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2018 (8) TMI 205 - HC - Income TaxReopening of assessment - reason to believe - share application moneys were received - Held that - The material on records show that in all the relevant circumstances in which share application moneys were received by the assessee, the circumstances were explained and all the evidence in support of its contentions was furnished to the AO. In the present case, this Court is of the opinion that apart from that consideration, the reassessment notice is cast in overbroad terms; it merely mentions that pursuant to the search and seizure operations of a third party, some material came to light and that yet other third parties were Entry Operators , providing bogus entries in the form of share application credit to the petitioners. The identities of such bogus creditors or Book Entry Operators has not been revealed even though it is known nor are the exact amounts which are reflected in the books of such Entry Operators disclosed as reasons to believe . In these circumstances, it is held that the impugned reassessment notices cannot be sustained; they are hereby quashed as are all further consequential proceedings.
Issues:
Challenges to reassessment notices for A.Y. 2008-09 and 2009-10 based on undisclosed income from accommodation entries provided by entry operators. Analysis: The reassessment notices were issued based on information received from the Director of Income Tax regarding accommodation entries provided to the assessee by certain entry operators. The investigation revealed a modus operandi where unaccounted cash was routed through bogus companies to the assessee, disguising it as share application money, share capital, or loans. The assessee argued that all relevant details regarding share application moneys were disclosed during the original assessment under Section 143(3) of the Income Tax Act, including responses to detailed questionnaires about the genuineness of share applicants. The petitioner contended that the AO did not provide reasons for accepting the materials furnished during the original assessment, justifying the reassessment. Citing precedent, the petitioner argued that where assessment orders lack reasoning, reassessment is justified. However, the court found that the reassessment notice was vague and lacked specific details about the identities and amounts related to the alleged accommodation entries, rendering it unsustainable in law. The court emphasized that even though the AO's orders lacked reasoning, the Full Bench ruling upheld by the Supreme Court stated that inadequate reasons cannot justify reassessment if material was already provided by the assessee. In this case, the reassessment notice failed to disclose crucial details such as the identities of bogus creditors or entry operators and the exact amounts involved, rendering it overbroad and unsustainable. Consequently, the court quashed the reassessment notices and all further consequential proceedings, allowing the writ petitions in favor of the assessee.
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