DEPUTY COMMISSIONER OF INCOME TAX, AURANGABAD vs. SURYACHANDRA LALMANI DUBEY, AURANGABAD

Assessment Year:2014-15 The Deputy V Suryachandra Lalmani Commissioner of Income s Dubey, Tax, Plot No.D-21, MIDC, Waluj, Aurangabad. Auranbabad – 431136. PAN: AGGPD5697L Appellant/ Revenue Respondent /Assessee Assessee by Shri Prateek Jha – AR Revenue by Shri Sourabh Nayak, IRSAddl.CIT(DR) Date of hearing 08/08/2024 Date of pronouncement 30/08/2024 आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. On the facts and the circumstance of the case and in law, whether the Ld. CIT(A)-12, Pune was right in holding that the AO was not justified in taking recourse to the provision of sec. 147 merely to verify the facts. Whereas in fact, the reason for issue of notice U/s 148 Suryachandra Lalmani Dubey [R] was recorded on clear findings that, there was difference in purchase shown by the assessee and sales shown by the party from where purchases are made which is not subjected to verification.

2. On the facts and the circumstance of the case and in law, whether the Ld. CIT(A)-12, Pune was justified in holding that the AO had recorded the reasons for reopening the case for verification. Whereas in fact, the issue on which reasons recorded for escapement of income was not suffixed by the word "needs to verify".

3. On the facts and circumstance of the case and in law, whether the Ld.CIT(A)-12, Pune was justified in holding that reasons recorded before issue of notice u/s. 148 is merely for verification of the facts.

4. On the facts and circumstance of the case and in law, whether the Ld.CIT(A)-12, Pune was right in setting aside the case without going into merits of the case and appreciating facts mentioned in assessment order.

5. On the facts and circumstance of the case and in law, whether the - Ld.CIT(A)-12, Pune was justified in holding that there was no tangible material which suggests that escapement of income. Whereas in fact tangible material in the form of ledger abstract was available with AO on the basis of which he has formed his reasons 6. On the facts and circumstance of the case and in law, whether the Ld.CIT(A)-12, Pune erred in appreciating the fact that tangible material have direct nexus with escapement of income was available with AO while recording the reasons for issue of notice u/s.148.” Brief facts of the case : 2. In this case the Assessing Officer (AO) issued notice u/s 148 on 09/10/2017 after recording reasons. The AO had received certain information based on which the AO recorded reasons. The Assessee filed submission during the reassessment proceedings. The AO made addition of Rs.2,04,80,489/-. Aggrieved by the Order the Assessee filed appeal before the Ld.CIT(A). The Suryachandra Lalmani Dubey [R] Ld.CIT(A) held that the AO had recorded the reasons for reopening as “needs to be verified”, which is outside the purview of section 147.Accordingly,Ld.CIT(A) allowed the Legal ground raised by the assessee. The Ld.CIT(A) has not discussed merits of the additions. Aggrieved by the order of the Ld.CIT(A) the Revenue has filed appeal before us.

Submission of ld.DR : 3. The ld.Departmental Representative(ld.DR) for the Revenue Shri Sourabh Nayak, Addl.CIT[Ld.DR] for the Revenue submitted written submissions as under : “1.1 The assessee is an individual and engaged in business of resale of steels and deals in steel scrap, making purchases from various factories and selling it to steel manufacturers. The assessee engaged in proprietary business with name and style as M/s Brahma Steel. The assessee filed his return of income for A.Y. 2014-15 on 30.09.2014 declaring total income at Rs. 32,60,560/-. The return was processed u/s 143(1) of the Income Tax Act, 1961. 1.2 In this case information was received from Tax Recovery Officer (TRO)-2, Aurangabad by the ACIT, Circle-2, Aurangabad vide letter dated 09.01.2017. As per information, the TRO-2, Aurangabad during the course of assessment proceedings for the A.Y. 2014-15 in the case of Mr. Muzammil AM Rashid Ali Syed, Prop. M/s. Shidrah Multi Trade Link has pointed out following facts: The sales shown by the M/s Shidrah Multi Trade Link to M/s i. Brahma Steels was Rs. 2,62,36,903/- in his books of accounts whereas purchase shown by M/s Brahma Steel in his books of accounts was of Rs.2,98,93,153/-. M/s Shidrah Multi Trade Link has shown cash receipts of ii. Rs.93,88,389/- from M/s Brahma Steels and shown the Suryachandra Lalmani Dubey [R] outstanding balance of Rs. 28,32,967/- in his books of accounts. On the other hand, M/s Brahma Steels has shown outstanding balance of Rs. 1,96,57,205/- in his books of accounts.Hence the difference amount of Rs. 1,68,24,239/- is required to be taxed in the hands of M/s Brahma Steels. The following bills issued by M/s Shidrah Multi Trade Link, iii. which were booked as purchases by H.A. Khan (Scrap Dealer, A'bad) as well as M/s. Brahma Steel, A'bad, needs to be verified. Bill No. Date Qty. Material Description Lorry No. Amount 40 31/05/13 19575 Off cuts of MS Sheet MH20- 595794 AT/6155 41 31/05/13 16870 Off cuts of MS Sheet MH20- 513463 AT/6155 75 25/06/13 13235 Off cuts of MS Sheet MH20- 404216 AT/6155 79 27/06/13 9695 Off cuts of MS Sheet MH20- 296099 AT/6155 Total 1809574 1.3 Based on the above information, ACIT Circle-2, Aurangabad issued notice u/s 148 of theIncome Tax Act, 1961 on 09.10.2017 after recording reasons to believe and seeking priorapproval of the Addl. Commissioner of Income Tax, Range-2, Aurangabad. Subsequently, thecase of the assessee was centralized to DCIT, Central Circle-2, Aurangabad by Pr. Commissionerof Income Tax- 2, Aurangabad vide order u/s 127, dated 23.07.2018. The assessment proceedings u/s 143(3) r.w.s 147 of the IT Act was completed on 20.12.2018. 3.1 In this case concrete information was received from TRO-2, Aurangabad that during the course of assessment proceedings for the A.Y. 2014-15 in the case of Mr. Muzammil AM Rashid All Syed, prop. M/s. Shidrah Multi Trade Link has pointed out following facts: The sales shown by the M/s Shidrah Multi Trade Link to (i) M/s Brahma Steels was Rs.2,62,36,903/- in his books of accounts whereas purchase shown by M/s Brahma Steel in his books of accounts was of Rs.2,98,93,153/- M/s Shidrah Multi Trade Link has shown cash receipts of (ii) Rs.93,88,389/- from M/s Brahma Steels and shown the outstanding balance of Rs.28,32,967/- in his books of accounts.

Suryachandra Lalmani Dubey [R] On the other hand, M/s Brahma Steels has shown outstanding balance of Rs.1,96,57,205/- in his books of accounts. Hence the difference amount of Rs.1,68,24,239/- is required to be taxed in the hands of M/s Brahma Steels. The information received from TRO-2, was based on firm and concrete facts. Hon'ble Apex Court in the case of State of Uttar Pradesh Vs. Aryaverth Chawal Udyog reported in (2016) 91 VST. 1 (SC)has held that the material on which the assessing authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring the appropriate rationale of action taken by the assessing authority in pursuance of such belief. Thus, reason to believe cannot be said to be subjective satisfaction of the assessing authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment. The assessing officer is required to act, not on mere suspicion, but on direct and circumstantial evidence. On perusal of information received from TRO it is clear that the Information/material on which the AO has formed his reasons to believe was not arbitrary, irrational, vague, distant or irrelevant. The AO has recorded reason for issue of notice u/s 148 based on direct and circumstantial evidence which has live link with the tangible information available with him, but not on mere suspicion. 3.2 The facts of the case in Nivi Trading Ltd. Vs. UOI on which CIT(A) has relied upon is different from the facts of the case of the assessee. In the case of Nivi Trading Ltd. Vs. UOI no firm and concrete information was received. In that case the reasons were recorded on mere suspicion based on information available in return of Income. The reason recorded In case of Nivi Trading Ltd. was as under: 'It is verified from the return of income filed by the assessee for A.Y. 2009-10 that it has shown LTCG from investment in shares amounting to Rs.1,54,81,620/- and had shown dividend of Rs.9,74,420/-. During the A.Y. 2010-11 assessee had shown LTCG of Rs.33,48,191/- and dividend income of Rs.14,44,763/- and shown Rs.1,21,33,429 as gift. Hence it is seen that assessee had gifted these shares without any consideration. This fact needs to be verified as per section 47(iii) of the I. T. Act. Also it has to be verified whether the value of these shares have been computed on the market rate as on the date of such transfer'.

Suryachandra Lalmani Dubey [R] Hence, I have reasons to believe that income chargeable to tax amounting to Rs. 1,21,33,429/- as per provision u/s.147 of the Act has escaped assessment in this case for A.Y. 2010-11'. In the light of above reason the Hon'ble Bombay High Court held that the revenue proceeds on the footing that these shares were gifted without consideration. It is this fact which it wants to verify and particularly whether the value of these shares has been computed on the market value.All that the Revenue desires is verification of certain details and pertaining to the gift. That is not founded on the belief that any income which is chargeable to tax has escaped assessment and hence, such verification is necessary. That belief is not recorded and which alone would enable the Assessing Officer to proceed. Thus, the reason must be founded on the satisfaction of the AO that income chargeable to tax has escaped assessment. Accordingly Hon'ble Bombay High Court quashed and set aside the notice u/s. 148. 3.3 In the present case of the assessee, there was firm and concrete information was received from TRO-2 as mentioned in para 3.1 (i) which clearly suggest that the assessee has inflated its purchase in; order to reduce profits and thereby income to the tune of Rs.36,56,250/- has escaped assessment. On this issue, the AO while recording reasons does refer to the word "needs verification".Apart from this, other information with regard to cash payments made by assessee and difference in outstanding balance of the assessee and M/s. Sidhrah Multi Trade Link Prop. Mr. Muzammil Ali was received. Based on these tangible -material and concrete information the AO has recorded reason. Therefore the decision of Hon'ble Bombay High Court in the case of Nivi Trading Ltd. Vs. UOI is not squarely applicable to the case of the assessee as held by Ld. CIT(A) in para 7.4 of the appellate order. 3.4 The CIT(A) while setting aside the order, relied upon another case of Jurisdictional Hon'ble Bombay High Court in the case of NuPower Renewables Pvt. Ltd. Vs. ACIT. The facts of this case are different from the facts of the case of assessee. In this case basis of forming reasons to believe and escapement of income was recorded as under: "Information has been received from ADIT(lnv), Unit4(2), Mumbai vide letter dated 15/03/2018, that NuPower Renewables Pvt. Ltd., has received amount of Rs.49,90,49,000/ from Mauritius based FirstlandHoldinggs Ltd. In F. Y. 2010- 11 being subscription towards Compulsorily Convertible Cumulative Preference Share (4,99,048 nos.) On perusal of Form 2 filed with ROC in this respect clearly indicates that 4,99,048 number of shares have been allotted by M/s.NuPower Suryachandra Lalmani Dubey [R] Renewables Pvt. Ltd., on 31.12.2010 to Firstland Holdings Limited, Mauritius. The source, genuineness and creditworthiness of the foreign entity M/s. Firstland Holdings Limited, Mauritius remains unexplained needs further investigation. In this respect reference to the competent authorities of Mauritius through FT & TR Division has been made". In this context the Hon'ble Bombay High Court held that the investigation into the source of genuineness and creditworthiness of the investor company would fall within the realm of fishing enquires, which is wholly impermissible in law in context of the reopening of the assessment.The facts in the present case of the assessee, is altogether different. In the case of the assessee there was concrete information received from TRO-2 with regard to difference outstanding credit balance of the assessee and other party, inflated purchase and cash 'payments made by the assessee which is discussed in para 3.1 above. Therefore the decision of Hon'ble Bombay High Court in the case of NuPower Renewables Pvt. Ltd. Vs. ACIT is not squarely applicable to the case of the assessee as held by Ld. CIT(A) in para 7.4 of the appellate order. 3.5 The facts of the case in decision of ITAT Pune in the case of Smt. Parveen Sewak Nayyar Vs. ITO on CIT(A) has relied are also different form the facts of the present case of the assessee. In that case there was no tangible material available with the AO.The AO has recorded reasons as "To verify the genuineness of the loan transaction, the notice u/s 148 of the Act for re-opening the case has been issued to the assessee". In this context the Hon'ble ITAT Pune has held that in absence of any tangible material, AO's reasons of mere verification for reopening the assessment is not valid. Whereas in the instant case of the assessee there was tangible material available with AO as discussed in para 3.1 above which clearly suggest that there is escapement of income. Therefore the decision of Hon'ble ITAT Pune in the case of Smt. Parveen Sewak Nayyar Vs. ACIT is not squarely applicable to the case of the assessee as held by Ld. C1T(A) in para 7.4 of the appellate order. 3.6 The AO in this case before issue of notice u/s 148 has recorded reasons which are reproduced as under: "In this case, information was received in this office from TRO- 2, A'bad regarding Shri SuryachandraLalmani Dubey, Prop. M/s Brahma Traders. As per information during the course of assessment proceedings of Mr. Muzammmil Ali Rashid AH Syed Prop. M/s Shidrah Multi Trade Link, following observations were made:

(i) The sales shown by the M/s Shidrah Multi Trade Link to Mr. Brahma Steels was Rs.2,62,36,903/- in his books of accounts whereas purchase shown by M/s Brahma Steel in his books of accounts was of Rs.2,98,93,153/-. (ii) The M/s Shidrah Multi Trade Link has shown cash receipts of Rs. 93,88,389/- fromM/s Brahma Steels and shown the outstanding balance of Rs. 28,32,967/-in his books of accounts. On the other hand, M/s Brahma Steels has shown outstanding balance of Rs. 1,96,57,205/- in his books of accounts. Hence the difference amount of Rs. 1,68,24,239/- is required to be taxed in the hands of M/s Brahma Steels. Further, cash payment of Rs. 93,88,389/- is also required to be verified. (iii) The following bills issued by M/s Shidrah Multi Trade Link, which were booked as purchased by H.A. Khan (Scrap Dealer, A'bad) as well as M/s. Brahma Steel, A'bad, needs to be verified. Date Qty. Material Description Lorry No. Amount Bill No. 40 31/05/13 19575 Off cuts of MS Sheet MH20-AT/6155 595794 41 31/05/13 16870 Off cuts of MS Sheet MH20-AT/6155 513463 75 25/06/13 13235 Off cuts of MS Sheet MH20-AT/6155 404216 79 27/06/13 9695 Off cuts of MS Sheet MH20-AT/6155 296099 Total 1809574 On verification of ledger abstracts of M/s Shidrah Multi Trade Link and M/s Brahma Steels in their respective books of accounts, it can be seen that M/s Brahma Steels has shown total purchases at Rs. 2,98,93,153/- in his books of accounts, whreas M/s Shidrah Multi Trade Link has shown total sales at Rs.2,62,36,903/-. Therefore, it is evident that M/s Brahma Steels has shown bogus purchases to the tune of Rs. 36,56,250/- and suppressed the gross profit for the year under consideration. Also, The M/s Shidrah Multi Trade Link has shown cash receipts of Rs.93,88,389/- from M/s Brahma Steels and shown the outstanding balance of Rs. 28,32,967/- In his books of accounts. On the other hand, M/s Brahma Steels has shown outstanding balance of Rs. 1,96,57,205/- in his books of accounts. Hence the difference amount of Rs. 1,68,24,239/- needs to be verified. Also, the information provided in para (iii) needs to be verified.

Therefore, I have reasons to believe for A. Y. 2014-15, income to the tune of Rs. 36,56,250/- has escaped assessment within the meaning of Section 147". On perusal of the above reasons recorded by the AO, It is seen that the AO has reproduced the information received from TRO-2, Aurangabad in para (i) to (iii). Thereafter the AO proceeded to verify ledger extract of M/s. Shidrah Multi Trade link and the assessee M/s. Brahma Steel, Prop. Suryachandra Lalmani Dubey. On verification of ledger abstract of the assessee and the party, AO found that there was difference in purchases shown by the assessee and sales shown by M/s. Shidrah Multi Trade link to the tune of Rs.36,56,250/-. Thus it was evident that assessee M/s. Brahma Steel has shown bogus purchases to the tune of Rs. 36,56,250/- and suppressed the profit for the year under consideration. Based on this finding that AO has formed belief that income to the tune of Rs. 36,56,250/- has escaped assessment within the meaning of section 147.It can seen from above reason recorded by the AO that he has not referred to the words "needs verification" on this issue, on which AO has formed his reason to belief that "income to the tune of Rs. 36,56,250/- has escaped assessment within the meaning of section 147". It is true that on other two issues mentioned in para (ii) & (iii) of the reasons recorded the AO has referred the words as "needs to be verified" but the Ld.AO has not formed his reason to belief that income has escaped assessment on these issues. Therefore it is amply clear from the reasons recorded by AO that notice u/s 148 was not issued merely on suspicion for making enquiry or verification. In fact reasons were recorded on tangible and concrete material available with AO which was found during the course of assessment proceedings of M/s Shidrah Trade Link by TRO- 2, who subsequently forwarded the information to AO. 3.6 The Return of Income was filed by assessee on 30.09.2014 and the re-opening notice was issued on 09.10.2017 which is well within the four year period as per the then existing provision of section 148 of the act. It is not disputed that the assessee had not disclosed all the relevant facts fully and truly before the Assessing Officer. It is not disputed that the reopening was based on fresh and tangent material received by the Assessing Officer. Further it is not in dispute that there was change of opinion. 3.7 This is not a case of borrowed satisfaction as contended by the assessee before the Ld. CIT(A). The information was received from TRO, Aurangabad wherein the TRO also mentioned in para (ii) that Rs.1,68,24,239/- being difference amount needs to be taxed and certain verification needs to be done. However the Ld. AO has given Suryachandra Lalmani Dubey [R] explicit finding with respect to bogus purchases of Rs.36,56,250/- and suppression of gross profit. Further, reason to believe is based on escapement of income to tune of Rs.36,56,250/-. Thus Ld. AO had formed her own independent opinion with respect to reason to believe in escapement of income as required by Section 148 of the I T Act 1961. With respect to difference amount of Rs.1,68,24,239/-needs to be verified, this is an additional issue that needed to be checked by Ld.AO. On this ground, reliance is placed on judgement of Hon'ble Supreme Court in case of Raymond Woolen Mills Vs ITO wherein the observation is reproduced for perusal "3. In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage.We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case." Thus the court has ruled that correctness or sufficiency of material is not a thing to be established at the stage of re-opening itself. Thus Ld. AO is not wrong in mentioning the issues that require verification in addition to issues on which reason to belief was already established. 3.8 Thus it is pleaded that the order of ld.CIT(A) be reversed.” 3.1 The reasons recorded are as under : “In this case, information was received in this office from fRO-2, A'bad regarding Shri SuryachandraLalmani Dubey, Prop. M/s Brahma Traders. As per information during the course of assessment proceedings of Mr. Muzammmil Ali Rashid Ali Syed Prop. M/s Shidrah Multi Trade Link, following observation were made; i) The sales shown by the M/s Shidrah Multi Trade Link to Mr. Brahma Steels was Rs.2,62,36,903/- in his books of accounts whereas purchase shown by M/s Brahma Steel in his books of accounts was of Rs.2,98,93,153/- ii) The M/s Shidrah Multi Trade Link has shown cash receipts of Rs.93,88,389/- from M/s Brahma Steels and shown the outstanding balance of Rs.28.32,967/- in his books of accounts. On the other hand, M/sBrahma Steels has shown outstanding balance of Rs.1,96,57,205/- in his hooks of accounts. Hence the difference amount of Rs.1,68,24,239/- is required to be taxed in the hands of m/s Brahma Steels. Further, cash payment of Rs.93,88,389/- is also required to be verified. iii) The following bills issued by M/s Shidrah Multi Trade Link, which were booked as purchased by H.A. Khan (Scrap Dealer, A’bad) as well as M/s. Brahma Steel, A’bad, needs to be verified. Bill Date Qty- Material Description Lorry No. Amount No. 40 31/05/13 19575 Off cuts of MS Sheet MH20-AT/6155 595794 41 31/05/13 16870 Off cuts of MS Sheet MH20-AT/6155 513463 75 25/06/13 13235 Off cuts of MS Sheet MH20-AT/6155 404216 79 27/06/13 9695 Off cuts of MS Sheet MH20-AT/6155 296099 TOTAL 1809574 On verification of ledger abstracts of M/s Shidrah Multi Trade Linkand M/s Brahma Steels in their respective books of accounts, it can be seen that M/s Brahma Steels has shown total purchases at Rs.2,98,93,153/- in his books of accounts, whreas M/s Shidrah Multi Trade (.ink has shown total sales at Rs.2,62,36,903/-. Therefore, it is evident that M/s Brahma Steels has shown bogus purchases to the tune of Rs.36,56,250/- and suppressed the gross profit for the year under consideration. Also, The M/s Shidrah Multi Trade Link has shown cash receipts of Rs.93,88,389/- from M/s Brahma Steels and shown the outstanding balance of Rs. 28,32,967/- in his books of accounts. On the other hand, M/s Brahma Steels has shown outstanding balance of Rs. 1,96,57,205/- in his books of accounts. Hence the difference amount of Rs. 1,68,24,239/- needs to be verified. Also, the information provided in para (iii) needs to be verified. Therefore, 1 have reasons to believe that for A.Y. 2014-15, income to the tune of Rs.36,56,250/-has escaped assessment within the meaning of Section 147.”

Suryachandra Lalmani Dubey [R] Submission of ld.AR : 4. The ld.Authorised Representative(ld.AR) of the assessee strongly supported the order of the CIT(A). Ld.AR took us through the “Reasons” and submitted that repeatedly the AO has mentioned that AO wants to verify the transaction. Ld.AR submitted that reopening is not permissible for mere verification. The AO must have reason to believe that income has escaped assessment. In this case the AO had not recorded any such satisfaction that Income has escaped assessment. The ld.AR relied on the decisions of Hon’ble Bombay High Court in the case of NuPower Renewables P Ltd. and Nivi Trading Ltd. Findings &Analysis : 5. We have heard both the parties and perused the records. It is observed that in this case, notice u/sec.148 has been issued within four years from the end of the assessment year. Also, no order u/sec.143(3) was passed prior to issue of notice u/sec.148 of the Act. We have carefully studied the Reasons recorded by the AO.The Reasons have been reproduced in earlier paragraphs hence to avoid duplication they are not reproduced in this paragraph.

Suryachandra Lalmani Dubey [R] 5.1 Ld.CIT(A) held that the AO has merely mentioned that he needs to verify the transactions. However, we do not agree with the conclusion drawn by the ld.CIT(A).

5.2 The AO in the reasons has also observed as under : Quote , “ i) The sales shown by the M/s Shidrah Multi Trade Link to Mr. Brahma Steels was Rs.2,62,36,903/- in his books of accounts whereas purchase shown by M/s Brahma Steel in his books of accounts was of Rs.2,98,93,153/- ii) The M/s Shidrah Multi Trade Link has shown cash receipts of Rs.93,88,389/- from M/s Brahma Steels and shown the outstanding balance of Rs.28.32,967/- in his books of accounts. On the other hand, M/sBrahma Steels has shown outstanding balance of Rs.1,96,57,205/- in his hooks of accounts. Hence the difference amount of Rs.1,68,24,239/- is required to be taxed in the hands of m/s Brahma Steels…………… ******** On verification of ledger abstracts of M/s Shidrah Multi Trade Linkand M/s Brahma Steels in their respective books of accounts, it can be seen that M/s Brahma Steels has shown total purchases at Rs.2,98,93,153/- in his books of accounts, whreas M/s Shidrah Multi Trade (.ink has shown total sales at Rs.2,62,36,903/-. Therefore, it is evident that M/s Brahma Steels has shown bogus purchases to the tune of Rs.36,56,250/- and suppressed the gross profit for the year under consideration………………… Therefore, 1 have reasons to believe that for A.Y. 2014-15, income to the tune of Rs.36,56,250/-has escaped assessment within the meaning of Section 147” 5.3 Thus, it can be observed from the above part of the paragraphs reproduced, that the Assessing Officer(AO) in the reasons has specifically mentioned that Rs.1,68,24,239/- is required to be taxed in the hands of the assessee. Similarly, AO Suryachandra Lalmani Dubey [R] has mentioned that assessee has suppressed gross profit to the tune of Rs.36,56,250/- and hence, there is an escapement of income of Rs.36,56,250/-. Thus, in the reasons AO has properly recorded after analysing the ledger accounts, that there was an escapement of income to the extent of Rs.36,56,250/-(within the meaning of Section 147 of the Act). In certain parts, AO does have mentioned that he needs to verify certain amounts. However, one needs to read the reasons recorded in totality. We can appreciate the reasons only when we read the entire reasons in totality. Therefore, after reading the entire reasons, we are convinced that AO has properly recorded the satisfaction regarding escapement of income. The mere mention of the word “verification” does not vitiate the entire reasons in totality. The Hon’ble Supreme Court has laid down the law that the sufficiency or correctness of the material is not a thing to be considered at this stage. One only needs to see whether there was any prima-facia satisfaction based on some material. The relevant paragraph of the Hon’ble Supreme Court in the case of Raymond Woollen Mills ltd., vs. ITO [1999] 236 ITR 34 (SC) held as under : “In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have Suryachandra Lalmani Dubey [R] only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.”

6.1 The ld.CIT(A) has relied on the decision of the Hon’ble High Court of Bombay in the case of Nu Power Renewables (P.) Ltd., vs. DCIT [2018] 94 taxmann.com 29 (Bombay). In this case, the Hon’ble High Court has recorded a finding that AO had not examined the facts before arriving at a conclusion of escapement of income. However, in the case of the assessee, the AO has Suryachandra Lalmani Dubey [R] properly analysed the ledger accounts and then, arrived at a prima- facia conclusion of escapement of income. Hence, this decision is distinguishable on facts.

6.2 The ld.CIT(A) has also relied on the decision of the Hon’ble High Court of Bombay in Nivi Trading Ltd., vs Union of India [2015] 64 taxmann.com 92 (Bombay). In this case, the AO had only mentioned that he needs to verify share transfer as a gift as per section 47(iii) of the Act. In these facts, the Hon’ble High Court of Bombay allowed appeal of the assessee. Therefore, the case of Nivi Trading Ltd., is distinguishable on facts.

6.3 Therefore, we set-aside the order of ld.CIT(A) on this issue. However, ld.CIT(A) has not adjudicated the grounds raised by the assessee on merits of the addition. As per section 250(6) of the Act, ld.CIT(A) has to adjudicate the grounds raised by assessee regarding merits of the impugned addition. Hence, we set-aside the order of ld.CIT(A) to ld.CIT(A) with a direction to adjudicate the grounds raised by the assessee regarding merits of the addition. The assessee shall provide all the necessary documents before the ld.CIT(A). The ld.CIT(A) shall provide an opportunity of being