The main legal point established in the judgment is the requirement of a direct nexus or live link between the available material and the formation of belief regarding escapement of income, as mandated by Section 147 of the Income Tax Act.

JUDGMENT

Dhiraj Singh Thakur, J. - The Petitioner fled its return of income, which was processed under Section 143(1) of the Income Tax Act, 1961 ('the Act') for the assessment year 2016-17. The assessing offcer subsequently issued a notice under Section 148 of the Act dated 30.03.2021 seeking to reopen the assessment for the assessment year 2016-17 on the ground that income chargeable to tax for the said year had escaped assessment. The reasons for reassessment as furnished to the Petitioner were as under :

'Issues as per reasons recorded for reopening In this case, information has been received from O/o DDIT(Inv.), Unit-7(4), New Delhi, wherein the DDIT has informed that a search was conducted in the case of Mohit Garg and others on 26 November 2016 after information was received from Delhi Police that Rs.3.70 core cash in demonetized currency (Old Rs.500 and Rs.1000 notes) was seized from Mr. Mohit Garg, Mr. Devendra Kumar Jha and Mr. Raj Kumar Sharma. In his statement Mr. Mohit Garg, had named Shri Rajeev Singh Kushwaha, an Entry Operator, as the key accomplice involved in converting old currency in lieu of commission. The modus operandi was to deposit the unaccounted demonetized cash belonging to different persons in the Bank accounts of one of the shell entities foated by Mr. Rajeev Singh Kushwaha who thereafter used to circulate the money among the shell entities created by them through RTGS/NEFT transfer thereby making 3-4 layers and fnally transferring money to the ultimate benefciary.

On verifcation of the VAT return and Annexure-2A of M/s Magnum Tradex Pvt. Ltd., for the period 01.01.2016 to 31.03.2016 it is found that M/s BU Bhandari Auto Lines Pvt. Ltd. is one of such benefciaries (seller). Ms/ BU Bhandari Auto Lines Pvt. Ltd. has sold goods amounting to Rs.2,08,76,068/- to M/s Magnum Tradex Pvt. Ltd. (a shell entity).'

2. Objections were fled to the said reopening of the assessment, which was disposed of vide the Order dated 24 February 2022. Mr. Naniwadekar, learned Counsel appearing for the Petitioner, placed reliance upon the Apex Court judgment in the case of Income-tax Offcer Vs. Lakhmani Mewal Das[1976] 103 ITR 437 (SC), to urge that the reassessment proceedings initiated by the assessing offcer based upon reasons furnished to the Petitioner, which reasons besides being vague and general, had no direct nexus or live link with the formation of the belief that the assessee's income had escaped assessment. It was, therefore, contended that the jurisdictional requirement of Section 147 having not been fulflled by the assessing offcer, the notice under Section 148 of the Act, was without jurisdiction.

3. Learned Counsel for the revenue, Mr. Suresh Kumar, on the other hand, buttressed the reasoning of the assessing offcer and stated that there was enough material and reasons for the assessing offcer to initiate reassessment proceedings based upon the information, which was clearly suggestive of the fact that income chargeable to tax had escaped assessment. With reference to the reply affdavit fled by the revenue, it was urged that the information obtained by the assessing offcer was specifc as regard the transaction made by the assessee with M/s Magnum Tradex Pvt. Ltd, which is a shell company foated by Mr. Rajeev Kushwaha for the purpose of providing accommodation entries.

4. We have heard learned Counsel for the parties and have also gone through the material on record. Section 147 of the Act authorizes an assessing offcer to assess or reassess any income if he has 'reason to believe' that any such income chargeable to tax had escaped assessment for any assessment year.

5. In ITO Vs. Lakhmani Mewal Das (supra), the Supreme Court held that the reopening of the assessment after a lapse of many years is a serious matter and while the Act contemplates the reopening of the assessment if grounds exist for believing that income of the assessee had escaped assessment, yet the words of the statute were 'reason to believe' and