Point of Law: Taxation - Assessment - The word “reason” in phrase “reason to believe” would mean cause or justification. If Assessing Officer has a cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment.

JUDGMENT :

Bela M. Trivedi, J.

1. The petition filed by the petitioner under Article 226 of the Constitution of India is directed against the Notice dated 26.3.2019 (Annexure-B) issued by the respondent under Section 148 of Income Tax Act (hereinafter referred to the “said Act”) and the preliminary order dated 21.9.2019 (Annexure-E) passed by the respondent disposing off the objections raised by the petitioner against the said Notice.

2. The short facts giving rise to the present petition are that the petitioner is a Private Limited Company incorporated under the Companies Act and is being regularly assessed to income tax by the Income Tax Department. For the A.Y. 2012-13, a return of income was filed on 29.9.2012 by the petitioner. No scrutiny assessment was filed under Section 143(3) of the said Act. The petitioner received the impugned Notice dated 26.3.2019 issued by the respondent under Section 148 read with Section 147 of the said Act, stating inter alia that the respondent had reason to believe that the income of the petitioner chargeable to Tax for the A.Y. 2012-13 had escaped assessment. The petitioner, therefore, was called upon to deliver a return in the prescribed form for the said A.Y. The respondent also issued a letter dated 7.5.2019 providing the reasons recorded for reopening of the assessment for the A.Y. 2012-13 under Section 147 of the said Act. The petitioner filed his objections to the said reasons on 28.7.2019, which have been rejected vide the impugned order dated 21.9.2019.

3. The respondent has filed affidavit-in-reply resisting the petition by contending inter alia that the respondent had reason to believe that the petitioner had suppressed income to the tune of Rs.67,64,436/- for the A.Y. concerned, for the grounds stated in the letter dated 7.5.2019, and therefore, the assessment was sought to be reopened under Section 147/148 of the Act.

4. The learned Sr. Advocate Mr.D.R. Patel for the petitioner raised various contentions, challenging the action of the respondent in seeking to reopen the assessment for the concerned year by submitting that the respondent did not have the jurisdiction under Section 147/148 to reopen the proceedings based on incorrect facts. According to him, the petitioner had never carried out any transactions with Kamal Zaveri, proprietor of M/s. Rishit Corporation or his proprietary concern, nor had taken any unsecured loans from him, which was evident from the audit report. He further submitted that the respondent cannot be permitted to carry out fishing or roving inquiry merely for the purpose of verification. There was total non-application of mind on the part of the respondent in reopening the assessment, and therefore, it could not be said that there was a reason to believe on the part of the respondent in initiating the proceedings under Section 147 of the said Act. Mr.Patel has sought to rely upon the unreported judgment of this Court in case of Parth Knitex Pvt. Ltd., Pravinkumar Ramkaran Agarval Vs. Deputy Commissioner of Income Tax Circle 2(1)(1) (Special Civil Application No.21107 of 2017 decided on 27.2.2018) and in case of GKN Driveshafts (India) Limited Vs. Income-Tax Officer and Others, reported in 259 ITR 19 in support of his submissions.

5. Per Contra the learned Senior Standing Counsel Mr.Nikunt Raval for the respondent submitted that a survey action was undertaken by the Investigation Wing, Surat under Section 133A of the said Act in case of one Kamal Jayantilal Zaveri, Proprietor of M/s.Rishi Corporation on 24.3.2015 and during the reassessment proceedings in case of the said Kamal Jayantilal Zaveri, the impounded material revealed the entries of tax bills and accommodation loan entries connecting the present petitioner to the tune of Rs.67,64,463/- for the A.Y. 2012-13, and therefore, on the basis of the said material the respondent had sought to reopen the assessment by recording the reasons. Placing reliance on the decision of Supreme Court in case of A Raman