AMBIKA TRADELINK (P) LTD. ,KOLKATA V. ITO,WD-4(3),KOLKATA, KOLKATA

ITA 761/KOL/2023

AI Insights

The case involves Ambika Tradelink (P) Ltd., which appealed against the order of the National Faceless Appeal Centre, Delhi, concerning the reopening of its assessment for the Assessment Year 2009-10. The reopening was based on information from the investigation wing about the assessee being a beneficiary of accommodation entries amounting to INR 1,70,00,000. The Tribunal examined the reasons recorded for reopening the assessment and found them to be vague and lacking specific details about the transactions involved. The Tribunal referenced a similar case, Ahinsha Management Pvt. Ltd. Vs. ITO, where the reopening was also quashed under similar circumstances. As a result, the Tribunal allowed the appeal, quashing the reopening of the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474007 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Other Referred Cases: Ahinsha Management Pvt. Ltd. Vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONALISHA PAL MUKHERJEE
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Unexplained cash credit; Reopening of assessment; Search and seizure; Accommodation entries; Bogus Share capital; Reason to believe; Borrowed satisfaction; Bogus
• Section: 147; 148; 144; 143(3); 139(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.761/KOL/2023 (Assessment Year: 2009-10) Ambika Tradelink (P) Ltd. C/o. S.N. Ghosh & Associates, Advocates, 2, Garstin Place, 2 nd Floor, Suite No.203, Off Hare Street, Kolkata-700001, West Bengal Vs. ITO, Wd-4(3), Kolkata Aaykar Bhavan, P-7, Chowringhee Square, 8 th Floor, Kolkata-700069 West Bengal (Appellant) (Respondent) PAN No. AAGCA2764A Assessee by : Shri Somnath Ghosh, AR Revenue by : Ms. Monalisha Pal Mukherjee, DR Date of hearing: 13.03.2025 Date of pronouncement : 25.03.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 26.05.2023 for the AY 2009-10. 02. The only issue pressed at the time of hearing by the ld. Counsel for the assessee is against the invalid assumption of jurisdiction u/s 147 of the Act without the precedent conditions being fulfilled by the ld. Assessing Officer. 03. The facts in brief are that the assessee filed the return of income u/s 139(1) of the Act on 23.09.2009, declaring nil income and loss of Page | 2 ITA No.761/KOL/2023 Ambika Tradelink (P) Ltd; A.Y. 2009-10 ₹7,231. The case of the assessee was reopened u/s 147 of the Income-tax Act, 1961 (the Act) after receiving information from the investigation wing that the assessee is a beneficiary of accommodation entries to the tune of ₹1,70,00,000/-. In this case, the assessment was also framed u/s 147/143(3) of the Act for A.Y. 2008-09, during which the assessee had failed to offer satisfactory explanation about the nature and source of credit sums credited in its Axis Bank Account No.0008846 and during A.Y. 2009-10 a sum of ₹ 1,70,00,000/- was credited to the said bank account. The said fact was revealed during the course of search and seizure action carried out on the business premises of Mr. Santosh Kumar Shah at 9/12, Lal Bazar Street, Block-E, 2nd Floor, Kolkata-700001 and at his residential premises. During the course of search, statements of the employees of the Mr Santosh Kumar Shah were recorded on oath that companies run and operated by them were engaged in providing accommodation entries in the form of share capital/ loans. The same fact was admitted by Mr. Santosh Kumar Shah in his statement. Finally, the ld. AO issued statutory notices along with questionnaire to the assessee, which were not complied with and finally the ld. AO treated the amount deposited in the bank account as unexplained cash credit and added the same to the income of the assessee u/s 144 of the Act dated 19.12.2016. 04. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee, though the legal issue was not raised. 05. After hearing the rival contentions and perusing the materials available on record, we find that the assessment has been reopened by recording the reasons to believe u/s 148(2) of the Act which in our opinion are vague and scanty only based on the information received Page | 3 ITA No.761/KOL/2023 Ambika Tradelink (P) Ltd; A.Y. 2009-10 from the investigation wing as extracted therein and nowhere the details of transactions which the assessee had entered into were ever discussed. For the sake of ready reference, the reasons read as follows:- “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- 191010200008046 with Axis Bank (Ay. 2008-09) During the financial year 2008-09 (Α.Υ. 2009-10) a sum of ₹1.70 Crores 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 Barun Nahar Roy, former director of Edward Supply Private Limited, Sn 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 Santosh Kumar Shah were engaged in providing accommodation entries in the form of share capital, loans etc. Shri Santosh Kumar Shan 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 Kurnar 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 is submitted before the Ld. Pr.CIT, Kolkata 2, Kolkata for his kind approval, if satisfied.” Page | 4 ITA No.761/KOL/2023 Ambika Tradelink (P) Ltd; A.Y. 2009-10 06. It is apparent from the perusal of the reasons that the reasons are vague, scanty and without any independent application of mind by the AO. Therefore, any reopening based on the said reasons is invalid. We note that in the entire reasons, nowhere the AO has whispered or discussed about the transactions which the assessee had done through Mr. Santosh Kumar Shah or his related / operated entities and only in the last para the ld. AO noted that I have reason to belief that assessee’s income is chargeable to tax had escaped assessment. We note that similar issue has been decided in the case of Ahinsha Management Pvt. ltd. Vs. ITO in ITA Nos. 1 & 2/KOL/2024 for A.Y. 2009-10 and 2010-11 vide order dated 24.02.2025, wherein under similar facts re-opening as well as the assessment were quashed. We note that in the said case the reasons recorded were exactly same, the operative part whereof is extracted below:- “6. 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 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). Page | 5 ITA No.761/KOL/2023 Ambika Tradelink (P) Ltd; A.Y. 2009-10 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” 7. 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 Page | 6 ITA No.761/KOL/2023 Ambika Tradelink (P) Ltd; A.Y. 2009-10 are vague, scanty and ambiguous. Therefore, we are inclined to quash the reopening of assessment. Consequently, the appeal of the assessee is allowed. 8. 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.” 07. Since, the facts before us are materially same vis-à-vis as decided by the co-ordinate Bench, we therefore respectfully following the same quash the reopening of assessment. The legal ground raised by the assessee is allowed. 08. Since, we have already allowed the appeal of the assessee on legal issue, therefore, we are not adjudicating the grounds raised on merit and are being left upon to be decided on later stage if need arises for the same. 09. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 25.03.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 25.03.2025. Sudip Sarkar, Sr.PS 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 "