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Issues involved: Reopening of assessment proceedings u/s 147 of the Income-tax Act, 1961 for the assessment year 1996-97 based on statement of a third party.
The High Court of Delhi considered the appeal challenging the reopening of assessment proceedings for the assessment year 1996-97. The Income-tax Appellate Tribunal had earlier allowed the appeal of the assessee, declaring the reassessment proceedings to be bad in law. The revenue appealed under section 260A of the Income-tax Act, 1961, contending that the Assessing Officer had valid reasons to believe that income had escaped assessment. The reassessment proceedings were initiated based on the statement of Sh. V.K. Jain, Director of M/s. Visa Fin Cap Pvt. Ltd., alleging money laundering activities and providing non-genuine loans. The Assessing Officer disallowed the loan from M/s. Visa Fin Cap Pvt. Ltd. and share application money from other individuals, adding a substantial amount to the assessee's income from undisclosed sources. The Tribunal, upon reviewing Sh. V.K. Jain's statement, found it to be too general and lacking specific details linking the assessee to the alleged transactions. The Court emphasized the requirement of tangible material for initiating action u/s 147, stating that the Assessing Officer must have a valid reason to believe that income has escaped assessment. As the statement did not mention the present assessee, the reassessment proceedings were deemed not initiated in accordance with the law. In line with the precedent set in United Electrical Co. (P) Ltd.'s case, the Court dismissed the appeal, stating that no substantial question of law arose in the present case. The appellant was directed to pay costs of Rs. 5,000 to the Delhi High Court Legal Services Committee within four weeks.
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