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2021 (4) TMI 537 - AT - Income TaxValidity of reopening of the assessment by issuing notice u/s 148 read with section 147 - eligible reason to believe escapement of income - bogus LTCG/STCL and unsecured loans receipts - A.O noted that the assessee company has no real business activities since there are no purchase and sales found during the relevant F.Y - whether the AO on the basis of whatever material before him, [which he had indicated in his "reasons recorded"] had reasons warrant holding a belief that income chargeable to tax has escaped assessment? - whether the condition precedent necessary to usurp the re-opening jurisdiction can be discerned from perusal of the reasons recorded by the AO in the instant case? - HELD THAT:- As in the reasons recorded had specifically stated that the assessee had received ₹ 25,00,000/- from M/s. DRS Enterprises Pvt. Ltd. and M/s. Hanuman Traders Pvt. Ltd. which according to him was nothing but the unaccounted money of the assessee company which prompted him to believe that there is escapement of income, and therefore, he resorted to reopening u/s 147 of the Act by issuing notice u/s 148 of the Act. So it should be noted that this was the factual basis/foundation based on information from Investigation Wing, which was the basis and reason for him to form a belief that income of assessee which is chargeable to tax has escaped assessment. However, when the assessee brought to the notice of the A.O that the assessee company did not receive ₹ 25,00,000/- from M/s. DRS Enterprises Pvt. Ltd. and M/s. Hanuman Traders Pvt. Ltd., the A.O finds that the assessee company has received money from M/s Radharani Vyapaar (P) Ltd. According to the A.O, M/s Radharani Vyapaar (P) Ltd. has received the money directly from M/s Kokila Trading Co. and M/s Kokila Trading Co. has received money from M/s. DRS Enterprise. Thus, it is noted that the factual foundation on which the AO based his reason for reopening does not exist. Information adverse may trigger “reason to suspect” and not “reason to believe”. So the AO should have conducted reasonable enquiry and collected material which could make him believe, that in fact there is escapement of income, which in this case AO did not do, so the reopening based on the reasons recorded by him to re-open is bad in law. Reasons are required to be read as they were recorded by the A.O. No substitution or deletion is permissible. No addition can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded by the A.O. He has to speak through the reasons”. Their lordships added that “the reasons shall be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and evidence ” Therefore, reasons are to be examined only on the basis of reasons as recorded. Here, in this case, note that the A.O on mistaken facts resorted to reopening which is an admitted fact on a perusal of re-assessment order. Therefore, the condition precedent for reopening the assessment u/s 147 of the Act is found to be absent and, therefore, the reopening itself is bad in law - Decided in favour of assessee.
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