Reassessment sanction and bogus transaction additions fail where prescribed approval is missing and documentary evidence remains unchallenged.

Reassessment initiated after three years from the end of the assessment year was invalid where approval was obtained from the wrong specified authority, because valid sanction from the prescribed authority is mandatory for a reassessment notice; the proceedings were therefore quashed. An addition under section 69C for alleged bogus purchase and sale transactions was also deleted because the assessee produced purchase details, stock register and sales records, and the assessing authority made no independent enquiry or found any defect in the documents; reliance on investigation material alone was insufficient. Relief was granted to the assessee on both issues.

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Issues: (i) Whether reassessment for A.Y. 2018-19 was invalid for want of sanction by the proper specified authority under the reassessment regime; (ii) Whether the addition made for A.Y. 2019-20 on account of alleged bogus purchase/sale transactions under section 69C could be sustained.

Issue (i): Whether reassessment for A.Y. 2018-19 was invalid for want of sanction by the proper specified authority under the reassessment regime.

Analysis: The notice and order under the reassessment provisions had been issued after expiry of three years from the end of the relevant assessment year. On the facts recorded, the approval had been taken from the Principal Commissioner instead of the authority prescribed for notices issued beyond the three-year period. In view of the controlling principle that the proper sanctioning authority is mandatory for validity of the reassessment notice, the reassessment initiation was found to be without valid sanction.

Conclusion: The reassessment proceedings for A.Y. 2018-19 were held to be invalid and liable to be quashed, in favour of the assessee.

Issue (ii): Whether the addition made for A.Y. 2019-20 on account of alleged bogus purchase/sale transactions under section 69C could be sustained.

Analysis: The assessment addition was based mainly on information from the investigation/survey material. The appellate order recorded that the assessee had furnished purchase details, stock register and sales particulars, while the assessing authority had not made independent enquiry or pointed out discrepancies in the documentary evidence. The Tribunal accepted the appellate finding that, on the material placed, the addition could not rest only on the investigation report and unsupported presumptions.

Conclusion: The addition for A.Y. 2019-20 was not sustained and the assessee was granted relief, in favour of the assessee.

Final Conclusion: The Revenue's appeals failed, while the assessee succeeded on the reassessment validity issue and on the merits of the addition, resulting in complete relief to the assessee.

Ratio Decidendi: Reassessment initiation must be backed by sanction from the authority prescribed for the relevant time period, and an addition based on alleged bogus transactions cannot be sustained without independent enquiry where the assessee's documentary evidence is not found defective.

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