression reason in Section 147 of Act means cause or justification . Assessing Officer can be said to have reason to believe that income has escaped assessment, if he has cause or justification to know, or suppose, that income has escaped assessment. 22. It is also apposite to note observations of Supreme Court in Sri Krishna Pvt. Ltd v. Income Tax Officer [1996] 221 ITR 538 wherein, it was emphasized that at this stage, test is not as to whether there has been any escapement of income, but whether there exist reasons to believe that income chargeable to tax has escaped assessment. 23. There are several judgments of Supreme Courts and of High Courts which have extensively deliberated on construction of expression reason to believe [Ref: G.S. Engineering & Construction Corporation v Deputy Director Of Income-tax (International Taxation), Circle -1(2) [2013] 38 taxmann.com 29 (Delhi)]. scope of judicial review under Article 226 of Constitution of India has also now been well recognized. In nutshell, Courts have applied test of reasonableness, holding that recorded reasons to believe must suggest and disclose that belief is that of honest and reasonable person, based on reasonable grounds. discretion vested under scheme of Act has also prompted Courts to put cautionary note in several judgments that while exercising judicial review, although Court can examine whether reasons to believe satisfy conditions, however, declaration or sufficiency of reasons to believe cannot be investigated. W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 19 of 47 24. Undoubtedly, there has to be sufficient tangible material on record which justifies prima facie belief of AO regarding escapement of taxable income. However, in facts of present case, we cannot agree with Mr. Vohra, that there was no basis or material for respondent No.1 to come to this conclusion. Mr. Vohra has argued that there was no evidence/material placed on record to allege that share application money received from Gold Singapore represents money emanating from coffers of petitioners, which in turn represents undisclosed income taxable in India. He also emphasized that respondent No.1 has not mentioned in recorded reasons, any specific provisions of Act that have been violated by petitioner. In our opinion, tangible material in present case is information received by AO from DIT (Intell. & Cr. Inv.). It would thus be apposite to refer to said referred report which has been placed on record. relevant portion of said report is extracted herein:- 2. In report, First Secretary (Economic) observed that investment made by Singapore entity needed to be examined for following reasons: (i) equity of the.87 million USD which is very small in comparison to investment investing company M/s Gold Hotels & Resort Pte. Ltd., hereinafter referred as Gold Singapore is 5 million USD as against above investment of 163. (ii) Gold Singapore is owned by on share holder M/s Gemwood Invest Holdings Limited having address in British Virgin Island. (iii) Directors of Gold Singapore are W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 20 of 47 Name Nationality Address Arvind Tiku Indian 329, River Valley Road #25-02, National Yong Ann Park, Singapore 238361 Yap Chee Keong Singapore 77 Marine Drive #9-48 Michael Citizen Singapore 440077 (iv) Mr. Arvind Tiku is key person who managed investments. (v) It is possible that amounts may have been shown all credits/ loans raised from other countries mostly tax havens to form circuitous route. (vi) Gold had not filed annual accounts and its business premises consisted of just one room which was found closed most of times. (vii) details of Indian companies which received investment from Gold Singapore are: S.No. Name of Indian Amount in Amount in Companies USD INR (Cr.) (million) 1. Gold Developers Private 88.48 411.63 Limited 2. 2. Gold Resorts & Hotels 46.13 191.19 Private Limited 3. Gold Developers 29.26 142.42 International Limited 163.87 745.24 (viii) It is learnt that Gold group of companies in India are engaged in development of real estate including land acquisition construction, trading and other developmental activities having its projects located at Gurgaon, Lucknow, Jaipur, Amritsar, Sonepat,. group also has interest in hotels & resorts with projects in Hyderabad and other places. xxxxxxx W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 21 of 47 4. reply was received from Inland Revenue Authority (IRA) of Govt. of Singapore, through Jt. Secy. (FT&TR), dated 16th March, 2012, wherein they forwarded copies of financial statements from 29th March 2009 till 31st March 2010 and company profile as per ACRA, Singapore. They also enclosed details of remittances to India in bank account of Gold Resort & Hotels Pvt. Ltd., maintained in ING Vysya Bank, Delhi. information shared by IRA Singapore are summarized as under: (i) As per report of IRA Singapore summary of movement in share capital in Gold Singapore shows that funding came from Dailey Investment Service Inc. (Darley) and Merix International Ventures Limited. Darley and Merix subsequently transferred their shares in Gold Singapore through complex series of financial arrangements involving many entitle: finally to M/S Gemwood Invest Holdings Ltd. chronological summary of movement of funds starting from incorporation of Gold Singapore on 29.03.2006- till final transfer of its shareholding to M/s Gemwood Holding on 31.01.2010 has been given by IRA Singapore in their detailed report which is enclosed at Annxure-2. (ii) IRA Singapore expressed its inability to enquire further into sources of funding of Gold Singapore since both Darley and M/s Gemwood Invest Holdings were located outside Singapore. (iii) IRA Singapore has mentioned in its report that search of internet showed that Darely is/ was controlled by Kazakhstan billionaire Timur Kulibayev. However, they were unable to comment further upon him since he was not Singapore entity. (iv) IRA Singapore has also given details of remittances made to M/s Gold Resorts & Hotels Pvt. Ltd. For acquisition of its shares as on 31.03.2011 in statement which is enclosed as per Annexure-3 of this report. (v) IRA Singapore has forwarded Financial statements of W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 22 of 47 Gold Singapore from 29.03.2006 (date of Incorporation) to 31.03.2007 and for year ended on 31.03.2008, 31.03,2009 & 31.03.2010, As per statement, Gold Singapore has following subsidiaries in India: Sl. Name of Director Director Director Director Director No. company 1 Gold Resorts Arvind Jitendra Suneet - - and Hotels Tiku Kumar Puri Pvt. Jain Ltd. 2 Gold Arvind Hemant Rakesh Sanjay Basaavaradd Developers Tiku Tikoo Kaul Kumar i Private Bakliwal Krishnaradd Limited Malagi 3 Gold Arvind Sunnet Rakesh - - Developers Tiku Puri Jain (International) Pvt. Ltd. (vi) following companies in India are wholly owned subsidiaries of Gold Resorts and Hotels Pvt. Ltd. Sl. Name of Director Director Director Director No. company 1. Gold Jitendra Suneet Sanjay Hemant Resorts and Kumar Puri Maheshawar Tikoo Hotel Jain (Jaipur) Pvt. Ltd. 2. Gold Jitendra Suneet Sanjay - Resorts and Kumar Puri Maheshawari Hotels Jain (Chandigar h) Pvt. Ltd. 3. Gold Jitendra Suneet Sanjay - Resorts and Kumar Puri Maheshawar Hotel Jain (Hyderabad ) Pvt. W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 23 of 47 Ltd. 4. Gold Jitendra Suneet Sanjay - Resorts and Kumar Puri Maheshawar Hotel (Goa) Jain Pvt. Ltd. 5. Gold Resorts Jitendra Suneet Sanjay - and Kumar Puri Maheshawar Hotel Jain (Taminlnadu ) Pvt. Ltd. (vii) following companies in India are wholly owned subs diaries of Gold Developers Private Limited. Sl.no. Name of company Director Director 1. KNS Nirman Pvt. Ltd. Arvind Tiku Gaurav Maheshwari 2. KNS Real Estate Arvind Tiku Gaurav Developers Pvt. Ltd. Maheshwari 3. Goldstar Infracon Pvt. Not known Not known Ltd. 4. Gold Town planners & Suneet Puri Gaurav Promoters Pvt. Ltd. Maheshwari 5. Gold Estate Developers Suneet Puri Gaurav Pvt. Ltd. Maheshwari 6. Gold Builders Pvt. Ltd. Suneet Puri Gaurav Maheshwari 5. Since information received from Inland Revenue Authority of Govt, of Singapore showed that Gold Singapore had received its funds from sources other than Singapore and Sri Arvind Tiku was reported as key person behind all transactions leading investment in Indian companies, notice u/s 131 of Income Tax Act, 1961 was issued to Sri Tiku on 27.07.2012 seeking relevant details regarding source of investment of Gold Singapore in Indian companies. xxxxxxxx W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 24 of 47 12. In view of details gathered, Singapore company (Gold Singapore) apparently does not appear to be carrying out regular business activities in Singapore and has been floated to act as conduit to funnel investments into Indian companies. Therefore, source of investment into three Indian entities (which are wholly owned subsidiaries of Gold Singapore) raises serious doubts and suspicion on genuineness of these investments. series of transactions have been undertaken through complex legal arrangements among entities spread across various jurisdictions to fund investments made in India. origin of fund in hands of companies located in tax havens with dubious antecedents and background of shareholders/promoters needs to be further investigated. assessment in all three companies namely 1) M/s Experion Hospitality Pvt. Ltd. (formerly, M/s Gold Resorts & Hotels Pvt. Ltd.) 2) M/ s Experion Developers International Pvt. Ltd. (formerly, M/s Gold Developers International Pvt. Ltd.) 3) M/s Experion Developers Pvt. Ltd. (formerly, M/s Gold Developers Pvt. Ltd.) which have received funds needs to be reopened under section 147 read with section 149(1)(c) of Income Tax Act, 1961 to investigate genuineness of such funds and creditworthiness of investing entities. year wise details of investments received by Indian entities in whose hands cases are required to be re-opened are given in Annexure-8. (Emphasis supplied) 25. This report, whereby it is revealed that Gold Singapore does not appear to be carrying out regular business activities in Singapore and series of transactions undertaken through complex legal arrangements among entities spread across various jurisdictions to fund investments made in India, justifies AO to form reason to believe to investigate genuineness of funds and creditworthiness of investing entities. year-wise details of investments received by Indian entities whose cases are required to be re-opened are given in report and same read as W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 25 of 47 under: Annexure-8 Year wise details of investment/ capital received by Indian Companies to be considered for reopening of case u/s 147 read with 149(1)(c) S. Name of Address PAN Assessment Amount Indian Year in INR No. Companies (Cr.) 1 M/s Experion F-9, First AACCG8138L 2008-09 142.422 Developers Floor, Pvt. Ltd. Manish 2012-13 182.944 (Gold Plaza-1, Developers Plot No. Private 7, MLU, Limited) Sector- 10, Dwarka, New Delhi- 110075 2 M/s Experion AACCG5418P 2006-07 18.220 Hospitality 2007-08 52.383 Pvt. Ltd. (Gold Resorts 2008-09 39.271 & Hotels Pvt. Ltd.) 2009-10 40.339 2010-11 10.067 2011-12 2.327 2012-13 5.75 3 M/s Experion AACCG8200B 2008-09 409.581 Developers International 2009-10 28.323 Pvt. Ltd. (Gold Developers 2011-12 31.834 International Limited) 2012-13 36.910 2013-14 21.251 Total 1021.679 In report, it has been noted that Mr. Arvind Tiku, is key person behind transactions and notice under Section 131 of Act was issued W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 26 of 47 to him. DIT (Intell. & Cr. Inv.) has also taken note of fact that Mr. Arvind Tiku has been evasive in his replies to said notice. Further, in report, it has been noticed that office of Attorney General of Switzerland has opened criminal investigation in September, 2010 on allegations of money laundering against Mr. Arvind Tiku and Ors. We may also note that Mr. Vohra has argued that allegations against Mr. Arvind Tiku are contrary to reasons to be recorded by respondent No.1, inasmuch as re-assessment proceedings initiated against him were dropped by Income Tax Department and that proceedings against him were dismissed by authority in Switzerland on 27.11.2013. It has been argued that closure happened in 2013 and department is relying on report of 2015. However, we are of opinion that all these aspects ought not be examined at this stage and for us relevant question is as to whether there is indeed some tangible material having live link to reasons to believe for arriving at prima facie opinion that income has escaped assessment. facts noted above clearly demonstrate that there are indeed such reasons and test of tangible material is met. genuineness of transaction, as also creditworthiness of foreign investor is indeed in doubt aspect which was not examined by Assessing Officer during course of original assessment proceedings.ithe 26. In RDS (supra), we have extensively referred to recent decision of Supreme Court in Principal Commissioner of Income Tax (Central)- I v. NRA Iron & Steel Pvt. Ltd., (2019) 412 ITR 161 (SC) decided on 05.03.2019. In said decision, Supreme Court also took note of its earlier W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 27 of 47 decision in Kale Khan Mohammad Harif v. CIT, (1963) 50 ITR 1 (SC), and Roshan Di Hatti v. CIT, (1977) 107 ITR (SC), wherein it had laid down that onus of proving source of money found to have been received by assessee, is on assessee. Once assessee has submitted documents relating to identity of payer, genuineness of transaction, and creditworthiness of payee, then AO must conduct inquiry and call for more details before invoking section 68. If assessee is not able to provide satisfactory explanation of nature and source of investment made; genuineness of transaction, and; creditworthiness of payer, it is open to revenue to hold that such investment is income of assessee, and that there would be no further burden on revenue to show that income is from any particular source. Supreme Court also observed that with respect to genuineness of transaction, it is for assessee to prove same by cogent and credible evidence, since investment was claimed to have been made in share capital of assessee company, it was for assessee to establish that it was genuine investment, since facts are exclusively within assessee s knowledge. Merely providing identity of investors does not discharge onus of assessee, if capacity or creditworthiness has not been established. Supreme Court also took note of decision of Calcutta High Court in Shankar Ghosh v. ITO, (1985) 23 ITJ (Cal), where assessee failed to prove financial capacity of person from whom he had allegedly taken loan. said loan amount was held to be assessee s own undisclosed income. principles culled out by Supreme Court have been summarized in para 11 of said judgment, which is reproduced as follows: W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 28 of 47 11. principles which emerge where sums of money are credited as Share Capital/Premium are: i. assessee is under legal obligation to prove genuineness of transaction, identity of creditors, and credit-worthiness of investors who should have financial capacity to make investment in question, to satisfaction of AO, so as to discharge primary onus. ii. Assessing Officer is duty bound to investigate credit- worthiness of creditor/subscriber, verify identity of subscribers, and ascertain whether transaction is genuine, or these are bogus entries of name-lenders. iii. If enquiries and investigations reveal that identity of creditors to be dubious or doubtful, or lack credit- worthiness, then genuineness of transaction would not be established. In such case, assessee would not have discharged primary onus contemplated by Section 68 of Act. 27. live-link between said material information and formation of belief that taxable income has escaped assessment is fact that EDPL received Rs. 36.910 crores and EDIPL received Rs. 183 Crores, while EHPL received Rs.5.75 Crores, as capital investment from Gold Singapore, which to assessing officer, appears to be bogus entity for reasons recorded by him. This live-link is actionable as it was found and acted upon within period of limitation under proviso to Section 147 of Act. 28. Mr. Vohra has also attempted to demonstrate that information provided in report is merely based on internet searches, and argues that it is whimsical, unsubstantiated allegations, without iota of evidence to W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 29 of 47 show that share capital received by petitioner can be taxed as income in hands of petitioner company. 29. We do not agree with this submission of Petitioner. There is sufficient material disclosed in investigation report to say that creditworthiness of investor company is doubtful. Moreover, responses of Mr. Arvind Tiku also appear to be evasive. We cannot lose sight of fact that apparently, parent company itself, does not have sufficient funds to invest such huge amounts in Indian subsidiaries, and funds are routed through web of entities spread across various jurisdictions, mostly in tax havens. investments so made, are required to be investigated and credit worthiness of investing company is in jeopardy, in view of information received from investigation wing. This exercise can be undertaken during re-reassessment proceedings to finally determine if amounts represent undisclosed income of petitioner company which is required to be taxed in their hands. As noticed above, at stage of re-opening, only reason to believe should exist with regard to escapement of income. Definite conclusion would be drawn after raising queries upon assessee in light of Section 68 of Act. 30. There cannot be any doubt from reasons recorded, that petitioner companies are beneficiaries of funds received from Gold Singapore . If indeed, investing entities do not have any creditworthiness to make such huge investments into petitioner company, in our view, there would be sufficient cause or justification for AO to attribute income to petitioner. Thus, at this stage, there are sufficient "reasons to believe" that W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 30 of 47 such income has escaped assessment and to reopen assessment proceedings. Since there is relevant material to form reasonable belief in background of facts noted above, at this stage of proceedings, where AO has yet to finally adjudicate issues, it is not for this Court to deal with questions as to whether reopening of assessment would ultimately result in creating further demand. 31. We are therefore of opinion that AO had sufficient tangible materials and was justified in issuing notice for assessment. (b) WHETHER INITIATION OF RE-ASSESSMENT PROCEEDINGS IS MERELY ON BASIS OF CHANGE OF OPINION WHICH IS IMPERMISSIBLE IN LAW 32. In Full Bench decision of this Court in Commissioner of Income Tax v Usha International, [2012] 348 ITR 485 (Delhi), principle of "change of opinion" was discussed extensively: "16. Here we must draw distinction between erroneous application/interpretation/understanding of law and cases where fresh or new factual information comes to knowledge of Assessing Officer subsequent to passing of assessment order. If new facts, material or information comes to knowledge of Assessing Officer, which was not on record and available at time of assessment order, principle of "change of opinion" will not apply. reason is that "opinion" is formed on facts. "Opinion" formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under principle of "change of opinion". Factual information or material which was incorrect or was not available with Assessing Officer at time of original assessment would justify initiation of W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 31 of 47 reassessment proceedings. requirement in such cases is that information or material available should relate to material facts. expression 'material facts' means those facts which if taken into account would have adverse affect on assessee by higher assessment of income than one actually made. They should be proximate and not have remote bearing on assessment. omission to disclose may be deliberate or inadvertent. question of concealment is not relevant and is not precondition which confers jurisdiction to reopen assessment. 17. Correct material facts can be ascertained from assessment records also and it is not necessary that same may come from third person or source, i.e., from source other than assessment records. However, in such cases, onus will be on Revenue to show that assessee had stated incorrect and wrong material facts resulting in Assessing Officer proceeding on basis of facts, which are incorrect and wrong. reasons recorded and documents on record are of paramount importance and will have to be examined to determine whether stand of Revenue is correct. Decision of this Court in Dalmia (P.) Ltd. v. CIT [2011] 202 Taxman 372/ 14 taxmann.com 106 and decision of Bombay High Court in Indian Hume Pipe Co. Ltd. v. Asstt. CIT [2012] 204 Taxman 347 /[2011] 16 taxmann.com 190 are two such cases. In first case, Assessing Officer in original assessment had made additions of Rs. 19,86,551/- under Section 40(1) on account of unconfirmed sundry creditors. reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details etc. were not furnished, were to extent of Rs. 52,84,058/- and not Rs. 19,86,551/-. In Indian Hume Pipe Co. Ltd. (supra), after verification claim under Section 54-EC was allowed but subsequently on examination it transpired that second property was purchased prior to date of sale. aforesaid decisions/facts cases must be distinguished from cases where material facts on record are correct but Assessing Officer did not draw proper legal inference or did not W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 32 of 47 appreciate implications or did not apply correct law. second category will be case of "change of opinion" and cannot be reopened for reason that assessee, as required, has placed on record primary factual material but on basis of legal understanding, Assessing Officer has taken particular legal view. However, as stated above, erroneous decision, which is also prejudicial to interest of Revenue, can be made subject matter of adjudication under Section 263 of Act. 18. In New Light Trading Co. v. CIT [2002] 256 ITR 391/[2011] 117 Taxman 741, Division Bench of this Court had referred to decision of Supreme Court in CIT v. P.V.S. Beedies (P.) Ltd. [1999] 237 ITR 13 / 103 Taxman 294 and following observations were made:- "In case of P.V.S. Beedies (P.) Ltd. [1999] 237 ITR 13, apex court held that audit party can point out fact, which has been overlooked by Income-tax Officer in assessment. Though there cannot be any interpretation of law by audit party, it is entitled to point out factual error or omission in assessment and reopening of case on basis of factual error or omission pointed out by audit party is permissible under law. As Tribunal has rightly noticed, this was not case of Assessing Officer merely acting at behest of audit party or on its report. It has independently examined materials collected by audit party in its report and has come to independent conclusion that there was escapement of income. answer to question is, therefore, in affirmative, in favour of Revenue and against assessee." 19. As recorded above, reasons recorded or documents available must show nexus that in fact they are germane and relevant to subjective opinion formed by Assessing Officer regarding escapement of income. At same time, it is not requirement that Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. final ascertainment takes place when W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 33 of 47 final or reassessment order is passed. It is enough if Assessing Officer can show tentatively or prima facie on basis of reasons recorded and with reference to documents available on record that income has escaped assessment." (Emphasis supplied) 33. As already discussed above, in present case, new facts, material or information have come to knowledge of Assessing Officer by way of report of DIT (Intelligence and Criminal Investigation) with regards to doubtful source of investments made into petitioner companies. At time of original assessment, Assessing Officer was not aware of or in possession of information which could have indicated that introduction of share capital from outside India has been routed through doubtful entity. DIT (I&CI) Delhi had also made detailed enquiries regarding origin of funds which were used for introduction of share capital and premium. This information was received much later after original assessment had been completed, and is germane and relevant to subjective opinion formed by AO in regard to escapement of income. In present case, AO s reasons to believe are fortified with tangible material in form of specific information received by Investigation Wing. Thus, AO is downright justified in issuing notice for reassessment. It is revealed from said material available on record that reasonable belief was formed by Assessing Officer that income of petitioner has escaped assessment and therefore, once reasonable belief is articulated and expressed by AO on basis of cogent tangible material, he was not expected to arrive at final conclusion W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 34 of 47 thereon at stage of issuance of notice. At this stage, having regard to scope of section 147 as also sections 148 to 152, we are of opinion that AO s decision is to be governed by mandate of statute that requires him to have reason to believe , and not to conclusively establish fact of escapement of income. Therefore, even if scrutiny assessment has been undertaken in first place, if significant new material is found in form of information, assessing officer can form belief that income of petitioner has escaped assessment, and reopen assessment. It is also trite law that for cases relating to inter alia, share application money, three vital aspects have to be considered by Assessing Officer, namely (i) identity of investors; (ii) credit worthiness of investors; and (iii) genuineness of transaction. Ex-facie, order of assessment which was passed by Assessing Officer under Section 143(3), does not indicate that all these aspects were gone into. Today, there is serious doubt relating to credit-worthiness of share applicant/investor, in view of investigation report noted above and clarity can only come in by way of reassessment. Therefore, recorded reasons are not mere change of opinion. (c) WHETHER INITIATION OF RE-ASSESSMENT PROCEEDINGS IS BARRED BY LIMITATION AS PRESCRIBED IN PROVISO TO SECTION 147 OF ACT 34. first proviso to section 147 provides that where assessment under sub-section (3) of section 143, or this section, has been made for relevant assessment year, no action shall be taken under this section after expiry of four years from end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 35 of 47 by reason of failure on part of assessee to make return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Explanation 1 to proviso to section 147 is also relevant and reads as follows: Explanation 1. Production before Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by Assessing Officer will not necessarily amount to disclosure within meaning of foregoing proviso. 35. From bare reading of proviso, it is clear that reassessment proceedings under section 147 may be initiated after expiry of period of four years from end of relevant assessment year if there is failure on part of assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. This Court in NTPC Ltd. v. Deputy Commissioner of Income-tax [2013] 29 taxmann.com 421 (Delhi) discussed limitation period as provided for in proviso in following terms: "The proviso is couched in negative terms. It states that where assessment, inter alia, under Section 143(3) has been made for relevant assessment year "no action shall be taken under this section after expiry of four years from end of relevant assessment year." There is, however, exception and that begins with words "unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 36 of 47 assessment year." Therefore, no action under Section 147 can be taken beyond said period of four years unless and until conditions precedent mentioned in proviso are satisfied. first condition is that income chargeable to tax must have escaped assessment. second condition is that such escapement from assessment must be by reason of failure on part of assessee to, inter alia, disclose fully and truly all material facts necessary for his assessment for that assessment year. If either of these two conditions is missing, exception to bar setup in proviso, does not get triggered. consequence being that assessment cannot be re- opened." (Emphasis supplied) 36. expression "fully and truly disclose all material facts" has been discussed in multiple decisions of this Court as well as Apex Court. In Honda Siel Power Products Ltd v. Dy. CIT [2012] 340 ITR 53 (Delhi), it was explained as to what is meaning of expression "disclose fully and truly all material facts" appearing in Section 147 of said Act. In that decision, this Court observed as under:- "12. law postulates duty on every assessee to disclose fully and truly all material facts for its assessment. disclosure must be full and true. Material facts are those facts which if taken into accounts they would have adverse affect on assessee by higher assessment of income than one actually made. They should be proximate and not have any remote bearing on assessment. Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on part of assessee. latter confers jurisdiction to reopen assessment." 37. Explanation 1 to proviso to section 147 elaborates on meaning of phrase disclosure as mentioned in proviso. Reference may be made to decision of this Court in Rose Serviced Apartments (P.) Ltd. v. W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 37 of 47 Deputy Commissioner of Income-tax [2011] 9 taxmann.com 199 (Delhi), wherein it was observed that from reading of said Explanation, it is clear that that mere production of books of account or other material from which Assessing Officer could, with due diligence, have discovered escapement of income, does not bar reassessment proceedings. Yet at same time if proviso applies and assessee has fully and truly disclosed all material facts necessary for assessment for that assessment year, reassessment proceedings cannot be initiated. In present case, however, mere disclosure of identity of investor (as being holding company of assessee) in return of income and audited financial statements of assessee as source of share application money received, is not sufficient to constitute disclosure under proviso to section 147. Therefore, assessee cannot be said to have made true and complete disclosure. Hence, notice for reassessment is justified. 38. From reading of reasons recorded, it is clear that there is fresh tangible material in hands of Assessing Officer with respect to dubious nature of source of investments made into assessee company, which fact had not been fully and truly disclosed at time of assessment. factum of shareholding and business activity of investor, i.e., Gold Singapore had not been disclosed at time of assessment proceedings. Mere disclosure of identity of investor could not translate into satisfaction with regard to creditworthiness of investor. We have perused audited financial statement and return of income filed by petitioners. In case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 it was held by Supreme Court that where W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 38 of 47 transaction itself on basis of subsequent information, is found to be bogus transaction, mere disclosure of true and full facts in case and Income Tax Officer would have jurisdiction to reopen concluded assessment in such case . In present case, return of income merely lists Gold Singapore as holding company and Notes to audited financial statement merely mention that securities application money has been received from Holding Company, being Gold Singapore. genuineness of this transaction as also creditworthiness of investor are doubtful in present case and, therefore, mere mention of said transaction does not amount to full and true disclosure. Therefore, this amounts to fulfilment of second condition, that is, failure to disclose fully and truly all material facts, relevant for his assessment in that assessment year. 39. Thus, on fulfilment of second condition, bar to reopening of proceedings after expiry of four years from date of final assessment order, under proviso, does not apply and initiation of proceedings is not barred by limitation. (d) WHETHER PROPER SANCTION AS REQUIRED UNDER SECTION 151 OF ACT WAS OBTAINED OR NOT 40. It is requirement for issuance of notice for reopening of assessment proceedings under section 151 of Act that Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on reasons recorded by Assessing Officer, W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 39 of 47 that it is fit case for issuance of such notice. 41. In recorded reasons also, it has been noted that "necessary sanction to issue notice under section 148 of Act is being obtained separately from Pr. Commissioner of Income Tax, Delhi-03, New Delhi as per provisions of section 151 of Act". In its reply on this issue, in order dated 25.9.2019 dismissing objections of petitioners to notice under section 148, it has been pointed out that approval of competent authority was obtained vide note sheet entries dated 31.3.2019 and same was enclosed along with order. However, same has not been annexed to present petitions. It has been argued that obtaining approval of Additional Commissioner of Income Tax is not provided for under section 151 and therefore, same is not justified. However, in present case, approval/sanction has been obtained from both, Addl. Commissioner of Income Tax as well as Principal Commissioner of Income Tax, which is appropriate authority for issuance of such sanction, as noted in Commissioner of Income-tax-8 (Erstwhile CIT-III) v. Soyuz Industrial Resources Ltd [2015] 58 taxmann.com 336 (Delhi). 42. Further, it is case of petitioner that there was no independent application of mind by sanctioning authorities for according approval. Whilst it is settled position in law that sanctioning authority is required to apply his mind and grant of approval must not be made in mechanical manner, however, as noted by Division Bench of Calcutta High Court in Prem Chand Shaw (Jaiswal) v Assistant Commissioner, Circle-38, Kolkata [2016] 67 taxmann.com 339 (Calcutta), W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 40 of 47 mere fact that sanctioning authority did not record his satisfaction in so many words would not render invalid sanction granted under section 151(2) when reasons on basis on basis of which sanction was sought could not be assailed and even appellate authority is not required to give reasons when it agrees with finding unless statute or rules so requires. decision in United Electrical Co. Pvt. Ltd. (supra), as relied upon by petitioner is distinguishable from present case, as in said case, there was no material on record to provide foundation for Assessing Officer's reasons to believe. Therefore, it was held that recording of satisfaction by AO was unjustified and without independent application of mind. However, there is no requirement to provide elaborate reasoning to arrive at finding of approval when Principal Commissioner is satisfied with reasons recorded by AO. Similarly, in Virbhadra Singh v Deputy Commissioner, Circle Shimla [2017] 88 taxmann.com 888 (Himachal Pradesh) where competent authority was in agreement with reasons assigned by Assessing Officer, so placed before him, which came to be considered and sanction accorded with proper application of mind, by recording "I am satisfied that it is fit case for issuance of notice u/s 148", issuance of notice under section 147/148 was held to be valid. 43. Therefore, it is clear that necessary sanction for issuance of notice under section 148, as required under section 151 had been obtained. (e) WHETHER NOTICE ISSUED IN NAME OF EXPERION DEVELOPMENT PVT. LTD. (EDPL) IS BAD IN LAW AS SEPARATE NOTICES WERE REQUIRED TO BE ISSUED TO EDPL IN ITS INDIVIDUAL CAPACITY AND AS SUCCESSOR-IN- W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 41 of 47 INTEREST OF EDIPL 44. Petitioner has placed reliance on Principal Commissioner of Income Tax-6, New Delhi v Maruti Suzuki [2017] 85 taxmann.com 330 (Delhi) where two entities namely, Suzuki Powertrain India Ltd. (SPIL) and Maruti Suzuki India Ltd (MSIL) had amalgamated into MSIL and assessment order under section 143 (3) had been passed in name of SPIL, which entity had ceased to exist on date of assessment order. In these circumstances, Court held said assessment order to be without jurisdiction. relevant portion of said judgment is extracted as under: 13. question whether, for purposes of Section 170 (2) of Act, defect of passing assessment order in name of non-existent entity is mere irregularity was answered by this Court in Dimension Apparels (P.) Ltd. (supra), where in paras 6 and 7 it was held as under: '6. Sections 170(1) and 170(2) of Act do not assist revenue in their case. revenue does not contest that in case of amalgamation, predecessor (being dissolved company) "cannot be found". Consequently, Section 170(2) applies. This provision clarifies that where predecessor cannot be found, "the assessment of income of previous year in which succession took place up to date of succession and of precious year preceding that year shall be made on successor in like manner and to same extent as it would have been made on predecessor." (Emphasis Supplied) 7. revenue seems to argue that assessment is justified because liabilities of amalgamating company accrue to amalgamated (transferee) company. While that is true, question here is which entity must assessment be made on. text of Section 170(2) makes it clear that assessment must be made on successor (i.e., amalgamated company).' W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 42 of 47 petitioner has also placed reliance on decision in Commissioner of Income Tax v K. Adinarayana Murty [1967] 65 ITR 607 (SC). relevant portion of said judgment is extracted hereunder: Under scheme of Income Tax Act Individual and Hindu Undivided Family are treated as separate units of assessment and if notice under Section 34 of Act is wrongly issued to assessee in status of individual and not in correct status of Hindu Undivided Family notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction. It was contended by Mr S.T. Desai on behalf of assessee that return was filed by assessee in response to first notice in character of Hindu Undivided Family . But submission of return by assessee will not make any difference to character of proceedings in pursuance of first notice which must be held to be illegal and ultra vires for reasons already stated. We are therefore of opinion that Income Tax Officer was legally justified in ignoring first notice issued under Section 34 of Act and return filed by assessee in response to that notice and consequently assessment made by Income Tax Officer in pursuance of second notice issued on February 12, 1958 was valid assessment. 45. On basis of aforenoted judgment, challenge whereto by Revenue before Supreme Court resulted in dismissal, and further relying upon Section 170 (2) of Act, Mr. Vohra has contended that separate notices are required to be issued viz. one in name of amalgamated company in its independent capacity and another in name of amalgamated company as successor-in-interest of amalgamating company. We are not impressed with Mr. Vohra s contentions. In Maruti Suzuki (supra), this Court while relying upon its earlier decision in W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 43 of 47 Dimension Apparels (P) Ltd. (supra), has dealt with Section 170 (1) and 170 (2), on entirely different issue, which is clearly discernible from portion of judgment extracted herein above. In Dimension Apparels (P) Ltd (supra), Court has held that text of Section 170 (2) makes it clear that assessment must be made on successor (i.e. amalgamated company) in event, predecessor cannot be found. factual situation in present case is different from that in case of Maruti Suzuki (supra). Maruti Suzuki (supra) dealt with validity of assessment order under section 143(3), whereas in present case, notice for reassessment under section 148 is under challenge. In present case, pursuant to scheme of amalgamation, approved by this Court vide order dated 20.12.2012, EDIPL was amalgamated with EDPL with effect from 01.04.2012. Thus, income of EDIPL merged with income of EDPL with effect from 01.04.2012. On date of reassessment notice, therefore, EDIPL and EDPL existed as single common entity, for relevant AY 2012-2013, i.e. beginning on 01.04.2012, which is date of amalgamation. Petitioner contends that common notice for reassessment issued in name of EDPL is bad in law as separate notices are required to be issued in name of EDPL in its own capacity and in name of EDPL, as successor-in-interest of EDIPL separately since during relevant time, i.e., AY 2012-2013, they existed as separate entities. There is no dispute that in present case, amalgamating company does not exist on date of issuance of notice and accordingly, assessment had to be made in name of amalgamated company i.e. petitioner. However, we cannot construe Section 170 (2) of Act in manner, petitioner has urged. aforesaid provision nowhere requires that two W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 44 of 47 separate notices and separate assessment order are to be passed. On contrary, petitioner as successor would also be liable for income of previous year in which succession took place upto date of succession. We are therefore unable to understand as to what purpose would be served by two separate assessment orders. Pertinently, as of now, we are only concerned with requirement of issue of two separate notices under Section 147/148 and we cannot find any such requirements emanating from Section 170 (2) of Act. 46. Similarly, in case of K. Adinarayana Murty (supra), notice was wrongly issued on HUF in status of individual while entity was being assessed in status of HUF. In present case, there is no infirmity in name and status of entity in whose name notice has been issued. 47. This Court in BDR Builders & Developers (P) Ltd. V Assistant Commissioner of Income Tax [2017] 85 taxmann.com 146 (Delhi), has considered question of issue of notice in context of amalgamation. In said case, company VBPPL amalgamated with petitioner company therein (BDR Builders & Developers) on 01.04.2012 and notice for reopening of assessment under section 148 was issued in name of VBPPL on 03.04.2012. It was held that on date of said reassessment order, VBPPL had ceased to exist as entity and therefore, notice issued in name of VBPPL was void. Thus, once, amalgamating company has merged with amalgamated entity, it ceases to exist in its individual capacity. In present case also, on date of issue of reassessment W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 45 of 47 notice, i.e. 31.03.2019, EDIPL had ceased to exist as separate entity (w.e.f. 01.04.2012). Therefore, for reopening of assessment proceedings in respect of EDIPL, now merged with EDPL, notice can only be issued in name of merged entity. There is no requirement to issue two separate notices in name of amalgamated company (i) as successor-in-interest of amalgamating company and (ii) in its individual capacity, as amalgamated company (EDPL) has taken over liabilities of amalgamating company (EDIPL) and notice mentions liabilities of EDIPL as it accrued pre-amalgamation in its individual capacity. 48. We are therefore, of opinion that notices for reopening of assessment proceedings under section 148, are valid and Assessing Officer has sufficiently showcased that there are "reasons to believe" that income of assessee(s) may have escaped assessment, with tangible material on record. 49. Accordingly, petitions are dismissed. Interim order dated 24.12.2019 stands vacated. We make it clear that observations made hereinabove have been made to consider pleas raised by petitioner. Assessing Officer shall not be influenced by them and shall pass Assessment order on merits after considering all materials/evidences and submissions in accordance with law. All pending applications are also disposed of. No order as to costs. ithe SANJEEV NARULA, J W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 46 of 47 VIPIN SANGHI, J FEBRUARY 13, 2020/Pallavi W.P.(C) 11302/2019 & W.P.(C) 11303/2019 Page 47 of 47 Experion Developers Pvt. Ltd. v. Assistant Commissioner of Income-tax & Or