ACIT, CIR-1(2)(1), MUMBAI vs. M/S. CHERYL ADVISORY PVT LTD., MUMBAI

4. On further appeal, the assessee challenged validity of the On further appeal, the assessee challenged validity of the On further appeal, the assessee challenged validity of the ment proceedings on two grounds. Firstly Firstly, accordingly to reassessment proceedings on two grounds. the assessee provisions of section 153C of the Act should have been the assessee provisions of section 153C of the Act should have been the assessee provisions of section 153C of the Act should have been invoked for reassessment rat reassessment rather than section 147 of the Act. her than section 147 of the Act. Secondly, the assessee challenged reassessment proceedings u/s , the assessee challenged reassessment proceedings u/s , the assessee challenged reassessment proceedings u/s 147 of the Act on the ground of borrowed satisfaction. The assessee 147 of the Act on the ground of borrowed satisfaction. The assessee 147 of the Act on the ground of borrowed satisfaction. The assessee also challenged addition on merit. The Ld. CIT(A) in the impugned also challenged addition on merit. The Ld. CIT(A) in the impugned also challenged addition on merit. The Ld. CIT(A) in the impugned order allowed the grounds challenging validity of the reassessment order allowed the grounds challenging validity of the reass order allowed the grounds challenging validity of the reass as well as ground raised on merit. Aggrieved as well as ground raised on merit. Aggrieved, the Revenue is in the Revenue is in appeal before the Income appeal before the Income-tax Appellate Tribunal (in short ‘the tax Appellate Tribunal (in short ‘the Tribunal’), raising grounds as reproduced above. Tribunal’), raising grounds as reproduced above.

6.1 The facts in brief The facts in brief qua the issue in dispute are that in the qua the issue in dispute are that in the course of search proceedings in the case of Sanjay Shah, course of search proceedings in the case of Sanjay Shah course of search proceedings in the case of Sanjay Shah Ahmadabad unexplained cash of Rs. 19.37 Crores was found along unexplained cash of Rs. 19.37 Crores was found along unexplained cash of Rs. 19.37 Crores was found along with evidences of commission earned on accommodation entries of with evidences of commission earned on accommodation entries of with evidences of commission earned on accommodation entries of providing bogus long term providing bogus long term capital gain, share premium etc capital gain, share premium etc and transport of cash through “ transport of cash through “Angdiyas”, in tally data file with in tally data file with company name “ 123”. company name “ 123”. The information contained in the seized information contained in the seized digital data indicated indicated transactions transactions with with large large number number of of beneficiaries. The assessee assessee was also appearing as one of beneficiary appearing as one of beneficiary and therefore, the investigation wing of income and therefore, the investigation wing of income-tax department , tax department , Ahmadabad sent information to the Assessing Officer of assessee Ahmadabad sent information to the Assessing Officer of assessee Ahmadabad sent information to the Assessing Officer of assessee for considering remedial action in the hands of the assessee. On the for considering remedial action in the hands of the assessee. On the for considering remedial action in the hands of the assessee. On the basis of the information s basis of the information supplied by the investigation wing, the upplied by the investigation wing, the Assessing officer recorded reasons to believe that income escaped Assessing officer recorded reasons to believe that income escaped Assessing officer recorded reasons to believe that income escaped assessment and completed the assessment under 147 of the Act. assessment and completed the assessment under 147 of the Act assessment and completed the assessment under 147 of the Act But the Ld CIT(A) held that the reassessment should have been But the Ld CIT(A) held that the reassessment should have been But the Ld CIT(A) held that the reassessment should have been completed invoking section completed invoking section 153C of the Act and therefore, he 153C of the Act and therefore, he quashed the assessment order passed by the AO. quashed the assessment order passed by the AO. The provisions of The provisions of section 153C has undergone change with effect from 1/6/2015. section 153C has undergone change with effect from 1/6/2015. section 153C has undergone change with effect from 1/6/2015. Prior to amendment to the provisions of section Prior to amendment to the provisions of section 153C of the Act on 153C of the Act on 01.06.2015, the section 153 the section 153C of the Act could be invoked if the C of the Act could be invoked if the material seized during the course of the search in the case of the material seized during the course of the search in the case of the material seized during the course of the search in the case of the searched person belonged to other person. searched person belonged to other person. However, after 01.06.2015 the legislature 01.06.2015 the legislature amended the condition of of belongingness of material. For ready refere For ready reference the amended provisions of section nce the amended provisions of section 153C of the Act are reproduced as under: 153C of the Act are reproduced as under:

“153C. 1(1)]"[Notwithstanding anything contained in section 139, section 153C. 1(1)]"[Notwithstanding anything contained in section 139, section 153C. 1(1)]"[Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the 147, section 148, section 149, section 151 and section 153, where the 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied tha Officer is satisfied that,— a. any money, bullion, jewellery or other valuable article or thing, seized any money, bullion, jewellery or other valuable article or thing, seized any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains (b) any books of account or documents, seized or requisitioned, pertains (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a per or pertain to, or any information contained therein, relates to, a per or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of other than the person referred to in section 153A, then, the books of other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed account or documents or assets, seized or requisitioned shall be handed account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] over to the Assessing Officer having jurisdiction over such other person] over to the Assessing Officer having jurisdiction over such other person] "land that Assessing Officer shall p "land that Assessing Officer shall proceed against each such other person roceed against each such other person and issue notice and assess or reassess the income of the other person in and issue notice and assess or reassess the income of the other person in and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer accordance with the provisions of section 153A, if, that Assessing Officer accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized is satisfied that the books of account or documents or assets seized is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of requisitioned have a bearing on the determination of the total income of requisitioned have a bearing on the determination of the total income of such other person ?*[for six assessment years immediately preceding the such other person ?*[for six assessment years immediately preceding the such other person ?*[for six assessment years immediately preceding the assessment year relevant to the previous year in which search is assessment year relevant to the previous year in which search is assessment year relevant to the previous year in which search is conducted or requisition is made and] for t conducted or requisition is made and] for the relevant assessment year or he relevant assessment year or years referred to in sub years referred to in sub-section (1) of section 153A]:] …………………………………………………………………………………………… …………………………………………………………………………………………… …………………………………………………………………………………………… …………………………………………………………………………………………. …………………………………………………………………………………………. ………………………………………………………………………………………….” 6.1.1 Thus prior to Thus prior to 01.06.2015, the proceedings u/s 153C of the proceedings u/s 153C of the Act could have been initiated the Act could have been initiated in case of other person if the case of other person if the material belongs to third person. The decisions relied upon by the material belongs to third person. The decisions relied upon by the material belongs to third person. The decisions relied upon by the Ld. CIT(A) pertains to the period prior to 01.06.2015. In the case of Ld. CIT(A) pertains to the period prior to 01.06.2015 Ld. CIT(A) pertains to the period prior to 01.06.2015 the assessee search in the case of Shri Sanjay Shah and Shri the assessee search in the case of Shri Sanjay Shah and Shri the assessee search in the case of Shri Sanjay Shah and Shri Jignesh Shah has been carrie has been carried on 11.09.2018 d on 11.09.2018 and therfore amended provisions amended provisions would apply. Further, we find that the Hon’ble we find that the Hon’ble Supreme Court in the case of Income Supreme Court in the case of Income-tax Officer v. Vikram Sujeet tax Officer v. Vikram Sujeet Kumar (2023) 149 taxmann.com 123 (SC) has held that said Kumar (2023) 149 taxmann.com 123 (SC) has held that said Kumar (2023) 149 taxmann.com 123 (SC) has held that said amendment shall be be applicable on searches conducted u/s 132 of conducted u/s 132 of the Act even before 01.06.2015 and therefore, now invoking of before 01.06.2015 and therefore, now invoking of before 01.06.2015 and therefore, now invoking of section 153C of the Act in the case of section 153C of the Act in the case of other person should be seen in the light of the amended provisions only. in the light of the amended provisions only.

6.2 Before us, the Ld. DR submitted that in the case 153C Before us, the Ld. DR submitted that in the case 153C Before us, the Ld. DR submitted that in the case 153C proceedings are not not applicable for two reasons two reasons, firstly, the information has been received from the Investigation Wing and not information has been received from the Investigation Wing and not information has been received from the Investigation Wing and not from the Assessing Officer of the searched person and therefore, in from the Assessing Officer of the searched person and therefore, in from the Assessing Officer of the searched person and therefore, in absence of any such satisfaction by the Assessing Officer of the absence of any such satisfaction by the Assessing Officer of absence of any such satisfaction by the Assessing Officer of searched person no proceedings u/s 153C could be invoked in the searched person no proceedings u/s 153C could be invoked in the searched person no proceedings u/s 153C could be invoked in the case of third person. Secondly, the material in the form of computer case of third person. Secondly, the material in the form of computer case of third person. Secondly, the material in the form of computer document found during the course of the search pertain to Shri document found during the course of the search pertain to Shri document found during the course of the search pertain to Shri Sanjay Shah only and Sanjay Shah only and it did not pertain to the assessee it did not pertain to the assessee and therefore, also proceedings u/s 153C could not have been invoked therefore, also proceedings u/s 153C could not have been invoked therefore, also proceedings u/s 153C could not have been invoked in the case of the assessee. The Ld. DR accordingly submitted that in the case of the assessee. The Ld. DR accordingly submitted that in the case of the assessee. The Ld. DR accordingly submitted that proceedings u/s 147 of the Act has been validly initiated. proceedings u/s 147 of the Act has been validly initiated. proceedings u/s 147 of the Act has been validly initiated.

6.3 On the other hand, the Ld. counsel On the other hand, the Ld. counsel for the assessee relied on the assessee relied on the finding of the Ld. CIT(A) and the decisions relied upon by him. the finding of the Ld. CIT(A) and the decisions relied upon by him the finding of the Ld. CIT(A) and the decisions relied upon by him According to him in view of the amended ccording to him in view of the amended provisions, provisions, firstly, the documents found from the searched person must pertain to the documents found from the searched person must pertain to the documents found from the searched person must pertain to the other person or secondly secondly, the information contained in such tion contained in such documents should relates to such third person. Thus, even in case documents should relates to such third person. Thus, documents should relates to such third person. Thus, of information related to third person of information related to third person, provisions of section 153C of provisions of section 153C of the Act are applicable and thus applicable and thus the reassessment proceedings u/s proceedings u/s 147 of the Act in the case of th n the case of the assessee are without authority of are without authority of law and accordingly should be quashed. law and accordingly should be quashed.

6.4 We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. In the case the dispute is whether the relevant material on record. In the case the dispute is whether the relevant material on record. In the case the dispute is whether the proceedings u/s 153C of the Act proceedings u/s 153C of the Act or proceedings u/s 147 of the Act u/s 147 of the Act should have been initiated in the hands of the assessee on receipt should have been initiated in the hands of the assessee should have been initiated in the hands of the assessee to the information by the AO, which was supplied by the ation by the AO, which was supplied by the ation by the AO, which was supplied by the investigation wing of income investigation wing of income-tax department. Under the amended Under the amended provisions, there are three steps for initiating provisions, there are three steps for initiating action under section action under section 153C of the Act. Firstly Firstly, the Assessing Officer of the searched , the Assessing Officer of the searched person is required to record satisfaction as to whether the books of person is required to record satisfaction as to whether the books of person is required to record satisfaction as to whether the books of accounts or documents pertain to the other person or information accounts or documents pertain to the other person or information accounts or documents pertain to the other person or information contained therein relates to the other person. Secondly Secondly, after contained therein relates to the othe recording satisfaction, he shall hand over the relevant books of recording satisfaction, he shall hand over the relevant books of recording satisfaction, he shall hand over the relevant books of account or documents to the Assessing officer of other person. account or documents to the Assessing officer of other person. account or documents to the Assessing officer of other person. Thirdly, the Assessing Officer of the other person shall also record , the Assessing Officer of the other person shall also record , the Assessing Officer of the other person shall also record satisfaction to the effect that satisfaction to the effect that said books of accounts or documents said books of accounts or documents (i.e. which pertain to the other person) have a bearing on the (i.e. which pertain to the other person) have a bearing on the (i.e. which pertain to the other person) have a bearing on the determination of total income of such other person. After recording determination of total income of such other person. After recording determination of total income of such other person. After recording such satisfaction only, the Assessing officer of third person shall such satisfaction only, the Assessing officer of third person shall such satisfaction only, the Assessing officer of third person shall initiate proceedings u/s 153C of the Act by way of issuing notice u/s 153C of the Act by way of issuing notice u/s 153C of the Act by way of issuing notice u/s 153C read with section 153A of the Act. u/s 153C read with section 153A of the Act.

6.4.1 Under the amended provisions nder the amended provisions of section 153C of the Act of section 153C of the Act, the material found during the course of search of the searched person material found during the course of search of the searched person material found during the course of search of the searched person has been divided into two categor s been divided into two categories. The first category is of . The first category is of assets like any money, bullion, bullion, jewellary or other valuable article or other valuable articles. In this category of material, if , if same belongs to third person then only same belongs to third person then only the Assessing Officer of searched person shall record satisfaction note Assessing Officer of searched person shall record satisfaction note Assessing Officer of searched person shall record satisfaction note and handover said material to the Assessing Officer of other person handover said material to the Assessing Officer of other person handover said material to the Assessing Officer of other person for taking action u/s 153C of the Act for taking action u/s 153C of the Act. In second category of the In second category of the material i.e. books of accounts or documents material i.e. books of accounts or documents, same should , same should pertain to the third person or any information contained therein i.e. books to the third person or any information contained therein i.e. to the third person or any information contained therein i.e. of accounts or documents pertaining to third person, should relates of accounts or documents pertaining to third person of accounts or documents pertaining to third person to such third person to such third person, then only proceedings u/s 153C could have only proceedings u/s 153C could have been initiated by the Assessing Officer of the third person on being been initiated by the Assessing Officer of the third person on being been initiated by the Assessing Officer of the third person on being satisfaction recorded by the AO of the searched satisfaction recorded by the AO of the searched person and after person and after handing over of such material. handing over of such material.

6.4.2 Thus, in terms of section 153C of the Act, the Assessing Thus, in terms of section 153C of the Act, the Assessing Thus, in terms of section 153C of the Act, the Assessing Officer of the other person can invoke provisions of section 153C of Officer of the other person can invoke provisions of section 153C of Officer of the other person can invoke provisions of section 153C of the Act only in case of handing over of the seized material by the the Act only in case of handing over of the seized material by the the Act only in case of handing over of the seized material by the Assessing Officer of the searched person after recording satisfaction ng Officer of the searched person after recording satisfaction ng Officer of the searched person after recording satisfaction note that said material pertains to the other person. In the case note that said material pertains to the other person. In the case note that said material pertains to the other person. In the case information has been forwarded to the Assessing Officer by the information has been forwarded to the Assessing Officer by the information has been forwarded to the Assessing Officer by the Investigation Wing and therefore the required condition for invoking Investigation Wing and therefore the required condition for invo Investigation Wing and therefore the required condition for invo u/s 153C of the Act is not fulfilled and thus the Assessing Officer of u/s 153C of the Act is not fulfilled and thus the Assessing Officer of u/s 153C of the Act is not fulfilled and thus the Assessing Officer of the assessee was not authorised to invoke section 153C of the Act. the assessee was not authorised to invoke section 153C of the Act. the assessee was not authorised to invoke section 153C of the Act. 6.4.3 Further, in the case in n the case in hand, the condition of documents hand, the condition of documents pertaining to the other person i.e. the pertaining to the other person i.e. the assessee, has been disputed has been disputed by the assessee. The assessee has by the assessee. The assessee has asserted that that the computer document found from the premises of Shri Sanjay Shah pertains to document found from the premises of Shri Sanjay Shah pertains to document found from the premises of Shri Sanjay Shah pertains to the assessee or the information contained therein is related to the or the information contained therein is related to the or the information contained therein is related to the assessee, therefore, action should have bee assessee, therefore, action should have been taken invoking section en invoking section 153C only. We are of opinion that t are of opinion that though the word ‘pertains’ is hough the word ‘pertains’ is wider than the word ‘belongs to’ but still there has to some wider than the word ‘belongs to’ but still there has to some wider than the word ‘belongs to’ but still there has to some connection of the document with the third person connection of the document with the third person or some monetary or some monetary or financial interest of the third perso or financial interest of the third person should reflect from the n should reflect from the document. Since in the document seized there was reference of there was reference of several persons and particular several persons and particular reference in the case of assessee , in the case of assessee , which has been reproduced in the reasons recorded, is of certain which has been reproduced in the reasons recorded which has been reproduced in the reasons recorded payments made by the assessee throug the assessee through banking channel and thus h banking channel and thus document can’t be said to be can’t be said to be as pertaining to the assessee and it the assessee and it pertains to Shri Sanjay Shah only. Since, the information contained Shri Sanjay Shah only. Since, the information contained Shri Sanjay Shah only. Since, the information contained therein ‘means’ information in the document pertaining to the third information in the document pertaining to the third information in the document pertaining to the third person but in the instant c person but in the instant case the pertaining relationship is ase the pertaining relationship is lacking. The document should pertain to the assessee in hand i.e. other The document should pertain to the assessee in hand i.e. other The document should pertain to the assessee in hand i.e. other person, because it is the Assessing officer of third person, who has person, because it is the Assessing officer of third person, who has person, because it is the Assessing officer of third person, who has to record satisfaction whether said document is having any bearing to record satisfaction whether said document is having any bearing to record satisfaction whether said document is having any bearing on the determination of the income of the assessee i.e. other person. ination of the income of the assessee i.e. other person. ination of the income of the assessee i.e. other person. Thus the second condition Thus the second condition of section 153C(1)(b) i.e. of section 153C(1)(b) i.e. any information contained therein , also , also does not apply in the case of the assessee. does not apply in the case of the assessee. In such circumstances provisions of section 153C of the Act cannot In such circumstances provisions of section 153C of the Act cannot In such circumstances provisions of section 153C of the Act cannot be invoked in the case of the assessee. be invoked in the case of the assessee. Thus, the Assessing Officer Thus, the Assessing Officer has correctly invoked reassessment proceedings u/s 147 of the Act has correctly invoked reassessment proceedings u/s 147 of the Act has correctly invoked reassessment proceedings u/s 147 of the Act wherein on the basis of information supplied by the Investigation the basis of information supplied by the Investigation the basis of information supplied by the Investigation Wing of income-tax department, he recorded ‘reason to believe’ that tax department, he recorded ‘reason to believe’ that tax department, he recorded ‘reason to believe’ that income escaped assessment. income escaped assessment.

6.4.4 In view of above discussion, 6.4.4 In view of above discussion, we set aside the finding of the Ld. we set aside the finding of the Ld. CIT(A) on the issue in dispute and CIT(A) on the issue in dispute and uphold the validity of uphold the validity of reassessment u/s 147 of the Act. reassessment u/s 147 of the Act. The ground No. 1 of the appeal of The ground No. 1 of the appeal of the Revenue is accordingly allowed. the Revenue is accordingly allowed.

“6.2. The assessment order and the submissions of the appellant 6.2. The assessment order and the submissions of the appellant 6.2. The assessment order and the submissions of the appellant have been examined. In the ins have been examined. In the instant case, the original return of tant case, the original return of income income income was was was filed filed filed on on on 24.09.2013 24.09.2013 24.09.2013 and and and thereafter thereafter thereafter scrutiny scrutiny scrutiny assessment u/s 143(3) was completed on 01.03.2016. assessment u/s 143(3) was completed on 01.03.2016. Thereafter Thereafter the assessment was re the assessment was re-opened by issue of 148 notice on opened by issue of 148 notice on 27.03.2021 based on information received from the based on information received from the DDIT(Inv), Unit DDIT(Inv), Unit 1(3), Ahmedabad. The AO in the re 1(3), Ahmedabad. The AO in the re-opened assessment order opened assessment order mentions about the information received from the DDIT about mentions about the information received from the DDIT about mentions about the information received from the DDIT about concerns run by jignesh Shah and Sanjay Shah and how they are concerns run by jignesh Shah and Sanjay Shah and how they are concerns run by jignesh Shah and Sanjay Shah and how they are involved in providing accommodation entries of various kinds involved in providing accommodation entries of various kinds involved in providing accommodation entries of various kinds such as unsecured loans, share premium, as unsecured loans, share premium, bogus gains, contrived loss bogus gains, contrived loss etc.. and reproduce the etc.. and reproduce the observation of the DDIT that it was observation of the DDIT that it was observed that the assessee (cheryl advisory pvt Itd) had taken the observed that the assessee (cheryl advisory pvt Itd) had taken the observed that the assessee (cheryl advisory pvt Itd) had taken the following following following bogus bogus bogus accommodation accommodation accommodation entries entries entries summing summing summing to to to Rs 2,77,92,524/- in various bank accounts. in various bank accounts. 6.3. In the alleged "reason recorded" 6.3. In the alleged "reason recorded" reproduced in the assessment reproduced in the assessment order, the AO elaborately discusses the modus operandi of the elaborately discusses the modus operandi of the "Penny stock-L TCG scam" in detail: however failed to satisfy L TCG scam" in detail: however failed to satisfy L TCG scam" in detail: however failed to satisfy himself a reason to believe on ho himself a reason to believe on how this modus operandi is w this modus operandi is applicable for the assessee for the relevant assessment year. He applicable for the assessee for the relevant assessment year. He applicable for the assessee for the relevant assessment year. He just jumps to a conclusion for justifying the re just jumps to a conclusion for justifying the re-opening by observing opening by observing that "Considering all these facts as explained in above, it can be that "Considering all these facts as explained in above, it can be that "Considering all these facts as explained in above, it can be concluded that the total amou concluded that the total amount of Rs. 2.77.92.524/ nt of Rs. 2.77.92.524/- is unexplained receipts u/s 69A. in the hand of assessee, which has unexplained receipts u/s 69A. in the hand of assessee, which has unexplained receipts u/s 69A. in the hand of assessee, which has not been offered to tax by the assessee company in its return of not been offered to tax by the assessee company in its return of not been offered to tax by the assessee company in its return of income during the year under consideration i.e. A.Y 2013 income during the year under consideration i.e. A.Y 2013-14. There 14. There is failure on part of the assess is failure on part of the assessee to disclose truly and fully all ee to disclose truly and fully all material facts in relation to the income related to above material facts in relation to the income related to above material facts in relation to the income related to above transactions and any other income which comes to the notice of the transactions and any other income which comes to the notice of the transactions and any other income which comes to the notice of the AO subsequently has escaped assessment by reasons of failure on AO subsequently has escaped assessment by reasons of failure on AO subsequently has escaped assessment by reasons of failure on the part of the assessee which w the part of the assessee which was required for correct assessment as required for correct assessment of the assessee for A.Y 2013 of the assessee for A.Y 2013-14 resulting in escapement of income 14 resulting in escapement of income to the extent of Rs. 2. 77,92,5247 to the extent of Rs. 2. 77,92,5247-. 6.4. It is well settled position of law that "reason to believe" has to 6.4. It is well settled position of law that "reason to believe" has to 6.4. It is well settled position of law that "reason to believe" has to be formed by the assessing officer and the sam be formed by the assessing officer and the same should be on the e should be on the basis of his own observation and finding and not merely based on basis of his own observation and finding and not merely based on basis of his own observation and finding and not merely based on borrowed satisfaction or direction of some authority. borrowed satisfaction or direction of some authority. Reliance is Reliance is placed on the decision of the Hon'ble High Court of Bombay in the placed on the decision of the Hon'ble High Court of Bombay in the placed on the decision of the Hon'ble High Court of Bombay in the case of PCIT v. Shodiman Investments Pvt case of PCIT v. Shodiman Investments Pvt. Ltd. (2020) 422 ITR 337 . Ltd. (2020) 422 ITR 337 (Bom.) (HC)wherein it was held that Where reasons as made (Bom.) (HC)wherein it was held that Where reasons as made (Bom.) (HC)wherein it was held that Where reasons as made available to assessee for reopening available to assessee for reopening assessment merely indicated assessment merely indicated information received from Director (Investigation) about a particular information received from Director (Investigation) about a particular information received from Director (Investigation) about a particular entity, entering into suspicious trans entity, entering into suspicious transactions and, that material was actions and, that material was not further linked by any reason to come to conclusion that not further linked by any reason to come to conclusion that not further linked by any reason to come to conclusion that assessee had indulged in any activity which could give rise to assessee had indulged in any activity which could give rise to assessee had indulged in any activity which could give rise to reason to believe on part of Assessing Officer that income reason to believe on part of Assessing Officer that income reason to believe on part of Assessing Officer that income chargeable to tax had escaped assessment, r chargeable to tax had escaped assessment, reassessment was an eassessment was an evidence of a fishing enquiry and not a reasonable belief that evidence of a fishing enquiry and not a reasonable belief that evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax had escaped assessment. This is clearly income chargeable to tax had escaped assessment. This is clearly income chargeable to tax had escaped assessment. This is clearly in breach of settled position in law that reopening notice has to be in breach of settled position in law that reopening notice has to be in breach of settled position in law that reopening notice has to be issued by Assessing Officer on his own s issued by Assessing Officer on his own satisfaction and not on atisfaction and not on borrowed satisfaction. borrowed satisfaction. 6.5. In view of the above the jurisdictional judicial precedents, 6.5. In view of the above the jurisdictional judicial precedents, 6.5. In view of the above the jurisdictional judicial precedents, factual aspects of the case, I hold that the AO was not in factual aspects of the case, I hold that the AO was not in factual aspects of the case, I hold that the AO was not in possession of any tangible evidence or fresh material to warrant a possession of any tangible evidence or fresh material to warrant a possession of any tangible evidence or fresh material to warrant a reassessment after reassessment after the period of 4 years and hence the reopening the period of 4 years and hence the reopening of the assessment is bad in law and ab initio void. This ground is of the assessment is bad in law and ab initio void. This ground is of the assessment is bad in law and ab initio void. This ground is allowed.”

7.1 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Ld. dispute and perused the relevant material on record. The Ld. dispute and perused the relevant material on record. The Ld. counsel for the assessee relied on the Ld. CIT(A) and also relied on counsel for the assessee relied on the Ld. CIT(A) and also relied on counsel for the assessee relied on the Ld. CIT(A) and also relied on the decision of the Hon’ble Bombay High Court in the case of the decision of the Hon’ble Bombay High Court in the case of the decision of the Hon’ble Bombay High Court in the case of Mohanlal Champalal Jain v. Income anlal Champalal Jain v. Income-tax Officer, Ward 1(2), Thane tax Officer, Ward 1(2), Thane [2019] 102 taxmann.com 293 (Bombay), Arvind Sahdeo Gupta v. [2019] 102 taxmann.com 293 (Bombay), Arvind Sahdeo Gupta v. [2019] 102 taxmann.com 293 (Bombay), Arvind Sahdeo Gupta v. Income-tax Officer [2023] 153 taxmann.com 244 (Bombay), tax Officer [2023] 153 taxmann.com 244 (Bombay), tax Officer [2023] 153 taxmann.com 244 (Bombay), Reynolds Shirting Ltd. v. Assistant Commissioner of Income-tax, Reynolds Shirting Ltd. v. Assistant Commissioner of Income Reynolds Shirting Ltd. v. Assistant Commissioner of Income Central Circle 6(3), Mumbai [2022] 135 taxmann.com 78 (Bombay). 6(3), Mumbai [2022] 135 taxmann.com 78 (Bombay). 6(3), Mumbai [2022] 135 taxmann.com 78 (Bombay).

7.2 On the contrary, the Ld. DR referred to the On the contrary, the Ld. DR referred to the On the contrary, the Ld. DR referred to the decision of the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. Income Tax Officer [1999] 236 ITR 34 (SC) and ACIT v. Rajesh v. Income Tax Officer [1999] 236 ITR 34 (SC) and ACIT v. Rajesh v. Income Tax Officer [1999] 236 ITR 34 (SC) and ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 161 Taxman 316 (SC). Brokers (P) Ltd. [2007] 161 Taxman 316 (SC). Brokers (P) Ltd. [2007] 161 Taxman 316 (SC).

7.3 We have heard rival submission of the parties and perused the rival submission of the parties and perused the rival submission of the parties and perused the relevant material on record. The Ld. CIT(A) has concluded that the relevant material on record. The Ld. CIT(A) has concluded that the relevant material on record. The Ld. CIT(A) has concluded that the reopening was based merely on borrowed satisfaction. But we find reopening was based merely on borrowed satisfaction. But we find reopening was based merely on borrowed satisfaction. But we find that in the case of information has been received from the case of information has been received from the case of information has been received from the Investigation Wing which was gathered during the course of search Investigation Wing which was gathered during the course of search Investigation Wing which was gathered during the course of search proceedings in the case of Shri Jignesh Shah and Shri Sanjay Shah. proceedings in the case of Shri Jignesh Shah and Shri Sanjay Shah. proceedings in the case of Shri Jignesh Shah and Shri Sanjay Shah. Evidently, it is tangible tangible evidence gathered during the course of the evidence gathered during the course of the search, which is basis for reopening of the assessment. The reasons search, which is basis for reopening of the assessment. The reasons search, which is basis for reopening of the assessment. The reasons recorded by the Assessing Officer recorded by the Assessing Officer are reproduced for ready reference reproduced for ready reference as under:

“REASONS:-

5. Thus I have reason to believe that income in excess of Rs. 1,00,000/ 5. Thus I have reason to believe that income in excess of Rs. 1,00,000/ 5. Thus I have reason to believe that income in excess of Rs. 1,00,000/- chargeable to tax has escaped assessment in this case. The word reason chargeable to tax has escaped assessment in this case. The word reason chargeable to tax has escaped assessment in this case. The word reason in the phrase 'reason to believe' would mean cause or justification. If the in the phrase 'reason to believe' would mean cause or justification. If the in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has cause or ju Assessing Officer has cause or justification to know or suppose the stification to know or suppose the income had escaped assessment, it can be said to have reason to believe income had escaped assessment, it can be said to have reason to believe income had escaped assessment, it can be said to have reason to believe that the income had escaped assessment. The expression cannot be read that the income had escaped assessment. The expression cannot be read that the income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the to mean that the Assessing Officer should have finally ascertained the to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion, objectively. In the present case, since legal evidence or conclusion, objectively. In the present case, since legal evidence or conclusion, objectively. In the present case, since the assessee has failed to make true disclosure of its income, it leads to the assessee has failed to make true disclosure of its income, it leads to the assessee has failed to make true disclosure of its income, it leads to enough cause for forming of belief by the undersigned regarding enough cause for forming of belief by the undersigned regarding enough cause for forming of belief by the undersigned regarding escapement of income during the year under cons escapement of income during the year under consideration. 6. Accordingly, subject to provisions of section 148, there is a need to 6. Accordingly, subject to provisions of section 148, there is a need to 6. Accordingly, subject to provisions of section 148, there is a need to assess the income of Assessee Company which has escaped assessment assess the income of Assessee Company which has escaped assessment assess the income of Assessee Company which has escaped assessment in AY 2013-14. The scrutiny assessment in this case has been completed 14. The scrutiny assessment in this case has been completed 14. The scrutiny assessment in this case has been completed u/s. 143(3) of the Income Tax Act, u/s. 143(3) of the Income Tax Act, 1961. However, four years has expired 1961. However, four years has expired from the end of relevant assessment year AY 2013 from the end of relevant assessment year AY 2013-14. In view of the 14. In view of the same, kind administrative sanction of the Pr. Commissioner of Income same, kind administrative sanction of the Pr. Commissioner of Income same, kind administrative sanction of the Pr. Commissioner of Income- tax-1, Mumbai is solicited in accordance with the provisions contained in 1, Mumbai is solicited in accordance with the provisions contained in 1, Mumbai is solicited in accordance with the provisions contained in sub-section of (1) of Section 151 of the Income Tax Act, 1961, for issue of ction of (1) of Section 151 of the Income Tax Act, 1961, for issue of ction of (1) of Section 151 of the Income Tax Act, 1961, for issue of notice u/s. 148 of Income Tax Act, 1961. 148 of Income Tax Act, 1961.” 7.3.1 In the case of Mohanlal Champalal Jain (supra), the In the case of Mohanlal Champalal Jain (supra), the In the case of Mohanlal Champalal Jain (supra), the Assessing Officer had proceeded on wrong premises that the Assessing Officer had proceeded on wrong premises that the Assessing Officer had proceeded on wrong premises that the petitioner had not filed r petitioner had not filed return of income. Whereas eturn of income. Whereas, in the instant case no such wrong premise case no such wrong premise, has been brought to the record. In the has been brought to the record. In the case of Arvind Sahdeo Gupta (supra) case of Arvind Sahdeo Gupta (supra), the Hon’ble High Court the Hon’ble High Court observed that the notice suf observed that the notice suffered from fundamental factual fered from fundamental factual error and while disposing the and while disposing the objection also the Assessing Officer did not objection also the Assessing Officer did not apply his mind and therefore, Hon’ble High Court quashed the apply his mind and therefore, Hon’ble High Court quashed the apply his mind and therefore, Hon’ble High Court quashed the notice u/s 148. Facts of the instant case notice u/s 148. Facts of the instant case are distinguishable from distinguishable from the said case and therefore, the ratio of the said decision cannot be the said case and therefore, the ratio of the said decision cannot be the said case and therefore, the ratio of the said decision cannot be applied over the facts of the instant case. In the case of Raynonlds the facts of the instant case. In the case of Raynonlds the facts of the instant case. In the case of Raynonlds Shirting Ltd. (supra), , there was no mention of the reference of the there was no mention of the reference of the petitioner in the information received from the Investigation Wing petitioner in the information received from the Investigation Wing petitioner in the information received from the Investigation Wing and therefore, the Hon’ble High Court has held that there was no and therefore, the Hon’ble High Court has held that there was no and therefore, the Hon’ble High Court has held that there was no live link of the material with the reasons recorded live link of the material with the reasons recorded. T . The Hon’ble High Court further observed that sanctioning authority also did not apply Court further observed that sanctioning authority also did not apply Court further observed that sanctioning authority also did not apply mind while approving the reasons recorded. Accordingly, the mind while approving the reasons recorded. Accordingly, the mind while approving the reasons recorded. Accordingly, the Hon’ble High Court set aside the notice issued u/s 148 of the Act. Hon’ble High Court set aside the notice issued u/s 148 o Hon’ble High Court set aside the notice issued u/s 148 o The facts of the present case facts of the present case are distinguishable and therefore the and therefore the ratio of the said decision is not applicable in the present case. ratio of the said decision is not applicable in the present case. ratio of the said decision is not applicable in the present case. Whereas, we find that the Hon’ble Supreme Court in the case of we find that the Hon’ble Supreme Court in the case of we find that the Hon’ble Supreme Court in the case of Rajesh Jhaveri (supra) held that for reopening t Rajesh Jhaveri (supra) held that for reopening there should be here should be relevant material on the basis of which relevant material on the basis of which a reasonable person could reasonable person could make a requisite belief that income escaped assessment. Similarly make a requisite belief that income escaped assessment make a requisite belief that income escaped assessment in the case of Raymond Woolen Mills (supra) in the case of Raymond Woolen Mills (supra), Hon’ble Supreme Hon’ble Supreme Court held that sufficiency or correctness of the material for Court held that sufficiency or correctness of the material for Court held that sufficiency or correctness of the material for information should not be information should not be seen at the stage of recording reasons. at the stage of recording reasons. In the instant case there is a the instant case there is a tangible material received from the material received from the reliable source and which has been gathered source and which has been gathered in the course of search in the course of search action ,therefore, , belief of the Assessing Officer that income therefore, , belief of the Assessing Officer that income therefore, , belief of the Assessing Officer that income escaped is reasonable. On the basis of the information of payment, escaped is reasonable. On the basis of the information of payment escaped is reasonable. On the basis of the information of payment the Assessing Officer inferred the said payment as liable u/s 69 of the Assessing Officer inferred the said payment as liable u/s 69 of the Assessing Officer inferred the said payment as liable u/s 69 of the Act. During relevant period the Act. During relevant period the Assessing Officer was not the Assessing Officer was not authorized to carry out any inquiry from the assessee for authorized to carry out any inquiry from the assessee for authorized to carry out any inquiry from the assessee for verification the facts contended in the verification the facts contended in the information. Therefore, in our formation. Therefore, in our opinion, the reasons have been recorded after appreciation of the the reasons have been recorded after appreciation of the the reasons have been recorded after appreciation of the information available with the available with the Assessing Officer and it cannot be Assessing Officer and it cannot be termed as based on borrowed satisfaction. Further, the assessment termed as based on borrowed satisfaction. Further, the assessment termed as based on borrowed satisfaction. Further, the assessment has been reopened beyond the period has been reopened beyond the period of four years of four years from relevant assessment years and therefore, assessment could be reopened only assessment years and therefore, assessment could be reopened only assessment years and therefore, assessment could be reopened only in the case of failure o in the case of failure on the part of the assessee in disclosing true n the part of the assessee in disclosing true and full material facts. Since, in the information received by the and full material facts. Since, in the information received by the and full material facts. Since, in the information received by the assessee, the fact of accommodation entry received by the assessee the fact of accommodation entry received by the assessee the fact of accommodation entry received by the assessee came to light for the first time and this fact was not disclosed by the came to light for the first time and this fact was not disclosed by the came to light for the first time and this fact was not disclosed by the assessee and therefore assessment has been reopened validly due ssee and therefore assessment has been reopened validly due ssee and therefore assessment has been reopened validly due to failure on the part of the assessee in disclosing the material facts to failure on the part of the assessee in disclosing the material facts to failure on the part of the assessee in disclosing the material facts fully and truly. Thus fully and truly. Thus, we set aside the finding of the Ld. CIT(A) on we set aside the finding of the Ld. CIT(A) on the issue in dispute. The ground No. 3 of the appeal of the Revenue the issue in dispute. The ground No. 3 of the appeal of the issue in dispute. The ground No. 3 of the appeal of is accordingly allowed. is accordingly allowed.

“7.1. The appellant contend that the impugned a 7.1. The appellant contend that the impugned addition under ddition under section 69A of the act to the tune of Rs 2,77,92,52/ section 69A of the act to the tune of Rs 2,77,92,52/- is bad in law is bad in law without appreciating that there is no iota of evidence to suggest any without appreciating that there is no iota of evidence to suggest any without appreciating that there is no iota of evidence to suggest any nexus between the assessee and shri Jignesh/Sanja shah. nexus between the assessee and shri Jignesh/Sanja shah. Further the assessee had not received any accomm the assessee had not received any accommodation entry i.e. Bogus odation entry i.e. Bogus penny stock transaction or bogus loan or bogus share premium and penny stock transaction or bogus loan or bogus share premium and penny stock transaction or bogus loan or bogus share premium and section 69A is not applicable to payments made by the assessee, section 69A is not applicable to payments made by the assessee, section 69A is not applicable to payments made by the assessee, which is duly reflected in the books of the assessee and made which is duly reflected in the books of the assessee and made which is duly reflected in the books of the assessee and made through proper banking channels. through proper banking channels. Based on the information received from the DDIT(inv), the on the information received from the DDIT(inv), the on the information received from the DDIT(inv), the Assessing officer reopened the assessment and found that for the Assessing officer reopened the assessment and found that for the Assessing officer reopened the assessment and found that for the relevant assessment year there are questionable investment entries relevant assessment year there are questionable investment entries relevant assessment year there are questionable investment entries of the assessee as follows: of the assessee as follows: Bank Name Account No Account No Account Holders Date Date of of Amount Name Transaction Dhana Lakshmi Bank 014308300000015 014308300000015 AA Plus Share 22.09.2012 22.09.2012 Rs.1,00,00,000/- Brokers Pvt. Ltd. 014308300000015 Dhana Lakshmi Bank 014308300000015 AA Plus Share 22.09.2012 Rs.75,00,000/- Brokers Pvt. Ltd. 014308300000015 Dhana Lakshmi Bank 014308300000015 AA Plus Share 24.09.2012 Rs.26,13,178/- Brokers Pvt. Ltd. 014308300000015 Dhana Lakshmi Bank 014308300000015 AA Plus Share 28.09.2012 Rs.16,33,631/- Brokers Pvt. Ltd. Yes Bank 000784000002051 000784000002051 Sarvagya 24.09.2012 60,45,715/- Builders Total 2,77,92,524/-

7.2. The AO concluded that the total amount of Rs.2.77,92.524/ 7.2. The AO concluded that the total amount of Rs.2.77,92.524/ 7.2. The AO concluded that the total amount of Rs.2.77,92.524/- is unexplained receipts u/s 69A in the hands of the assessee, which unexplained receipts u/s 69A in the hands of the assessee, which unexplained receipts u/s 69A in the hands of the assessee, which has not been offered to tax by the assessee company. In the has not been offered to tax by the assessee company. In the has not been offered to tax by the assessee company. In the computation of taxable income in page 5 of the assessment order, computation of taxable income in page 5 of the assessment order, computation of taxable income in page 5 of the assessment order, the same amount is added as addition u/s69 (unexplained the same amount is added as addition u/s69 (unexplained the same amount is added as addition u/s69 (unexplained investments). He further observes that though the assessee has investments). He further observes that though the assessee has investments). He further observes that though the assessee has objected to the proposed addition by claiming that the asseee has objected to the proposed addition by claiming that the asseee has objected to the proposed addition by claiming that the asseee has not made any bogus share premium or Long term capital gains, it is not made any bogus share premium or Long term capital gains, it is not made any bogus share premium or Long term capital gains, it is clear that there is corroborative evidence produced by DDIT(Inv) ar that there is corroborative evidence produced by DDIT(Inv) ar that there is corroborative evidence produced by DDIT(Inv) that both companies (AAplus share brokers pt. Ltd and Sarvagya that both companies (AAplus share brokers pt. Ltd and Sarvagya that both companies (AAplus share brokers pt. Ltd and Sarvagya builders Pvt. Ltd) in which the above mentioned investments are builders Pvt. Ltd) in which the above mentioned investments are builders Pvt. Ltd) in which the above mentioned investments are bogus and shell companies. bogus and shell companies. 7.3. I find that the Assessing Officer w .3. I find that the Assessing Officer was in confused state of mind as in confused state of mind on how to treat this amount for taxation purpose. In one sentence in on how to treat this amount for taxation purpose. In one sentence in on how to treat this amount for taxation purpose. In one sentence in the assessment order, he observes it as unexplained receipts u/s the assessment order, he observes it as unexplained receipts u/s the assessment order, he observes it as unexplained receipts u/s 69A in the hands of the assessee; wherein in the conclusion part he 69A in the hands of the assessee; wherein in the conclusion part he 69A in the hands of the assessee; wherein in the conclusion part he observes the same amount observes the same amount as bogus investments. Further in ihe as bogus investments. Further in ihe Assessment order the AO sketches in detail from page 2 to 4, how Assessment order the AO sketches in detail from page 2 to 4, how Assessment order the AO sketches in detail from page 2 to 4, how a bogus long term capital gain (LTCG) is availed by any person by a bogus long term capital gain (LTCG) is availed by any person by a bogus long term capital gain (LTCG) is availed by any person by using the concept of using the concept of accommodation entry using penny stock. accommodation entry using penny stock. Further he elaborates in gen Further he elaborates in general, the entire scam scheme of penny eral, the entire scam scheme of penny stock- bogus LTCG by discussing in detail about the role played by bogus LTCG by discussing in detail about the role played by bogus LTCG by discussing in detail about the role played by the operators, the directors of company, the beneficiary of LTCG the operators, the directors of company, the beneficiary of LTCG the operators, the directors of company, the beneficiary of LTCG and the bogus paper entities and share brokers. However when and the bogus paper entities and share brokers. However when and the bogus paper entities and share brokers. However when coming to the assessment coming to the assessment of the appellant, the AO; strangely of the appellant, the AO; strangely remains lost and in a single sentence, he considers the total remains lost and in a single sentence, he considers the total remains lost and in a single sentence, he considers the total amount of Rs 2,77,92,524/ amount of Rs 2,77,92,524/- as income escaped assessment and as income escaped assessment and brought it to faxation u/s 69 of the 1 T Act. brought it to faxation u/s 69 of the 1 T Act. 7.4. It is clear from the record that the appellant 7.4. It is clear from the record that the appellant had not offered had not offered any non taxable any non taxable LTCG for the relevant assessment year. What is LTCG for the relevant assessment year. What is available in the record is that the appellant had made some available in the record is that the appellant had made some available in the record is that the appellant had made some payments to the above mentioned companies out of the funds payments to the above mentioned companies out of the funds payments to the above mentioned companies out of the funds available in the books of account through proper banking c available in the books of account through proper banking c available in the books of account through proper banking channel. The entire scheme of bogus LTCG will culminate in assessee The entire scheme of bogus LTCG will culminate in assessee The entire scheme of bogus LTCG will culminate in assessee offering a "tax free" long term capital gain and in the instant case offering a "tax free" long term capital gain and in the instant case offering a "tax free" long term capital gain and in the instant case there is no such thing. The appellant during the scrutiny process there is no such thing. The appellant during the scrutiny process there is no such thing. The appellant during the scrutiny process had replied many times before the AO that the company had replied many times before the AO that the company had replied many times before the AO that the company had not bought or sold any shares during the year in question. There was bought or sold any shares during the year in question. There was bought or sold any shares during the year in question. There was no evidence found against the appellant on bogus LTCG and no no evidence found against the appellant on bogus LTCG and no no evidence found against the appellant on bogus LTCG and no evidence was pointed out by the assessing officer, and the entire evidence was pointed out by the assessing officer, and the entire evidence was pointed out by the assessing officer, and the entire addition had been made on hypothetical basis. addition had been made on hypothetical basis. 7.5. It is pertinent to note that, in the response to the proposed draft pertinent to note that, in the response to the proposed draft pertinent to note that, in the response to the proposed draft assessment order of the AO, the appellant had vehemently argued assessment order of the AO, the appellant had vehemently argued assessment order of the AO, the appellant had vehemently argued before the AO that the transactions are bona fide, and the assessee before the AO that the transactions are bona fide, and the assessee before the AO that the transactions are bona fide, and the assessee had not received bogus share premium or Bogus long had not received bogus share premium or Bogus long-term capit term capital gain or Bogus loss. Further the appellant raised objection before the gain or Bogus loss. Further the appellant raised objection before the gain or Bogus loss. Further the appellant raised objection before the AO that, no addition can be made merely based on the alleged AO that, no addition can be made merely based on the alleged AO that, no addition can be made merely based on the alleged information received from the Investigation wing without providing information received from the Investigation wing without providing information received from the Investigation wing without providing any evidence of the information received. The said Tall any evidence of the information received. The said Tally Data file y Data file with company name "123" statement of M.Jignesh Shah or Sanjay with company name "123" statement of M.Jignesh Shah or Sanjay with company name "123" statement of M.Jignesh Shah or Sanjay Shah were never been provided to the assessee in spite of objection Shah were never been provided to the assessee in spite of objection Shah were never been provided to the assessee in spite of objection raised by the appellant during the re raised by the appellant during the re-opened scrutiny assessment. opened scrutiny assessment. 7.6. This allegation of the appellant is of seri 7.6. This allegation of the appellant is of serious concern. The AO ous concern. The AO had just made an addition behind the back of the assessee had just made an addition behind the back of the assessee had just made an addition behind the back of the assessee arbitrarily with surmises and conjectures, without any application arbitrarily with surmises and conjectures, without any application arbitrarily with surmises and conjectures, without any application of investigative mind. Further the Assessing Officer had not of investigative mind. Further the Assessing Officer had not of investigative mind. Further the Assessing Officer had not questioned himself, how the payment made by the as questioned himself, how the payment made by the as questioned himself, how the payment made by the assessee company to other companies through banking channel with the company to other companies through banking channel with the company to other companies through banking channel with the funds available in the books of account of the company; is taxable funds available in the books of account of the company; is taxable funds available in the books of account of the company; is taxable u/s 69A?. The alleged addition under section 69A of the act is on u/s 69A?. The alleged addition under section 69A of the act is on u/s 69A?. The alleged addition under section 69A of the act is on payments made by the assessee through banking channels, payments made by the assessee through banking channels, payments made by the assessee through banking channels, which the appellant already produced before the assessing officer at the the appellant already produced before the assessing officer at the the appellant already produced before the assessing officer at the time of re-opened assessment. The Assessing officer without opened assessment. The Assessing officer without opened assessment. The Assessing officer without application of mind, had merely acted upon the information application of mind, had merely acted upon the information application of mind, had merely acted upon the information submitted to him by the investigation wing that there is materia submitted to him by the investigation wing that there is materia submitted to him by the investigation wing that there is material to suggest suggest suggest that that that the the the appellant appellant appellant had had had been been been benefited benefited benefited by by by the the the accommodation entries given by Jignesh Shah and Sanjay shah accommodation entries given by Jignesh Shah and Sanjay shah accommodation entries given by Jignesh Shah and Sanjay shah run companies and came to conclusion which is on the result of run companies and came to conclusion which is on the result of run companies and came to conclusion which is on the result of suspicion only. Unlike section 68, sections 69 and 69A deal with suspicion only. Unlike section 68, sections 69 and 69A deal with suspicion only. Unlike section 68, sections 69 and 69A deal with items not recorded in the books of account. If an item is recorded in recorded in the books of account. If an item is recorded in recorded in the books of account. If an item is recorded in the books of account, then section 69 &69A is not applicable. The the books of account, then section 69 &69A is not applicable. The the books of account, then section 69 &69A is not applicable. The relevant cases on the above mentioned points are: relevant cases on the above mentioned points are: 1. Vasanthi visweswaran 257 ITR 94 (Mad) Vasanthi visweswaran 257 ITR 94 (Mad) 2. Surendra M.Khandhar 321 ITR 254 (Bom.) Surendra M.Khandhar 321 ITR 254 (Bom.) 3. Jagjit Pal Singh Anand 320 ITR 106 (Del.) jit Pal Singh Anand 320 ITR 106 (Del.) 4. Chuharmal 172 ITR 250(SC) Chuharmal 172 ITR 250(SC) 7.7. In view of the above facts and position of law, the addition 7.7. In view of the above facts and position of law, the addition 7.7. In view of the above facts and position of law, the addition made us 69A/69 amounting to Rs.2,77,92,524/ made us 69A/69 amounting to Rs.2,77,92,524/- by re-opening the opening the assessment lacks justification and the impugned order stands assessment lacks justification and the impugned order stands assessment lacks justification and the impugned order stands deleted. This ground stands allowed. eleted. This ground stands allowed. 7.8. As the major grounds relating to jurisdiction u/s 153C as well 7.8. As the major grounds relating to jurisdiction u/s 153C as well 7.8. As the major grounds relating to jurisdiction u/s 153C as well as the validity of reopening of the assessment is allowed, by as the validity of reopening of the assessment is allowed, by as the validity of reopening of the assessment is allowed, by observing that the assessment is ab initio void, there is no need to observing that the assessment is ab initio void, there is no need to observing that the assessment is ab initio void, there is no need to adjudicate other grou adjudicate other grounds: However the ground no. 3 related to nds: However the ground no. 3 related to addition u/s 69/69A is also adjudicated and allowed on merits addition u/s 69/69A is also adjudicated and allowed on merits addition u/s 69/69A is also adjudicated and allowed on merits assuming without conceding that the re assuming without conceding that the re-opening is valid. The other opening is valid. The other grounds are either consequential or academic/general in nature grounds are either consequential or academic/general in nature grounds are either consequential or academic/general in nature and hence not adjudicat and hence not adjudicated.” 8.1 We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. We find that the Assessing Officer has relevant material on record. We find that the Assessing Officer has relevant material on record. We find that the Assessing Officer has made addition in terms of section 69 of the Act. As per the made addition in terms of section 69 of the Act. As per the made addition in terms of section 69 of the Act. As per the provisions of section 69 of the provisions of section 69 of the Act, any investment which any investment which are not recorded in the books of accounts and the assessee offers no recorded in the books of accounts and the assessee offers no recorded in the books of accounts and the assessee offers no explanation about the nature of source of the investment or the explanation about the nature of source of the investment or the explanation about the nature of source of the investment or the explanation offered by him is not in the opinion of the Assessing explanation offered by him is not in the opinion of the Assessing explanation offered by him is not in the opinion of the Assessing Officer is satisfactory Officer is satisfactory, the value of said investment is the value of said investment is deemed to be income of the assessee. But income of the assessee. But, we find that in the case the Assessing we find that in the case the Assessing Officer has nowhere stated Officer has nowhere stated that said investment was not recorded in that said investment was not recorded in books of account of the assessee books of account of the assessee. The addition u/s 69 of the Act addition u/s 69 of the Act could be made where the investments are n could be made where the investments are not recorded in the books ot recorded in the books of accounts. But in the case no such finding has been given by the of accounts. But in the case no such finding has been of accounts. But in the case no such finding has been Assessing. The addition if any Assessing. The addition if any, could have been made for the bogus could have been made for the bogus credit entries corresponding to the payment credit entries corresponding to the payment, subject to the subject to the conditions of section conditions of section 68 of the Act, but to the extent payments are but to the extent payments are supported by the credit entries as appearing in the books of supported by the credit entries as appearing in the books of supported by the credit entries as appearing in the books of account, no addition u/s 69 of the Act no addition u/s 69 of the Act could have been have been made. The Assessing Officer has not carried out any exercise or efforts to look Assessing Officer has not carried out any exercise or efforts to look Assessing Officer has not carried out any exercise or efforts to look into genuineness of source of into genuineness of source of payments except recording reasons to payments except recording reasons to believe. Accordingly, we uphold the finding of the Ld. CIT(A) on the Accordingly, we uphold the finding of the Ld. CIT(A) on the Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground No. 2 of the appeal of the Revenue is issue in dispute. The ground No. 2 of the appeal of the Revenue is issue in dispute. The ground No. 2 of the appeal of the Revenue is dismissed.