Point of Law: It is settled law that, at the stage of Section 148 of the Act, what is required is “reason to believe”, but not the established fact of escapement of income. This aspect has been considered by the Apex Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri (2008) 14 SCC 208, wherein, the Apex Court has observed that, “at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief and whether the material would conclusively prove the escapement is not the concern at that stage

ORDER :

ILESH J. VORA, J.

1. By filing this writ application under Article 226 of the Constitution of India, the writ applicant seeks to challenge the notice of reopening of the assessment dated 19.03.2019 issued under Section 148 of the Income Tax Act, 1961 (for short “The Act, 1961”) for the A.Y 2012-13, on the ground that, it is illegal and without jurisdiction inasmuch as the conditions precedent as laid under Section 147 of the Act are not fulfilled.

2. The brief facts can be summarized as under:

2.1 The assessee viz. Cemach Machineries had filed its return of income on 29.09.2012 for the A.Y. 2012-13 declaring total income as Nil and claimed loss of Rs.10,57,484/-. The same was processed without any scrutiny by the Revenue under Section 143(1) of the Act.

2.2 The Assessing Officer has issued notice under Section 148 of the Act based on the reasons recorded dated 06.03.2019. In response to the said notice, the assessee requested the Department to treat the original return under Section 139(1) of the Act filed on 29.09.2012 as the return of income. Notice under Section 142(1) of the Act was issued calling for the necessary particulars. As per the case of the Revenue, the Assessing Officer had received information from the ITO, Ward 6(1), Ahmedabad, vide letter dated 11.04.2014, that during the scrutiny assessment under Section 143(1) for the A.Y. 2011-12 in the case of Smt. Harshaben Rasikbhai Gosai, who is the proprietor of Mahavir Enterprise, it was found that, there was a high value financial transaction in her bank account and in connivance with one Mr. Kundan Mudaliar, whose statement was recorded on oath under Section 131(1A) of the Act, they are alleged to have provided accommodation entries through bogus billing activities to many business concerns and the assessee company was also one of the beneficiaries. Smt.Harshaben Gosai, Mr.Kundan Mudaliar and Mr.Rasikbhai Gosai and other entities like P & M Co. R.S Enterprise, and J.K Enterprise provided accommodation entries to the business concerns without any business activities.

2.3 After receiving the information, the Assessing Officer verified the return of the assessee and other details. The Assessing Officer had verified the bank statements of three main entities namely R.S Enterprise, P & M Co and J.K Enterprise and found that, without any actual sale or purchase, the assessee company had received Rs.14,82,79,492/- and after making independent inquiry and application of mind, the Assessing Officer formed a belief that the amount of Rs.14,82,79,492/- is liable to be taxed and has escaped assessment within the meaning of Section 147 of the Act. The reasons for re-opening recorded by the assessing officer reads thus:

Reasons for re-opening :

“1. In this case, the information was received from erstwhile ITO Ward-12(4), now ITO, Ward-6(1)(5), Ahmedabad vide letter No. Wd12(4)/ Information / CML/ 2014-15 dated 11.04.2014. The scrutiny assessment u/s 143(3) for A.Y. 2011-12 was completed in case of Smt. Harshaben Rasikbhai Gosai, Porp. of Mahavir Enterprise by then ITO, Ward-12(4) Ahmedabad. During the course of assessment proceedings, it was established that Smt. Harshaben [Prop. of Mahavir Enterprise] had no business, activity at all but its bank statement showed high value financial transactions. Further, statement of Kundan Mudaliar recorded in the case of Smt. Harshaben Rashikbhai Gosai, Prop. of Mahavir Enterprise was received in this office on 21.02.2018. It was also established through a statement under oath u/s 131(1A) of the Income Tax Act, 1961, of Shri Kundan Mudaliar, Prop. of Marshall Enterprise residing at 75/76 Gujarat Housing Board, Khokhra, Ahmedabad, that he in connivance with Smt. Harshaben Rashikbhai Gosai managed accommodation entries through bogus billing activities for many business concerns who are the beneficiaries. The assessee company i.e. Cemach Machineries Ltd is one of the beneficiaries that feature in the list of such companies.

2. The disseminated