Badar Durrez Ahmed, J.:— By way of this writ petition, the petitioner seeks the quashing of the impugned notice dated March 28, 2008, under section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the said Act”) as well as the order passed by the Assessing Officer on November 28, 2008, disposing of the objections to the initiation of reassessment proceed-ings preferred by the petitioner/assessee.

2. We have heard the learned counsel for the parties. The facts are that the original assessment was framed under section 143(3) of the said Act on March 5, 2003. In the course of the assessment proceedings, the Assessing Officer had raised certain queries, inter alia, with regard to the share application money received by the assessee from Solo-Mio Marketing Pvt. Ltd. In response to the queries raised by the Assessing Officer, the assessee submitted a reply dated February 10, 2003. A copy of the said reply has been placed as annexure 4 at page 75 of the present paper book. On going through the said reply, we note that the petitioner had clearly disclosed the names and addresses of the directors of the assessee/petitioner-company.

3. The petitioner had also stated categorically that no loans had been accepted by it during the year under consideration and that there was an increase of Rs. 64,75,000 in the share capital of the company. It was also stated that all the, share application money had come from companies which were duly registered under the Companies Act, 1956, and that each one of them was legal entity. It was also stated that the applicants had con-firmed their investments through duly attested affidavits. Specifically, with regard to the investment made by Solo-Mio Marketing Pvt. Ltd., the peti-tioner gave the following response:

“2. Name and address of the investor/shareholder

M/s. Solo-Mio Marketing Private Limited, L-132, Shastri Nagar, Delhi-110,052.

No. of shares held

50,000 equity shares of Rs. 10 each.

Amount received and mode of payment

Rs. 3,00,000 through cheque No. 436482 dated March 12, 2001 and Rs. 2,00,000 through cheque No. 436483 dated March 12, 2001 drawn on Bank of India, Parliament Street, New Delhi.

Source wherefrom the applicant had received funds

The applicant had received back repayment of loan of Rs. 3,00,000 through cheque No. 459673 dated March 11, 2001, Rs. 5,00,000 through cheque No. 459674 dated March 12, 2001, Rs. 2,00,000 through cheque No. 459672 dated March 7, 2001 from M/s. Flowtech Air (P) Ltd., drawn on Canara Bank, South Extn. New Delhi, Rs. 90,000 from M/s. MJM Investments through Cheque No. 444851 dated March 9, 2001, and Rs. 60,000 from M/s. Nikki Drugs and Chemicals Pvt. Ltd., through Cheque No. 317104 dated March 9, 2001, drawn on Bank of India, Bank Street, Karol Bagh, New Delhi-110 005.

Supporting evidence relied upon

1. The applicant is a legal entity, a company duly incorporated under Indian Companies Act.

2. The applicant is a regular income-tax assessee on P.A No. AAACS9707P. [Thus the identity of the investor is established and known to the department.]

3. The payment has been received through banking channels. [Copy of relevant extract of their bank account is enclosed.]

4. The applicant made investment after a due authority drawn from meeting of board of directors, (copy of the same is enclosed.)

5. Certificate from the debtors, who had repaid the loan to the applicant/investor is enclosed. This shows the source of credit entry in the bank account of the applicant/investor out of which application money was paid to the assessee.

6. Affidavit by the investor confirming these facts is enclosed.”

4. We also note that the petitioner had also filed the affidavit of Mr. K.K Bansal, who was the director of M/s. Solo-Mio Marketing Pvt. Ltd. con-firming that the said company had purchased 50,000 fully paid up equity shares of Rs. 10 each of the petitioner-company at par during the financial year which ended on March 31, 2001, and relevant to the assessment year 2001-02. The affidavit also disclosed that the payments towards the share application money were made through two separate cheques, details of which were given in the said affidavit.

5. The PAN number of the investor company, i.e, Solo-Mio Marketing Pvt. Ltd. was also clearly disclosed in the said affidavit. After having received this explanation and information from the assessee, the Assessing Officer framed the assessment order on March 5, 2003. In the assessment order itself, it was noted as under:

“The details and documentary evidence of share application money pending for allotment in the previous year have been filed along with documentary evidence from subscribers. It has been stated that funds available with the company has been advanced to various persons and the company has earned interest income of Rs. 7,44,691 on such advances.”

6. The Assessing Officer issued the notice under section 148 of the said Act on March 28, 2008, beyond the period of four years. As such, the proviso to section 147 would become applicable. Under the proviso itself, it is necessary that before any action is initiated, it must be pointed out that the assessee had failed to make a true and full disclosure of all the material facts. In the reasons recorded in writing for reopening the case under section 148 of the said Act, there is no allegation that the petitioner did not make a full and true disclosure of all the material facts. In fact, in our view, the reasons recorded are quite general and vague as would be apparent from a plain reading of the same. The reasons recorded are as under:

“Reasons recorded in writing for reopening the case under section 148.

M/s. JSRS Udyog Limited

Assessment year 2001-02

Information has been received from the Investigation Wing of Income-tax Department, New Delhi, regarding beneficiaries and operators of accommodation entries in Delhi.

In the said information, it has been, inter alia, reported as under:

Entries are broadly taken for two purposes

1. To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets, etc., in the form of gifts, share application money, loans, etc.

2. To inflate expenses in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes.

The specific information provided by the Investigation Wing of Income-tax Department, New Delhi, is enclosed as per annexure.

In view of the specific information received as above from Inves-tigation Wing of Income-tax Department, New Delhi, I have suffi-cient reason to believe that the assessee-company M/s. JSRS Udyog Pvt. Limited has indulged in receiving accommodation entries and the total amount of payment received by the assessee-company amounting to Rs. 8,00,000 is bogus and represents the undisclosed income/income from other sources of the assessee-company, which has not been offered to tax by the assessee in its return filed.

Accordingly, I have reason to believe that income of Rs. 8,00,000 has escaped assessment as the assessee-company has understated its returned income for the assessment year 2001-02 by an amount of Rs. 8,00,000.

(Sd.)……………………..

Hemant Kumar

Income-tax Officer

Ward 4(1), New Delhi”

Annexure

Beneficiary's name JSRS Udyog Ltd. JSRS Udyog Ltd. JSRS Udyog Ltd. Beneficiary bank name OBC OBC OBC Beneficiary bank branch Ghaziabad Ghaziabad Ghaziabad Value of entry taken Instrument No. by which entry taken Rs. 3,00,000 413946 Rs. 3,00,000 436482 Rs. 2,00,000 436483 Date on which entry taken April 11, 2000 March 13, 2001 March 13, 2001 Name of account holder of entry giving account Solo-Mio Marketing P. Ltd. Solo-Mio Marketing P. Ltd. Solo-Mio Marketing P. Ltd.

Bank from which entry given Bank of India Bank of India Bank of India Branch of entry giving bank Karol Bagh Karol Bagh Karol Bagh AJc No. entry giving account 11266 CD 11266 CD 11266 CD

7. It is apparent from the reasons recorded and the annexure referred to therein that the entire issue revolves around three transactions. A payment of Rs. 3 lakhs received in April, 2000, from Solo-Mio Marketing Pvt. Ltd. and further payments of Rs. 3 lakhs and Rs. 2 lakhs received by the peti-tioner in March, 2001, from the same Solo-Mio Marketing Pvt. Ltd. In the objections filed by the petitioner to the said reasons, the petitioner had, inter alia, explained the same by stating that all the three amounts were received towards share application money. However, the amount of Rs. 3 lakhs, which was received in April, 2000, pertains to the previous year. In the year in consideration, only two payments of Rs. 3 lakhs and Rs. 2 lakhs had been received from Solo-Mio Marketing Pvt. Ltd. towards share application money in respect of the 50,000 equity shares referred to in the peti-tioner's letter dated February 10, 2003, in response to the queries raised by the Assessing Officer in the course of the original assessment proceedings. According to the petitioner, there had been a complete, full and true disclosure of all the material facts and the assessment was framed by the Assessing Officer after being fully satisfied with the details and documentary evidence with regard to share application money which had been submitted by the petitioner. It was contended that the initiation of reassessment proceedings was nothing but mere change of opinion and, in any event, it was not permissible because the pre-condition of there being a lack of full and true disclosure on the part of the petitioner had not been satisfied.

8. The Assessing Officer did not agree with the objections raised by the petitioner and passed the following order on November 28, 2008:

“F. No. ITO/Ward 4(2)/2008-09/190

Office of the Income-tax Officer,

Ward 4(2),

Room No. 413A, C.R Building,

New Delhi

Dated : 28th November, 2008.

The Principal Officer,

M/s. JSRS Udyog Ltd.,

H-3/41, Sector-18, Rohini,

Delhi-110085.

Sub : Reply to your letter dated 24/11/2008 in respect of objections for validity of the initiation of proceedings under section 147 of Income-tax Act for the assessment year 2001-02 ‘regarding’

Please refer to the above. In this connection, it is to inform you that original assessment in this case was completed under section 143(3) on March 5, 2003. Later on, in this case information from the Investigation Wing of the Income-tax Department, Jhandewalan, New Delhi, was received that the assessee has indulged in receiving accommodation entries.

The details of accommodation entries are given as under:

1. Rs. 3,00,000 was received from M/s. Solo Mio Marketing Pvt. Ltd. Cheque No. 413946 dated April 11, 2000, drawn on Bank of India, Karol Bagh, New Delhi, Bank A/c. No. 11266 CD which was deposited in the A/c. of M/s. JSRS Udyog Ltd. in O.B.C Bank, Ghaziabad (UP).

2. Rs. 3,00,000 was received from M/s. Solo-Mio Marketing Pvt. Ltd. Cheque No. 436482 dated March 13, 2001, drawn on Bank of India, Karol Bagh, New Delhi, Bank A/c. No. 11266 CD which was deposited in the A/c. of M/s. JSRS Udyog Ltd. in O.B.C Bank, Ghaziabad (UP).

3. Rs. 2,00,000 was received from M/s. Solo-Mio Marketing Pvt. Ltd. Cheque No. 436483 dated March 13, 2001, drawn on Bank of India, Karol Bagh, New Delhi, Bank A/c. No. 11266 CD which was deposited in the A/c. of M/s. JSRS Udyog Ltd. in O.B.C Bank, Ghaziabad (UP).

During the course of investigation made by the Investigation Wing has found these entries are bogus/sham transactions and informed the concerned Assessing Officer for necessary action in the matter.

Therefore, the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment as the assessee-company has failed to disclose fully and truly all material facts necessary for assessment year 2001-02.

Under the circumstances, the Assessing Officer has initiated the proceedings under section 147/148 of the Income-tax Act with the prior approval of the Commissioner of Income-tax, Delhi-II, New Delhi within the time prescribed under the provisions of section 149 read with section 151 of the Income-tax Act, 1961. Therefore, your application, vide letter dated November 24, 2008, objecting the vali-dity of initiation of proceedings under section 147/148 of the Income-tax Act is not acceptable and is hereby rejected.

Yours faithfully,

(Sd.)………………………….

Suresh Mamtani,

Income-tax Officer,

Ward-4(2), New Delhi.”

9. We are of the opinion that the said order has, first of all, not dealt with any of the objections raised by the petitioner. Secondly, the order is nothing but a repetition of what is given in the purported reasons. There is no indication of any specific information with regard to any accommodation entry being provided by the assessee/petitioner. Apart from merely saying that the receipts of the share application money were bogus and sham transactions, there is nothing indicated either in the reasons or in the impugned order dated November 28, 2008, to enable us to arrive at such a conclusion. In a recent decision in the case of Haryana Acrylic Manufac-turing Company v. CIT, [2009] 308 ITR 38 (Delhi) (WP(C) 4074 of 2007 decided on November 3, 2008), in a somewhat similar circumstances, we had made the following observations (page 56):

“18. Viewed in this light, the proviso to section 147 of the said Act, carves out an exception from the main provisions of section 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of section 147 of the said Act would not be material. Once the exception carved out by the proviso came into play, the case would fall outside the ambit of section 147.

19. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied:

(a) an assessment under sub-section (3) of section 143 or this sec-tion has been made for the relevant assessment year; and

(b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee:

(i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or

(ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year.

Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Con-dition (b) deals with a special kind of escapement of income charge-able to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all mate-rial facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts.

20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to dis-close fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for remov-ing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd. v. ITO, [2009] 308 ITR 22 (Delhi) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania v. Asst. CIT, [2003] 269 ITR 192 that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated March 29, 2004, under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated March 2, 2005, are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.”

10. We feel that the present case is entirely covered by that decision. Con-sequently, we set aside the order dated November 28, 2008, and quash the impugned notice under section 148 dated March 28, 2008. There shall be no order as to costs. This writ petition stands allowed as indicated above.