Reassessment Unjustified: No Evidence to Tax Unsecured Loan; Officer Lacked 'Reason to Believe' Income Escaped Assessment.

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....The High Court held that the reopening of assessment u/s 147 was not justified. The mere existence of an outstanding unsecured loan in the assessee's balance sheet did not provide a 'reason to believe' that the income had escaped assessment. There was no material to indicate that the Assessing Officer had any ground to believe that the loan availed by the assessee was chargeable to tax under the Act. The assessee had explained the source of the unsecured loan from its then director, which was duly disclosed in the notes to accounts. The Assessing Officer erroneously proceeded on the premise that the unsecured loan was unexplained and chargeable to tax u/s 68, without any basis. As per the Supreme Court's ruling in Lakhmani Mewal Das, reasse.........