JUDGMENT :

K.R. Shriram, J.

1. The petitioner has impugned notice dated 30.03.2019 received under Section 148 of the Income Tax Act, 1961 (the Act). After petition was filed, an order dated 30.01.2021 u/s 92-CA(3) of the Act came to be passed. Petition was, therefore, amended pursuant to the liberty granted by this Court on 20.2.2021 by which respondent no.2 re-initiated transfer pricing proceedings which were already concluded pursuant to re-opening of assessment by respondent no.1.

2. Mr. Sridharan submitted that if the Court is going to set aside notice issued under Section 148 of the Act then consequence thereof will be to set aside all revised orders passed by respondent no.2 u/s 92-CA(3). He submitted that there is enough material to set aside notice under Section 148 of the Act and at the same time, if notice u/s 148 goes, there will be a cascading effect and all other orders will also go.

3. Petitioner filed its return of income for the Assessment Year 2012- 2013 on 29.11.2012 declaring total income of Rs.9,90,48,280/-. Return was processed u/s 143(1) of the Act on 19.02.2014 accepting the return income of Rs.9,90,48,280/-. Petitioner’s case was thereafter taken up for regular assessment and assessment order under Section 143(3) of the Act came to be passed on 28.3.2016. Total income was assessed at Rs.11,11,94,030/-.

4. Petitioner thereafter received impugned notice dated 30.3.2019 u/s 148 of the Act in which, respondent no.1 asserted that he had reasons to believe that income chargable to tax for Assessment Year 2012-13 has escaped assessment within the meaning of Section 147 of the Act. Petitioner was provided reasons for reopening alongwith approval received under Section 151 of the Act. Mr. Sridharan further submitted that the reasons recorded clearly indicate that the Assessing Officer who has issued the notice has acted merely on the dictates of the Revenue Audit in issuing the notice. Therefore, the notice itself is bad in law. Mr. Sridharan further submitted that it is settled law that the Income Tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and opinion rendered by the audit party in regard to law cannot be the basis for the purpose of such belief. He submitted that evaluation of law must be made directly and solely by the Income Tax officer.

5. Mr. Sharma strongly objected and made valiant effort to justify issuance of notice. He submitted that Transfer Pricing Officer (TPO) has calculated operating profit / operating revenue at 1.55% after considering operating cost as debited to the profit and loss account including depreciation of Rs.2.93 Crores. Whereas, depreciation of Rs. 6.58 Crores, which was debited should have been included for computing assessee’s Arm’s Length Pricing (ALP) margin, thus resulting in Rs.3.64 Crores to be considered for the purpose of ALP. He submitted that TPO has grossly erred in calculating operating profits to operating revenue and, therefore, revenue audit was justified in raising objections.

6. In our view, Mr. Sharma’s objections does not hold water because the reason to believe that income has escaped assessment, cannot be based on borrowed information. The Apex Court in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, (1979) 2 Taxman 197 (SC) held that opinion of internal audit of Income Tax Department can not be regarded as information within the meaning of Section 147(d) of the Act. Paragraphs 7, 8, 9, 11 and 20 of the said judgment read as under:-

“7. Insofar as the word "information" means instruction or knowledge concerning facts or particulars, there is little difficulty. By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. Its quintessential value lies in its definitive vitality.

8. But when "information" is regarded as meaning instruction or knowled