TMI Blog2009 (1) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... Dr. Rakesh Gupta had contended that proceedings were initiated without application of mind and without showing that there was material to have reasons to believe that income had escaped assessment. The learned CIT had granted approval under s. 151 of IT Act to the re-initiation in a mechanical manner. Therefore, the assessment was bad in law. 3. Shri Gupta also contended that the CIT(A) also accepted the claim of the assessee that reassessment order was passed in violation of principles of natural justice, for the reason that the adverse material relied upon by the AO for drawing adverse inferences and for making additions was not confronted to the assessee, nor any opportunity of cross-examination was granted. After taking note of certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be quashed." 4. The learned CIT(A) has also referred to and relied upon decision of Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT (l980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC). From the above, it is clear that reassessment was made in violation of principles of natural justice and could have been quashed. May be the assessee felt that his case on other points was quite strong and, therefore, led learned CIT(A) to consider them. All other points, except for re-initiation of assessment proceedings were decided in favour of the assessee, after an elaborate discussion. 5. The learned counsel for the assessee on his objection to initiation of reassessment proceedings, has submitted as under. It was argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information AO received, relating to bank entries, which and for what sum, entries were taken to be Hawala entries, which entries were identified as beneficiary and representing assessee's unaccounted funds; if entries were identified, why these are not mentioned and total undisclosed income found on the basis of those entries; how assessee was a beneficiary? Why AO had reason to believe that income of the assessee company had escaped assessment, to the tune of above Rs. 1 lac, why above Rs. 1 lac and what is the basis of this figure; has the figure been adopted merely to override statutory provision as proceedings were taken six years after the close of the assessment year? 7. In support of his claim that initiation of reassessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) is clearly applicable to the facts of the present case. In the case before the Supreme Court, the purported reasons recorded for reopening the assessment were inter alia: 'it appears that these persons are name lenders and the transactions are bogus. Hence, proper investigation regarding these loans is necessary'. The Supreme Court did not find that these were sufficient reasons for reopening the assessment. With regard to the sentence 'hence, proper investigation regarding these loans is necessary', the Supreme Court observed that this conclusion that there is a case for investigation as to the truth of the alleged transactions is not the same thing as saying that there are reasons to issue a notice under s. 148." 8. The learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the decisions placed before us and the law laid down therein, it is necessary to appreciate the information available with the AO in the present case. The only information is that the assesses had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. Insofar as the basis for the reasons is concerned, even this is absent. The AO did not verify the correctness of the information re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, summons were issued to various parties, who did not respond and, therefore, it was clearly established that assessee was indulging in Hawala transactions. The Departmental Representative also mentioned that as per report of the Director of IT (Inv.), assessee company was an entry operator. 10. We are of the view that subsequent material collected during the course of reassessment proceedings cannot be taken to account and validity of reassessment is to be judged on the basis of material available at the time of issuance of notice under s. 148 of the IT Act. The AO in the reasons recorded, has not referred to any material. In fact as pointed out by their Lordship in the above quoted decisions, he had no material to have reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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