2015 (10) TMI 2694 - AT - Income Tax

Reopening of assessment - Addition u/s. 69 - Unexplained Investment - Held that - AO had issued notice without proper recording of satisfaction and hence reopening of assessment is bad in law. Under the circumstances the proceedings initiated by the AO under section 148 is bad in law. - Decided in favour of assessee.

Summary

Issues:
Reopening of completed assessment without proper reasons, addition u/s. 69 of the Income Tax Act, 1961, validity of reopening of assessment.

Analysis:
The appeal pertains to the order passed by the CIT(A)-27, Mumbai for A.Y. 2008-09. The assessee raised revised grounds challenging the reopening of the completed assessment and the additions made by the AO under section 69 of the Income Tax Act, 1961. The AO reopened the assessment based on the suspicion that the assessee obtained entries/bills for purchasing shares from a source undisclosed to the Department. The assessment was completed with a total income of Rs. 10,72,340.

The assessee contended before the CIT(A) that the shares purchased were genuine and not accommodation entries. However, the CIT(A) observed that the assessee failed to provide complete information regarding the transactions, leading to the confirmation of the AO's action. The assessee then appealed to the Tribunal, challenging the validity of the reopening of the assessment and the addition made under section 69 of the Act.

During the Tribunal proceedings, the assessee presented evidence showing that only shares of Reliance Natural Resources were purchased and sold, contrary to the AO's belief that shares of other companies were involved. The Tribunal noted a similar case where the AO's notice was deemed invalid due to lack of material evidence. The Tribunal agreed that the AO in the current case had not properly recorded satisfaction before issuing the notice, rendering the reopening of the assessment invalid.

In conclusion, the Tribunal found that the AO's reopening of the assessment was not supported by proper recording of satisfaction, making it invalid in law. Therefore, the appeal filed by the assessee was allowed, and the proceedings initiated by the AO under section 148 were deemed invalid.