TaxTMI 
TaxTMI 
2026 (1) TMI 871
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....rm Capital Gain ("LTCG") of INR 2,28,22,400/-. In response to notice u/s 148 of the Act, assessee filed return of income on 29.04.2021, declaring same income as was declared in the return of income filed u/s 139(1) of the Act. Thereafter, assessee filed the objections to the reopening of assessment based on incorrect and reasons recorded and further filed various submissions. After considering the same, AO passed the reassessment order wherein it is alleged that the assessee has obtained bogus LTCG of INR 3,55,88,404/- and by holding the same as unexplained cash credit, addition was made u/s 68 of the Act. The AO further made the addition 2% of the said amount as commission for obtaining accommodation entry of bogus LTCG. 3. Against the said order, the assessee has filed an appeal before Ld.CIT(A) who after considering the submissions of the assessee, has allowed the legal grounds of the assessee by observing that reasons recorded were on borrowed satisfaction without appreciating the facts and without spelling out the basic details of the transaction as to how the assessee has claimed LTCG of INR 2,28,22,400/- as fictious. 4. Aggrieved by the said order, the Revenue is in ap....
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.... submitted that Ld.CIT(A) vide para 6.4.3 of the order has allowed the legal grounds of appeal of the assessee and has not decided the issue on merits therefore, the order of ld. CIT(A) deserves to be set aside to his file with the directions to decide the issue relating to the merits of the additions. 6. Ld. Sr. DR for the Revenue further submits that AO has passed the assessment order after making necessary verification of the facts and after following the due procedure as provided under the statute where the AO has disposed-off the objections raised against the re-opening of the assessment and therefore, the reassessment proceedings concluded were the valid proceedings. He thus, prayed that the action of the Ld.CIT(A) in allowing the legal grounds taken by the assessee is not correct and requested for setting aside the order of Ld. CIT(A) for deciding the appeal on merits. 7. On the other hand, Ld.AR vehemently supported the order of Ld.CIT(A) and submits that from the perusal of the reasons recorded as appearing at pages 1 & 2 of the re-assessment order, it could be seen that AO has not stated the complete facts as to from which script and through which transactions, the ....
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....sh Ramanlal Shah reported in 477 ITR 296 (SC) wherein Hon'ble Supreme Court has held that AO reopened the assessment on borrowed satisfaction without establishing the live link between the information and material on record and dismissed the SLP filed by the Revenue. He also relied on the judgment of Hon'ble Jurisdictional Delhi High Court in the case of Sanjay Kaul vs ITO in Writ Petition (C) No.11198/2019 dated 30.05.2025 wherein Hon'ble High Court has held that re-opening based on general information from the Report of Investigation Wing is bad in law. 8. Heard the contentions of both the parties and perused the material available on record. In the instant case, it is seen that AO has re-opened the assessment of the assessee by alleging that the assessee has disclosed LTCG of INR 2,28,22,400/- and finally the assessment was made by making addition towards the LTCG of INR 3,55,88,404/- holding the same as fictitious. Ld. CIT(A) appreciated these facts and further appreciated that the AO has proceeded with borrowed satisfaction without independent application of mind on the material available on record and held the re-opening as invalid by making following observations in para ....
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....sed of the objections by passing an order. In response to various notices, the appellant filed her submission before the AO and asked for the relevant report and documents on the basis of which the reasons to believe were recorded by the AO. However, the relevant documents and reports were not supplied to the appellant by the AO as evident from the assessment order and submission of the appellant. On going through the reasons recorded by the AO which are reproduced in the assessment order, it was found that the AO has recorded the reasons only on the basis of information received in the "Insight Portal" as a potential case for escapement of income. The AO has simply recorded that the assesses has suppress her income by booking fictitious profit in equity/ derivative trading as bogus Long Term Capital Gain through reputed stock by issuing ante dated forged contract note for a value of Rs. 2,28,22,400/- as detailed in the flagged report from Investigation Wing Rohtak and Delhi. However, the AO has not mentioned any details of transactions claimed to be forged by the appellant, like name of the shares, quantity, name of the broker, date of transaction. There was no any reference of ta....
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....Further, reliance has been placed on the following decisions: Well Trans Logistics India (P.) Ltd. v. Addl. Commissioner of Incometax [2024] 166 taxmann.com 72 (Delhi), in which it was held that.... there is no close nexus" or live link between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. [Para 25] Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. There is not even a line of reason which may justify the formation of the belief. Consequently, reopening of assessment for the assessment year in question by the Assessing Officer does not satisfy the requirement of law in terms of sections 147 ....
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....low. This is the bare minimum mandatory requirement of the first part of section 147 (1). [Para 24] The first part of section 147(1) of the Act requires the Assessing Officer to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject-matter of examination. The Assessing Officer being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe, the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre-condition to the assumption of jurisdiction under section 147 The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment [Para 26] In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the Assessing Officer one after the ....
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.... In the circumstances, the Revenue is directed to adhere to the following (a) While communicating the reasons for re-opening the assessment, a copy of the standard form/request sent by the Assessing Officer for obtaining approval of the Superior Officer should itself be provided to the assessee. This would contain comment or endorsement of the Superior Officer with his name, designation and date. The Assessing Officer shall not merely state the reasons in the letter addressed to the assessee. (b) If the reasons make reference to any other document or a letter or a report, such document or letter or report should be enclosed to the reasons. Such portion as it does not bear reference to the assessee concerned could be redacted. (c) The order disposing the objections should deal with each objections and give proper reasons for the conclusion. (d) A personal hearing shall be given and minimum seven working days advance notice of such personal hearing shall be granted. (e) If the Assessing Officer is going to rely on any judgment/order of any Tribunal or Court reference/citation of these judgment/orders shall be provided alongwith notice for ....