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2020 (1) TMI 1070 - HC - Income TaxReopening of assessment u/s 147 - assumption of jurisdiction by the AO under Section 147 - unpaid loan liability - HELD THAT:- AO has accepted genuineness of the loan transaction. The reasons are completely silent as to how, and on what basis, material or evidence, the AO has come to the conclusion that the loan transaction was an amount received without consideration, so as to bring the same within the ambit of Section 56 of the Act. The nature of the transaction depends solely on the intention of the parties. Both the parties have admitted that the same is an interest bearing loan, a fact accepted by the AO. AO has, thus, not shown any rational for involving Section 56 to the transaction of loan. The reasons are completely and wholly silent as to how the provisions of Section 56 are attracted in respect of outstanding liability of loan. Moreover, the reasons also do not spell out as to how there has been escapement of income by the assessee. The approach of the AO is fundamentally flawed, as he has assumed that just because certain loan amount is outstanding, the same was liable to be added to the income of the petitioner-assessee. Applying the test of prima facie evaluation of reasons for determining whether the commencement of reassessment proceedings is valid or not, we have no hesitation to say that there is nothing on record to justify the reopening. We are also not impressed by the contention of the Revenue that reopening of assessment is justified and necessary as there are discrepancies in the return originally filed, and the return filed in response to the notice under Section 148 of the Act by the assessee. At this stage we are only concerned with the fact whether the reasons as recorded by the AO showcase due application of mind. The reasoning does not indicate the basis for coming to the conclusion that the petitioner’s taxable income has escaped assessment and the reasons formulated by the AO are based on a fundamentally flawed approach. We do not find any such material or basis to justify the reopening of the assessment. Resultantly, the writ petition is allowed. The notice under Section 148 of the Act and the proceedings emanating therefrom are hereby quashed. - Decided in favour of assessee.
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