Power of Court under Article 226 is Applied where Heading Authority Breached the Principles of Natural Justice: High Court of New Delhi
The Court is duty-bound to exercise its powers under Article 226 where ever it finds that a statutory authority has exercised its jurisdiction either irregularly or acted in a matter in which it had no jurisdiction or committed a breach of the principles of natural justice. This honorable judgement was passed by High Court of New Delhi in the case of Synfonia Tradelinks Pvt Ltd v. Income Tax Officer Ward-22(4) by The Hon’ble Mr. Justice Rajiv Shakdher and The Hon’ble Mr. Justice Talwant Singh. This writ petition was filed against notice, issued under Section 148 of the Income Tax Act, 1961. The income tax return was filed by the assessed along with the balance sheet as on 31.03.2011. On 31.03.2018, which was the last date on which the limitation was to expire, a notice under Section 148 of the Act was issued by respondent no.1, wherein respondent no.1 inter alia stated that he had reason to believe that income chargeable to tax qua had escaped assessment within the meaning of Section 147 of the Act. Accordingly, the assessed was directed to file a return in the prescribed form for the said AY as respondent no.1 proposed to assess/re-assess the income/loss for the concerned AY. As indicated above, the limitation for issuance of notice expired, concededly, on 31.03.2018. Besides this, the said communication went on to state, that without prejudice to its contention that the notice under Section 148 of the Act was time-barred, it had enclosed a copy of the income tax return qua AY 2011- 2012. Since respondent no.1 did not furnish a copy of the proceedings in which he had documented his reasons for initiating proceedings under Section 147 of the Act, the assessed escalated the matter, by writing to the Assistant Commissioner of Income Tax [in short ‘ACIT’] vide communication dated 09.06.2018. Respondent no.1 in no uncertain terms, had indicated in the order recording reasons that the information which triggered the initiation of proceedings qua the assessee under Section 147 of the Act was received upon a search being carried out at the residence. The court quash the impugned notice dated 31.03.2018 stating that, “that the order recording reasons neither discusses the contents of the report received from the investigation wing or the statements made by Mr. Pradeep Kumar Jindal and his associates. The order recording reasons, merely, indicates that the formation of belief is based on these sources. Furthermore, although, there is a reference to Shri Laxman Singh Satyapal and Ms. Meera Mishra in paragraph 3.14 of the counter-affidavit, as persons, whose statements were also recorded during the search, which formed the basis of initiation of proceedings under Section 147 of the Act, there is no reference to them in the order recording reasons.” 
 J 1 IN THE HIGH COURT OF DELHI AT NEW DELHI Judgement reserved on 15.03.2021 Judgement pronounced on 26.03.2021 W.P.(C) 12544 2018 SYNFONIA TRADELINKS PVT LTD .....Petitioner INCOME TAX OFFICER WARD 22(4) .....Respondent Through: Mr. Udaibir Singh Kochar and Ms. Kunjala Bhardwaj Advs. Through: Ms. Vibhooti Malhotra and Mr. Shailendra Singh Adv. HON BLE MR. JUSTICE RAJIV SHAKDHER HON BLE MR. JUSTICE TALWANT SINGH RAJIV SHAKDHER J.: TABLE OF CONTENTS Preface ............................................................................................................... 2 Background facts ............................................................................................... 2 Submissions made on behalf of the assessee ...................................................... 5 Submissions advanced on behalf of the Revenue ............................................... 7 Analysis and Reasons ...................................................................................... 10 Conclusion ....................................................................................................... 20 W.P.12544 2018 Preface: This writ petition is directed against notice dated 31.03.2018 issued under Section 148 of the Income Tax Act 1961 and the sanction accorded by respondent no. 2 i.e. the Principal Commissioner of Income Tax Delhi VIII on 29.03.2018 for issuance of notice under Section 148 of the Act. The assessee being aggrieved has moved this court via the instant writ petition. Background facts: To adjudicate upon the writ petition the following broad facts are required to be noticed: 2.1. The assessee before us is a private limited company going by the name Synfonia Tradelinks Pvt. Ltd. The assessee was incorporated on 28.05.1993 the Companies Act 1956 albeit under the name Synfonia Pharmaceuticals Pvt. Ltd. On 31.03.2015 the assessee changed its name to Synfonia Tradelinks Pvt. Ltd. 2.2. The income tax return for the assessment year2010 2011 along with the balance sheet as on 31.03.2010 was filed by the assessee on 23.09.2010. Insofar as the succeeding year was concerned which is also the AY in issue i.e. AY 2011 2012 the income tax return was filed on 29.08.2012 by the assessee along with the balance sheet as on 31.03.2011. Returns for the aforementioned AY(s) were filed via electronic mode. 2.4. On 31.03.2018 which was the last date on which the limitation was to expire a notice under Section 148 of the Act was issued by respondent no.1 wherein respondent no.1 inter alia stated that he had reason to believe that income chargeable to tax qua AY 2011 2012 had escaped assessment within the meaning of Section 147 of the Act. Accordingly the assessee was directed to W.P.12544 2018 file a return in the prescribed form for the said AY as respondent no.1 proposed to assess re assess the income loss for the concerned AY. 2.5. The record shows that the assessee had perhaps written to respondent no.1 on 03.04.2018 to close the reassessment proceedings as the notice under Section 148 qua AY 2011 2012 was time barred having been served upon him after the expiry of the prescribed limitation. As indicated above the limitation for issuance of notice expired concededly on 31.03.2018. This aspect finds mention in the assessee’s communication dated 23.04.2018 addressed to respondent no.1. Besides this the said communication went on to state that without prejudice to its contention that the notice under Section 148 of the Act was time barred it had enclosed a copy of the income tax return qua AY 2011 In addition to the aforesaid the assessee also called upon respondent no.1 to furnish a copy of the reasons based on which he believed that the assessee’s income for AY 2011 2012 had escaped assessment. The communication concluded with a request to respondent no.1 to furnish a copy of the approval granted by respondent no.2 for initiating proceedings under Section 147 of the 2.7. Since respondent no.1 did not furnish a copy of the proceedings in which he had documented his reasons for initiating proceedings under Section 147 of the Act the assessee escalated the matter by writing to the Assistant Commissioner of Income Tax vide communication dated 09.06.2018. In this communication while flagging the issue that the assessee has not been furnished reasons for initiating proceedings under Section 147 of the Act reference was also made to the fact that the assessee’s case had also been picked up for initiating proceedings under Section 147 in AY 2009 2010 and AY 2010 2011 when additions amounting to Rs. 3 06 00 000 and Rs. 2 30 62 500 respectively had been made. Furthermore the assessee pointed W.P.12544 2018 out that its share capital which included reserves and surplus as on 31.03.2010 amounted to Rs. 3 87 78 048 a figure which had remained consistent since the financial year2005 2006. 2.8. Even while this request was pending the assessee was served with a notice dated 02.08.2018 under Section 143(2) of the Act vis à vis AY 2011 2012 as also a notice of even date i.e. 02.08.2018 for the said AY under Section 142(1) of the Act. 2.9. Finally on 14.09.2018 the petitioner was furnished the reasons for issuance of notice under Section 148 of the Act. In response to the same the assessee filed its objections. Respondent no.1 vide order dated 08.10.2018 rejected the objections preferred by the assessee. This order was handed over to the chartered accountant of the assessee on 12.10.2018. It is in these circumstances that the assessee was propelled to move this court by way of the instant writ petition. The court while issuing notice dated 26.11.2018 which was accepted by the counsel for the revenue made the following observations: “Issue Notice. Mr. Deepak Anand Jr. Standing Counsel accepts notice. This Court is of the opinion that the petitioner applicant s grievance is with respect to non application of mind by the concerned officerto issue the impugned notice under Sections 147 148 is prima facie warranted and justified. In these circumstances the respondents are hereby restrained from passing a final order in the re assessment proceedings during the pendency of the present writ petition. The Revenue is directed to produce the original file for consideration on the next date of hearing. List on 11th February 2019. Since then respondent no.2 has filed a counter affidavit on behalf of the W.P.12544 2018 revenue. Submissions made on behalf of the assessee: Arguments in the matter on behalf of the assessee have been advanced by Mr. Udaibir Singh Kochar while on behalf of the revenue submissions have been made by Mr. Shailendra Singh. Briefly Mr. Kochar made the following submissions: i. That respondent no. 2 who is the sanctioning authority under Section 151 of the Act has not applied his mind to the reasons supposedly recorded by respondent no.1. Respondent no.2 has simply rubber stamped the reasons by simply writing “approved”. ii. Furthermore the assessee has also gone on to aver that the approval for issuance of notice under Section 148 of the Act and commencement of proceedings under Section 147 of the Act were sought by ACIT and not by respondent no.1. It is averred by the assessee that since the notice was issued after the expiry of four years from the end of the relevant assessment year under the provisions of Section 151 of the Act the ACIT had no role to play in the process of grant of sanction. iii. There was a total non application of mind by both respondent no.1 and respondent no.2 inasmuch as they did not correlate the information received from the Additional Director of Income TaxUnit 2(1) and that which was available in the income tax return and the balance sheet filed by the assessee. It was submitted that not only the information concerning the authorized capital issued and subscribed paid up capital and share premium account was wrongly recorded but also an error as gross as that which pertained to its year of commencement of business had crept in the order recording reasons. It was submitted that respondent no.1 proceeded on the basis that FY 2010 W.P.12544 2018 2011 was the assessee’s first year of business whereas the assessee s incorporation took place as far back as 28.05.1993. a) In support of the aforesaid plea the reference was made to the following facts and figures: Figures referred to in the order containing reasons recorded by respondent no. 1 Authorised Capital Rs. 1 25 00 000 Issued and Subscribed Paid up Capital Rs. 16 00 000 Share Premium Account Rs. 14 83 40 250 Correct figures as per return Authorised Capital Rs. 25 00 000 Issued and Subscribed Paid up Capital Rs. 24 15 200 Share Premium Account Rs. 3 66 16 800 iv. Although respondent no.1 in the notice issued under Section 148 of the Act has referred to the report of the ADIT there is no discussion qua the said report in the order recording reasons. Therefore it is difficult to discern from the order recording reasons as to what was the basis of the formation of belief by respondent no.1 that the assessee s income chargeable to tax had escaped assessment. v. Respondent no.1 erred in rejecting the objections raised by the assessee by relying upon a purported statement of one Mr. Pradeep Kumar Jindal who had allegedly provided accommodation entries to the assessee without furnishing a copy of the statement made by the said person. vi. Respondent no. 2 via the counter affidavit has attempted to justify the issuance of notice under Section 148 of the Act by adverting to matters which are not found in the order recording reasons for initiating proceedings under Section 147 of the Act. The revenue cannot supply reasons by way of counter affidavit which were not available at the time of issuance of a notice under Section 148 of the Act. W.P.12544 2018 vii. We may note at this juncture that the grounds set forth hereafter are the grounds incorporated in the writ petition which were not articulated during the submissions made in the Court before us: a) The assessee has averred that while the reasons which were furnished to the assessee were recorded by ITO Ward 22(4) the reasons purportedly given for obtaining approval of respondent no.2 were recorded by ITO Ward 22(2). b) Besides this the assessee has also averred that although according to the revenue the sanction was accorded by respondent no.2 before the issuance of the notice dated 31.03.2018 under Section 148 of the Act the order granting sanction was served upon it only on 01.11.2018 and that too after repeated requests. According to the assessee the inordinate delay in the dispatch of the sanction order was suggestive of the fact that the sanction was not granted before the issuance of a notice under Section 148 of the Act. In support of this submission reliance was placed on the judgement of the Supreme Court rendered in State of Andhra Pradesh v. M. Ramakishtaiah & Co.93 STC 406(SC). Submissions advanced on behalf of the Revenue: On the other hand Mr. Shailendra Singh submitted that respondent no.1 had reasons to believe that the taxable income of the assessee for the concerned AY 2011 2012 had escaped assessment. 7.1. Mr. Singh contended that notwithstanding the obvious errors in the order recording reasons passed by respondent no.1 concerning assessee s authorized capital issued and subscribed paid up capital the share premium account and the year of its incorporation no fault could be found in the initiation of reassessment proceedings under Section 147 of the Act since all that respondent W.P.12544 2018 no.1 was required to demonstrate that the formation of the belief that the taxable income had escaped assessment was not based on reasons which were either arbitrary or irrational. To demonstrate that the formation of the belief as discernible from the order recording reasons was neither arbitrary nor irrational a reference was made to the following portion of the said order : “Further on perusal of return of income filed by the assessee for A.Y 2010 11 and A.Y 201l 12 it has been observed that the assessee has shown unsecured loans of Rs. 38 071 and Rs. 25 57 206 respectively. Thus there is substantial increase in the unsecured loans during A.Y. 2011 12. A careful scrutiny of information received from the investigation wing and reportreceived from Investigation Wing. New Delhi subsequent analysis of report of investigation wing data of transactions and verification of ITR lead to an irresistible conclusion that the assessee company has taken accommodation entry at least up to the amount of Rs.26 93 500 Considering the above referred credible information and enquiries and analysis subsequent to the information. I have reason to believe that an amount at least of Rs.26 93 500 & Commission @ 2.5% amounting to Rs 67 338 has escaped assessment in case the of M s SYNFONIA TRADELINKS PVT. LTD for the A. Y 2011 12 within the meaning of Section 14 7 148 of Income tax Act 1961.” 7.2. The submission advanced was the assessee had accommodation entries from one Mr. Pradeep Kumar Jindal in lieu of cash via dummy companies entities which was reflected in the balance sheets of the assessees as unsecured loans. It was contended that this fact was discovered upon search being conducted at the premises of Mr. Pradeep Kumar Jindal on 18.11.2015. 7.3. Mr. Singh attempted to explain away the assertion made in the order recording reasons “Thus the assessee company has taken bogus share capital share premium account from the above said entry providers amounting to Rs.26 93 500 ” by submitting that the reference to share capital share premium account was an inadvertent error. 7.4. According to Mr. Singh the accommodation entries were reflected in the return of the assessee which is accompanied by its balance sheets in the form of unsecured loans. It was thus the contention of Mr. Singh that at the stage of initiation of reassessment proceedings all that one is required to enquire is W.P.12544 2018 whether or not prima facie material was available which could form the basis for reassessment. Mr. Singh emphasized the fact that at this stage the court was not required to examine the sufficiency or correctness of the material which formed the edifice for the formation of the belief that the assessee’s taxable income had escaped assessment. In support of this plea reliance was placed by Mr. Singh on the judgment of the Supreme Court rendered in Raymond Wooden Mills Limited v. Income Tax Officer Central Circle XI Range Bombay and Ors. 14 SCC 218 7.5. Mr. Singh drew our attention as noted above to that part of the order recording reasons which bore the heading “analysis of information” to emphasize the fact that reassessment proceedings had been initiated as respondent no.1 suspected the genuineness of the loans received during the subject AY. In sum Mr. Singh argued that there was cogent material available for respondent no.1 to form a belief that the assessee s taxable income had escaped assessment. This information according to Mr. Singh which was received from the office of the ADIT and the report generated thereafter and its analysis formed the basis of respondent no.1’s belief that the assessee’s income chargeable to tax had escaped assessment. 7.7. Mr. Singh went on to state that respondent no.2 had given his approval to initiation of proceedings against the assessee only after satisfying himself that a case was made out for initiation of proceedings under the provisions of Section 147 of the Act. 8. We may record here that a perusal of the counter affidavit filed by respondent no.2 would show that the revenue has denied the allegation levelled against it that a breach of principles of natural justice had occurred by adverting to the fact that it had furnished the relied upon documents12544 2018 Jindal and his associates i.e. Shri Laxman Singh Satyapal and Ms. Meera Mishra) to the authorized representative of the assessee at the proceedings held before the respondent no.1 on 12.10.2018. Analysis and Reasons: 9. We have heard the learned counsel for the parties and perused the record. Before we proceed further it would be helpful if we were to set forth certain well established principles enunciated by the courts over the years vis à vis initiation of proceedings under Section 147 of the Act. The reasons which lead to the formation of opinion or belief that the assessee’s income chargeable to tax has escaped assessment should be inextricably connected. In other words the reasons for the formation of opinion should have a rational connection with the formation of the belief that there has been an escapement of income chargeable to taxii) The expression "reason to believe" is stronger than the word "satisfied". The belief should be based on material that is relevant and cogent.(a) The assessing officer should have reasons to believe that the taxable income has escaped assessment. The process of reassessment cannot be triggered based on a mere suspicion. The expression "reason to believe" which is found in Section 147 of the Act does not have the same connotation as reason to suspect". The order recording reasons should fill this chasm. The material brought to the knowledge of the assessing officer should have nexus with the formation of belief that the taxable income of the assessee escaped assessment the link being the reasons recorded in that behalf by the assessing W.P.12544 2018 The AO is mandatorily obliged to record reasons before issuing notice to the assessee under Section 148(1) of the Act. This is evident from the bare perusal of sub sectionof Section 148 of the Act. iv) No notice can be issued under Section 148 of the Act by the A.O. after the expiry of four years from the end of the relevant AY unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner arrives at a satisfaction based on the reasons recorded by the A.O. that it is a fit case for issuance of a notice under Section 148 of the Act. See: Section151(1) of the Act]. v) The limitation for issuance of notice under Section 148 as prescribed under Section 149 of the Act commences from the date of its issuance while the time limit for passing the order of assessment reassessment computation and re computation as prescribed under Section 153 of the Act commences from the date of service3 SCC 96]. vi) A jurisdictional error would occur which can be corrected by a writ court if reasons to believe are based on grounds that are either arbitrary and or irrational. 3 SCC 9.1. Thus if one were to apply the aforestated principles it would be clear as daylight that the order recording reasons discloses complete non application of mind. The reason we say so is discernible from the following: 9.2. Respondent no.1 in paragraphs 2 and 3 of the order recording reasons has unequivocally stated that under the heading “Details of information received regarding escapement of income and analysis” that material impounded during the search conducted at the premises of Mr. Pradeep Kumar Jindal had inter alia revealed that he had made investments in the form of share capital share W.P.12544 2018 premium loans and advance in lieu of cash via front non listed companies controlled by dummy directors to the tune of nearly Rs.100 crores which included the assessee. It is in this context that in the order recording reasons the following table is set out: AmountSynfonia Pharmaceuticals Pvt. 17 00 000 Synfonia Pharmaceuticals Pvt. 5 00 000 Synfonia Pharmaceuticals Pvt. 1 00 000 Ltd. Name changed Tradelinks Pvt. Ltd. to Synfonia Synfonia Pharmaceuticals Pvt. Synfonia Pharmaceuticals Pvt. of Entry Dume Footwears Pvt. Ltd. Dume Footwears Pvt. Ltd. Dume Footwears Pvt. Ltd. Resources Ltd. Pawansut Holdings 43 500 3 50 000 26 93 500 The table extracted above as noted in the earlier part of the judgment is followed by the following assertion which is made in the order recording “Thus the assessee company has taken bogus share capital share premium from the said entries providers amounting to Rs.26 93 500 .” 9.3. Furthermore respondent no.1 in no uncertain terms has indicated in the order recording reasons that the information which triggered the initiation of proceedings qua the assessee under Section 147 of the Act was received upon a search being carried out at the residence of Mr. Pradeep Kumar Jindal. While a general statement had been made that Mr. Pradeep Kumar Jindal had provided accommodation entries in the form of share capital share premium loans and advances in lieu of cash qua a large number of beneficiaries through his front companies insofar as the assessee was concerned it was emphasized that the W.P.12544 2018 accommodation entry was reflected in its books in the form of bogus “share capital and share premium”. 9.4. Respondent no.1 in paragraph 4 of the order recording reasons in no uncertain terms alludes to the fact that the information was received from the investigation wing. The emphasis was laid on the fact that the entry providers were three companies i.e. Dume Footwears Pvt. Ltd. Focus Industrial Resources Ltd. and Pawansut Holdings Ltd. A perusal of the order recording reasons shows that the purported investments made via these entities were quantified at Rs.26 93 500 . This information which was the underlining material based on which proceedings under Section 147 of the Act were triggered was correlated with the return of income filed by the assessee for the concerned AY i.e. AY 2011 2012. In correlating the information concededly respondent no.1 made errors with regard to the basic information provided by the assessee in its balance sheet for the year ending on 31.03.2011 concerning authorized share capital issued and subscribed paid up share capital share premium and even as regards the year in which the assessee had been incorporated. The facts and figures have already been recorded in paragraphs 2 to 2.9 above. Therefore the correlation between the underlying material and the information which was available in the balance sheet of the assessee was clearly not made. 9.5. Mr. Singh in a desperate attempt to salvage the situation drew our attention to the unsecured loans shown in the income tax returns of the assessee for AYs 2010 2011 and 2011 2012 amounting to Rs.38 071 and Rs.25 57 206 respectively. Apart from anything else simple math would show that the cumulative total of these figures is Rs.25 95 277 and not Rs.26 93 500 which according to respondent no. 1 is the unexplained credit in the books of accounts of the assessee and hence required to be added under Section 68 of the Act. Therefore for Mr. Singh to say that these are inadvertent W.P.12544 2018 errors and hence should be ignored in our opinion is an argument that is completely misconceived. As indicated above if the information receivedwas that the accommodation entries in lieu of cash were taken in the form of share capital and share premium they could certainly not be linked to unsecured loans received in AYs 2010 2011 and 2011 2012. It is pertinent to note that in the objections filed by the assessee an attempt has been made to explain the purported accommodation entries by stating therein that the advances had been given to the 5 companies adverted to in the order recording reasons which were received back on the dates given in the said order. The assessee also went on to state in its objections that the opening balanceand closing balance of the share premium account and the share capital account Rs. 24 15 200 ) remained unchanged. In other words the emphasis was that there was no increase in the share capital or the share premium account as alleged or at all. In the order passed by the assessing officer dated 08.10.2018 whereby the objections of the assessee were rejected none of this has been dealt with. Therefore in our view while the assessing officer may suspect that the taxable income of the assessee escaped assessment he could not have formed a belief qua the same based on the material which is presently on 9.7. Therefore in our opinion the formation of belief by respondent no.1 that income of the assessee chargeable to tax had escaped assessment was unreasonable and irrational as it could not be related to the underlining information something which is discernible from a bare reading of the order recording reasons. 9.8. This apart what is even more disconcerting is the fact that respondent no.2 who accorded sanction for triggering the process under Section 147 of the W.P.12544 2018 Act simply rubber stamped the reasons furnished by respondent no.1 for issuance of notice under Section 148 of the Act. 9.9. The provisions of Section 151(1) of the Act required respondent no.2 to satisfy himself as to whether it was a fit case in which sanction should be accorded for issuance of notice under Section 148 of the Act and thus triggering the process of reassessment under Section 147. The sanction order passed by respondent no.2 simply contains the endorsement ‘approved’. In our view the sanction order passed by respondent no.2 presents metaphorically speaking ‘the inscrutable face of sphinx’ 2 QB 17500 Also see: State of H.P. v. Sardara Singh 9 SCC 392). In our view the satisfaction arrived at by the concerned officer should be discernible from the sanction order passed under Section 151 of the Act. In this context the observations made by the Supreme Court in Chhugamal Rajpal vs. S.P. Chaliha 1 SCC 453 being apposite are extracted hereafter : “… Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads “whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section 148” he just noted the word “yes” and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance. “ Emphasis is ours] 10.1. Also see the observations made in the judgment of the Division Bench of this Court in The Central India Electric Supply Co. Ltd. vs. Income Tax W.P.12544 2018 Officer Company Circle X New Delhi & Anr. SCC OnLine Del 472 333 ITR 237. “19. In respect of the first plea if the judgments in Chuggamal Rajpal s caseChanchal Kumar Chatterjee s case and Govinda Choudhury & Sons s case supra) are examined the absence of reasons by the assessing officer does not exist. This is so as along with the proforma reasons set out by the assessing officer were in fact given. However in the instant case the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by a Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this Court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the ITO was to be agreed upon the least which is expected is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the Apex Court in Union of India v. M.L. Capoor and Ors. MANU SC 0405 1973 : AIR 1974 SC 87 wherein it was observed as under: 27. ... We find considerable force in the submission made on behalf of the Respondents that the "rubber stamp" reason given mechanically for the supersession of each officer does not amount to "reasons for the proposed supersession". The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. ... ... ... 28. ... If that had been done facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. emphasis supplied) This is completely absent in the present case. Thus we find force in the contention of learned Counsel for the Appellant that there has not been proper application of mind by the Board and if a proper application had taken place there would have been no reason to re open the closed chapter in view of what we are setting out hereinafter.” W.P.12544 2018 Emphasis is ours] 10.2. We may also note that apart from respondent no.2 the order according sanction also bears an endorsement of the ACIT. For the sake of convenience the said endorsement is set forth hereafter: “On perusal of information received from the investigation wing & reasons recorded by AO I am satisfied that Rs. 27 60 838 has escaped taxation. Approval for reopening may be granted.” 10.3. There is no explanation by the revenue as to why approval of ACIT was taken in the instant case. Even if we were to assume for the moment that the approval of the ACIT was rightly taken a bare perusal of the endorsement would show that there is no application of mind as to whether the information received by the AO had any nexus with the formation of honest belief that the assessee s taxable income had escaped. What is glaring is that the ACIT notes that income to the tune of Rs.27 60 838 had escaped taxation whereas in the order recording reasons income has been quantified as Rs.26 93 500 . As noted above based on the arguments of Mr. Singh that the escaped income should be related to unsecured loans there is in play a third figure which is Rs.25 95 277 . 10.4. The reliance placed by Mr. Singh on paragraphs 40 to 43 of the judgment of a division bench of this court in Experion Developers Pvt. Ltd. and Ors. vs. Assistant Commissioner of Income Tax and Ors.422 ITR 355(Delhi) in support of his submissions that the order granting sanction for initiation of proceedings under Section 147 was valid is misconceived as a careful perusal of paragraph 42 of the said judgment would show that the learned judges were of the view that there was no requirement to provide elaborate reasoning while granting approval if the principal commissioner was satisfied with the reasons recorded by the AO. In that case while according sanction the principal commissioner had at least paid lip service to the provision by noting “I am satisfied that it is a fit case for notice under Section 148”. In the instant case respondent no.2 i.e. the principal commissioner has not even made such an W.P.12544 2018 endorsement. This apart the endorsement of the ACIT should have indicated to respondent no.2 if nothing else that there was something amiss when the escaped income is quantified as Rs. 25 95 277 whereas in the order recording reasons penned by respondent no.1 the escaped income was quantified as Rs.26 93 500 . 10.5. As noted above in the instant case because of the failure on the part of respondent no.1 to correlate the information received with the ostensible formation of belief by him respondent no.2 attempted to connect via her counter affidavit that the escaped income with the "suspicious" unsecured loan entries reflected in the assessee s returns for AY 2010 2011 and 2011 2012. As correctly argued by Mr. Kochar the counter affidavit and the submissions made across the bar cannot be used to sustain the impugned actions. The order recording reasons and the order granting sanction should speak for themselves. See observations made Commissioner Of Police Bombay vs Gordhandas Bhanji AIR 1952 SC 16 and Mohinder Singh Gill and Ors. vs. The Chief Election Commissioner New Delhi and Ors.1 SCC 405) 10.6. Insofar as the ground taken in the writ petition is concerned that the notice issued under Section 148 was barred by limitation we are of the view that this submission advanced on behalf of the assessee is not sustainable. As noticed above the limitation provided under Section 149 of the Act for issuance of notice commences from the date when the notice is issued and not when the notice served. The record presently before us shows that the notice was issued on 31.03.2018. Therefore this submission made on behalf of the petitioner is 10.7. The other argument advanced on behalf of the assessee that the notice under Section 148 was issued by an AO Ward No.22(4) while the order recording reasons was issued by another officer is not borne out from the W.P.12544 2018 record. 10.8. This brings us to another ground raised in the writ petition which is that there was a huge time lag between the issuance of the impugned notice under Section 148 of the Act and the date when the order recoding reasons was furnished to the authorized representatives of the petitioner. While the assessee is in our view right in contending that if the time lag is huge it does point in the direction that the order was ante dated a final view on this aspect could have only been taken if the original record was examined by us. Since the revenue has denied the allegation levelled against it and Mr. Kochar did not press this issue during the hearing we can t reach a definitive view on this aspect of the matter based on the record available before us Therefore this submission made on behalf of the assessee cannot be accepted. 11. Given the aforesaid we are also of the view that since respondent no.1 was unable to link the information received with the formation of belief a jurisdictional error did occur which this Court is empowered to correct by exercising its powers under Article 226 of the Constitution of India 2 SCR 241). 11.1. Although Mr. Singh did argue that the assessee should be relegated to statutory remedies in our view a case is made out for interference at this stage itself. According to us relegating a party to an alternative remedy is a self imposed limitation which however does not denude the court of its powers under Article 226. The Court is duty bound to exercise its powers under Article 226 where ever it finds that a statutory authority has exercised its jurisdiction either irregularly or acted in a matter in which it had no jurisdiction or committed a breach of the principles of natural justice. 11.2. Before we conclude we must also indicate that the order recording reasons neither discusses the contents of the report received from the investigation wing or the statements made by Mr. Pradeep Kumar Jindal and his W.P.12544 2018 associates. The order recording reasons merely indicates that the formation of belief is based on these sources. Furthermore although there is a reference to Shri Laxman Singh Satyapal and Ms. Meera Mishra in paragraph 3.14 of the counter affidavit as persons whose statements were also recorded during the search which formed the basis of initiation of proceedings under Section 147 of the Act there is no reference to them in the order recording reasons. 11.3. Besides this the revenue has taken the position that not only the report of the investigation wing but also the statements of Mr. Pradeep Kumar Jindal and his aforementioned associates were furnished to the authorized representative of the assessee in the proceedings held before respondent no.1 on 12.10.2018does not refer to this fact. Therefore apart from anything else a case could have been made out also of breach of principles of natural justice. For the reasons best known Mr. Kochar did not press this issue. We need not elaborate any further on this aspect of the matter as our decision does not turn on whether or not there has been a breach of principles of natural justice. Conclusion: 12. Thus for the foregoing reasons we are inclined to quash the impugned notice dated 31.03.2018 issued under Section 148 of the Act as well as the order granting sanction issued by respondent no.2. It is ordered accordingly. Parties will bear their own cost. W.P.12544 2018 13. The case papers shall stand consigned to record. RAJIV SHAKDHER J. TALWANT SINGH J. MARCH 26 2021 Click here to check the corrigendum if any W.P.12544 2018 