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2008 (6) TMI 311 - AT - Income TaxNotice issued u/s 148 for protective addition - Addition made in block assessment - Search And Seizure - Undisclosed investment in the share capital - CIT(A) held that the reopening is not valid - HELD THAT:- In the instant case, the assessment in the case of Shri G.P. Goyal was completed on July 31, 1997. Notice u/s 148 has been issued to the assessee-company on July 27, 1998. Once the Revenue has taken its stand that such investment in the share capital belong to Shri G.P. Goyal and the assessment order was passed, then it cannot be said that the AO was having reason to believe that income has escaped in the hands of the assessee-company. Reassessment cannot be made on mere suspicion. AO has to form a belief that income has escaped assessment in the hands of the assessee. Once it has been held that such investment belonged to Shri G.P. Goyal, then there was no further material to come to the conclusion that such escaped income belonged to the assessee. The basic requirement for reopening the assessment is that the AO should have reason to believe that the income has escaped assessment is not satisfied in this case. Hence, we are satisfied that the ld CIT(A) was justified in holding that the assessment cannot be reopened for making protective addition. The hon'ble apex court in the case of CIT v. Divine Leasing and Finance Ltd. [2007 (11) TMI 627 - SC ORDER] held that if the AO treats share application money as undisclosed income u/s 68 and the Revenue believes that the shareholders are bogus, then the AO is free to reopen the assessment of the shareholders. The apex court held that the share application money cannot be added in the hands of the company. Therefore, it is held that the ld CIT(A) was justified in cancelling the assessment in the hands of the assessee. In the result, the appeal filed by the Revenue is dismissed.
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