Reopening of assessment based on incorrect information without due verification by the Assessing Officer is declared illegal.

ORDER

Per Rajesh Kumar, AM

The present appeal arises from order dated 17.03.2022 passed u/s 250 of the Income Tax Act, 1961 (hereafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals), [hereafter referred to as “the Ld. CIT(A)].

2. At the time of hearing, the Ld. Counsel for the assessee challenged the legality of notice issued u/s 148 of the Act on the ground that the same has been issued on wrong facts and without application of mind by the AO and therefore, the same is bad in law and so is the assessment framed consequently.

3. The facts in brief are that the assessee filed its return of income on 06.08.2018 declaring total income of Rs. 11,860/-. The case of the assessee was reopened u/s 147 read with section 148A of the Act on the basis information on insight portal that the assessee received Rs. 10,50,000/- during the year from M/s Rangoli Plaza Pvt. Ltd. which is shell company. Accordingly, the case of the assessee was reopened by the issuing notice u/s 148 of the Act dated 30.03.2022 which was complied by the AO filing return of income on 14.04.2022 declaring the same income. Finally, the AO on the basis of information furnished by the assessee noted that the assessee has received Rs. 10,50,000/- in City Union Bank from Kishnapriya Infradev LLP/Nilanchal Grih Nirman Ltd. and M/s Rangoli Plaza Pvt. Ltd. and accordingly, during the course of assessment proceedings assessee was specifically asked to provide confirmed copies of accounts and details of business relations with the said entities. However, the assessee submitted the required information stating that it has not enrtered into any transaction with M/s Rangoli Plaza Pvt. Ltd. Finally, the AO issued show cause notice issued to the assessee on 28.02.2023 which was replied by the assessee vide written submission dated 04.03.2023 submitting that the assessee has received Rs. 10,50,000/- from sale of shares to Bacha Ram Sharma for which Rs. 10,50,000/- was received while the assessee has not entered into any transaction with Sh. Krishnapriya Infradev and Nilanchal Grih Nirman Ltd. The assessee has submitted that the case of the assessee has been reopened on the ground that the assessee received Rs. 10,50,000/- from M/s Rangoli Plaza Pvt. Ltd. Finally, the AO added the said amount to the income of the assessee as unexplained cash credit u/s 68 of the Act. In the appellate proceedings, the addition was confirmed by the CIT(A).

4. After hearing the rival contentions and perusing the material available on record, we find that in this case the notice u/s 148A(b) of the Act was issued on 17.03.2022 mentioning therein that as per information available with the department the assessee has received an amount of Rs.10,50,000/- during financial year 2017-18 relevant to AY 2018-19 from M/s Rangoli Plaza Pvt. Ltd. which was listed as shell company. We note that the assessee replied the said notice vide letter dated 29.03.2023 submitting that the assessee has never received money from the said party during the impugned assessment year and therefore, the information has received from the insight portal is incorrect. Thereafter, the AO has passed order u/s 148A(d) on 30.03.2022 noting the same facts that the assessee received Rs. 10,50,000/- from M/s Rangoli Plaza Pvt. Ltd. Which has escaped assessment. Finally, notice u/s 148 of the Act on 30.03.2022. Considering the facts of the case in totality, we find that the notice issued u/s 148 of the Act is based on the incorrect facts as the amount of Rs. 10,50,000/- has been received from Rangoli Plaza Pvt. Ltd. whereas the fact of the matter is that the assessee has received Rs. 10,50,000/- from sale of shares from M/s Bacharam Sharma. The notice u/s 148 of the Act has been issued despite the assessee