CIT v. Insecticides (India) Ltd.

INCOME TAX ACT, 1961

--Reassessment--ValidityUndisclosed share application money vis-a-vis tangible material--During course of reassessment proceedings consequent upon issuing notice under section 148, it was observed by AO from information gathered by DIT(Inv.) that assessee was involved in giving and taking unaccommodation entries only and represented unsecured money of assessee-company and as such, assessee had failed to disclose fully and truly all material facts and source of these funds routed through bank account of assessee, therefore, he had reason to believe that income of assessee had escaped assessment to that extent and a sum of Rs. 30 lakhs and 35 lakhs which was added for assessment years 2002-03 and 2002-04 respectively. Essentially, AO held that said sums of money represented income of assessee from undisclosed sources which had been shown as share application money. In other words, AO held the said sums to be bogus entries. It was also to be noted that AO had dismissed assessee's objections against reason recorded by him. Held: Reasons recorded by AO were totally silent with regard to amount and nature of bogus entries and transactions and persons with whom transactions had taken place, reassessment was, therefore, invalid.