ITAT allows partial appeal, rejects addition under section 68, finds reopening valid.

The ITAT upheld the reopening of assessment under section 147 but found the addition under section 68 to be unsustainable. The appeal was partly allowed as the ITAT concluded that the loan was not received as alleged, providing evidence to support this claim. The objection against reopening lacked merit, and the Assessing Officer was deemed to have rightly exercised power under section 147.

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Issues:
1. Validity of reopening of assessment under section 147 of the Income-tax Act, 1961.
2. Merits of the addition made under section 68 of the Act.

Issue 1: Validity of Reopening of Assessment:
The appeal was against the order of CIT(A)-II, Pune relating to the assessment year 2003-04 under section 143(3) r.w.s. 147 of the Income-tax Act. The Assessing Officer reopened the assessment under section 147 by issuing a notice under section 148. The reasons for reopening included the unexplained cash credit of Rs. 47,21,887, which was not reflected in the accounts of the lender. The Assessing Officer treated this amount as an unexplained cash credit under section 68 of the Act. The CIT(A) confirmed this addition, leading to the appeal before the ITAT. The ITAT directed the CIT(A) to consider the jurisdiction issue, which was done, and it was concluded that the objection against reopening lacked merit. The ITAT held that the Assessing Officer rightly exercised power under section 147. The objection on lack of jurisdiction was dismissed.

Issue 2: Merits of the Addition under Section 68:
Regarding the merits of the addition made under section 68, the assessee contended that the loan was given to Shri L.K. Jain (HUF) and not received as alleged. The CIT(A) upheld the addition, but the ITAT allowed the appeal on this ground. The ITAT found that the Annexure 4, showing the loan received, did not reflect the name of the assessee and had no nexus with the tax audit report. It was considered extraneous and not integral to the report. The assessee provided bank statements and confirmatory letters to prove the non-existence of the loan. The ITAT held that the addition of Rs. 47,21,887 under section 68 was not sustainable on facts and law. Therefore, the Ground No.3 of the assessee was allowed, and the appeal was partly allowed.

In conclusion, the ITAT upheld the reopening of the assessment under section 147 but found the addition made under section 68 to be unsustainable. The assessee's appeal was partly allowed on the grounds related to the merits of the addition.

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