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2021 (2) TMI 176 - AT - Income TaxReopening of assessment u/s 147 - addition on account of shifting ascertained losses - reason to believe or reason to suspect - HELD THAT:- It is well settled law that validity of the reassessment proceedings is to be determined on the basis of the reasons recorded for reopening of the assessment. AO in the same has mentioned that provisions of section 147(b) are applicable in this case for reopening of the assessment, however, this section does not exist in the statute for assessment year under appeal. Further, the entire reopening is based on information received from ADIT(Inv.) Ahmedabad for shifting out profits using client code modification. It is alleged in the reasons that on the basis of information received from ADIT(Inv.) M/s SMC Global Securities Limited broker has shifted out the profits using client code modification for the assessee to claim losses. Pr. CIT while approving the reasons merely mentioned “yes I am satisfied” The assessee filed objections to the reopening of the assessment and explained before AO that M/s SMC Global Securities Ltd. broker has not done anything for assessee and assessee did not deal with such broker, therefore, there is no question of loss claimed through this broker. The assessee further explained that assessee had carried out transactions through M/s Mansukh Securities Finance Limited. AO recorded incorrect and wrong facts in the reasons for reopening of the assessment. Though the AO rejected the objections of the assessee but in the rejection order confirmed that assessee carried out the transactions through Mansukh Securities Finance Limited, therefore, there is no question of assessee arranging any loss through transaction involving CCM through SMC Global Securities Broker. The reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in the client code was not on account of genuine error, originally occurred while punching the trade. The material available is that there is a client code modification done by assessee broker which fact is also incorrect and there is no link from there to conclude that it was done to escape assessment of a part of its income. In case incorrect, wrong and non existing reasons are recorded by the AO for reopening of the assessment and that AO failed to verify the information received from Investigation wing, the reopening of the assessment would be unjustified and is liable to be quashed. Considering the above discussion, it appears to be a case of reason to suspect and not reason to believe that income chargeable to tax has escaped assessment, therefore, reopening of the assessment is bad in law and the AO would not get valid jurisdiction to proceed for reassessment. The decisions cited by the DR would not be applicable to the facts of the case - we set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly all additions stands deleted. - Decided in favour of assessee.
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