Akil Kureshi, J.
1. These petitions arise in common background. They have been heard together and would be disposed of by this common judgment. For convenience, we may refer to the facts arising in SCA No. 17307 of 2015.
2. The petitioner is a company registered under the Companies Act. For the Assessment Year 2011-12, the petitioner filed return of income on 17.10.2011 declaring nil income. Such return was processed under Section 143(1) of the Income Tax Act, 1961 ("the Act" for short) and thus accepted without any scrutiny. The Assessing Officer later on issued impugned notice dated 02.03.2015 under Section 148 of the Act seeking to reopen the assessment of the petitioner for the said Assessment Year 2011-12. He supplied to the petitioner the reasons recorded for issuing such notice, which read as under: ”
"In this case, on verification of records, it is found that the Assessee is a Private Ltd. Company engaged in the business of Manufacturing of Ceramic Tiles. On the basis of information available with this office, assessee company had issued its shares at huge premiums during F.Y. 2010-11. On verification of "PART-A-BS" of return of income filed by the assessee company, it is found that the assessee company has shown "Issued, Subscribed and Paid- up" share capital of Rs. 2,66,57,000/-. During the F.Y. 2010-11, the assessee had issued 60,000/- shares at a face value of Rs. 10 per share with a premium of Rs. 990/- per share. Hence the premium received by the assessee per share is Rs. 990 for the share of face value of Rs. 109/-. On the basis of the assets and liabilities furnished by the assessee company in its balance sheet, and computing the net worth of the company, per share valuation of the assessee company comes out to Rs. 33/-. Hence the shares of the company have been subscribed by the shareholders at a premium which is very high in comparison to the real worth of the shares. Further assessee company has shown total income of Rs. NIL for A.Y. 2011-12.
It is difficult to accept the fact that a person will invest in the share capital of a Private Limited company at such a huge premium which is even higher than the real worth of the share. In fact a sound investor will never subscribe to the shares of the company with such meager profits at such high premiums. A detailed analysis of the data furnished by the assessee with its return shows that whereas the net worth of the shares issued is Rs. 33/-, the same have been allotted for Rs. 1000/-, i.e. an excess of Rs. 967/-.
In my opinion this excess premium amount of Rs. 967/- is unexplained cash credit in the hands of the assessee. Hence I have reasons to believe that income to the extent of Rs. 5,80,20,000/- has escaped assessment in the hands of the assessee for A.Y. 2011-12.
I have, therefore, reasons to believe that income/gain chargeable to Tax has escaped assessment for the A.Y. 2011-12. The above income/gain chargeable to tax has escaped assessment by reason of the failure on the part of the above named assessee who failed to disclose fully and truly all material fact necessary for the assessment for the A.Y. 2011- 12 within the meaning of explanation 2(b) of section 147 of the IT Act, 1961.
Hence it is a fit case for re-opening the assessment for A.Y. 2011-12.
Issue Note u/s.148 of the I.T. Act, 1961."
3. The petitioner raised objections to the notice for reopening under communication dated 20.08.2015. Such objections were rejected by the Assessing Officer by order dated 18.09.2015. The petitioner has therefore filed this petition. Facts are substantially similar in all cases.
4. Learned Counsel Shri J.P. Shah for the petitioner submitted that the Assessing Officer, once having accepted the return, could not have issued notice for reopening on the basis of material which was already on record. In his contention, therefore, the Assessing Officer had to have some tangible material which did not form part of the original record to enable him to issue notice for reopening, failing which the Assessing Officer would be merely reviewing the earlier assessment.
4.1 Counsel further contended that the reason to believe that income chargeable to tax has escaped assessment must be based on some tangible material, which in the present case was simply not available. Drawing our attention to the reasons recorded by the Assessing Officer, Counsel contended that merely because some investors had invested in the shares of the company at a value which may seem to be excessive to the Assessing Officer, would not imply that the additional amount represents the unexplained cash credit of the assessee company which would be covered under Section 68 of the Act.
4.2 Counsel lastly submitted that in any case, the assessee company had not commenced its manufacturing activity till such investments were made. Therefore, there cannot be any income till the business commenced.
5. In support of his contentions, Counsel drew our attention to a decision of Division Bench of the Delhi High Court in case of CIT v. Orient Craft Ltd. [2013] 354 ITR 536/215 Taxman 28/29 taxmann.com 392, in which it was held and observed as under: ”
'18. In the present case the reasons disclose that the Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT v. Kelvinator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words "reason to believe" vis- -vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147.'
5.1 Counsel also relied on the decision of Division Bench of this Court in case of Hindustan Inks and Resins Ltd. v. Dy. CIT [2011] 60 DTR 18, in which referring to the decision of the Supreme Court in case of CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008] when the Court found that the investors were not even found to be bogus, observed that in any case, no addition can be made in hand of the company.
5.2 Counsel also relied on the decision of the Supreme Court in case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, in which the Supreme Court observed that the reason for the formation of the belief that income chargeable to tax had escaped assessment must be held in good faith and should not be a mere pretence.
6. On the other hand, learned Counsel Shri Desai for the Department opposed the petitions contending that the original assessment was accepted under Section 143(1) of the Act without scrutiny. There is, therefore, no question of change of opinion. The Assessing Officer has recorded valid reasons to form a belief that income chargeable to tax had escaped assessment. Such reason is not open to scrutiny at this stage unless it is shown to be wholly baseless.
7. In all three cases, admittedly, the original assessments were not framed after scrutiny. We must, therefore, examine the petitioners' challenge to the notice for reopening in that background. It is by now well settled that in case of reopening of an assessment where return was accepted under Section 143(1) without scrutiny, the question of change of opinion would not arise. In case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC), it was held and observed as under: ”
"16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has 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. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. 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. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [1999 (236) ITR 34 (SC)].
17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso."
8. In case of Inductotherm (India) (P.) Ltd. v. M. Gopalan, Dy. CIT [2013] 356 ITR 481/36 taxmann.com 401/217 Taxman 132 (Mag.) (Guj.) Division Bench of this Court, in the context of notice for reopening of assessment under Section 143(1) of the Act, observed as under: ”
"11. It is undoubtedly true that proviso to section 143(2) of the Act prescribes a time limit within which such notice could be issued. It is equally well settled that such notice is mandatory and in absence of notice under section 143(2) of the Act within the time permitted, scrutiny assessment under section 143(3) cannot be framed. However, merely because no such notice was issued, to contend that the assessment cannot be reopened, is not backed by any statutory provisions. Counsel for the petitioner did not even stretch his contention to that extent. The case of the petitioner as we understand is that in guise of reopening of an assessment, the Assessing Officer cannot try to scrutinize the return. This aspect substantially overlaps with the later contention of the petitioner that the reasons recorded by the Assessing Officer were not germane and were not sufficient to permit reopening.
12. We must recall that the return filed by the petitioner was not taken in scrutiny. No assessment, thus, took place. The Assessing Officer without any assessment, merely issued an intimation under section 143(1) of the Act accepting such return. In that view of the matter, it cannot be stated that the Assessing Officer formed any opinion with respect to any of the aspects arising in such return. In such a case, scope for reopening such assessment under section 147 of the Act as compared to an assessment which was previously framed under section 143(3) of the Act, whether beyond or within four years from the end of the relevant assessment year, is substantially wider. The Apex Court in case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) noticed such distinction and noted that the scheme of sections 143(1) and 143(3) of the Act is entirely different. It was noticed that after 1.4.1989, the provisions contained in section 143 underwent substantial changes. It was noticed that the intimation under section 143(1) of the Act is given without prejudice to the provisions of section 143(3) of the Act and though technically the intimation would be deemed to be demand notice under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2)(a) of the Act. The Apex Court observed that the word "intimation" as substituted for assessment carried different concepts. It was observed that while making an assessment, the Assessing Officer is free to make any addition after granting an opportunity to the assessee. The Apex Court observed that, "It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1,1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any assessment is done by them? The reply is an emphatic no. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1) (a), the question of change of opinion, as contended, does not arise.
13. Despite such difference in the scheme between a return which is accepted under section 143(1) of the Act as compared to a return of which scrutiny assessment under section 143(3) of the Act is framed, the basic requirement of section 147 of the Act that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment is not done away with. Section 147 of the Act permits the Assessing Officer to assess, re- assess the income or re-compute the loss or depreciation if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. This power to reopen assessment is available in either case, namely, while a return has been either accepted under section 143(1) of the Act or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both of cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment."
8.1 It was concluded as under: ”
"16. It would, thus, emerge that even in case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. However, as held by the Apex Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd., (supra) and several other decisions, such reason to believe need not necessarily be a firm final decision of the Assessing Officer.
17. If we accept such proposition, the petitioner's apprehension that the Assessing Officer would arbitrarily exercise powers under section 147 of the Act to circumvent the scrutiny proceedings which could not be framed in view of notice under section 143(2) having become time barred, would be taken care of. To reiterate, even for reopening of an assessment which was accepted previously under section 143(1) of the Act without scrutiny, the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment."
9. In case of Orient Craft Ltd. (supra), heavily relied upon by Shri Shah, the Division Bench of Delhi High Court, in the context of reopening of an assessment, which was originally accepted under Section 143(1) of the Act, reiterated that the requirement of 'reason to believe' would apply even in such case and that such requirement cannot be different in case of 143(1) and 143(3) assessment. On this aspect, we have no disagreement at all. In fact, this was substantially what was held in judgment of this Court in Inductotherm (India) (P.) Ltd. (supra). However, in later portion of the judgment in para-18, which is reproduced hereinabove, the Court went further and observed that there was no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. The Court was, therefore, of the opinion that it reflects an arbitrary exercise of the power conferred under section 147 of the Act. Heavy reliance was placed on the decision of the Supreme Court in case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312. We are unable to persuade ourselves to take such a strong line. The decision of the Supreme Court in case of Kelvinator of India Ltd. (supra) was rendered in the background of a case of reopening of an assessment which was previously framed after scrutiny. The observations of the Supreme Court of requirement of reason to believe even after amendment in Section 147 of the Act therefore, must be seen in background of such facts. We are afraid, the Supreme Court never meant to convey that to reopen an assessment, which was accepted under Section 143(1) of the Act, there must be some tangible material, which is alien to the record.
10. In case of Gujarat Power Corpn. Ltd. v. Asstt. CIT [2013] 350 ITR 266/[2012] 26 taxmann.com 51/211 Taxman 63 (Mag.) (Guj.), the Division Bench of this Court in fact rejected the contention of the assessees that for reopening of assessment, which was previously framed after scrutiny where notice is issued within four years from the end of relevant assessment year, the material to enable the Assessing Officer to form the belief that income chargeable to tax has escaped assessment, must be alien to the record. The Court observed as under: ”
"30. In the result, we are of the opinion that reopening of an assessment within a period of four years from the end of relevant assessment year after 1.4.1989 could be made as long as the same is not based on mere change of opinion. Merely because a certain material which is otherwise tangible and enables the Assessing Officer to form a belief that income chargeable to tax has escaped assessment, formed part of original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. Expression "tangible material" does not mean material alien to the original record."
11. In such judgment, the Court noted the decision of 5 Judge Bench of the Delhi High Court in case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1/123 Taxman 433 which eventually came to be confirmed by the Supreme Court in case of Kelvinator of India Ltd. (supra). It was noted that even the Delhi High Court had questioned whether Kelvinator judgment of 5 Judge Bench could be read as to requiring some material outside of the record to enable the Assessing Officer to reopen an assessment within four years from the end of relevant assessment year. The issue was referred to Larger Bench in case of CIT v. Usha International Ltd. [2012] 21 taxmann.com 454/210 Taxman 61 (Mag.) (Delhi). Later on, Delhi High Court Full Bench rendered its decision in case of CIT v. Usha International Ltd. [2012] 348 ITR 485/210 Taxman 188/25 taxmann.com 200 (Delhi) (FB). The majority opinion referring to the judgment of the Delhi High Court in case of Kelvinator of India Ltd. (supra) observed as under: ”
"23. The said observations do not mean that even if the Assessing Officer did not examine a particular subject matter, entry or claim/deduction and therefore had not formed any opinion, it must be presumed that he must have formed an opinion. This is not what was argued by the assessee or held and decided. There cannot be deemed formation of opinion even when the particular subject matter, entry or claim/deduction is not examined.
24. Distinction between disclosure/declaration of material facts made by the assessee and the effect thereof and the principle of change of opinion is apparent and recognized. Failure to make full and true disclosure of material facts is a precondition which should be satisfied if the reopening is after four years of the end of the assessment year. The explanation stipulates that mere production of books of account and other documents, from which the Assessing Officer could have with due diligence inferred facts does not amount to full and true disclosure. Thus in cases of reopening after 4 years as per the proviso, conduct of the assessee and disclosures made by him are relevant. However, when the proviso is not applicable, the said precondition is not applicable. This additional requirement is not to be satisfied when re-assessment proceedings are initiated within four years of the end of the assessment year. The sequitor is that when the proviso does not apply, the re-assessment proceedings cannot be declared invalid on the ground that the full and true disclosure of material facts was made. In such cases, re-assessment proceedings can be declared invalid when there is a change of opinion. As a matter of abundant caution we clarify that failure to state true and correct facts can vitiate and make the principle of change of opinion inapplicable. This does not require reference to and the proviso is not invoked. The difference is this; when proviso applies the condition stated therein must be satisfied and in other cases it is not a prerequisite or condition precedent but the defence/plea of change of opinion shall not be available and will be rejected.
25. Thus if a subject matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/deduction or the entry, and therefore, it is the case of change of opinion. When at the first instance, in the original assessment proceedings, no opinion is formed, principle of change of opinion cannot and does not apply. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion."
11.1 The majority view thus relying on the decision of the Supreme Court in case of A.L.A. Firm v. CIT [1991] 189 ITR 285/55 Taxman 497 observed as under: ”
"The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently come by the material from the record itself, then such a case would fall within the scope of Section 147(b) of the Act." (emphasis supplied)
The aforesaid observations are complete answer to the submission that if a particular subject matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred."
11.2 The third Member of the Bench, R.V. Easwar J. however, expressed dissenting view. It was observed as under: ”
"17. In my understanding of the judgment of the Full Bench of this court in Kelvinator (supra), the ruling is applicable to all cases where the assessment was completed under section 143(3) of the Act, subject only to the condition that the assessee has furnished fully and truly all material particulars and primary facts necessary for the assessment. It is not a question of deemed formation of opinion alone; it goes beyond that, and the substratum of the ruling is that the assessing officer cannot take advantage of the perfunctory manner in which he completed the assessment. This does not necessarily mean that wherever the assessing officer has completed the assessment under section 143(3) it must be taken as if he has discharged his duties in a perfunctory manner. The ratio of the judgment is rooted to the salutary principle that the assessees shall not be subjected to harassment if they have furnished full and true particulars at the time of the original assessment, which is what the Supreme Court observed in the judgment in Srikrishna Pvt. Ltd. (supra). It certainly does not imply that every assessment order passed under section 143 (3) without an elaborate discussion of various contentions and claims put forth by the assessee is necessarily a wrong order to be corrected later by resorting to section 147. Making an assessment to income tax represents the quantification of the charge to tax; it is a serious task. Legal consequences follow. A return of income is not a mere scrap of paper. It is to be treated with the respect it deserves. I think the real principle laid down by the Full Bench in Kelvinator (supra) is that if the assessee has discharged his duty of furnishing full and true particulars at the time of the assessment, it may be fairly taken that the assessing officer has equally discharged his functions in the manner required of him. If he passes an assessment order under section 143(3) of the Act, it hardly matters that he has not recorded his agreement with the assessee on every issue or point; that could be reasonably inferred."
12. Under the circumstances, we are unable to accept the contention of Counsel Shri Shah that the Assessing Officer, when recorded his reason to believe that income chargeable to tax has escaped assessment, could not have relied on the original assessment records and he must have some material outside or extraneous to the records to enable him to form such a belief. Being a case which was originally accepted under Section 143(1) of the Act without scrutiny, the only requirement to be fulfilled for issuing notice for reopening was that the Assessing Officer must have reason to believe that income chargeable to tax had escaped assessment. In this context, we may again revert back to the decision of the Supreme Court in case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), in which it has been highlighted that the reason to believe does not have to be a final opinion that the additions would certainly be made. It was observed that whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. Reliance in this respect was made to the decision of the Supreme Court in case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34. We have already reproduced para-16 of the judgment in which these aspects are highlighted.
13. The decision of this Court in case of Hindustan Inks and Resins Ltd. (supra) was rendered in vastly different factual background. It was an appeal root which the assessee had taken, upon which additions were made, which were questioned by the assessee. On merits, on the basis of evidence on record, the Court was convinced that the additions could not be made.
14. Reverting back to the reasons recorded by the Assessing Officer, he noted that the assessee company had issued share capital of Rs. 2.66 crores (rounded off) during the Financial Year 2010-11. the assessee had issued 60,000/- shares at a face value of Rs. 10 per share with a premium of Rs. 990/- per share. The Assessing Officer, on the basis of assets and liabilities furnished by the assessee company in its balance sheet, after computing the net worth of the company, noted that the share valuation of the assessee company would come to Rs. 33/-, whereas shares have been allotted at Rs. 1,000/- per share, i.e. at a premium of Rs. 967/- per share. On the basis of such working out, he recorded his reason to believe that income to the extent of Rs. 5.80 crores had escaped assessment. We do not find that the reasons are perverse or so untenable as to terminate the assessment at this stage on the ground that the Assessing Officer cannot be stated to have any reason to believe or tangible material to form such an opinion that income chargeable to tax had escaped assessment. Prima facie, the facts appear to be glaring. Whether the assessee will be able to discharge the minimal burden of establishing identity, source and creditworthiness of the depositors is a question not possible to answer without scrutiny. Whether the assessee had started its manufacturing activity and consequently its business operations so as to earn income or not are the issues which cannot be gone into at this stage and must be made part of the reopened assessment to be judged on the basis of evidence which may be brought on record. It is always open for the assessee company to contend before the assessing authority that there has not been over valuation of the allotted shares or that for any legal reasons, in any case, addition cannot be made in the hands of the assessee, despite such glaring facts. These are the issues in the realm of assessment, once it is allowed to be reopened. We are not inclined to terminate the assessment proceedings at this stage on the grounds pressed in service by the petitioners.
15. In the result, all these petitions are dismissed.