Assessing Officer reopened the assessment based on statement of searched person that he was engaged in the providing accommodation entries and that the assessee is one of the beneficiaries. AO completed the assessment by making addition to the income of the assessee based on the statement given by searched person and levied penalty u/s. 271(1)(c) of the Act. On writ the Court held that there was no live nexus between material relied and belief formed, the name of the assessee was not mentioned in the statement recorded, there no record to show that the assessee had paid cash to so-called entry provider to obtain accommodation entry. The expression accommodation entry and bogus financial transactions used in the recorded reasons are not reasons but conclusions. Assessment Order is silent under which provision of the Act the additions are sought to be made. Court also held that there was no tangible material, no live nexus between the material and belief formed for reopening of the assessment,

that statement recorded did not refer to the name of the assessee nor there was any clarity as to for which assessment year and under which sections i.e. 132(4) or 133A of the Act such statement was recorded. That the A.O. had not mentioned the section under which he made the addition, That the reasons recorded were supplemented by using the word “for bill purchase” which means amount has flown-out of books, not a case of receipt of accommodation entry. It is well settled that the reasons cannot be supplemented by assessment Order or Affidavit. That there is no material on the basis of which a reasonable belief could be formed that the cash has been deposited by the Assessee into the bank of the accommodation entry provider. That the expression “accommodation entry” and “bogus financial transactions” used in the recorded reasons are not reasons but conclusions.

That the impugned Assessment Order is passed on pure guesswork without any relevant material which is contrary to mandates of Section 144 dealing with Best Judgment Assessment. Accordingly the order is quashed. (AY. 2015-16)