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2022 (12) TMI 1210 - AT - Income TaxReopening of assessment u/s 147 - new material and evidences available with the assessing officer to arrive at the reason indicating escapement of income - independent application of mind v/s borrowed satisfaction - addition made by the AO u/s 68 - As argued income has escaped assessment in the case of the assessee by trading in the bogus penny stocks of Splash Media was based entirely on the satisfaction of the Directorate of Investigation, Kolkata, and there was no independent application of mind on the part of the AO - HELD THAT:- In the present case, it is pertinent to note that no scrutiny assessment was conducted in the case of the assessee and therefore the only data available with the AO was the data provided along with the income tax return and the report/information received subsequently from the office of Directorate of Investigation, Kolkata. The said information constitutes new and tangible material for initiating the reassessment proceedings in the case of the assessee. Though this information was received from Investigation Wing, Kolkata but the AO applying his mind extracted the relevant details pertaining to the assessee. In the first paragraph of the reasons, information of penny stock was noted. Based on this in second paragraph, relevant details about the alleged bogus transaction of the assessee were identified. In the third paragraph, the AO has clearly identified the escapement of income and in the last paragraph, the satisfaction of the AO is recorded. Thus, there was a ‘tangible material’ on which the AO applied his mind independently. Hence, it is not correct to state that reopening has been made on the basis of borrowed satisfaction. Also undisputed that the assessee has transacted in shares of Splash Media and earned Rs. 14,91,646.90 and has declared an amount of Rs. 13,93,293 as a long-term capital gain on the sale of shares in its return of income. Thus when new and tangible material in form of a report from the Directorate of Investigation, Kolkata was received, reassessment proceedings were initiated. The expression ‘reason to believe’ imports the cumulative presence of the following four elements viz. some tangible material or materials to establish that income has escaped assessment; nexus between such material and the belief of escapement of income from assessment as envisaged under Section 147; application of mind by the Assessing Officer to such material; and an inference, based on reason, drawn tentatively by the officer that income has escaped assessment. The application of mind by the AO to the new and tangible material has to be discerned from the reasons recorded in each case and from the perusal of the reasons recorded for reopening the assessment in the present case, we are of the considered view that all the aforesaid conditions are fulfilled and the AO has rightly initiated the reassessment proceedings under section 147 - Decided in favour of revenue.
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