2020 (9) TMI 1153 - ITAT DELHI

Validity of reopening of assessment - information is received by AO from the investigation wing - Addition u/s 68 - assessee was identified as one of beneficiaries who had received bogus/accommodation entries in the form of share capital by entry provider S.K Jain - HELD THAT:- Merely using the expression ‘failure on the part of the assessee to disclose fully and truly all material facts’ is not enough. The reasons must specify as to what is the nature of default or failure on the part of the assessee.

Hon’ble Bombay High Court in the case of Anand Developers [2020 (2) TMI 995 - BOMBAY HIGH COURT] has held that a mere bald assertion by the AO that the assessee has not disclosed fully and truly all material facts is not sufficient. AO has to give details as to which fact or the material was not disclosed by the assessee leading to its income escaping assessment otherwise the reopening is not valid.

We agree with the argument of assessee that the reason to believe that income has escaped assessment is not based on correct facts and the approval has been given in a mechanical manner and, therefore, such notice based on wrong facts and the approval given in a mechanical manner make the re-assessment proceedings invalid being not in accordance with law. Accordingly we hold that the reassessment proceedings initiated by the AO is not valid in the eyes of law. Accordingly the same is directed to be quashed. Since the assessee succeeds on this preliminary legal ground, the other legal grounds as well as the grounds on merit, in our opinion, do not require adjudication being academic in nature. Appeal filed by the assessee is allowed.