Agr Investment Ltd v. Additional Commissioner of Income Tax Range-1 and Another

MANMOHAN, J. JANUARY 7, 2011 Pk/dk

* HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on: 9th November, 2010 % Judgment Pronounced on: 7th January, 2011 + WP(C) No.7517/2010 AGR INVESTMENT LTD. ..... Petitioner Through: Mr. S. Ganesh, Sr. Adv. with Mr. Satyen Sethi, Mr. Arta Trana, Advocates Versus ADDL. COMMISSIONER OF INCOME TAX AND ANOTHER ....Respondents Through: Mr. M.P. Sinha, Advocate CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether reporters of the local papers be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes DIPAK MISRA, CJ By this writ petition preferred under Article 226 of the Constitution of India, the petitioner has prayed for issue of a writ of certiorari for quashment of the notice dated 25th February, 2010 issued under Section 148 of the Income Tax Act, 1961 (for brevity "the Act") for the assessment year 2003- 04 and further to quash the order dated 28th June, 2010 whereby the objections raised by the petitioner have been rejected. 2. It is submitted by Mr. S. Ganesh, learned senior counsel along with Mr. Satyen Sethi and Mr. Arta Trana, learned counsel appearing for the petitioner, that the assessing officer has assumed jurisdiction to initiate the proceedings under Section 147 and issued notice under Section 148 of the Act solely on the basis of certain statements recorded by the Directorate of Investigation without forming an independent opinion. It is urged by him that the expression used in Section 147 of the Act is "reason to believe" and not "reason to suspect" and it is the settled legal position that there should be direct nexus or live link between the materials relied upon by the revenue and the belief that income has escaped assessment. It is contended that on a bare reading of the reason to believe, it is evident that the jurisdiction to reassess the income has been assumed on the basis of unspecific and vague information which cannot justify the formation of the belief or the reason to believe that income has escaped assessment. The entire foundation of the belief that the income has escaped assessment is that "certain investigations were carried out by the Directorate of Investigation, Jhandewalan" though no particulars had been given on what basis the Directorate of Investigation had come to the conclusion that accommodation entries were given to the petitioner. It is urged that no details of the persons who supposedly alleged that the transactions of the petitioner were bogus were provided and further the nature of the alleged accommodation entries have not been referred to in the reason to believe. In essence, the submission in this regard is that there is complete absence of material which can be said to have a live link with or be the basis of formation of the purported belief or reason to believe that the petitioner"s income had escaped assessment. The allegation that the transactions entered into by the petitioner were bogus is totally without any substance in the absence of any materials/details provided. It is further submitted by the learned counsel for the petitioner that the reasons recorded must show application of mind by the assessing officer to the material produced before him on the basis of which the reason to believe is formed that income has escaped assessment and in the absence of such application of mind which is evincible from the reasons recorded, the order is vulnerable in law. It is contended by him that the assessing officer has merely blindly accepted what was allegedly intimated to him by the Directorate of Investigation without even attempting to ascertain the basis of the Directorate"s assertion that accommodation entries were given to the petitioner. It is his further submission that the objections raised by the petitioner have not been disposed of in conformity with the decision rendered by the Apex Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer & Ors., (2003) 179