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TMI Blog2015 (2) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The learned CIT(A) erred in not giving opportunity to appellant to make s ubmis s i ons u/ s . 68 a nd es t a blis h i dent it y, genu i nenes s a nd creditworthiness of the share applicant. c) The learned CIT(A) erred in confirming addition by relying on statements of Chartered Accountant who was neither a director or employee nor had he stated that the payments received by the appellant were not genuine." 2. The brief facts of the case are that the assessee 'M/s. Lark Chemicals Ltd' filed its return of income for the year under consideration i.e. A.Y. 200405 on dated 1.11.2004 declaring loss of Rs. 13,81,336/-. The return was accepted u/s 143(1) of the Act on 22.2.2005. Thereafter on 22.3.11 there was a search action carried out u/s 132 of the Act on one Mr. Parag Mehta CA. The said Mr. Parag Mehta made a statement that M/s Suryodaya Engg. Ltd. in which Mr. Sanjay Sonaware has been a Director had issued bogus bills to various companies. The M/s Lark Chemicals Ltd. (assessee) was also indicated as one of the beneficiaries. The AO therefore issued notice u/s. 148 on 29.3.11 of the Act for reopening of the assessment. The assessee objected to the reopening on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received share allotment money and till date the shares are owned by Suryodaya. All material facts were in the file of the AO. The Balance Sheet of Lark showed increase in authorized and issued capital. All Government requirements were fulfilled in 2004 when shares were issued and proof of the same had been filed. That the AO had only relied only upon Statement of Parag Mehta and no other tangible material was present to form an opinion that the income of the assessee had escaped assessment. Even in statement of Parag Mehta there was no allegation about Suryodaya or Lark. Even statements of Sanjay Sonawane, Director of Suryodaya, were recorded, and in none of the statements had Sanjay Sonawane alleged that money invested in Lark was bogus nor did the Department ask any questions about Suryodaya or Lark. That there were many subsequent Asst. Years in which the AO made assessments u/s 143(3) but no issue was raised with regard to share capital. It has been therefore contended that in the absence of any tangible incriminating material, the reopening and reassessment done by the AO was bad in law. 6. On the other hand, the Ld. DR has contended that earlier the return was processed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 561. 8. Now coming to the issue of reopening, as per the provisions of section 147 of the Act, the AO is authorized to reopen the assessment proceedings, if he has reason to believe that any income chargeable to tax has escaped assessment. The courts of law have time and again held that such a reason to believe that the income of the assessee has escaped assessment should be based on some tangible material which comes to the knowledge of the AO. An assessment cannot be reopened under section 147 of the Act on the basis of mere suspicion. A perusal of the reasons recorded reveals that assessment has been reopened on the suspicion that assessee was in receipt of accommodation bills and the same was not verifiable from P&L account and balance sheet filed with return of income. Whereas the plea of the Ld. AR has been that when the assessee had not made any purchase at all from Saryoday Engineering ltd., where was the question of forming the belief by the AO that the assessee had received any accommodation bills. There is no dispute to the well settled proposition that reason to believe must have a material bearing on the question of escapement of income. It does not mean a purely s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce for increase in authorized capital, payment of fees for income etc. had been filed with AO. When the very reasons on the basis of which reopening was sought to be done were not only objected to but also proved to be wrong, there was no justification for the AO to proceed further for re assessment. As observed above, the original assessment u/s 143(1) of the act had already become final. The AO therefore was precluded from review of the assessment which had already become final. The addition by the AO in respect of share capital was nothing but the review of the already finalized assessment that too without any material evidence available to the AO to form such a belief in this respect. The Hon'ble Supreme Court in the case of "CIT vs. Kelvinator of India Ltd." (2010) 228 CTR(SC) 488 has held that we must keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. As observed above, the reopening and reassessment in this case was nothing, but, the review u/s 143(3) of the Act in the garb of the provisions of section 147 of the Act, which was not permissible in view of the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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