ACIT, CIRCLE-5.1, KOLKATA, KOLKATA V. YADAV PRASAD TOSNIWAL, KOLKATA

ITA 1730/KOL/2024

AI Insights

The case involves an appeal by the revenue against the order of the CIT(A), which had deleted an addition of Rs. 17,75,988 made by the Assessing Officer (AO) under section 68 of the Income Tax Act. The AO had re-opened the assessment for the Assessment Year 2010-2011 based on information from the DDIT(Inv.), alleging that the assessee had engaged in transactions with shell companies and made bogus profits. The CIT(A) found the re-opening and the addition to be unjustified, leading to the revenue's appeal. The Tribunal dismissed the appeal, agreeing with the CIT(A) that the AO's actions were based on borrowed satisfaction without proper verification or discussion.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126278 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHUMITA SAS
• Assessee Lawyers: SIDDHARTH KEJRIWAL
• Keywords: Tax effect; Reopening of assessment; Capital Gains; Accommodation entries; Borrowed satisfaction; Bogus; Grounds of appeal; Satisfaction; Dismissed; National Faceless Appeal; HRA; Purchases; Transactions; Deleted; Tangible Evidence
• Section: 147

Judgement Text

" आयकर अपीलीय अधिकरण,“एस.एम.सी” न्यायपीठ,कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER आयकर अपील सं/ITA No.1730/KOL/2024 (नििाारण वर्ा / Assessment Years : 2010-2011) ACIT, Circle-5.1, Kolkata Vs Yadav Prasad Tosniwal, 638, Basanmoyee Apartment Rabindra Sarani, Bagbazar, Kolkata-700003 PAN No. :ACIPT6576E (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) राजस्वकीओरसे /Revenue by : Ms. Madhumita Sas, Addl.CIT नििााररतीकीओरसे /Assessee by : Shri Siddharth Kejriwal, AR सुनवाई की तारीख / Date of Hearing : 17/04/2025 घोषणा की तारीख/Date of Pronouncement : 21/04/2025 आदेश / O R D E R This is the appeal filed by the revenue against the order dated 18.03.2024, passed by the ld. CIT(A), National Faceless Appeal Centre, (NFAC), Delhi for the Assessment Year 2010-2011. 2. As per the office record, it is noted that the appeal is filed belatedly by 89 days. In this regard, the revenue has filed condonation application stating therein sufficient reasons for condonation of delay. Considering the reasons stated in the application of the revenue, the delay of 89 days in filing the present appeal is condoned and the appeal is admitted for hearing. 3. The revenue has raised the following grounds :- 1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the additions to the tune of Rs 17,75,988/- made u/s 68 of the I.T. Act made on account of unaccounted transactions, ignoring the evidences brought on record by the Assessing Officer to establish that the genuineness of the transaction and creditworthiness could not be satisfactorily proved in this case? ITA No.1730/KOL/2024 2 2. Whether on the facts and circumstances of the case and in law the order of the Ld CIT(A) suffers from perversity as it ignored the facts brought on records that the said company made huge profits through sub broker Arman Trading, Gilbert Merchants & Dignity Tie Up which are identified shell companies ? 3. That the appellant's appeal is suggested despite low tax effect, in view of the exception clause mentioned in para 3.1 (h) of the circular no 5/2024 dated 15.03.2024. 4. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds herein above before or hearing of this appeal. 4. The only issue raised by the revenue in this case is against the deletion of addition of Rs.17,75,988/- by the ld. CIT(A) as made by the ld. AO u/s.68 of the Act. 5. Facts in brief are that the assessee is an individual having income from capital gains and other sources and filed his return for A Y 2010-11 on 26.04.2017 declaring total income at Rs.4,09,452/-. Subsequently, based on the information received from DDIT(Inv.), Unit-3(1), Kolkata, the case of the assessee was re-opened by issuing notice u/s.148 of the Act dated 31.03.2017. The case of the assessee was re-opened u/s 147 of the Act on the ground that the assessee has purchased shares amounting to Rs.1,84,45,750/- and has sold shares amounting to Rs.2,58,97,250/-, thereby resulting into huge profits through sub-broker Arman Trading, Gilbert Merchants & Dignity Tie Up. According to the AO, the said profits were bogus profits taken from shell companies which were managed and controlled by various Kolkata based entry operators which were engaged in providing accommodation entries in various forms to the beneficiaries. ITA No.1730/KOL/2024 3 Thereafter the AO added the amount of Rs.17,75,988/- to the total income of the assessee and framed the assessment u/s.147/143(3) of the Act on 20.12.2017 without discussing anything as to how and where from this amount of addition has been computed. 6. In the appellate proceedings, ld. CIT(A) allowed the appeal of the assessee by observing and holding as under :- 6. Decision: I have considered the submission carefully. The appellant has taken six grounds of appeal. Ground Nos. 1 to 3 pertain to claim of erroneous re-assessment. The appellant has claimed that the re-assessment is erroneous and unlawful, that re- opening merely done on the basis of information received from Investigation Wing without tangible evidence is erroneous. It is also claimed that the AO did not dispose the objection before proceeding with the assessment. Ground Nos. 4 & 5 pertain to merits of the addition and ground no. 6 is residual ground. Various grounds are decided below. 6.1 In the submission, it is claimed that the assessee categorically denied having any deal with any of the parties mentioned in the show cause notice. It is also stated that NMCE Stock Exchange does not allow share transaction. The AO has passed a two line order on borrowed information from Investigation Wing. It is also claimed that the basis of addition of Rs. 17,75,988/- is not there in the assessment order as against reasons recorded for escapement of income of Rs. 71,51,500/- (sales minus purchases). A number of case laws are quoted on the issue of borrowed satisfaction claiming that re-assessment done by AO merely on the information of Investigation Wing is not good in law. 6.2 The re-opening of assessment on the basis of information received from Investigation Wing can only be valid if the AO has carried out an exercise of verification of the information vis-à-vis the return of the appellant and after analysis reached to a conclusion that certain transaction(s) reflecting income is not shown in the return of income. No such exercise has been done. Further, the AO has not even mentioned details of the approval of the higher authority taken for re-opening of the assessment. Under the circumstances, the re-opening cannot be said to be valid. 6.3 The assessment order is reproduced above. The case of the appellant was re-opened on the basis of information received from Investigation Wing. The AO has not discussed the information so received in the assessment order. It is however mentioned that the assessee earn huge profits from transactions with certain brokers and that such profit is made from shell companies managed by ITA No.1730/KOL/2024 4 Kolkata based entry operators. Leave aside the details of the transactions entered into by the appellant, even names of the shell companies are not mentioned in the order nor the names of the entry operators through which the appellant took accommodation entries. The discussion leading to the conclusion that income of Rs. 17,75,988/-has escaped tax net is cryptic, not accompanied by any factual details and analysis as to how income has escaped assessment. There is no discussion in the assessment order as to how the AO has arrived at escaped income of Rs. 17,75,988/-. The same is not in line with the details of the share purchases and sales mentioned earlier in the order. Thus, the addition is also not sustainable on merits. Therefore, the appellant succeeds in objection to re-opening as well as in his challenge to addition on merits. 7. In the result, the appeal is allowed. 6. After hearing the rival submissions and perusing the material on record, we find that the AO has passed a very cryptic order mentioning therein that information has been received from the DDIT(Inv.) Unit-3(1), Kolkata that the assessee had entered into huge transactions of purchase and sales of shares of Rs.1,84,45,750/- and Rs.2.58.97.250/- respectively thereby making huge profits which were in the nature of bogus profits and thereafter concluded that the assessee has escaped assessment amounting to Rs.17,75,988/- and added to the same to the total income of the assessee, despite the assessee having denied to have done any such transactions made by him during the year. Thereafter in para 6.1 the ld. CIT(A) recorded a categorical finding that the assessee has denied any such transactions and the AO has passed two line assessment order based on the information received from the DDIT(Inv.), Unit-3(1), Kolkata. Even the ld. CIT(A) has noted that there was no basis of addition of Rs.17,75,988/- in the assessment order whereas as per the reasons recorded for escapement of income was Rs. 71,51,500/- (sales minus ITA No.1730/KOL/2024 5 purchases). Thus, the ld. CIT(A) quashed the assessment based on the borrowed satisfaction. Even on merit, the ld. CIT(A) in para 6.3 has noted that no basis of making addition of Rs.17,75,988/- was given by the AO and, therefore, rightly deleted the addition. In our opinion, the order passed by the ld. CIT(A) is a very reasoned and speaking order who has categorically recorded that there was no basis of making addition and the assessee has not entered into any such transactions. Consequently, we do not find any infirmity in the order of the ld. CIT(A) and accordingly, the appeal of the revenue is dismissed. 7. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 21/04/2025. Sd/- (RAJESH KUMAR) लेखा सदस्य/ACCOUNTANT MEMBER कोलकाताKolkata; ददनाांक Dated 21/04/2025 Prakash Kumar Mishra, Sr.P.S. आदेशकीप्रनतललपपअग्रेपर्त/Copy of the Order forwarded to : आदेशािुसार/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलार्थी/ The Appellant- 2. प्रत्यर्थी/ The Respondent- 3. आयकरआयुक्त(अपील) / The CIT(A), 4. आयकरआयुक्त/ CIT 5. विभागीयप्रविविवि, आयकरअपीलीयअविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्डफाईल / Guard file. सत्यापपतप्रतत //True Copy// "