JUDGMENT : BHARGAV D. KARIA, J. 1. Heard learned advocate Mr.S.N.Divatia for the petitioner and learned Senior Standing Counsel Mr.Varun K. Patel for the respondent. 2. Rule, returnable forthwith. Learned Senior Standing Counsel Mr.Varun K. Patel waives service of notice of rule for and on behalf of the respondent. 3. Having regard to the controversy arising in this petition in narrow compass, with the consent of the learned advocates, the same is taken up for hearing. 4. By this petition under Article 226 of the constitution of India, the petitioner has prayed for quashing and setting aside the notice dated 30th March, 2021 issued under Section 148 of the INCOME TAX ACT , 1961 (for short 'the Act') to re-open the assessment for Assessment Year 2017-18 and the order disposing of the objections dated 19th March, 2022. 5. Brief facts of the case are as under : 5.1. The petitioner derives income from House proprietary. 5.2. The respondent issued the notice dated 30th March, 2021 under Section 148 of the Act for the year under consideration recording the following reasons : " 1. Brief details of the assessee : The assessee Navinchandra Amrutlal Patel, having PAN: ACHPM8194J and the assessee had filed return of income for AY 2017-18 on 28-07-2017. 2. Brief details of Information collected/received by the AO: In this case, information has been received from the INSIGHT portal of ITBA that assessee has claimed bogus LTCG/STCL of Rs.52,61,549/- during F.Y. 2016-17 relevant to A.Y. 2017-18. In this regard, on verification of details received, It is noticed that the assessee is one of the beneficiaries, who has entered into transactions, during the year under consideration, the assessee has sold the shares for the Rs.52,61,549/-. In the instant case, it has been proved with conclusive evidence that the transaction carried out by the assessee in the scrip, which is a penny stock and is a bogus transaction. 3. Analysis of information collected/received: On verification of details received, it is noticed that the assessee has made huge transaction during the year under consideration; the assessee has carried out huge transactions of purchase and sale of shares (penny stock). Therefore, it is case where the assessee has invested in shares and carried out the transactions with her undisclosed income. 4. Analysis of information collected/received: On verification of details received, it is noticed that the assessee has made huge transaction during the year under consideration; the assessee has carried out huge transactions of purchase and sale of shares (penny stock). Therefore, it is case where the assessee has invested in shares and carried out the transactions with her undisclosed income. 4. Enquiries made by the AO as sequel to information collected/received: On verification of details received, it is noticed that the assessee is one of the beneficiaries, who has entered into transactions in penny stock during the year under consideration, the assessee has made transaction in the shares the Rs.52,61,549/-. In the instant case, it has been proved with conclusive evidence that the transaction carried out by the assessee in the above scrip, which is a penny stock and is a bogus transaction. 5. Finding of the A.O. Based on the above information, this case is a fit case for re-opening u/s 147 of the act. On verification of above details and information send it is ascertained that during the year under consideration, the assessee has made transaction in the shares for the Rs.52,61,549. In the instant case, it has been proved with conclusive evidence that the transaction carried out by the assessee in the above scrip, which is a penny stock and is a bogus transaction. The income of Rs.52,61,549/- was not offered to tax by the assessee and the same has escaped from assessment for A.Y. 2017-18. 6. Basis of forming reasons to believe and deals of escapeent of income: From analysis and findings made from information received from INSIGHT portal of ITBA and verification in ITBA portal, ITD, I have reason to believe that the income of Rs.52,61,549/- has escaped from assessment for A.Y. 2017-18." 5.3. The petitioner filed the objections on 3rd March, 2022. The respondent disposed of the objections on 19th March, 2020. The petitioner has therefore preferred this petition. 6.1. Learned advocate Mr.S.N.Divatia for the petitioner submitted that in the reasons recorded for the re-opening of the assessment, the respondent has not referred to the details regarding alleged bogus STCG/LTCG of Rs.52,61,549/- during the Financial Year 2016- 17. The respondent disposed of the objections on 19th March, 2020. The petitioner has therefore preferred this petition. 6.1. Learned advocate Mr.S.N.Divatia for the petitioner submitted that in the reasons recorded for the re-opening of the assessment, the respondent has not referred to the details regarding alleged bogus STCG/LTCG of Rs.52,61,549/- during the Financial Year 2016- 17. It is only alleged that the petitioner had made transactions in shares of the said amount and only considering the information received from insight portal, has arrived at a prima-facie conclusion that it has been proved with conclusive evidence that transaction carried out by the petitioner of Rs.52,61,549/- in the shares, which is a penny stock, is bogus transaction and petitioner did not offer to tax the said income and therefore, the same has escaped the assessment. 6.2. It was pointed out that the petitioner has offered the income of Rs.52,61,549/- as Short Term Capital Gain as reflected in the computation of income. It was submitted that the respondent-Assessing Officer has referred to the transactions entered into by the petitioner for sale and purchase of the shares in Kushal Tradelink/Kushal Limited though the name of the said Company is not given in the reasons recorded as it is evident from the affidavit-in-reply filed by the respondent in these proceedings. It was therefore submitted that the reasons recorded by the respondent for formation of the belief that income has escaped assessment was not based upon the details available on record but the same are on the basis of the information supplied by the insight portal i.e. an external source and therefore, it cannot be said that the requirements of re-opening of the assessment as per Section 147 of the Act were satisfied. 6.3. Learned advocate Mr.S.N.Divatia referred to and relied upon the decision of this Court in case of Varshaben Sanatbhai Patel Versus Income-Tax Officer reported in [2015] 64 taxmann.com 179 and decision in case of Ashishbhai Jashwantbhai Desai HUF versus Income-Tax Officer reported in [2025] 171 taxmann.com 220 and submitted in both the above decisions, this Court has held that the Assessing Officer could not be said to have formed an independent satisfaction regarding the reasons recorded to re-open the assessment to come prima-facie conclusion that there was escapement of income in similar facts. 6.4. 6.4. It was further submitted that the reasons recorded are contrary to the record as the petitioner has already offered the Short Terms Capital Gains in the return of income filed for the year under consideration and which is already taxed and therefore, there is no escapement of income. 6.5. It was also pointed out by learned advocate Mr.S.N.Divatia that the initiation of re-opening proceedings are on the borrowed satisfaction because no independent opinion is formed by the respondent and on perusal of the letter dated 02.03.2021 placed on record along with the affidavit-in-reply, clearly shows that the respondent considering the information received from insight portal has issued the notice for re-opening on the baseless presumption that the petitioner has been involved in creating the non-genuine profit which is already offered to tax in the return of income which accepted in the regular course. 6.6. Learned advocate Mr.S.N.Divatia submitted that on the basis of such information received from insight portal the respondent could not have assume the jurisdiction to re-open the assessment without considering the material available on record, which clearly shows that the petitioner has offered the profit from the sale of shares as Short Term Capital Gains. 6.7. Reliance was also placed on the decision of this Court in Raajratna Stockholdings Pvt. Ltd. Versus Assistant Commissioner of Income Tax Circle 1(1)(1) in Special Civil Application No.3696 of 2022 decided on 25.11.2024 wherein, in similar circumstances, the notice under Section 148 was quashed and set aside. It was therefore submitted that the impugned notice issued under Section 148 of the Act and the order, rejecting the objections, are liable to be quashed and set aside. 7.1. Per contra, learned Senior Standing Counsel Mr.Varun K. Patel for the respondent submitted that the impugned notice under Section 148 of the Act is issued only after recording the reasons or the belief that the income chargeable to tax has escaped the assessment for the Assessment Year 2017-18 after recording the satisfaction that it is a fit case for issuance of notice under Section 148 of the Act. 7.2. 7.2. It was further submitted that the re- opening in the facts of the case cannot be said to be done merely on presumption as there was sufficient information available on record regarding rigging the share price of Kushal Limited and thereby, raising the market capital without supportive financials and fundamental of the said Company by providing bogus accommodation entry in form of bogus Long Term Capital Gain/Loss and Short Terms Capital Gain/Loss and petitioner is one of the beneficiary of such rigging of price. 7.3. Learned Senior Standing Counsel Mr.Varun Patel has also placed on record the confidential Appraisal Report of Kushal Group of Companies Group of Ahmedabad dated 05.02.2019 to point out the modus-operandi of rigging of the share price of the said Company. It was therefore submitted that on the basis of the information available with the respondent-Assessing Officer, the impugned notice for re-opening has been issued and the non-mentioning of the name of Kushal Limited in the reasons recorded, cannot make the notice invalid as the petitioner has not denied the transactions in the shares of Kushal Limited. It was therefore submitted that no interference may be made in by this Court while exercising the extra-ordinary jurisdiction under Article 226 of the Constitution of India. 8. Having heard the learned advocates for the respective parties, having considered the facts of the case and material placed on record and on perusal of the reasons recorded, it is apparent that the reasons for re-opening are contrary to the material placed on record in form of the return of income and the computation of total income for the year under consideration by the petitioner, as it clearly shows that the petitioner has offered the profit earned from the sale of shares of the Kushal Tradelink/Kushal Limited as income from Short Terms Capital Gains for the year under consideration and the entire income of Rs.52,61,549/- is reflected in the computation of the Short Term Capital Gains offered to tax. Therefore, the reasons recorded by the respondent that the income of Rs.52,61,549/- was not offered to tax by the petitioner is incorrect and therefore, it cannot be said to be any escapement of income on such reasons. 9. Therefore, the reasons recorded by the respondent that the income of Rs.52,61,549/- was not offered to tax by the petitioner is incorrect and therefore, it cannot be said to be any escapement of income on such reasons. 9. The petitioner has also placed on record the documents showing the purchase and sale of shares of Kushal Limited, copy of global report, detailed statements of share transactions for Financial Years 2015-16 and 2016-17, Copy of Form 10 DB, computation of Short Term Capital Gains, copy of Kotak Mahindra Bank's statement, details of income received on investment for Assessment Year 2017-18, copy of Demat Account of the petitioner along with the reply dated 3rd March, 2022. However, without considering such details, by order dated 19th March, 2022, the respondent has rejected the objections only relying upon the decision of the Apex Court in case of Raymond Woolen Mills Versus ITO reported in (1999) 236 ITR 34 (SC) and other similar decisions of this Court ignoring the fact that the petitioner has offered the income earned from the sale of shares of the Kushal Limited as Short Term Capital Gains. 10. In case of Ashishbhai Jashwantbhai Desai HUF (Supra) in similar facts, it was alleged that the assessee availed the bogus LTCG amounting to Rs.68,03,303/- through Kushal Group of Ahmedabad during the year under consideration and similar contentions were raised by both the sides and after considering the same, it was held by this Court as under: “8. Considering the submissions made by learned advocates for both the sides and on perusal of the reasons recorded, it appears that the Assessing Officer has failed to give the requisite details in the reasons recorded so as to form a requisite prima-facie belief that income has escaped assessment. The reasons recorded only refer to the information received from the credible sources that the search was carried out in case of Kushal Group and during course of search, incriminating documents were found and seized and on going through the information available on Insight Portal, it was found that the petitioners are one of the beneficiaries of the accommodation entries in form of different types of income like Long Terms Gains/Loss/Short Terms Gains/Loss and also beneficiary of unsecured loans etc. , without there being any basis for forming such belief. 9. , without there being any basis for forming such belief. 9. Therefore, it is clear that the respondent-Assessing Officer has recorded the reasons only on the basis of the borrowed satisfaction without there being any live-link between the information available on the In-sight Portal and the data available on the record of the petitioners-assesses. In such circumstances, the Assessing Officer cannot be said to have formed an independent satisfaction regarding the reasons recorded to re-open the assessment to come to the prima-facie conclusion that there is escapement of income.” 11. This Court in case of Varshaben Sanatbhai Patel (Supra) in the facts of the said case has held as under: “10. Before adverting to the merits of the case, reference may be made to the decision of the Supreme Court in the case of Income Tax Officer, I Ward, Dist. VI, Calcutta and others v. Lakshmani Mewal Das, (1976) 103 ITR 437 , wherein it has been held that the grounds or reasons which lead to the formation of belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. 11. This court in Aayojan Developers v. Income Tax Officer, (2011) 335 ITR 234, after referring to various decisions of the Supreme Court as well as other High Courts in this regard, has held that for the purpose of assuming jurisdiction to issue notice under section 148 of the INCOME TAX ACT , 1961, the Assessing Officer is required to record his reasons for doing so as laid down under sub-section (2) of section 148 of the Act. For the purpose of filing objections to the issuance of notice, the assessee is required to be provided with a copy of the reasons for issuing notice. For the purpose of filing objections to the issuance of notice, the assessee is required to be provided with a copy of the reasons for issuing notice. The reasons should set out the reasons for formation of the belief of the Assessing Officer that the income has escaped assessment and in case where the reopening of assessment is after the expiry of a period of four years from the end of the relevant assessment year, the belief should be that, by reason of omission or failure on the part of the assessee to disclose fully and truly the material facts, the income has escaped assessment in a particular year. Unless the substratum is laid in the reasons, clearly demonstrating the twin belief, that is, the belief that income has escaped assessment and the belief that such escapement is by reason of failure on the part of the assessee, filing an affidavit and stating the same before the court for the first time would amount to bringing on record material which did not form the basis of formation of such belief. The belief that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts has to be recorded in the reasons, though the same may be elaborated by filing an affidavit. But, in the absence of formation of any such belief being recorded in the reasons, it is not open for the Assessing Officer to express formation of such belief for the first time by way of affidavit-in-reply filed in the court. 12. The reasons recorded by the Assessing Officer for reopening of the assessment for the years under consideration have to be viewed in the light of the above settled principles. Having regard to the fact that in this case there was no scrutiny assessment under section 143(3) of the Act, the scope of inquiry by this court is limited to the extent laid down by the Supreme Court in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd. (supra), viz. whether there was relevant material on which a reasonable person could have formed the requisite belief. 14. whether there was relevant material on which a reasonable person could have formed the requisite belief. 14. At this juncture, reference may be made to the decision of the Supreme Court in the case of Ram Bai v. Commissioner of Income Tax, (1999) 3 SCC 30 , wherein, the Income Tax Officer has made an order of assessment under section 147(a) of the Act holding that a sum of Rs.2,43,934/- was payable as tax and initiated penalty proceedings. On appeal by the assessee, the Commissioner of Income Tax (Appeals) held that the ITO could not have had any reason to believe that there was escapement of income as there was no material whatever at that time to indicate that the lands were non-agricultural. The Commissioner (Appeals) allowed the appeal and cancelled the order of assessment under section 147(a). The Department approached the Income Tax Appellate Tribunal with an appeal, but in vain, as the Tribunal agreed with the Commissioner and confirmed his order. The revenue applied for reference to the High Court which answered the reference in favour of the revenue and against the assessee. The assessee filed special leave petition before the Supreme Court. Before the Supreme Court, the revenue placed reliance upon the judgment of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. Income Tax Officer, (1991) 191 ITR 662 , wherein it was held on the facts in that case that the reasons recorded in the notice issued under section 147(a) and the material on record, justified the issue of such notice. The court observed that the said ruling would not help the revenue in that case as there was no material whatever on record to justify the issue of notice by the Income Tax Officer under section 147 of the Act. The court observed thus: “6. We have already mentioned that the ITO sought sanction of the Commissioner to reopen the matter. That was by a communication dated 17- 3-1973 in which the relevant part read as follows: In this case, the assessee owned 16 acres 33 cents in Nacharam Village near Hyderabad. This was acquired by the Government with effect from 27-10-1964. The assessee was awarded a final compensation of Rs.2,10,361 on 7- 7-1967. The land in question is not agricultural land and has not been subjected to agricultural operations. The capital gains are chargeable to in-come tax. This was acquired by the Government with effect from 27-10-1964. The assessee was awarded a final compensation of Rs.2,10,361 on 7- 7-1967. The land in question is not agricultural land and has not been subjected to agricultural operations. The capital gains are chargeable to in-come tax. The value as on 1-1-1954 is estimated at Rs.1000 per acre and the total value of the entire land as on 1- 1-1954 would be about Rs. 16,500. Thus the assessee made a net capital gain of Rs.1,93,860. Besides the amount of interest that accrued year to year will have to be included as a protective basis. The assessee has filed a return disclosing an income of Rs 3599 being interest on belated compensation on 17-2-1972. As this has been filed beyond the period prescribed under Section 139(4), the return has been treated as in valid and filed. I have, therefore, reason to believe that the income chargeable to tax has escaped for Assessment Year 1965-66 and that such escapement was by reason of omission or failure on the part of the assessee to make a valid return under Section 139 for Assessment Year 1965-66. I request the Commissioner to accord sanction for reopening the assessment under Section 147 (a). 7. Apart from the said communication, there is nothing on record to disclose the material on which the ITO decided to reopen the assessment. He has made an assertion in the said communication that the land in question was not subjected to agricultural operation and that he had reason to believe, the income chargeable to tax had escaped for Assessment Year 1965-66 by reason of omission or failure on the part of the assessee to make a valid return. But for such assertion, no reference has been made to any material on the basis of which he proceeded to invoke the pro-visions of Section 147 (a) of the Act. Even the assertion as such was a bare one without any reference to the materials on the basis of which he made the said assertion.” 9. Learned counsel for the Revenue has placed reliance on the judgment of this Court in Central Provinces Manganese Ore Co. Ltd. v. ITO. It was held on the facts in that case that the reasons recorded in the notice issued under Section 147 (a) and the material on record justified the issue of such notice. Learned counsel for the Revenue has placed reliance on the judgment of this Court in Central Provinces Manganese Ore Co. Ltd. v. ITO. It was held on the facts in that case that the reasons recorded in the notice issued under Section 147 (a) and the material on record justified the issue of such notice. That ruling will not help the Revenue in this case as there is no material whatever on record to justify the issue of notice by the ITO under Section 147 of the Act.” 15. Adverting to the facts of the present case, the returns filed by the assessee have been processed under section 147(1) of the Act. The Assessing Officer in the reasons recorded for the purpose of reopening the assessment has placed reliance upon the record of the case. As noted hereinabove, there is no assertion as regards on what basis the Assessing Officer has stated that the assessee had made claim in respect of bogus purchases in the trading and the Profit and Loss Account as expenditure. The Assessing Officer has stated that on verification of the details available on record, it has been noticed that the assessee has made bogus purchases; however, no specific averments are made as regards which details available on record reflected such bogus purchases. It is evident that the Assessing Officer for the purpose of reopening the assessment has placed reliance upon the material from an external source which does not form part of the record. However, the said aspect is not reflected in the reasons recorded. On behalf of the Assessing Officer, the learned counsel is not in a position to point out any material on the record on the basis of which the Assessing Officer could have formed such belief. What is now sought to be stated by way of the order rejecting the objections as well as the affidavit-in-reply filed in response to the averments made in the petitions is that the formation of belief is based upon the information which is received from the DGIT (Inv.), Mumbai. It is settled legal position as held by a catena of decisions that the substratum for formation of belief that income liable to tax has escaped assessment has to form part of the reasons recorded. It is settled legal position as held by a catena of decisions that the substratum for formation of belief that income liable to tax has escaped assessment has to form part of the reasons recorded. In the present case, the substratum for formation of belief, as indicated in the order rejecting the objections as well as the affidavit-in- reply, is the information given by the DGIT (Inv.), Mumbai, which got no relation with the reasons recorded, which are stated to be based upon the material available on record. Under the circumstances, the Assessing Officer, on the basis of the material on record, could not have formed belief that there was any escapement of income chargeable to tax so as to validly assume jurisdiction under section 147 of the Act. As held by the Supreme Court in a catena of decisions, the reasons recorded cannot be supplemented in the affidavit or by the order rejecting the objections. The material, on the basis of which, the belief that income chargeable to tax has escaped assessment has been formed, has to find place in the reasons itself. 16. In the aforesaid premises, the formation of belief that income has escaped assessment not being based upon record, it is evident that the substratum for reopening the assessment is not laid in the reasons recorded, but on material extraneous thereto. Under the circumstances, the basic requirement for assumption of jurisdiction under section 147 of the Act for reopening the assessment is not satisfied in the present case. The impugned notice under section 148 of the Act, therefore, cannot be sustained.” 12. Considering the facts of the case and in light of the observations made by this Court in the aforesaid decisions, it appears that the Assessing Officer has failed to provide requisite details in reasons recorded so as to form a prima-facie belief that income has escaped the assessment in as much as the reasons recorded only referred to the information received from insight portal without any live nexus with the record of the petitioner and hence, it is evident that substratum of reopening assessment is not laid in the reasons recorded but on material extraneous thereto. Under such circumstances, the basic requirement for assumption of jurisdiction under Section 147 of the Act for re-opening the assessment is not satisfied in the facts of the case. Under such circumstances, the basic requirement for assumption of jurisdiction under Section 147 of the Act for re-opening the assessment is not satisfied in the facts of the case. The impugned notice issued under Section 148 of the Act therefore cannot be sustained. 13. For the foregoing reasons, the petition succeeds and is accordingly, allowed. The impugned notice dated 30th March, 2021 issued under Section 148 of the Act as well as the order dated 19th March 2022 disposing the objections filed by the petitioner are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No orders as to cost.