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2013 (8) TMI 411 - ITAT AGRAInitiation of re-assessment proceedings u/s 147 of the Income Tax Act - reason to believe or reason to suspect - The assessee filed return of income declaring total income of Rs.11,35,776/- which was accepted by the AO while computing income of the assessee – Held that:- The profit and loss account and balance sheet are filed in the paper book of these concerns to show that the assessee did not deal in real estate and was also not colonizer in assessment year under appeal - Nature of business of these concerns held by the assessee would also support the submissions of the assessee that in the year under consideration, the assessee was not colonizer and dealer in real estate - The AO had not examined this information before recording his satisfaction of escaped income and initiated the re-assessment proceedings. The AO had acted only on the basis of suspicion that the assessee was a colonizer and dealer in real estate. The AO was having no material or evidence with him to support his belief that the assessee acted as colonizer or dealer in real estate in the assessment year under appeal. The reasons recorded by the AO for reopening of the assessment are factually incorrect and non-existent. Section 40A(3) applies in the case of expenditure claimed by the assessee while computing business income, but in this case, the assessee did not claim any expenditure in the profit and loss account of all the concerns held by him - The AO had to act on the basis of reason to believe and not on reason to suspect - The AO had failed to incorporate any material for his satisfaction for re- opening of assessment. There was no foundation to his reasons to believe that there was escapement of income in the assessment year under appeal. Therefore, the issuance of notice u/s. 148 of the IT Act for re-assessment proceedings was not valid – Appeal allowed – Decided in favor of Assessee.
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