Reassessment based on an incorrect premise and unsupported accommodation-entry addition failed where sales were backed by invoices and banking records.
Reassessment under section 147 cannot be sustained where the recorded reasons proceed on the premise that no return was filed, although a return had already been furnished and processed, and where the reopening relies on unrelated later cash-deposit information without material linking it to the earlier transactions. On the merits, sale receipts supported by invoices, stock records and banking entries cannot be treated as unexplained income when the sales have already been credited in the accounts and offered to tax; in that situation, an estimated commission addition also fails for want of evidentiary support. The reassessment was quashed and the addition deleted.
Issues: (i) Whether the reassessment was validly initiated under section 147 on the basis of the recorded reasons. (ii) Whether the addition of Rs. 30,70,400, comprising the alleged RTGS receipts and estimated commission, was sustainable on merits.
Issue (i): Whether the reassessment was validly initiated under section 147 on the basis of the recorded reasons.
Analysis: The recorded reasons proceeded on the incorrect premise that no return of income had been filed, although the return had already been furnished and processed. The invocation of clause (a) of Explanation 2 to section 147 was also inapplicable because it applies where no return is filed. The reopening was further founded on later cash-deposit information from a different period, without concrete material linking the earlier sales transactions to any bogus or accommodation-entry nature.
Conclusion: The reassessment was held to be invalid and liable to be quashed.
Issue (ii): Whether the addition of Rs. 30,70,400, comprising the alleged RTGS receipts and estimated commission, was sustainable on merits.
Analysis: The assessee showed that the receipts represented sale consideration from business transactions, supported by sales invoices, stock movement records, and banking entries. The sales had already been credited in the accounts and offered to tax. In the absence of corroborative evidence to displace the documentary material, the receipt could not be treated as unexplained income, and the estimated commission addition also lacked foundation once the underlying transaction was accepted as genuine.
Conclusion: The addition was deleted as unsustainable on merits.
Final Conclusion: The assessee succeeded, and the assessment addition was deleted after the reopening was found to be invalid and the merits addition to be unsupported by evidence.
Ratio Decidendi: Reassessment cannot be sustained when it is founded on an incorrect factual premise and on inapplicable statutory assumptions, and an addition based on alleged accommodation entries cannot stand without corroborative evidence where the transaction is supported by sales records and banking material.