VEERENDRA KUMAR PATIL,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME, CENTRAL CIRCLE-1(2), BANGALORE

Per Laxmi Prasad Sahu, Accountant Member : These three appeals are filed by the assessee against common order passed by the learned CIT(A), Bangalore, dated 26.06.2024, on the following grounds: Grounds of appeal in ITA No.1656/Bang/2024 1. The Assessment order passed u/s 148 is bad in law as the AO has not recorded the reason by himself, for reopening of assessment u/s.148 of the Act and not provided copy of reasons recorded by AO. 2. The CIT (A) has erred in assuming that without recording of reasons, there will not be approval from PCIT. The CIT (A) has made an ITA Nos.1656 to 1658/Bang/2024 Page 2 of 32 assumption instead of obtaining the assessment records from AO for verification of the copy of reasons recorded by AO. 3. The Assessment order passed u/s.148 is bad in law as the AO has not generated DIN on the reasons recorded for initiation of re-opening of assessment u/s.147 as stated in section 151 approval of PCIT. 4. The entire assessment u/s.148 is bad in law as the Captioned assessment is subject matter of section 153C proceeding as the AO has concluded the assessment based on the materials/information impounded during the course of survey u/s.133A and search u/s.132(4) of the Act. 5. The assessment proceedings u/s.147/148 are bad in law as the case was re-opened based on the borrowed satisfaction as the AO has not recorded independent satisfaction for initiation of proceedings u/s.147 of the Act. 6. The assessment framed on Appellant was not correct as per provisions of the Act as D S Nandish has stated in survey statement that he has deposited cash in Appellant Bank account. Hence it should have been added in the hands of D S Nandish and not in the hands of Appellant ON MERITS: 7. On the facts and circumstances of the case, learned CIT (A) has erred, as A.O. was not correct in not accepting the explanation that the cash deposits made by Mr. Nandish are out of Borrowed Funds. Hence the addition made by AO treating entire cash deposit as unexplained income in the hands of the Appellant is not correct. 8. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming addition made by AO for entire cash deposits of Rs. 2,13,37,000/- instead of net income as the Appellant has claimed expenditure being Interest expenses in the Return of Income . Hence only net income should have been added. 9. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming in not considering the Interest on loan paid Rs. 2,15,39,000/- to lenders through Banking Channels by AO, which was claimed in Return of Income filed in response to notice u/s.148. ITA Nos.1656 to 1658/Bang/2024 Page 3 of 32 10. The CIT (A) and The A.O. have failed to send letters for confirmation of loans taken from Lenders and also interest paid to them by invoking provisions of section 133(6), as all the lenders, Name and Address were provided during the course of Assessment Proceedings by the Appellant and the CIT (A) simply stated that the Appellant has not maintained books, hence no need to invoke section 133(6). Hence, the averments of the CIT (A) is not as per law. 11. The Appellant objects the levy of interest u/s.234A and B consequential to the addition made by AO. 12. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal. Grounds of appeal in ITA No.1657/Bang/2024 1. The Assessment order passed u/s 148 is bad in law as the AO has not recorded the reason by himself, for reopening of assessment u/s.148 of the Act and not provided copy of reasons recorded by AO. 2. The CIT (A) has erred in assuming that without recording of reasons, there will not be approval from PCIT. The CIT (A) has made an assumption instead of obtaining the assessment records from AO for verification of the copy of reasons recorded by AO. 3. The Assessment order passed u/s.148 is bad in law as the AO has not generated DIN on the reasons recorded for initiation of re-opening of assessment u/s.147 as stated in section 151 approval of PCIT. 4. The entire assessment u/s.148 is bad in law as the Captioned assessment is subject matter of section 153C proceeding as the AO has concluded the assessment based on the materials/information impounded during the course of survey u/s.133A and search u/s.132(4) of the Act. 5. The assessment proceedings u/s.147/148 are bad in law as the case was re-opened based on the borrowed satisfaction as the AO has not recorded independent satisfaction for initiation of proceedings u/s.147 of the Act. 6. The assessment framed on Appellant was not correct as per provisions of the Act as D S Nandish has stated in survey statement that he has deposited cash in Appellant Bank account. Hence it should have been added in the hands of D S Nandish and not in the hands of Appellant

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ON MERITS:
1. On the facts and circumstances of the case, learned CIT (A) has erred, as A.O. was not correct in not accepting the explanation that the cash deposits made by Mr. Nandish are out of Borrowed Funds. Hence the addition made by AO treating entire cash deposit as unexplained income in the hands of the Appellant is not correct.
2. The CIT (A) and AO have not examined in respect of cash deposits made in the Bank Account as the Appellant has categorically confirmed vide his letter 21.06.2024 that the cash deposits made in his bank account are not relating to Appellant and are deposited by Mr. D S Nandish and late K P
Krishna.
3. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming addition made by AO for entire cash deposits of Rs. 3,16,21,500/- instead of net income as the Appellant has claimed expenditure being Interest expenses in the Return of Income .
Hence only net income should have been added.
4. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming in not considering the Interest on loan paid Rs. 3,23,50,000/- to lenders through Banking Channels by AO, which was claimed in Return of Income filed in response to notice u/s.148. 5. The CIT (A) and The A.O. have failed to send letters for confirmation of loans taken from Lenders and also interest paid to them by invoking provisions of section 133(6), as all the lenders, Name and Address were provided during the course of Assessment Proceedings by the Appellant and the CIT (A) simply stated that the Appellant has not maintained books, hence no need to invoke section 133(6). Hence, the averments of the CIT
(A) is not as per law.
6. The Appellant objects the levy of interest u/s.234A and B consequential to the addition made by AO.
7. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal.

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Grounds of appeal in ITA No.1658/Bang/2024
1. The Assessment order passed u/s 148 is bad in law as the AO has not recorded the reason by himself, for reopening of assessment u/s.148
of the Act and not provided copy of reasons recorded by AO.
2. The CIT (A) has erred in assuming that without recording of reasons, there will not be approval from PCIT. The CIT (A) has made an assumption instead of obtaining the assessment records from AO for verification of the copy of reasons recorded by AO.
3. The Assessment order passed u/s.148 is bad in law as the AO has not generated DIN on the reasons recorded for initiation of re-opening of assessment u/s.147 as stated in section 151 approval of PCIT.
4. The entire assessment u/s.148 is bad in law as the Captioned assessment is subject matter of section 153C proceeding as the AO has concluded the assessment based on the materials/information impounded during the course of survey u/s.133A and search u/s.132(4) of the Act.
5. The assessment proceedings u/s.147/148 are bad in law as the case was re-opened based on the borrowed satisfaction as the AO has not recorded independent satisfaction for initiation of proceedings u/s.147 of the Act.
6. The assessment framed on Appellant was not correct as per provisions of the Act as D S Nandish has stated in survey statement that he has deposited cash in Appellant Bank account. Hence it should have been added in the hands of D S Nandish and not in the hands of Appellant
ON MERITS:
7. On the facts and circumstances of the case, learned CIT (A) has erred, as A.O. was not correct in not accepting the explanation that the cash deposits made by Mr. Nandish are out of Borrowed Funds. Hence the addition made by AO treating entire cash deposit as unexplained income in the hands of the Appellant is not correct.
8. The CIT (A) and AO have not examined in respect of cash deposits made in the Bank Account as the Appellant has categorically confirmed vide his letter 21.06.2024 that the cash deposits made in his bank account are not relating to Appellant and are deposited by Mr. D S Nandish and late K P Krishna.

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9. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming addition made by AO for entire cash deposits of Rs. 1,43,94,500 /- instead of net income as the Appellant has claimed expenditure being Interest expenses in the Return of Income . Hence only net income should have been added.
10. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming in not considering the Interest on loan paid Rs. 3,80,81,400 /- to lenders through Banking
Channels by AO, which was claimed in Return of Income filed in response to notice u/s.148. 11. The CIT (A) and The A.O. have failed to send letters for confirmation of loans taken from Lenders and also interest paid to them by invoking provisions of section 133(6), as all the lenders, Name and Address were provided during the course of Assessment Proceedings by the Appellant and the CIT (A) simply stated that the Appellant has not maintained books, hence no need to invoke section 133(6). Hence, the averments of the CIT (A) is not as per law.
12. The Appellant objects the levy of interest u/s.234A and B consequential to the addition made by AO.
13. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal.
2. from the above grounda of appeal for all the three years we notice that the issues involved in all the appeals are common, therefore, for the sake of brevity of the case, we are taking first appeal in ITA No.1656/Bang/2024 for Assessment
Year 2015-16. The decision taken in ITA No.1656/Bang/2024 shall apply mutatis mutandis for appeals in ITA Nos.1657, 1658/Bang/2024. 3. Briefly stated, the facts of the case are that a survey under section 133Afo the Act was carried out in the case of M/s. Xentrix Studios Pvt. Ltd., on 03.05.2017. It was found that Shri. D. S. Nandish had floated several companies
/ firms / business concerns and utilized the bank accounts of these entities for depsoting unaccounted and unexplained cash, wherein the account of the ITA Nos.1656 to 1658/Bang/2024
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appellant has also ben utilized for depositing such cash. Subsequently, search seizure operation was carried out on 28.08.2017 and statements were recorded of Shri. D. S. Nandish under section 132(4) of the Act dated 28.08.2017 in which it was observed that the cash was deposited as under:
Assessment Year

Amount deposited
2015-16
Rs. 2,13,37,000/-
2016-17
Rs 3,16,21,500/-
2017-18
Rs. 1,4394,500/-
4. During the coure of survey while detailing the name of the companies, name of the assessee appeared int the table prepared but there is no name found as cash deposited in the case of the assessee. Accordingly, after recording the reasons and duly taking approval from the competent authority, the notice/s 148
of the Act was issued on 24.03.2020 issued. Time was allowed to the assessee to file return of income within 30 days from the date of service of notice. In response to the notice under section 148 of the Act, assessee did not file return of income within the due date. Assessee filed l return of income on 12.02.2022 in response to notice under section 148 of the Act declaring income of Rs.44,60,860/- as declared in return filed u/s 139(1) of the Act which was not e- verified. In this regard, questionnaire under section 142(1) fo the Act dated
18.10.2021 was communicated to the assessee for compliance for the Assessment Year under consideration. Further a notice dated 22.02.2022 was issued to the assessee u/s 142(1)stating that no valid return is exists If the compliance is not done, the case will be completed under section 144 of the Act.
. Accordingly, the case was processed under section 144 of the Act Assessee was issued notice on 25.09.2020 udner section 142(1) of the Act to furnish the details regarding nature of business carried out during the year, details of bank accounts, name / addressand PAN of the directors and partners, copy of statement of incomee .Further notice dated 18.10.2021 was issued asking to file the details

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of parties to whom advance had been given and business purpose of the same details of parties to whom interest had been paid with TDS deduction for the business purpose of the same. The cash deposited in Bank accountas held by the assessee for the year under consideration with supporting documentary evidence. In response to the above notice, assessee had submitted reply on 27.101.2021 copy of balance sheet, profit and loss account, interest certificate.
Further, a notice was issued to the assessee on 07.02.2022 providng another opportunity to the assessee. It was noticed that the assessee had not filed return of income. On 27.10.2021, assessee submitted the interest paid details financial statement in ITR form, business connection for interest paid etc.. The AO observed that in spite of giving various opportunities to the assessee, he has not provided details of source of cash deposits made into the bank account. Hence, in the absence of documentary evidence to substantiate the source of cash deposits in account the AO observed from the documents available that during the survey proceedings in the case of M/s. Xentric Studios Pvt. Ltd., on 04.10.2017, sworn in statement of Shri. D. S. Nandish was recorded under section 131 of the Act and confirming the statements of survey during the search proceedings. During the course of recording of sworn in statement under section 131 of the Act, assessee was confronted about the source of cash deposited in various bank accounts held. Assessee stated that he could not explain the source of cash deposits made in various banks held since the same has not been accounted in the books of accounts. The amount of unexplained cash deposit in the account of assessee for the year works out to Rs.2,13,37000/- for the year under consideration in search proceedings. Further, the voluntary disclosure made during the course of survey proceedings( The particular name of the assessee is not appearing but in search proceedings the name of the asseseee is appearing) . Since during the coure of assessment proceedings, the assessee was unable to substantiate the source of cash deposits even after providing multiple opportunities. The AO noted that the source of the cash deposit remains unexplained and assessee did not furnish business activity carried out of which ITA Nos.1656 to 1658/Bang/2024
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cash deposits were made. Hence the contention of the assessee that amount deposited out of her business activity was not substantiated, since, the assessee could not substantiate the source of cash deposits in bank account of Rs.2,13,37000/-/- for the impugned Assessment Year, the source of which remains unexplained cash credit under section 68 of the Act. Further, from the financial statements, assessee has claimed an amount of Rs.2,15,39000 as interest paid. However, the assessee has not furnished any details regarding the expenses claimed as interest paid. In this regard, assessee neither submitted any documentary proof nor provided the nature of business activity carried out to substantiate the interest expenditure claimed for the year under consideration.
Further, it was asked by the assessee regarding TDS on such interest payment in the light of provisions of section 40(a)(ia) of the Act but there is no compliance of the provision of section 40(a)(ia) of the Act by the assessee since on this issue, the assessee was unable to substantiate the genuineness of expenditure incurred for business purposes as well as for non-compliance of section 40(a)(ia) of the Act was disallowed. Accordingly, the AO completed the assessment on 24.03.2022., but interesting to note that the AO has discussed the disallowance of interest at para NO. 9.2, 9.3 & 9.4 of his order but while assessing the income there is no addition made on the assessed income, ,hence, we will not adjudicate this ground No. 9 on this issue.
5. Aggrieved from the above Order, assessee filed appeal before the CIT(A).
The legal grounds challenging the notice issued under section 148 of the Act, approval under section 151 of the Act and date of issue of notice, etc., assessee furnished return submissions. The learned CIT(A) called for remand report from the AO. The learned CIT(A) has incorporated the approval granted under section 151 of the Act and remand report in order and remand report was provided to the assessee.

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6. After considering the submissions, The learned CIT(A) dismissed all legal grounds raised by the assessee. The learned CIT(A), after considering the survey/searchstatement , dismissed the appeal of the assessee. During the appellate proceedings, as per opinion of the learned CIT(A), assessee was unable to explain the source of cash deposits and interest payment in terms of section 37(1) of the Act. Accordingly, he dismissed the appeal of the assessee on merits.
7. Aggreived from the above Order, assessee filed appeal before the ITAT.
The learned Counsel reiterated the submissions made before the lower authorities. Assessee has filed written synopsis.
8. The learned Counsel reiterated the submissions made before the lower authorities and further submitted that the AO has passed the Assessment Order under section 148 of the Act, are no details mentioned about recording of satisfaction by AO himself before issuing notice under section 148 of the Act as to whether the income has escaped as comtemplated under section 147 of the Act.
During the course of assessment proceedings, the AO has not supplied the reasons recorded and sanction from competent authority. Hence, during the course of appellate proceedings, the appellant has sought from AO copy of the reasons recorded for initiation of proceedings under section 148 of the Act and satisfaction obtained from competent authority on direction of First Appellate
Authority, the AO has provided copies of approval given under section 151 of the Act by the PCIT dated 23.03.2020 for the Assessment Year 2015-16 and dated
20.03.2021 for Assessment Year 2016-17 and 2017-18. 9. However, the AO has not provided the copy of reasons recorded by him but has given only a copy of approval given by the PCIT (Central). Hence, the AO has not given any details in respect of reasons recorded by himself before obtaining approval from PCIT (Central). This was brought to the knowledge of CIT(A) vide submission dated 24.06.2024. However, the CIT(A) has stated that ITA Nos.1656 to 1658/Bang/2024
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without recording of reasons there cannot be approval from PCIT. However, the CIT(A) has not obtained the copy of reasons recorded by AO himself for initiating action under section 147 r.w.s, 148 of the Act. Hence, in the absence of the same, entire proceedings under section 147 of the Act is bad in law and null and void. He further submitted that the AO has not supplied copy of reasons recorded by himself while issuing notice under section 148 of the Act it was obtained by the assessee when the request was made before the CIT(A).
However, the CIT(A) has made assumption that without recording of reasons there will not be approval from PCIT. The CIT(A) has failed to call for the assessment records for verification for the copy of reasons recorded by the AO himself dated 23.03.2020 for Assessment Year 2015-16 and 23.03.2021 for the Assessment Year 2016-17 and 2017-18. He further submitted that the copy of reasons recorded was not supplied by the AO recorded on the aforesaid date. It was supplied during remand proceedings and he further submitted that on the reasons recorded by the AO, there is no DIN generated for the said reasons.
Hence, without DIN the copy of the reasons recorded is invalid and hence proceedings under section 147 of the Act is bad in law, null and void. He further submitted that the entire proceedings under section 148 of the Act is bad in law as the captioned subject matter is of proceedings under section 153C of the Act, as the AO has concluded the assessment under section 148 of the Act based on the material information impounded during the course of survey under section 133A of the Act and also search conducted against Mr. D. S. Nandish under section 132(4) of the Act. There is direct proximity to the survey and search conducted on Mr. D. S. Nandish and his other companies where returns under section 153A of the Act were initiated. Further, the AO has solely relied on the statement recorded during the course of survey and search from Mr. D. S.
Nandish and bank statements alleged to have been impounded during survey proceedings. Hence, assessment proceedings should have been completed under section 153C of the Act. He further submitted that the learned CIT(A) has stated that this issue has been raised at the later stage of the appellate proceedings and ITA Nos.1656 to 1658/Bang/2024
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this issue has not been raised during the course the course of assessment proceedings. The CIT(A) has failed to verify to adjudicate this issue and also failed to verify from the assessment records whether the reasons were recorded by the AO himself before obtaining approval. The AO has initiated only on the survey materials. He could have initiated the proceedings under section 153C of the Act when the information were received. In the reasons recorded for all 3
years, the contents are the same. On going through the reasons recorded, the AO clearly stated that based on the search statement dated 28.08.2017, duly recorded from D. S. Nandish was only basis for reasons to believe that the income chargeable to tax has escaped assessment. Hence, it clearly shows that it is a borrowed satisfaction and not independently satisfied for reopening of assessment under section 147/148 of the Act. He further submitted that the proceedings under section 148 of the Act should have been initiated by the juri ictional AO intead of Central Circle and there is no Order passed under section 127 of the Act for change of juri iction and no information was provided to the appellant regarding the change of juri iction. Therefore, the assessment completed under sections 148/147 of the Act instead of 153C of the Act is bad in law. In support of his arguments, he relied on the following judgments:

Sai Krupa Developers Vs ACIT (ITAT Ahmedabad), I.T.A. Nos. 248 to 250/Ahd/2023 order dated 23/08/2024 AY 2014-15

Hon'ble High court of Rajastan in the case of Tirupati Construction

Juri ictional Hon'ble Bangalore ITAT decision in the case of M/s.
Ickon Projects Vs ITO ward 4(3), in ITA No. ITA Nos. 771 &
772/Bang/2017 AY2006-07 vide order dated 26.10.2023

Commissioner of Income Tax in Income Tax Appeal No.16/2015 on 08.07.2022

ITA Nos.1656 to 1658/Bang/2024
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
Bombay High Court in the case of M/s. Aditi Constructions Vs. Deputy
Commissioner of Income Tax & Ors. in Writ Petition No.783/2016
dated 04.05.2023

Shyam Sunder Khandelwal V/s. Assistant Commissioner Of Income
Tax, Central Circle 2

Samanthapudi Lavanya Vs ACIT, In ITA No. I.T.A.No.704Niz/2019 to 706/Viz/2019 AY 2019-10 to 2011-12


Rajat Saurabh Chatterji v. ACIT ITA NO. 2430/De1/2015
10. He further submitted that the AO has made addition only on the basis of statements recorded of Shri. D. S. Nandish during the course of survey and search proceedings and Shri. D. S. Nandish has stated that he has deposited entire cash in the bank account of the appellant. In such cases, the AO should have made addition in the hands of Shri. D. S. Nandish but not in the hands of the assessee and the additions has been made solely on the basis of statements. Even the bank statement has not been verified and it is not provided to the assessee for rebuttal.
The cash deposited into the bank account are not relating to appellant as the searched person Shri. D. S. Nandish (under section 153A of the Act) has himself confirmed that the said cash deposits are relating to him and deposited by him.
While filing return in pursuance of notice under section 148 of the Act, the cash deposits have been treated as loan under the liability which was taken from lenders. The appellant had furnished list of lenders along with name, PAN, amount taken and interest paid. The AO has not rebutted this loan statement and not enquired about lenders though the details were submitted before the AO. The AO failed to get confirmation from the lenders for the loan taken as well as interest paid to them by invoking provisions under section 133(6) of the Act as all the lenders’ names and addresses were provided during the course of assessment proceedings by the appellant and the learned CIT(A) also commented very vaguely that the appellant has not maintained any books of accounts and ITA Nos.1656 to 1658/Bang/2024
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hence it cannot be considered the same. The learned CIT(A) has also not verified to the lenders in terms of section 68 of the Act whereas he has co-terminus power of the AO and simply confirmed the addition made by AO under section 68 of the Act without giving any cogent reasons. Accordingly, he prayed that the appeal of the assessee should be allowed.
11. Further, the learned Counsel relied on the judgment of Co-ordinate Bench of the Tribunal in ITA Nos.1568 to 1570/Bang/2024 in the case of N9 Sports &
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further submitted that in respect of the assessement, should have been made under section 153C of the Act instead of section 147 of the Act, the learned DR stated that prima facie at the time of issue of notice under sections 147/148 of the Act, the AO must have reason to believe that the particular income of the assessee is escaped income . During the course of survey proceedings under section 133A of the Act, In the list detailed out, name of the assessee is appearing as Xentrix
Technologies Ltd., at the last of the table and the assessee is a proprietor of this trade name which is is proved from the financial statement and computation of income submitted. However, while confirming in 132 proceedings, the same statement given under section 131 of the Act was repeated by the assessee and in search proceedings, the name of the assessee and amount is there. That is why the AO had reason to believe that there was escapement of income. Therefore, initiation of proceedings under sections 147/148 of the Act is in accordance with law. Further, in respect of merits of the case, huge cash was deposited by Shri.
D. S. Nandish and he has categorically accepted and during the course of statements recording during the search proceedings, the source of cash deposits by Shri. D. S. Nandish in the assessee’s bank account could not be explained with documentary evidence. He further submitted that the assessee has stated that the name and address of lenders, PAN submitted is wrong. The AO has clewarly mentioned in para No.9.2 the assessee had not furnished any supporting documents in support of the claim. Hence, the submission of the assessee is without supporting documents cannot be accepted even during the appellate proceedings as well as remand proceedings the assessee is unable to prove the source of cash deposits in terms of section 68 oif the Act. In respect of interest payments, there was no evidence produced by the assessee which could be considered in terms of section 37(1) of the Act and assessee has not deducted
TDS on such interest payment. Assessee was also unable to establish the nature of business carried out by her. From computation of income, the assessee has shown salary income from Xentrix Studio Pvt. Ltd., and the entire cash deposits have been shown as other income of the assessee and the assessee has claimed

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interest expenditure from other income which has been treated as nexplained cash credit by the AO whch is completely wrong. The.Learned DR further submitted that the assessee has claimed interest expenditure of Rs.2,15,39,000/- which is also not substantiated.
13. Considering the rival submissions and perusing the materials available on record and Order of the authorities below, we noted that survey under section 133A of the Act was conducted in the case of M/s. Xentrix Studios Pvt. Ltd., on 03.05.2017. During the survey, it was found that Shri. D. S. Nandish had business companies / firms and utilized the bank account of these entities for depositing cash in assessee’s bank account , Shri D.s. Nandish has deposited cash in the impugned
Assessment
Year
Rs.2,13,37,000-,Rs.3,16,21,500/-, for the Assessment Year 2015-16, 2016-17 & for 2017-1,43.94,500/- respectively in the account No. 13002560000351 of HDFC Bank Ltd. Karthik Nagar bangalore.
During the course of assessment proceedings, assessee was unable to substantiate the source of cashdeposits. From the approvals we noted that for issuance of notice under sections 147/148 of the Act, the AO has relied on survey materials found and statement recorded under section 131 of the Act. We also have gone through the survey statement recorded under setion 131 of the Act on 03.05.2017
which is placed at Paper Book Page Nos.32 to 48. At Page No.47 the list of parties names & with quantification for the different Assessment Years. At Sl.
No.16, the name of assessee is appearing and antified in the breakup of Rs.68,45,21,295/-. Further, a search was conducted under ection 132(1) of the Act on 28.08.2017 and the statement has been recorded under section 132(4) of the Act and details of parties in whose bank accounts by Shri D S Nandish has deposited cash. In the list prepared where the name of theassessee for the three
AYs and it is included in the total disclosure made by Shri. D. S. Nandish. It clearly shows that for recording reasons for escapement of income on the basis of survey material, there is escapement of income As confirmed, the survey statement recorded under section 131 of the Act, during the course of ssearch

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proceedings where the amount is quantified in the name of assessee in the table since at the time of recording the reason, there weree reason to believe that the assessee had escapement of income. The assessee has filed return of income u/s 139 and the cash deposited by Shri D. S, Nandish are not appearing and return was processed u/s 143(1) and there was no assessment made u/s 143(3) of the Act. The reasons were recorded after the search, therefore, it can not be said that the assessee had no escapement of income. Since the assessee did not disclose the cash deposited in bank account in his regular return of income u/s 139 of the Act and the AO had information in the form of statements recorded which is definite information and corroborated with the bank statement found during the course of survey. In a nutshell we can say that the at the time of recording reasons for initiating assessment u/s 147 there is reason to believe for escapement of income only. Accordingly we hold that the issuance of notive u/s 148 is justified, relying on the judgment of Hn’ble Apex Court in the case of PCIT
Vs.
Abhisar
Buildwell
P.
Ltd.
(2023) 149
taxmann.com
399 (SC).Therefore, we rejecte the arguments of the learned Counsel rearding initiation of proceedings under sections 147/148 of the Act instead of section 153C of the Act.
14. Further, the learned Counsel for the assessee has riased issue that the AO has not taken approval before issuance of notice is also wrong . on going through the approval obtained u/s 151 of the Act and date of issue of notice u/s 148, the AO has firstly obtained approval thereafter has issued notice because in these cases the date of issue of notice is after the date of approval granted u/s 151 of the act. The AO has obtained dully approval before issuing notice u/d 148 . in the approval granted u/s 151 there is DIN quoted , the copy of reason was enclosed as annexure therefore it not require to quote seperste DIN on the Annexure. This ground raised by the assessee also fails. The assessee did not file valid return within the time allowed by the AO hence, the the AO was not bound to provide the copy of reasons recorded . The Cit (A) has noted that during the ITA Nos.1656 to 1658/Bang/2024
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course of assessment the assessee did not ask for copy of reasons recorded. It I not mandatory to provide the copy of reasons recorded at the time of issue of notice u/s 148 of the Act. For initiation of proceeding under sections 147/148 of the Act, notice must have been issued within the specified time which is clear as per sections as under:
[Income escaping assessment.
20 147. If the 21[Assessing] Officer 22[has reason to believe23] that any income chargeable to tax has escaped assessment23 for any assessment year, he 23may, subject to the provisions of sections 148 to 153, assess or reassess23 such23 income 23and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings23 under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year24, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure24 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts24 necessary for his assessment, for that assessment year:
25[Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:]
26[Provided 27[also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.]
Explanation 1.—Production28 before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not ITA Nos.1656 to 1658/Bang/2024
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necessarily28 amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :—
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ;
29[(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;]
(c) where an assessment has been made, but—
(i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate30 ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;]
31[(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;]
32[(d) where a person is found to have any asset (including financial interest in any entity) located outside India.]
33[Explanation
3.—For the purpose of assessment or reassessment30 under this section, the Assessing Officer may assess or ITA Nos.1656 to 1658/Bang/2024
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reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.]
34[Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.]
15. As per the above section the notice u/s 148 was issued within parameter of the provisions as prescribed in the Act.
Therefore, these grounds raised by the assessee also fails.
16. Further we have also gone through the statements recorded during the course of survey under ection133A of he Act as well as search under section 132(4) of the Act. We have also gone through the statement recorded under section 131 of the Act. During the course of survey, question and answer No.40
is as under:
40.It is seen from the table submitted by you in the above answer, that the cash deposited in to different accouni is totalling to Rs. 68,45,21,295/- Also, you have stated in the above answer that you are unable to explain the source of these cash deposits. In view of this, you tare hereby given one more opportunity to explain the source of the cash deposits failing which the same may be construed as unaccounted income. Please explain the source of these cash deposits andstatewhether all these cash deposits are accounted under the above mentioned entities in respective financial years?

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17. We have also gone through the statements recorded during the course of search under section 132(4) of the Act of question and answerNo.22 which is as under :

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18. From the above statements, we noted that during the course of survey Shri
D. S. Nandish has specifically mentioned that I have not maintained any books of accounts for any of my entities except M/s. Xentrix Studios Pvt. Ltd. During the course of survey and during the search, Shri. D. S. Nandish has stated that no books of accounts are maintained for any of the 16 entities except in my individual status. THE ld. CIT (A) has also noted that the assessee has not maintained any books of accounts. We alo noted from the approval granted u/s 151 of the Act it has been observed by the approving authority as under:-
“Yes, I am satisfied that it is a fit case for issue of notice under section 148
for the reason that a survey under section 133A of the Act was carried out in the case of M/s. Zentrix Studios Pvt. Ltd., on 03.05.2017. During survey, it was found that there were huyge cash depsoits in the bank account of Shri. Veerendra Patil Prop. Xentrix Technologies during the Fin Year 2015-
16. In the absence of any books of accounts, documentary evidence or explanation to show the sources of unaccounted cash deposits of Rs.3,16,21,500/- not explained. Therefore, income of Rs.3,16,21,500/- pertaining to AY 2016-17 has escaped from the assessment which requires reopening under section 147 of the Act. Hence, the approval is hereby granted for issue of notice under section 148 of the Act for AY 2016-17.”
19. It is very much relevant that statement recorded during the course of search under section 132(4) of the Act has much evidentiary value and the very basis for making addition by the AO is mainly only from the statement recorded during the survey and confirmed during the statements under section 132(4) of ITA Nos.1656 to 1658/Bang/2024
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the Act. During the statement recorded under sction 132(4) of the Act, Shri. D.
S. Nandish stated that there is no books of accounts maintained for the other entities except in individual capacity . Therefore, relying on the judgment of Hon’ble Apex Court in the case of Roshan Lal Sanchiti v. PCIT (2023) 452 ITR
229/ 292 Taxman 69 (SC) the statements recorded are correct that there is no books of accounts maintained by the assessee either directly or by Shri D.S.
Nandish. the AO has made addition under section 68 of the Act. For the sake of convenience, we are reproducing section 68 of the Act as under:
“68. Cash credits.
- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988).], satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.[Provided that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—
(a)the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and(b)such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:[Provided further] that nothing contained in the first proviso 81[or second proviso]
shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
20. From the above section, it is very much clear that the assessee must have maintained books of accoutns in which the sum found / credited in the books of accounts of the assessee but it is here clear that there is no books of accounts maintained. Therefore, no addition can be made. A similar issue has been decided by the Co-ordinate Bench in ITA No. ITA Nos.1568 to 1570/Bang/2024
in the case of N9 Sports & Leisure Holdings Pvt. Ltd., Vs. DCIT (supra) in which it has been held as under which is also part of the above search / survey

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proceedings case, The relevant part of the decisions, we are reproducing the same:
“8. Considering the rival submissions, we note that a survey was conducted in the case of in the case of M/s Xentrix Studios P Ltd on 03.05.2017 and statements were recorded u/s. 131 of the Act, of Mr. D.S. Nandish which was reaffirmed in the statement recorded u/s. 132(4) during the search proceedings that he has deposited cash in various bank accounts. The AO on the basis of information recorded during the survey in the case of Shri
D.S. Nandish the reasons have been recorded for issue of notice and sought approval from the. Pr.CIT which is incorporated by the CIT(A) in his order.
The very basis for reopening of the case is on the basis of survey conducted in the case of M/s. Xentrix Studios P Ltd. but not on the basis of search conducted u/s. 132. In view of this, the notice issued by the AO u/s. 148 is correct. Therefore the assessee's objection raised that notice should be issued u/s. 153C fails. For the sake of convenience, we are reproducing the reasons recorded in ITA No.1568/Bang/2024:-
" Reasons for reopening of the Assessment in case of M/s N 9 Sports &
Leisure Holdings P Ltd for Asst Year 2013-14 u/s 147 of I T Act
1. Brief Details of the assessee: The assessee filed its return of income on 26.09.2013 declaring loss of Rs.27,771/-. In the return of income filed the assessee has declared interest income of Rs.1,37,398/- from bank fixed deposits. There is no other income declared in the return of income.
2. Brief Details of the information collected/received by the AO :
Survey u/s 133A of the Income-tax Act, 1961 was carried out in the case of M/s Xentrix Studios P Ltd on 03.05.2017. During the survey, it was found that Shri D S Nandish had floated several companies/firms/business concerns and utilised the bank accounts of these entities for depositing unaccounted and unexplained cash. It was also found that none of these entities were carrying any business activities, nor maintaining any books of account for the transactions in bank accounts and also not filing their returns of income. Shri D S Nandish accepted in his statement that entire cash deposits in these bank accounts were made by him from his unaccounted sources of income. During survey, it was found that there were cash deposits of Rs.33,22,000/- in the bank account of M/s. N 9 Sports &
Leisure Holdings P Ltd during the Fin Year 2012-13. In absence of any books of accounts, documentary evidence or explanation to show the sources of unaccounted cash deposits, Mr D S Nandish admitted to disclose an additional income of Rs.32,22,000/- in the hands of M/s N 9 Sports &
Leisure Holdings P Ltd in the capacity of promoter/director of the company.
3. Analysis of information collected/ received : From the above information received, it is clear that M/s N 9 Sports & Leisure Holdings P Ltd was having other income for Asst Year 2013-14 and had not declared the same in its return of income.

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4.Enquiries made by the AO as sequel to information collected /received :
On verification from the ITD system, it is found that return of income filed for Asst Year 2013-14 by the assessee company does not declared its true income.
5. Findings of the AO : It is found that the assessee is having bank account no. 845603477 with Axis Bank, Karthik nagar, Bangalore. There were total cash deposits of Rs.32,71,500/- in bank account during the period
01.04.2012 to 31.03.2013. A copy of bank statement for the period
01.04.2012 to 31.03.2013 is on record. Further, it is seen that the assessee has made many transactions in its bank account but the same is not declared in its return of income filed.
6.Basis of forming reason to believe and details of escapement of income :
On going through the statements of Shri D S Nandish dated 03.05.2017 and 28.08.2017 and enquiries made thereafter, it is clear that the assessee company was having unexplained income of Rs.32,71,500/- chargeable to tax in A.Y. 2013-14 and has not filed its return of income. After due consideration of the facts of the case, I have reason to believe that income chargeable to tax has escaped assessment for Asst Year 2013-14. 7. Applicability of the provisions of section 147/151 to the facts of the case:
In this case return of income was filed for the Asst Year 2013-14, but no scrutiny assessment u/s 143(3) was made. Accordingly in this case, the only requirement to initiate proceedings u/s I47 is reason to believe which has been recorded above as per para 5 & 6. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated under section 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the I T Act. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Pr Commissioner of Income Tax as per the provisions of section 151 of the Act."
9. The AO has also communicated copy of the reasons recorded with proper
DIN to the assessee which is clear from the remand report submitted by the AO. The AO has made addition u/s. 68 of the Act. for want of explanation in terms of section 68 of the Act. On going through the above reasons recorded, we note that assessee has not maintained any books of account.
Therefore, addition made u/s. 68 will not survive. The pre-condition for invoking section 68 is any amount credited in the books of account. For the sake of reference, we are reproducing section 68 of the Act:-
"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation

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about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :
[Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless--
(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:"
10. From the above section it is clear that the pre-condition to invoke section 68 is any sum found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof. The assessing officer is very much sure while recording the reasons for reopening that the assessee has not maintained books of accounts. Here in the present case, it is clear that the AO himself is satisfied that no books of account was maintained by the assessee and therefore addition cannot be made u/s. 68. The coordinate bench of ITAT has explained the books of accounts in the case of DCIT vs GSNR Rice
Industries S(P.) LTD REPORTED IN [2021] 128 taxmann.com 433
(Chennai - Trib.)/[2021] 90 ITR(T. In this judgement it has been held as under:-
"From the definition of 'books' or 'books of account', it is abundantly clear that books of account means regular books of account maintained by the assessee for any previous year to record day to day transactions of its business including ledgers, day-books, cash books, account books and other books. The term other books does not mean to include some dumb documents like diary, note book or deleted entries of computer CPU. The term other books refers to any other books which are relevant and in consonance with ledgers, day-books, cash books, account books, etc.
Therefore, in order to include any other books of account maintained by the assessee within the ambit of term 'other books', those books must be relevant in the business of the assessee to keep track of transactions.
Hence, other books refers to in the ordinary course of any business of the assessee are stock books maintained in the ordinary course of business to record movement of stocks, books of account maintained for recording salary and wages as required under the Wages Act and other statutory books prescribed under any other law. But, it does not include diary, note book and some other dumb documents maintained by any person for any reason. Thus, diary, note book and retrieved data from computer CPU are not books or books of account as defined under section 2(12A) and hence,

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those diary, note book and retrieved data cannot be considered as books for invoking provisions of sections 68 and 69/69A/69C."
It has been held that if there is no books of account maintained, no addition can be made u/s. 68 of the Act. The above judgment is squarely applicable in the present case on hand.
11. Further the addition made by the AO towards interest payment u/s.
37also fails. In this case, the very purpose of reopening of the case is not sustainable, then subsequent addition made by the AO which are not part of the very basis for reopening or part of the reasons recorded , therefore during the course of reassessment proceedings any further addition is made by AO is also not sustainable. Our view is supported by the decision of the coordinate Bench of ITAT Agra reported in [2014] 41 taxmann.com 380 in the case of Asha Kansal wherein it is held as under:-
" 7. Section 147 provides that if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section." Explanation
3 to Section 147 inserted by Finance Act 2009 specifically provides that the "Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue has come to the notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under such Section 2 of Section 148". Elaborating upon the scope of these provisions, and dealing with the question whether any addition can be made on account of issues other than the issue in respect of which reasons for reopening have been recorded in a situation in which no additions are made for the reasons recorded, Hon'ble Bombay
High Court, in the case of CIT v. Jet Airways (I.) Ltd. [2011] 331 ITR
236/[2010] 195 Taxman 117, has observed as follows :--
'Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words
"assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The ITA Nos.1656 to 1658/Bang/2024
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Legislature did not rest content by merely using the word "and". The words
"and", as well as "also" have been used together and in conjunction.
The Shorter Oxford Dictionary defines the expression "also" to mean
'further, in addition, besides, too'. The word has been treated as being relative and conjunctive. Evidently, therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2) must assess or reassess: (i) 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the season to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter.'
8. The legal position is thus clear. When the reasons for reopening the assessment itself is incorrect, as evidenced by the fact that the Assessing
Officer accepts that position by not making related addition, no further additions can be made in the course of such reassessment proceedings. The very initiation of reassessment proceedings in such a case ceases to be of any effect. In other words, the resultant reassessment proceedings are rendered infructuous. The underlying principle is not difficult to fathom.
When it is a position accepted by the Assessing Officer that no addition can be made on the basis of reasons for which reassessment proceedings were initiated, there cannot be any legal basis for the resultant reassessment proceedings either.

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9. Taking the above principle to a little further, we find that whether such an addition is not made by the Assessing Officer himself or whether the Assessing Officer does not challenge the CIT(A) deletion of such additions made by the Assessing Officer, the legal situation remains the same. In both the situations, the Assessing Officer accepts that addition cannot be made on the basis of reasons recorded by him while reopening the assessment.
The common thread in both these situations is that the Assessing Officer accepts the situation that based on the reasons recorded, while reopening the assessment, legally sustainable additions cannot be made or deletion of such additions cannot be challenged. Once he accepts such a position, whether at the stage of assessment by not making the related addition, or at a later stage by not challenging CIT(A)'s order deleting such an addition, the reassessment proceedings are rendered infructuous because no other additions, even if any, made by the Assessing Officer can survive the legal scrutiny. It is also important to bear in mind that while deleting the addition before us, as we have seen earlier in this order, learned CIT(A) has given categorical findings which run contrary to the reasons recorded while reopening the assessment and yet the revenue authorities have not raised, either in appeal or by any other mode, even a whisper against such findings which have thus reached finality. While on this issue, it is also important to note that, as is the settled legal position, the reasons recorded for reopening the assessment are to be read exactly as these are recorded and it cannot be open to the Assessing Officer to fill in the gaps, even if any, while justifying the reassessment proceedings. Nothing can be added to these reasons nor anything can be deleted from the same. To highlight this aspect of the matter, we may refer to the following observations made by their
Lordships in the case of Prashant S. Joshi v. ITO [2010] 324 ITR 154/189
Taxman 1 (Bom.).
'Sec. 147 provides that if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of ss. 148 to 163, assess or reassess such income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The first proviso to s. 147 has no application in the facts of this case. The basic postulate which underlines s. 147 is the formation of the belief by the AO that any income chargeable to tax has escaped assessment for any assessment year. The AO must have reason to believe that such is the case before he proceeds to issue a notice under s. 147. The reasons which are recorded by the AO for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an objective from a subjective exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment is to be decided.

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The reason recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well settled that the question as to whether there was reason to believe, within the meaning of s. 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the AO. The reasons which are recorded cannot be supplemented by affidavits. The imposition of that requirement ensures against an arbitrary exercise of powers under s. 148. 10. A Division Bench of this Court speaking through Mrs. Justice Sujata
Manohar (as the learned Judge then was) held thus in N.D. Bhatt, IAC v.
I.B.M. World Trade Corpn. [1995] 216 ITR 811 (Bom):
"It is also well-settled that the reasons for reopening are required to be recorded by the assessing authority before issuing any notice under s. 148
by virtue of the provisions of s. 148(2) at the relevant time. Only the reasons so recorded can be looked at for sustaining or setting aside a notice issued under s. 148. In the case of Equitable Investment Co. (P) Ltd. vs.
ITO (1988) 73 CTR (Cal) 236 : (1988) 174 ITR 714 (Cal), a Division Bench of the Calcutta High Court has held that where a notice issued under s.
148 of the IT Act, 1961, after obtaining the sanction of the CIT is challenged, the only document to be looked into for determining the validity of the notice is the report on the basis of which the sanction of the CIT has been obtained. The IT Department cannot rely on any other material apart from the report."
11. The same principle was reiterated in a judgment of the Division Bench of this Court in Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR
332/137 Taxman 479 (Bom):
".....the reasons are required to be read as they were recorded by the AO.
No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AO. The reasons recorded should be self- explanatory and should not keep the assessee guessing for the reasons.
Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The AO, in the event of challenge to the reasons must be able to justify the same based on material available on record. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the AO cannot be supplemented by filing affidavit of making oral submission, otherwise, the reasons which are lacking in material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.'

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10. For the reasons set out above, and in view of the fact the Assessing
Officer has not challenged the CIT(A)'s deletion of quantum addition made on the basis of reasons recorded for reopening the assessment, we hold that the reassessment proceedings were infructuous and no other additions could have been made by the Assessing Officer either. As we have also observed earlier in this order, learned CIT(A) has given categorical findings which run contrary to the reasons recorded while reopening the assessment and yet the revenue authorities have not raised, either in appeal or by any other mode, even a whisper against such findings which have thus reached finality. In response to specific question by us, learned
Departmental RepresentFative could not find out any infirmity in the action of the CIT(A) or factual inaccuracies in the observations made by the CIT(A) on this issue. The very reassessment proceedings were also thus based on, what is now a settled position, erroneous reading of facts which cannot lead to a legally sustainable addition. The reassessment proceedings were thus infructuous and invalid. The assessee succeeds for this short reason alone. In any case, the reasons recorded while reopening the assessment are disapproved, on merits, by the CIT(A) and those findings remain unchallenged and controverted. In this view of the matter, we also see no need to deal with many other erudite contentions raised by the learned counsel. All those aspects will be academic in the situation before us."
12. Respectfully following the above decision, we delete the addition u/s.
37 . The ld. DR has also filed written synopsis and relied on the case laws on the merits as well as on legal issue of the addition which do not support the case.
13. In the result, the appeal of the assessee for AY 2013-14 is partly allowed.
21. We noted that in these cases while assessing the total income by AO no addition has been made by AO towards disallowance of interest. Respectfully following the above judgment, we hold that the addition made by the AO u/s 68
of the Act are deleted in all the ITA Nos. 1656 to 1658/B/2024. ITA Nos.1656 to 1658/Bang/2024
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22. In the result, appeals filed by the assessee are partly allowed in above terms. A common order passed shall be kept in respective case files.
Pronounced in the court on the date mentioned on the caption page. (SOUNDARARAJAN K)
Accountant Member
Bangalore,
Dated : 23.05.2025. /NS/*
Copy to:
1. Appellant 2. Respondent 3. Pr.CIT4.CIT(A)
5. DR, ITAT, Bangalore.
By order