Court invalidates assessment reopening due to lack of independent assessment, erroneous income addition without evidence. Appellant's appeal allowed.

The court found the reopening of the assessment invalid due to the lack of independent application of mind by the Assessing Officer and absence of valid reasons to believe income had escaped assessment. The bench allowed grounds related to jurisdiction and validity of reopening. Additionally, the court deemed the addition of income under Section 68 erroneous as it was based on presumptions without factual evidence. The reassessment and income addition were set aside, and the appellant's appeal was allowed. Other grounds were considered superfluous and not adjudicated.

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Issues Involved:
1. Jurisdiction and validity of the reopening of the assessment.
2. Merits of the reassessment and addition of income under Section 68 of the Income Tax Act.

Detailed Analysis:

1. Jurisdiction and Validity of the Reopening of the Assessment:

*Grounds of Appeal:*
- The appellant challenged the reopening of the assessment on the basis that the reasons were not recorded by the Assessing Officer (AO) who had jurisdiction over the case.
- The appellant contended that the AO who recorded the reasons did not apply his mind independently and the notice issued was time-barred.

*Submissions and Findings:*
- The appellant argued that the notice under Section 148 dated 28.03.2017 was issued by ITO, Ward-14(3), and no notice was issued by ITO, Ward 17(4) within the statutory period. The subsequent notices under Section 148 and 143(2) were also time-barred.
- The appellant relied on judgments from the Hon'ble Kerala High Court and Hon'ble Delhi High Court to support the argument that reassessment without proper notice should be considered invalid.
- The reasons recorded for reopening the assessment were merely a reproduction of information received from the Investigation Wing, with no specific observations or independent application of mind regarding the appellant's transactions.
- The bench noted that the AO's reasons for reopening the assessment lacked a live link between the information received and the alleged failure of the appellant to disclose material facts. The reasons expressed a mere suspicion rather than a belief that income had escaped assessment.
- The AO's observation that the appellant's financial position was not sound was deemed insufficient for invoking Section 147 of the Income Tax Act.

*Conclusion:*
- The bench concluded that the reopening of the assessment was invalid due to the lack of independent application of mind by the AO and the absence of a valid reason to believe that income had escaped assessment. Grounds 1(c) and 2(d) were allowed.

2. Merits of the Reassessment and Addition of Income Under Section 68:

*Grounds of Appeal:*
- The appellant challenged the reassessment on the basis that the AO had not followed the proper procedure for transferring the case and issuing notices.
- The appellant contended that the addition of income under Section 68 was based on presumptions and not on factual evidence.

*Submissions and Findings:*
- The appellant argued that the reasons recorded for reassessment were factually incorrect as the transactions were with S.K.Khemka and not with the tainted Kayan brothers mentioned in the reasons.
- The appellant provided details of the purchase and sale of shares, showing that the shares were purchased on 07.07.2005 and sold on 12.03.2010, thus generating long-term capital gains (LTCG).
- The AO and CIT(A) were found to have relied heavily on the findings of the Investigation Wing without independently verifying the appellant's transactions.
- The bench observed that the AO and CIT(A) did not consider the factual aspects of the appellant's share transactions and were driven by presumptions arising from the Investigation Wing's findings.

*Conclusion:*
- The bench concluded that the addition of income under Section 68 was erroneous as it was based on presumptions and not on factual evidence. The AO and CIT(A) failed to independently verify the appellant's transactions and relied solely on the Investigation Wing's findings. Grounds 4 and 5 were allowed.

Final Order:
- The appeal of the appellant was allowed, and the reassessment and addition of income under Section 68 were set aside. The remaining grounds were deemed superfluous and not adjudicated.

Order Pronounced:
- The order was pronounced in the open court on 18th January, 2023.

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