TaxTMI 
TaxTMI 
2026 (1) TMI 601
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....incorporated under the Companies Act, 1956 and engaged in the business of Non-Banking Financial Company. The assessee filed its return of income for A.Y.2012-2013 on 28.09.2012 by declaring total income amounting to Rs. 31,600/-. The case of the assessee was selected for scrutiny and assessment u/s.143(3) of the Act was made by the Assessing Officer by assessing total income amounting to Rs. 4,39,680/-. Subsequently, the assessment was reopened by issuing notice u/s.148 of the Act on 29.03.2019 and the assessee in compliance to the said notice filed return of income by declaring total income amounting to Rs. 31,600/- on 30.04.2019. The Assessing Officer issued statutory notices u/s.143(2) & 142(1) of the Act to which the assessee duly replied along with relevant evidences as and when required, which was replied by the assessee explaining identity and creditworthiness of the investors and genuineness of the transaction. During the course of assessment proceeding, the Assessing Officer observed that the assessee company has raised share capital by issuing equity share of face value of Rs. 10/- at a premium of Rs. 990/- to 28 allottees. The Assessing Officer in order to verify the tra....
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....h before the AO and before this office. It was specifically contended that the recorded reasons were factually incorrect, as the appellant had never entered into any transaction with M/s Runicha Merchants Ltd. Furthermore, itwas submitted that the funds received from M/s Panchratan Commotrade Pvt. Ltd. Amounting Rs. 50,00,000/- were actually sourced from M/s Jaigaon Steels Pvt. Ltd. In support of this claim, the appellant filed detailed documentation, including the source of funds used by M/s Panchratan Commotrade Pvt. Ltd., which is included at page no. 284 of the paper book submitted by the appellant. This office has carefully examined the appellant's submissions and supporting documents and finds the contentions to be correct. The reasons recorded by the AO were based on incorrect facts and lack of independent application of mind. It is a well-settled legal principle that reassessment proceedings initiated on the basis of incorrect facts or borrowed satisfaction are invalid in the eyes of law. In the present case, the only allegation was that the fund trail, as indicated by the Investigation Wing. showed that the appellant was a beneficiary of funds routed through a propriet....
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.... the assessee provides the names, confirmations, and the loan creditors are income-tax assessees, the initial burden of proof is discharged. Despite this, the AO made an arbitrary addition without issuing notices under relevant provisions for further verification of the transactions. 5.4 In The present case AO had failed to point out any defect, lacuna and/or falsity/shortcomings in the documentary evidences and explanations furnished before him and arbitrarily and wrongly alleged that the Assessee Company was not able to discharge its onus of establishing the identity. creditworthiness of the aforesaid parties and also the genuineness of the transactions entered into with the said parties. The various courts have consistently held that reopening of assessments cannot be initiated solely for the purpose of making inquiries or verifying transactions without any prima facie evidence of income escapement. In this case, the reasons recorded do not reflect any tangible material or evidence that could justify the reopening of the assessment. Useful reference may be made to the judgment in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd., the Hon'ble Delhi High Court held th....
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....asons, without any independent application of mind, is not valid. The Hon'ble High Court emphasized that the AO must form a bona fide belief, based on specific and clear information, that income has escaped assessment. Reopening cannot be justified by merely conducting an analysis of materials after the fact. It is further observed that following the decision of the High Court in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd. (395 ITR 677), the coordinate bench of the Tribunal in the case of RN Khemka Enterprise Pvt. Ltd. Vs. ITO (ITA No. 7244/Del/2019) dated 12.08.2021 held that if there is a non-application of mind in recording reasons, the Assessing Officer (AO) could not be said to have had reason to believe to justify the reopening of the assessment. While making this observation, the Tribunal noted that the reasons recorded must show that the AO has applied his mind independently and arrived at a bona fide belief that income chargeable to tax has escaped assessment. If the reasons are vague, incomplete, or based merely on general observations without independent scrutiny, the reopening cannot be justified. The Kolkata Tribunal in the case of DCIT Vs. ....
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....des (India) Ltd., reported in [2013] 38 taxmann.com 403 (Delhi)/[2013] 357 ITR 330 (Delhi), wherein the Hon'ble High Court has held that when the reopening of an assessment is based on vague or insufficient information, the notice for reopening must be struck down. The court emphasized that the reasons for reopening should be clear, specific, and supported by adequate material. Reopening based on vague information is not permissible, as it does not meet the legal requirements for forming a valid belief that income has escaped assessment. Similarly, the ld.CIT(A) relied on the decision of the Hon'ble Delhi High Court in the case of Signature Hotels P. Ltd., reported in [2012] 20 taxmann.com 797 (Delhi)/[2011] 338 ITR 51 (Delhi), wherein the Hon'ble High Court has held that while analyzing the reasons recorded for reopening the case based on vague information, held that the reasons provided by the Assessing Officer must be specific and based on tangible material. It was also observed by the Hon'ble High Court that reopening based on generalized or unclear information is not sufficient, as it does not establish a clear connection between the material and the belief that income has esc....
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....hare capital and share premium is concerned we observe that the amendment to Section 68 by inserting proviso is not retrospective and is applicable retrospective, has been held by the Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure (P) Ltd. delivered in Income Tax Appeal No.1613 of 2014, dated 20.03.2017, wherein the Hon'ble High Court has held as under :- "We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that....