AHINSHA MANAGEMENT PVT. LTD.,KOLKATA V. ITO, WARD-4(3), KOLKATA

ITA 1/KOL/2024

AI Insights

Ahinsha Management Pvt. Ltd. appealed against the orders of the National Faceless Appeal Centre, Delhi, which upheld the reopening of their assessment for the assessment years 2009-10 and 2010-11 under section 147 of the Income Tax Act. The reopening was based on the alleged unexplained cash credit of \\u20b924,55,000/- in the assessee's bank account, linked to a broader investigation into accommodation entries provided by companies controlled by Shri Santosh Kumar Shah. The Tribunal found that the AO's reasons for reopening the assessment were not adequately detailed and lacked a specific basis for believing that income had escaped assessment, thus quashing the reopening.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25054 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Other Referred Cases: CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILEN SAMADDER
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Unexplained cash credit; Reopening of assessment; Search and seizure; Accommodation entries; Reason to believe; Borrowed satisfaction; Bogus
• Section: 147; 148; 144; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA Nos. 01 & 02/KOL/2024 (Assessment Years: 2009-10 & 2010-11) Ahinsha Management Pvt. ltd. C/0 SN Ghosh & Associates, Advocates2, Garastin Place, 2 nd Floor, Suite no.203, Off hare Street, Kolkata-700001 Vs. ITO, Ward-4(3) Aaykar Bhavan, P-7, Chowringhee Square, 8 th floor, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AACCA5229J Assessee by : Shri Somnath Ghosh, AR Revenue by : Shri Sailen Samadder, DR Date of hearing: 05.02.2025 Date of pronouncement : 24.02.2025 02 O R D E R Per Rajesh Kumar, AM: These are the appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 27.07.2023 for the AYs 2009-10 & 2010-11. 01/KOL/2024 for A.Y. 2009-10 02. The only issue raised in ground no.1 is against the order of ld. CIT (A) upholding the reopening of assessment u/s 147 of the Act, overlooking the fact that the conditions precedent for assumption of jurisdiction under section 147 were not fulfilled and therefore, the assessment framed u/s 147/ 144 of the Act is void ab initio, ultra virus and nullity in the eyes of law. Page | 2 ITA Nos. 01 & 02/KOL/2024 Ahinsha Management Pvt. Ltd; A.Ys. 09-10 & 10-11 03. The facts in brief are that the assessee filed the return of income on 23.09.2009 declaring total income at ₹998/-. Thereafter, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act 31.3.2016. There was no compliance to the said notice as the assessee did not filed any return of income in compliance . During the course of assessment proceedings, u/s 147 of the Act for A.Y. 2008-09, the ld. AO noted that the assessee has failed to offer satisfactory explanation about the nature and source of credits into the Axis Bank account having No.12290. Similarly, during the A.Y. 2009-10 relevant to F.Y. 2008-09 ₹24,55,000/- was credited to the bank account of the assessee the source of which was not clear. Thereafter the ld. AO noted that a search and seizure operation was carried out by the investigation wing at the business premises of Shri Santosh Kumar Shah at 9/12, Lal Bazar Street, Block-E, 2nd Floor, Kolkata-700001 and his resident at 22, Lake Town, Block-B, Flat No.4A and 5A, Kolkata-700089. The AO further noted that during the search and seizure operation statement of various persons such as Shri Gopal Ranjan Saha Roy, an employee of Santosh Kumar Shah, Sri Barun Nahar Roy, former director of Edward Supply Private Limited, Sri Viond Kumar Shah, a relative of Shri Santosh Kumar Shah and Shri Santosh Kumar Shah were recorded. During the course of recording of the statements, the above persons admitted that the companies controlled and run by Shri Santosh Kumar Shah were engaged in providing accommodation entries in the form of share capital, loans, etc. Thereafter, the ld. AO discussed the modus operandi from para 1 to 1.4, recording therein that Mr. Santosh Kumar Shah and his associates received huge money which was passed to the various beneficiaries. Thereafter in para 1.5 the ld. AO noted that he has reason to belief that assessee’s income amounting to ₹ 24,55,000/-, chargeable to tax has escaped assessment within the meaning of section Page | 3 ITA Nos. 01 & 02/KOL/2024 Ahinsha Management Pvt. Ltd; A.Ys. 09-10 & 10-11 147 of the Act. Thereafter the ld. AO issued a show cause notice to the assessee as to why the money received of ₹24,55,000/- should not be treated as unexplained cash credit and added to the income of the assessee u/s 68 of the Act which was replied by the assessee by submitting that the amount was received from M/s Hopewell Merchants Pvt. Ltd. during normal course of business through bank. The ld. AO finally after rejecting the reply of the assessee and relying on the report of the investigation wing concluded that the explanation of the assessee was not tenable and accordingly added ₹24,55,000/- to the income of the assessee as unexplained cash credit u/s 68 of the Act. 04. In the appellate proceedings, the ld. CIT (A) also dismissed the appeal of the assessee. The ld. AR at the outset submitted that the case of the assessee has been invalidly reopened u/s 147 of the Act when necessary, conditions precedent for reopening being not fulfilled and satisfied. The ld. AR while referring to page no.66 of the paper book submitted in the reasons recorded by the ld. AO, he nowhere stated that when the money was received and from whom it was received and after reproducing the investigation wing report in the last para simply noted that ‘I have reason to belief that income of the assessee chargeable to tax has escaped assessment and thus, it is fit case for invoking the provisions of Section 147 of the Act’ and accordingly, proposal was submitted to the ld. PCIT, Kolkata for his kind approval. The ld. AR submitted that the ld. AO has acted on the borrowed satisfaction and there is no independent application of mind to the facts of the case. The ld. AR therefore in defence of his arguments relied on the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi) and prayed that the reopening of assessment may kindly be quashed. Page | 4 ITA Nos. 01 & 02/KOL/2024 Ahinsha Management Pvt. Ltd; A.Ys. 09-10 & 10-11 05. The ld. DR on the other hand relied on the orders of the ld. lower authorities and submitted that the ld. AO has reopened the case on the basis of information received from the investigation wing that assessee received ₹24,55,000/- in his bank account with Axis Bank, the source of which was not clear. The ld. DR therefore, submitted that the case was validly re-opened by the ld. Assessing Officer. 06. After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act. The assessee did not comply with the said notice by filing the return of income. We have perused the reasons recorded for reopening of assessment u/s 148(2) of the Act, the copy of which is available at page no. 66 of the paper book, which revealed that the ld. AO after extracting the report of the investigation, simply recorded in three lines that I have reason to believe that assessee’s income chargeable to tax has escaped assessment, meaning thereby the ld. AO has not recorded his satisfaction and reasons are vague, unambiguous and scanty. We note that no details/information have been recorded as from whom the money was received and when it was received. In our opinion the re-assessment can be not be made on vague, scanty and ambiguous reasons recorded. The case of the assessee is squarely covered by the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (supra). Further, it is a case borrowed satisfaction and non-application of mind by the ld. AO too. We observe that the ld. AO has simply, after extracting the report from the investigation wing, noted that income of the assessee has escaped assessment. For the sake of ready reference, the reasons recorded are extracted below: - “Annexure Page | 5 ITA Nos. 01 & 02/KOL/2024 Ahinsha Management Pvt. Ltd; A.Ys. 09-10 & 10-11 During the course of the proceeding under section 147/143(3) of the Income Tax Act, 1961 it is seen that the assessee failed to offer satisfactory explanation about the nature and sources of credit of sums- credited to the bank account No. 191010200012290 with Axis Bank (A-Y. 2008-09). During the financial year 2008-09 (Α.Υ. 2009-10) a sum of ₹24, 55,000/- was credited to said bank account, the sources of which is also not clear. There was a Search & Seizure operation carried out by the investigation. Wing at the business premises of Sri Santosh Kumar Shah at 9/12, Lal Bazar Street, Block-E, 2nd floor, Kolkata-700 001 and at his residence at 22, Lake Town, Block-B. Flat No. 4A & SA, Kolkata-700 089. During the course of Search & Seizure operation, statements of various persons viz. Sri Gopal Ranjan Saha Roy, an employee of Sri Santosh Kumar Shah, Sri Barün Nahar Roy, former director of Edward Supply Private Limited, Sri Vinod Kumar Shah, a relative of Shri Santosh Kumar Shah and Shri Santosh Kumar Shah were recorded. All the above named persons have deposed on oath that the companies controlled/run by Shri Santosn Kumar Shah were engaged in providing accommodation entries in the form of share capital, loans etc. Shri Santosh Kumar Shah himself admitted that he was engaged in providing entry of bogus share application/loans. During the course of Search & seizure operation, a total number of 404 bank accounts in the name of various companies were found. As a result of the search, it was emerged that the bank accounts were used as a tool of layering the transactions from receiving cash and issuing cheques. The bank account sated as above is one out of 404 bank account found in the premises of Santosh Kumar Shah during the course of search operation conducted. Sri Shah and his associates have admitted in the statement recorded on oath that they used to use all accounts found, for accommodation entries. The previous address of the assessee company was the address of Santosh Kumar shah as well. The modus operandi has also been explained. The parties wanted for accommodation entries of share capital or loan paid the amount in cash and Shri Shah deposited the cash in the bank accounts maintained by him in the name of various companies/individuals and after layering the money into some of the bank accounts, the money was paid as share capital or loan to the party paid the money in cash. The total deposits made into the bank accounts maintained by Shri Shah and his associates piled up to 1102.62 crores. This fact was admitted before the Settlement Commission. As such I have reason to believe that the assessee's income chargeable to tax has escaped assessment and this is a fit case for invoking the provisions of Section 147 of the Income Tax Act, 1961. Accordingly, proposal As submitted before the Ld. Pr. CIT, Kolkata - 2, Kolkata for his kind approval, if satisfied.” Sd/- (joyanta Mridha) DCIT, Circle-4(2), Kolkata” Page | 6 ITA Nos. 01 & 02/KOL/2024 Ahinsha Management Pvt. Ltd; A.Ys. 09-10 & 10-11 07. It is apparent from the above that there is no satisfaction or independent application of mind by the ld. AO to the information received. Moreover, the reasons are vague, scanty and ambiguous. Therefore, we are inclined to quash the reopening of assessment. Consequently, the appeal of the assessee is allowed. 08. Since, we have allowed the appeal of the assessee on legal issue i.e. reopening of assessment being invalid and nullity in the eyes of law, the other grounds raised by the assessee on legal issue as well as on merits are not being adjudicated at this stage and are left open if the need arises for the same at a later stage. 02/KOL/2024 for A.Y. 2010-11 09. The issues raised in this appeal are similar to ones as decided by us in ITA No. 01/KOL/2024 A.Y. 2009-10. Accordingly, our decision, would apply mutatis mutandis to this appeal of assessee in ITA No.02/KOL/2024 as well. Hence, the appeal of assessee is allowed. 010. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 24.02.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:24.02.2025 Sudip Sarkar, Sr.PS Page | 7 ITA Nos. 01 & 02/KOL/2024 Ahinsha Management Pvt. Ltd; A.Ys. 09-10 & 10-11 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "