TMI Blog2008 (6) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, 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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the assessee s non- cooperation before the Assessing Officer to prove the credit-worthiness of the parties in respect of whom there are credits in the books of the assessee and, hence, the Assessing Officer was justified in treating the same as unexplained investment. (v)The CIT(A) erred in holding that the decision of the Supreme Court in the case of Stellar Investments [251 ITR 263] is applicable to the facts of this case. 2.1 In this case, the assessee filed the return on 23-2-1996 and assessment was concluded under section 143(3) on 31-3-1998. From 28-6-1996 to 3-7-1996, there was a search under section 132 of the Income-tax Act in the residential premises of Mr. G.P. Goyal, Managing Director of the assessee-company. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment in the hands of the assessee-company. The Assessing Officer in his order in para 1.3 has mentioned that one of the employees of Mr. G.P. Goyal confirmed that he was receiving cash from Mr. G.P. Goyal for investing the same in different benami names in the share capital of the assessee-company. The Assessing Officer has mentioned that such statements were elaborately repro- duced in the block assessment of Mr. G.P. Goyal. On the basis of such statements, Mr. Goyal agreed that investment made in the share capital of the assessee-company was his own and stated in his statement under section 132(4) that the same will be offered in the block assessment. 2.2 The learned CIT(A) observed that the Assessing Officer has taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of search and seizure action and secondly, the assessee-company disclosed in its balance sheet for year ending 31-3-1995. At the time of initiation of block assessment proceedings in the case of Shri G.P. Goyal, there was no clarity regarding the undisclosed income/unexplained income detected during the course of search as to whether it should be assessable in block assessment or regular assess- ment. Hence, the Assessing Officer initiated proceedings against the assessee-company under section 148 of the Income-tax Act. The learned DR further submitted that the Assessing Officer is justified in considering the addition on a protective measure while completing the regular assessment. For this proposition, the learned DR has given a number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue could have initiated proceedings against both the assessees. In the instant case, assessment in the case of Shri G.P. Goyal was completed on 31-7-1997. Notice under section 148 had been issued to the assessee-company on 27-7-1998. Once the revenue had 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 Assessing Officer was having reason to believe that income has escaped in the hands of the assessee-company. Reassessment cannot be made on mere suspicion. The Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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