Assessment order quashed under Section 147 due to invalid reopening: lack of facts, independent review.

The Tribunal affirmed the CIT (A)'s decision to quash the assessment order under Section 147, finding that the reopening was invalid due to incorrect facts and lack of independent application of mind by the AO. The reasons for reopening did not align with the material on record, leading to the deletion of the addition made under Section 68. The Tribunal dismissed the Revenue's appeal, concluding that the entire Section 147 proceedings were rightly quashed.

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Issues Involved:
1. Validity of the reopening of the assessment under Section 147.
2. Nexus between the information provided by the investigation wing and the reasons to believe.
3. Deletion of the addition of Rs. 1,19,37,679/- made under Section 68.
4. Application of the principles laid down by the Supreme Court in Sumati Dayal Vs. CIT and Durga Prasad More Vs. CIT.

Detailed Analysis:

1. Validity of the Reopening of the Assessment under Section 147:
The appeal was filed by the Revenue against the order of the CIT (A) quashing the assessment order under Section 147. The primary issue was whether the notice under Section 148 for AY 2017-18 was valid, given that it was issued before 01.04.2021, making the provisions of Section 148A inapplicable. The CIT (A) found that the reopening was based on information from the investigation wing regarding trading in penny stocks, specifically shares of Naresh Manakchand Jain. However, the assessment order made additions related to Nyssa Corporation Ltd., which was not mentioned in the reasons recorded for reopening. The CIT (A) held that the reopening was based on incorrect facts and lacked independent application of mind by the AO, thus quashing the assessment order.

2. Nexus Between the Information Provided by the Investigation Wing and the Reasons to Believe:
The Revenue contended that there was a nexus between the information from the investigation wing and the reasons to believe for reopening the assessment. However, the CIT (A) observed that the AO acted merely on the information provided without independent verification. The reasons recorded mentioned trading in shares of Naresh Manakchand Jain, while the addition was made concerning Nyssa Corporation Ltd. The CIT (A) found no link or relation between the two, indicating a lack of application of mind by the AO.

3. Deletion of the Addition of Rs. 1,19,37,679/- Made Under Section 68:
The AO made an addition of Rs. 1,19,37,679/- under Section 68, which was the quantum of net loss incurred on the transaction of shares of Nyssa Corporation Ltd. The CIT (A) noted that the assessee had already explained the share transaction during the original assessment proceedings under Section 143(3), and the AO had accepted the genuineness of the transaction. The CIT (A) held that reopening the assessment on the same issue without any new tangible material amounted to a "change of opinion," which is not permissible. Therefore, the addition made by the AO was deleted.

4. Application of the Principles Laid Down by the Supreme Court in Sumati Dayal Vs. CIT and Durga Prasad More Vs. CIT:
The Revenue argued that the CIT (A) erred in deleting the addition without considering the principles laid down by the Supreme Court in Sumati Dayal Vs. CIT and Durga Prasad More Vs. CIT, which state that the apparent must be considered real unless there are reasons to believe otherwise. The CIT (A) found that the AO's reasons for reopening were based on incorrect facts and lacked a nexus with the material on record. The AO's presumption that the assessee had undertaken transactions in shares of Naresh Manakchand Jain was incorrect, as the assessee had dealt with Nyssa Corporation Ltd. shares. Thus, the CIT (A) held that the reopening was invalid, and the addition was rightly deleted.

Conclusion:
The Tribunal affirmed the CIT (A)'s order, holding that the reasons recorded by the AO were not in accordance with the law, and the entire proceedings under Section 147 were rightly quashed. The Revenue's appeal was dismissed, and the orders were pronounced in the open court on 23rd November 2022.

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