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2023 (12) TMI 1260 - AT - Income TaxReopening of assessment u/s 147 - bogus LTCG - reopening was done on the basis of information received from the Investigation Wing that the assessee has earned long-term capital gain from transfer of shares of Quest Financial Service Limited, which is a penny stock company and the said gain has been claimed as exempt u/s 10(38) - HELD THAT:- The reasons were recorded without application of mind and in a very casual and mechanical manner. AO in the first second para stated that the assessee has taken bogus long-term capital gain through penny stocks. Besides we also note that the ld. AO has stated sometimes in the said reasons recorded “his/her”. We find merit in the contentions of the A.R. that the reasons have to be read as they are recorded and there has to be an independent application of mind by the AO and a objective satisfaction has to be recorded whereas the AO acted on the borrowed satisfaction which is a clear-cut non-application of mind by the AO. The case of the assessee finds support from the decision of Hindustan Lever Limited –vs.- R.B. Wadkar, Asst. CIT [2004 (2) TMI 41 - BOMBAY HIGH COURT] wherein it has been held that the reasons have to be read as they are recorded and it cannot be substituted. The Hon’ble Court has held that there has to be satisfaction of AO for reopening of the assessment and reopening cannot be made for borrowed satisfaction in a mechanical manner. Thus we quash the reopening of assessment and direct the ld. AO to delete the addition. The appeal of the assessee is allowed on legal issue.
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