ARCOY INDUSTRIES (INDIA) PRIVATE LIMITED,AHMEDABAD V. THE DCIT, CIRCLE-1(1)(1), AHMEDABAD

ITA 426/AHD/2024

AI Insights

The case involves Arcoy Industries India Pvt. Ltd., which appealed against the reassessment orders passed by the Commissioner of Income-Tax (Appeals) for four different assessment years. The primary contention was that the reassessment proceedings were based on information received from the ADIT and statements of third parties, which were not directly related to the appellant. The Tribunal examined the validity of the reassessment under section 147 of the Income Tax Act, focusing on whether there was a 'reason to believe' that income had escaped assessment, and whether the conditions for reopening the assessment after four years were met. The Tribunal concluded that the reassessment was not valid as it was based on insufficient and incorrect reasons, and the procedural requirements for reopening the assessment after the stipulated time were not fulfilled.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 823053 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 07-03-2024
• Other Referred Cases: Dr. Jagmittar Sain Bhagat & Ors vs Dir. Health Services, Haryana, Sushil Kumar Mehta v. Gobind Ram Bohra, Premier Automobiles Ltd. v. K.S. Wadke & Ors., Kiran Singh v. Chaman Paswan, Chandrika Misir & Anr. v. Bhaiyalal, Income Tax Officer v Lakhmani Mewaldas, CIT vs Paramjit Kaur, Spectrum Corporation vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALPESH PARMAR
• Assessee Lawyers: S.N. SOPARKAR
• Keywords: Difference of opinion; Change of opinion; Revised return; Reassessment proceedings; Income from undisclosed sources; Bogus purchase; Reopening of assessment; Search and seizure; Accommodation entries; Assessment record; Reason to believe; Bogus loan; Tangible material; Borrowed satisfaction; Bogus
• Section: 147; 148; 143(3); 132; 68

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “ए“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ A ” BENCH, AHMEDABAD \u0015ी संजय गग\u001b, \u0011ाियक सद एवं \u0015ी नरे !साद िस\"ा, लेखा सद क े सम%। ] ] Before Shri Sanjay Garg, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member ITA Nos.424, 425, 426 and 427/Ahd/2024 Assessment Years : 2013-14, 2014-15, 2015-16 and 2017-18 respectively Arcoy Industries India Pvt. Ltd. 606, Abhijeet Building Nr. Mithakhali Six Roads Ellisbridge, Ahmedabad. PAN : AABCA 2785 J V s The DCIT, Cir.1(1)(1) Ahmedabad. (Applicant) (Responent) Assessee by : Shri S.N. Soparkar, Sr.Advocate Revenue by : Shri Alpesh Parmar, CIT-DR सुनवाई की तारीख/Date of Hearing : 19/11/2025 घोषणा की तारीख /Date of Pronouncement: 23/12/2025 आदेश/O R D E R Per Sanjay Garg, Judicial Member The above captioned four appeals have been preferred by the assessee against the separate orders passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] all dated 30.01.2024 u/s. 250 of the Income Tax Act, 1961 (\"the Act\" for short) in respect of the above assessment years. Since issue raised in all the appeals are identical, they are disposed of by this common order for the sake of convenience. First, we take up the assessee’s appeal in ITA Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 2 No.424/Ahd/2024 for AY 2013-14 as lead case for the purpose of narration of facts. ITA No.424/Ahd/2024 (Asstt.Year 2013-14) The assessee, in this appeal, has taken following grounds of appeal: “1. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid which are initiated merely on the basis of information received from ADIT and statement of third party without appreciating that such details are not related to the appellant. The proceedings u/s 148 initiated in the present case are bad in law and required to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment rent proceedings u/s.147 as valid when such proceedings are on account of mere change of opinion since all relevant details were provided to AO during the course of original assessment proceedings and without any new tangible material on record of Assessing Officer. 3. In law and in the facts and circumstances of THE appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s.147 as valid when reassessment proceedings cannot be conducted on the basis of search conducted in case of third party more particularly when no details related to appellant are found therein. The ld CIT(A) ought to have treated notice u/s 148 as invalid as AO ought to have issued notice u/s 153C of the Act as proceedings have been initiated based upon documents found during the course of search at the premises of third party. 4. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unexplained unsecured loan for Rs.40,02,325/- when appellant has established genuineness of same by providing all the necessary details and discharging onus casted by provisions of section 68 of the Act. The addition is required to be deleted. 4.1 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition relying upon statement of Mr.Chirag Thakkar, ex employee and Bharat Padiya, ex director of Dishman Group and such statements are already disowned by Dishman Group in search proceedings as well as subsequent assessment proceedings. The Ld.CIT(A) Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 3 ought to have appreciated that above referred persons were also terminated from company hence no reliance can be placed on their statements. 4.2 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition without providing cross examination of Mr Chiarag Thakkar and Mr Bharat Padiya as entire addition has been made based upon their general statement recorded during the course of search and there is no corroborative evidence to suggest that cash has been exchanged against unsecured loan taken by appellant. 5. In law and in the facts and circumstances of the case, the Ld. CIT(A) has erred in dismissing the appeal of appellant without awarding opportunity of video hearing which was specifically requested by the appellant. 6. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 3. A perusal of the above grounds of appeal would reveal that the assessee apart from contesting the validity of the additions made by the lower authorities on merits, has also raised, vide Grounds No.1 to 3, the legal issue relating to the validity of the reopening of the assessment by the Assessing Officer (in short, “the AO”) u/s 147 read with section 148 of the Act. We take up this legal issue first for adjudication. Grounds Nos. 1 to 3: 4. The Ld. Counsel for the assessee has submitted that, in this case, the assessment was reopened by the AO on the basis of the information circulated on Insight Portal of Department, wherein, it was mentioned that a search & seizure action u/s 132 of the Act was carried out on 19/12/2019 in the case of one “Dishman Group” of companies during which the digital data found and seized from Dishman Group revealed that the said Dishman Group was involved in providing accommodation entries to various beneficiaries against Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 4 commission. This was also admitted in his statement recorded u/s 132(4) of the Act by Shri Chirag Thakkar, Accounts Manager, of Dishman Group and further confirmed by Mr. Bharat Padia, Executive Director of the Group. It was also found that the assessee was also beneficiary of transactions of Rs.40,02,325/-. From the aforesaid information, the AO noted that the assessee had claimed non-genuine commission expenses of Rs.40,02,325/- and, therefore, he formed the belief that the income of the assessee for the assessment year under consideration had escaped assessment. He further noted that though, the earlier assessment in this case was made u/s. 143(3) of the Act and four years had passed from the end of the relevant assessment year, however, in this case, the assessee had not disclosed fully and truly all material facts necessary for the assessment of his income for the year under consideration. He accordingly, reopened the assessment. However, he finally made the impugned addition of Rs.40,02,325/- u/s 69A of the Act on account of bogus loan taken from Dishman Group holding the same as the unaccounted income of the assessee, as against the observation made in the reasons recorded of bogus expenses of commission paid. 5 The Ld. CIT(A) confirmed the addition so made by AO. The assessee has, thus, come in appeal before us. 6. We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. At the outset, the Ld. Counsel for the assessee has invited our attention to the reasons recorded for reopening of the assessment, copy of which has been placed at paper book page No. 125 onwards, contents of which, for the sake of ready reference, are reproduced as under: Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 5 “Reasons for reopening of the assessment in the case of M/s ARCOY INDUSTRIES (INDIA) PRIVATE LIMITED for A.Y. 2013-14 u/s.147 of the Income-tax Act, 1961. 1. Brief details of the assessee: The assessee filed return for AY 2013-14 on 14.10.2013 declaring total income of Rs.59,04,430/-. The assessee filed revised return of income on 30.03.2015 declaring total income of Rs.26,45,480/-. Assessment u/s. 143(3) was completed on 31/03/2016 by determining total income at Rs.99,91,890/. 2. Brief details of information received: An information has been disseminated on insight port of the department wherein it has been intimated that 2. Search & seizure action u/s 132 of the Income tax Act. 1961 was initiated on 19/12/2019 in the case of “Dishman Group” of Companies. During the search and seizure action, the office premises of Dishman Carbogen Amics Limited situated at Dishman Corporate House. Opp. Jayantilal Park BRTS, Iscon-Bopal Road, Ambli, Ahmedabad was also covered u/s 132 of the Income Tax Act, 1961. From the said premises, various incriminating material such as loose paper, diary, cash books, vouchers, digital data were found and seized. 3. Digital Data found and seized from Dishman House: more particularly the desktop of Chirag Thakkar and data maintained in pen drive at Dishman House by Valjibhai Parmar contains evidences that unaccounted cash was exchanged against the transactions of bogus loans and advances. As admitted by Sh. Bharat Padia, Executive Director of DCAL the group has received bogus loans and advances of Rs. 671,92,06,680/- and advanced non-genuine loans and advances of Rs.795,00,36,904/- between FY 2009-10 to FY 2019-20 (upto date of Search). Year- wise bifurcation of such L&A is as under: Financial Year Transaction Type Amount of transaction during the year FY 2009-10 Debit 131,44,62,460 FY 2009-10 Credit 120,83,63,771 FY 2010-11 Debit 143,00,99,392 FY 2010-11 Credit 123,27,95,700 FY 2011-12 Debit 96,61,07,911 Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 6 FY 2011-12 Credit 106,10,00,900 FY 2012-13 Debit 124,26,45,882 FY 2012-13 Credit 90,86,45,834 FY 2013-14 Debit 123,70,31,262 FY 2013-14 Credit 70,50,35,602 FY 2014-15 Debit 64,84,98,722 FY 2014-15 Credit 67,65,27,450 FY 2015-16 Debit 54,99,15,015 FY 2015-16 Credit 46,33,57,004 FY 2016-17 Debit 21,93,56,361 FY 2016-17 Credit 16,84,13,846 FY 2017-18 Debit 16,19,20,000 FY 2017-18 Credit 10,07,45,505 FY 2018-19 Debit 10,23,05,000 FY 2018-19 Credit 4,65,00,000 FY 2019-20 Debit 7,76,94,900 FY 2019-20 Credit 14,78,21,029 Total Debit 795,00,36,904 Total Credit 671,92,06,680 As can be seen from the above table that during the FY-2012-13 relevant to AY-2013- 14 the Dishman Carbogen Amcis Ltd (Dishman Pharmaceuticals and Chemicals Ltd earlier) us indulged in bogus loan & advances are as under: - FY 2012-13 Debit 124,26,45,882 FY 2012-13 Credit 90,86,45,834 As pert the information received. M/s. ARCOY INDUSTRIES (INDIA) PRIVATE Limited has entered into non genuine transaction with Dishman Carbogen Amcis Ltd. (Dishman Pharmaceuticals and Chemicals Ltd earlier) amounting to Rs.40,02,325/-. 3. Analysis of information received: On verification of above information, it is found that the M/s. Dishman Carbogen Amics Limited is found to have received Rs. 671,92,06,680/- in form of bogus loan and advances and they have advanced Rs. 795,00,36,904/- in form of bogus loan and advance between FY-2009-10 to 2019-20. Unaccounted cash acceptance/payment and accommodation entries taken and given by Dishman Carbogen Amics Limited has been admitted and explained in statement recorded uls. 132(4) by Chirag Thakkar. The same has also been confronted by Shri Bharat Padia, Executive Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 7 Director of Dishman Group on whose instruction Chirag used to obtain such entries. From perusal of information, it is found that the assessee M/s ARCOY INDUSTRIES (INDIA) PRIVATE LIMITEDIS a company which has done transaction Dishman Carbogen Amics Limited during the F.Y.2012-13 relevant to AY. 2013-14. From the verification of excel sheet uploaded on insight portal, it is found that the assessee has done transactions with Dishman Carbogen Amics Limited. The total amount of transactions done by the assessee company with Dishman Carbogen Amics Limited is Rs. 40,02,325/-. The transaction done through the Dishman Group is nothing but the unaccounted income of the assessee company of the A.Y. 2013-14. 4. Enquiries made by the AO as sequel to information collected/ received: In this case, specific information has been received on Insight Portal and flagged as High Risk category case. Moreover, the underlying information is clearly outlining the systematic evasion of taxes by the assessee. The facts as enumerated above have been found out on examination on the case records of the assessee and are self explanatory. Therefore, no further enquiry is required in this case. On the basis of the same there are reasons to believe that the income chargeable to tax has escaped assessment. 5. Finding of the AO: M/s. Dishman Carbogen Amics Limited is found to have received Rs. 671,92,06,680/- in form of bogus loan and advances and they have advanced Rs. 795,00,36,904/- in form of bogus loan and advance between FY-2009-10 to 2019-20. Unaccounted cash acceptance/payment and accommodation entries taken and given by Dishman Group has been admitted and explained in statement recorded u/s. 132(4) by Chirag Thakkar. The same has also been confronted by Shri Bharat Padia, Executive Director of Dishman Group on whose instruction Chirag used to obtain such entries. Statement under oath u/s 132(4) of the Income Tax Act, 1961 of Sh. Chirag K Thakkar, Accounts Manager, DCAL was recorded during search proceedings. Some of the salient features of statements of Sh. Chirag K Thakkar, Accounts Manager, DCAL as under: 1. He reports to Sh. Sanjiv Bhat, GM and ultimately reports to Sh. Bharat Padia, Executive Director. 2. He knows Sh. Rajiv Shah, CA, who provides accommodation entries to Dishman Group companies including Dishman Pharmaceuticals Pvt. Ltd. & Dishman Infrastructure Ltd. 3. Complete modus operandi of such accommodation entries into Dishman Group companies through Rajiv Shah is explained by him. Bharat Padia used to contact Rajiv Shah for accommodation entries of Loans & Advances. At times, cash was paid Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 8 to Rajiv Shah and Rajiv Shah was paid through bank against that cash. The cash utilized for accommodation entries is unaccounted cash and not recorded in books. At other times, Dishman group companies issue cheque and receive cash from Rajiv Shah. This cash receipt unaccounted cash and not recorded in books of accounts. Cheque is issued in the name of concerns suggested by Rajiv Shah. Loan and Advances in books of a/c of Group companies including Dishman Carbogen Amcis Ltd. Dishman Pharmaceuticals Pvt. Ltd.(erstwhile) & Dishman Infrastructure Ltd. 4. He submitted list of a number of entities from which accommodation entries have been taken through Rajiv Shah, CA. He provided name of accommodation entry provider concerns of Rajiv Shah. He also explained that Rajiv Shah, CA used to charge commission in lieu of such accommodation entries. In case cash was to be paid to Rajiv Shah, instructions were received in this regard from Sh. Bharat Padia. Thereafter, Sh. Anand Shrimali, an employee of Rajiv Shah, used to collect cash. After collecting cash, Anand Shrimali used to hand over cash to Rajiv Shah. In similar manner, accommodation entries of cheque to cash and cash to cheque were carried out. 5. He admitted of bogus capital expenses of Rs. 15,20,84,459/- in Dishman Infrastructure Ltd. 6. He deposed that pen drive kept in cabin of Vajibhai Parmar at Dishman Corporate House contains details of accommodation entries. Thereafter, he explained accommodation entries of which are of nature of sales, purchases, commission & L&A. 8. He explained in detail about pen drive kept in Dishman Corporate House, which contains details of accommodation entries. Thereafter, he explained the accommodation entries recorded in seized evidences from Dishman Corporate House in detail. 9. He mentioned that various transactions mentioned in the Desktop computer (his workstation) situated at third floor of the office. He gave folder-wise details of contents. He stated that these are just bogus transactions with paper concerns of Rajeev Shah, Milind Shah & Jeevan jagatiya. He provided tables containing details of the bogus concerns through which the bogus purchases and bogus sales have been made. Thus, the money given for purchase of the goods to the parties is returned through bogus sales. The difference of the purchases and sales of Rs 14,99,03,809/- had been given as cash. It can be seen from the tables provided by Chirag Thakkar that the purchase made from Overseas polymers Pvt Ltd, Anshul Agencies, Faith Innovation, Lakeland Chemical (1) Ltd in 2010-11, 2011-12, 2012-13 have been sold to Anish Corporation, Western Trading Company & Climax Marketing Pvt Ltd. Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 9 Similarly, for the purchases made from other concerns in other years, there are corresponding concerns in table 2 in the annexure to his statement. 10. He categorically admitted that all the loans and advances are merely bogus in nature. He also submitted date-wise and party-wise details of such bogus transactions. Further, Shri Bharat Padiya, Executive Director of Dishman Group has also admitted in his statement recorded u/s. 132(4) of the Act at Dishman House during the search proceeding that whatever facts Shri Chirag Thakkar has stated about the accommodation entries transaction in DPCL/DCAL of Dishman Group entities are true and correct, and these bogu's transactions of loan & advances were being carried as per his instruction. In view of the above facts and evidence and after analysis of the information with the facts available on record, it can be concluded that the transactions done by the assessee Dishman Group are accommodation entry as result of which the assessee has benefitted to the tune of Rs. 40,02,325/-. Therefore, amount of Rs.40,02,325/- has escaped tax and the same is required to be brought to tax. In view of above facts, it is clear that the assessee has claimed non-genuine expenses of Rs.40,02,325/- in form of commission expense. Therefore, I have reasons to believe that there is an escapement of income from tax of Rs.40,02,325/- and it is a fit case for issuing notice u/s. 148 of the Act. 6. Basis of forming reason to believe and details of escapement of income: In this regard, it is stated that the information was not in the possession of the undersigned earlier. The said information/scheme of tax evasion could be unearthed only after investigation was done by Investigation Wing Ahmedabad after carrying out search and seizure operations in the case of Dishman Group. Although, during the course of assessment proceedings, the assessee submitted, P&L account, Balance sheet and other details, the seizure operations in the case of Dishman Group. Although, during the course of assessment scheme of tax evasion was embedded in annual report, audited P&L A/c, balance sheet and books of account in such a manner that it could not be detected by the AO and could be detected only after search was conducted and investigation was carried out by Investigation Wing. It can be reasonably concluded that there is failure on the part of assessee to disclose fully and truly all necessary facts during the assessment proceedings. For aforesaid reasons. it is not a case of change of opinion by the AO. It is evident from the above facts as mentioned in the para 3 & 5, that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration. Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 10 On the basis of the above, I have reason to believe that income of the assessee to the extent of Rs.40,02,325/- has escaped assessment for the year under consideration. Therefore, I am satisfied that it is a fit case for initiating proceedings u/s 147 of the Act. 7. Paragraph will include escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India: NA 8. Applicability of the provisions of section 147/151 to the facts of the case: Since, 4 years from the end of the relevant year has expired in this case, the requirement to initiate proceedings u/s. 147 are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year under consideration, It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above (refer paragraph 4, 5 and 6). In this regard, it is also pertinent to mention here that above referred details have not been called for by the AO and thus are not been examined by the AO nor such details are furnished by the assessee. It was only after receiving the information that this scheme of tax evasion could be unearthed. It is pertinent to mention here that the aforesaid information was not in the possession of the undersigned earlier. The said information/scheme of tax evasion could be unearthed only after receiving the information on Insight Portal in March 2021 i.e. well after the assessment proceedings have been finalized in the case of assessee company. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for assessment for the year under consideration: • In the AY 2013-14, there is an escapement of income chargeable to tax aggregating to Rs.40,02,325/-. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for assessment for the year under consideration thereby necessitating reopening u/s. 147 of the Act. It is true that the assessee has filed a copy of annual report and audited Profit & Loss A/c and Balance Sheet alongwith return of income where various information/material were disclosed. However, the requisite full and true disclosure of all the material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 11 account, annual report, audited P&L A/c and Balance Sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of Explanation 1 of section 147 of the Act It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment. This fact is corroborated from the contents of notices issued by the AO u/s 143(2)/142(1) and order sheet entries recorded during the assessment proceedings. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in annual report, audited P&L A/c, Balance sheet and books of accounts in such a manner that it would require due diligence by the AO to extract these information. For aforestated reasons, it is not a case of change of opinion by the AO. In this case more than four years have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue the notice u/s. 148 is being requested from Principal Commissioner of Income tax as per the provisions of section 151 of the Act.” (emphasis supplied by us) 6. Referring to the afore-reproduced reasons recorded for the opening of the assessment, the Ld. AR of the Assessee has contended that present case of the assessee has been reopened on the premise that it has claimed non genuine expenses of Rs. 40,02,325/- in the form of commission expenses and such reasons recorded by the Assessing Officer were incorrect. He has further contended that Rs. 40,02,325/- was the balance in the ledger of Dishman Carbogen on account of unsecured loan and there was no payment of commission expense made by the assessee to the said concern. The Ld. AR has submitted that the AO in this case had reopened the assessment without verifying and corelating the said information with the accounts/assessment records of the assessee. That the AO though, in the reasons recorded, had Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 12 formed the belief of escapement of income of the assessee alleging that the assessee had booked bogus commission expenses of Rs. 4002325/-, however, in the assessment proceedings he had made the impugned addition holding that the same was on account of bogus loan taken by the assessee from Dishman Group. The Ld. Counsel has submitted that had the AO cross verified the aforesaid information with the assessment records of the assessee, he would have got to know that the assessee had not claimed any such commission expenses in its computation of income. However, the AO without verifying the correctness of the information available on insight portal, straightaway, reopened the assessment u/s 147 of the Act, which is totally on the basis of borrowed satisfaction obtained from inside portal. The Ld. AR has submitted that the AO has failed to establish any live nexus between information received from Insight Portal with facts of assessee’s case. He has further submitted that as per the scheme of the Act, an Assessing Officer can reopen the case of an assessee within the prescribed time limit provided that he has “reason to believe” that some income chargeable to tax has escaped assessment. That such “reason to believe” must be based on some tangible material and must prima- facie establish that there is escapement of any income chargeable to tax. The Ld. Counsel has further referred to the copy of the reply dated 14/03/2022 filed before AO, placed at paper book page No. 168 to 193, and demonstrated that the assessee had specifically asked to the AO to provide information as to whether out of the alleged total amount of advanced by DCAL of Rs. 795,00,36,904/-. whether the alleged amount include amount of loan given to Assessee and whether any evidence was found showing that any cash was paid by the Assessee in lieu of unsecured loan received from Dishman Group. The assessee also requested for cross examination of Chirag Thakkar and Shri Bharat Padia. However, the AO neither provided any such information to the Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 13 assessee nor provided any copy of the statements recorded of Shri Chirag Thakkar and Shri Bharat Padia and nor given any opportunity to cross examine them. The Ld. Counsel has further submitted that the loan taken from Dishman Group was duly disclosed in audited annual accounts as well as in the Schedule of loan taken during the year in Tax Audit Report u/s 44AB of the Act. The assessment in the case of the assessee was carried out u/s 143(3) of the Act. He, therefore, has contended that all the relevant records were available with Assessing Officer and no material facts had been concealed by the assessee which were necessary for making the assessment by the AO for the year under consideration and thus, the reopening of the assessment by the AO was hit by the first proviso to Section 147 of the Act as the same was done after four years from the end of the assessment year. He, therefore, has submitted that reopening of the assessment in this case was bad in law. 7. The Ld. DR, however, has relied on the findings of the lower authorities. 8. We have heard the rival contentions and gone through the record. A perusal of the above recorded reasons would reveal that in the opening paras, the AO noted that from the incriminating digital data found from the laptop of Sh. Sh. Chirag Thakkar, the Accounts Manager, during the course of search action u/s 132 of the Act in the cases of Dishman Group, it revealed that the Dishman Carbogen Amics Limited was indulged in providing accommodation entries of bogus loans and advances and that unaccounted cash was exchanged against these transactions and that this fact was admitted in his statement, recorded u/s. 132(4) of the Act, by Sh. Chirag Thakkar. The same has also been confirmed by Shri Bharat Padiya, Executive Director of Dishman Group on whose instruction Chirag used to obtain such entries. That as per the Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 14 information, the assessee ‘M/s Arcoy Industries (India) Private Limited’ had entered into non-genuine transactions with ‘Dishman Carbogen Amics Limited’ (Dishman Pharmaceuticals and Chemicals Limited earlier) amounting to Rs. 40,02,325/- The AO reiterated the aforesaid facts in the subsequent paras under the heads “Analysis of information received” & “Enquiries made by the AO as sequel to information collected/received”. However, under the heading “Finding of AO” The AO while referring to the statement of Shri Chirag Thakkar has pointed out that the accommodation entries were also of nature of sales, purchases, commission & loan and advances. Further in Para 9 under the said heading the AO has mentioned certain specific transactions stated by Shri Chirag Thakkar to be bogus transactions of purchases and sales. Referring to tables containing details of the bogus purchases and sales transactions, he pointed out that the purchase made from Overseas Polymers Pvt. Ltd., Anshul agencies, Faith Innovation, Lakeland Chemical (I) Ltd. In 2010-11, 2011-12, 2012-13 13 have been sold to Anish Corporation, Western Trading Company & Climax Marketing Pvt Ltd. Similarly, for the purchases made from other concerns in other years, there were corresponding concerns in table 2 in the annexure to his statement. However, it is pertinent to mention here that the AO has not mentioned about any entry, detail or document pointing out about the nature of transaction done by the assessee with the Dishman Group. The only information received by the AO from the Insight Portal was that the assessee had done some non-genuine transaction of Rs.4002325/- with Dishman Group. Nothing more than has been mentioned by the AO either under the different heads of reasons recorded i.e. ‘Analysis of information received; Enquires made by the AO as sequel to information collected/received’. However, under the heading: “Findings of the AO”, he just in the last lines has mentioned: “In view of above facts, it is clear that the assessee has claimed non-genuine Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 15 expenses of Rs.40,02,325/- in form of commission expense. Therefore, I have reasons to believe that there is an escapement of income from tax of Rs.40,02,325/- and it is a fit case for issuing notice u/s. 148 of the Act.” 8.1. It is nowhere stated in any part of the lengthy reasons recorded as to how the AO came to the conclusion that the aforesaid alleged transaction of Rs. 4002325 was non-genuine transaction of commission expenses. A perusal of the reasons recorded for reopening of the assessment would reveal that the assessment in this case has been reopened on the basis of vague and general information available on insight portal that assessee has done some non- genuine transaction of Rs.4002325/- with the Dishman Group. There was no mention of the nature of alleged non-genuine transaction. As discussed above, the AO though, has recorded lengthy reasons under different heads, yet, failed to point out about the nature of the alleged transaction done by the assessee with Dishman Group. It is only at one point that he has mentioned that the said transaction was relating to bogus commission expenditure claimed by the assessee. However, the said observation was factually incorrect. The AO in this case, reopened the assessment in a mechanical manner, without corelating and cross verifying the general information available on the insight portal with the accounts/assessment records of the assessee. This is a case where the AO has reopened the assessment on the basis of borrowed satisfaction and without application of mind and the reasons recorded by the AO do not constitute sufficient and valid reasons for forming belief by the AO of escapement of income of the assessee for the year under consideration. The reasons recorded by the AO, in this case, were factually incorrect and there was no effort made by the AO to verify or corelate the alleged information available to the AO with the assessment records, therefore, it cannot be said that the AO was having Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 16 valid reasons, which a prudent officer in the ordinary course is supposed to have, to form the belief that income of the assessee for the year under consideration has escaped assessment. The Hon'ble Supreme Court in the case of \"Dr. Jagmittar Sain Bhagat & Ors vs Dir. Health Services, Haryana\" in Civil Appeal No.5476 of 2013 decided on July 11, 2013, while relying upon another decision of the Hon'ble Supreme Court in the case of \"Sushil Kumar Mehta v. Gobind Ram Bohra\" (1990) 1 SCC 193 and further placing reliance on the other decisions of the Hon'ble Supreme Court in the cases of \"Premier Automobiles Ltd. v. K.S. Wadke & Ors.\", (1976) 1 SCC 496; \"Kiran Singh v. Chaman Paswan\", AIR 1954 SC 340; and \"Chandrika Misir & Anr. v. Bhaiyalal\", AIR 1973 SC 2391 has observed that where a statute places obligation and enforces the performance in specified manner, \"performance cannot be forced in any other manner.\" Under the relevant provisions of section 147 & section 148 of the Income Tax Act, for assuming jurisdiction to reopen an assessment by the Assessing Officer, there is a condition precedent that the Assessing Officer must have reasons to believe that the income of the assessee for that year has escaped assessment. It has been held time and again that such reasons to believe must have a material bearing on the question of escapement of income. It does not mean a purely subjective satisfaction of the assessing authority. Such reason should be held in good faith and cannot merely be a pretence. The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are \"reason to believe\" and not \"reason to suspect\". There can be no manner of doubt that the words \"reason to believe\" Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 17 suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute \"reason to believe\" has been summed up by the hon'ble Supreme Court in the case of \"Income Tax Officer v Lakhmani Mewaldas\" (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs Paramjit Kaur' (2008) 311 ITR 38 (P&H), wherein, making identical observations, the Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notices u/s 148 of the Act was not valid. Similar view has been taken by the Hon’ble Gujarat High Court in the case of “Spectrum Corporation vs ITO” reported in [2024] 168 taxmann.com 477. 9. Now coming to the applicability of first proviso to section 147 of the Act, the AO, in the reasons recorded, has tried to justify his exercise of jurisdiction to reopen the assessment after four years from the end of the assessment year under consideration by stating : “Although, during the course of assessment proceedings, the assessee submitted, P&L account, Balance sheet and other details, the seizure operations in the case of Dishman Group. Although, during the course of assessment scheme of tax evasion was embedded in annual report, Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 18 audited P&L A/c, balance sheet and books of account in such a manner that it could not be detected by the AO and could be detected only after search was conducted and investigation was carried out by Investigation Wing. It can be reasonably concluded that there is failure on the part of assessee to disclose fully and truly all necessary facts during the assessment proceedings. For aforesaid reasons. it is not a case of change of opinion by the AO. It is evident from the above facts as mentioned in the para 3 & 5, that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration.” The AO has categorically mentioned that he had come to knowledge of non-genuine transactions made by the assessee only after receiving the information on insight portal in March 2021 i.e. well after the assessment proceedings have been finalized in the case of the assessee. Before concluding, the AO again mentions, “It is true that the assessee has filed a copy of annual report and audited Profit & Loss A/c and Balance Sheet along with return of income where various information/material were disclosed. However, the requisite full and true disclosure of all the material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of account, annual report, audited P&L A/c and Balance Sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of Explanation 1 of section 147 of the Act”, and thereby the AO has tried to justify the reopening of the assessment after lapse of four years from the end of assessment year under consideration. However, it is to be noted that in this case the AO has not pointed out as to what more or other facts or material which the assessee was supposed to disclose but not disclosed Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 19 for the purpose of his assessment of income. The AO time and again, himself, has mentioned that the assessee had disclosed all the material facts, however, has stated that the information/material pertaining to the escapement of income was so embedded that material evidence could not be discovered by the AO and could have been discovered with due diligence. The AO further goes on to add that this issue was not examined by the AO during original assessment proceedings u/s 143(3) of the Act. However, as noted above, in the entire reasons recorded, the AO has not mentioned as to what material facts were unearthed on the basis of information available on insight portal which were so allegedly so deeply embedded in the material facts disclosed by the assessee during the original assessment proceedings. As observed above, the assessment in this case has been reopened on the basis of a general and vague information that the assessee has done some non-genuine transaction with Dishman Group, even without pointing out about the nature of such transaction. The beautifully crafted reasoning given by the AO, in this respect, is far from realty. Since, the assessment in this case has been reopened after the lapse of four years from the end of the relevant assessment year, and the earlier assessment was carried out by the AO u/s 143(3) of the Act and further the aforesaid loan transaction with the Dishman Group was duly disclosed by the assessee in its audited accounts of the assessee which formed part of the assessment records, and the AO has not pointed out as to what material facts have not been disclosed by the assessee, which comes to the knowledge of the AO subsequently, hence, the reopening of the assessment u/s 147 of the Act, in this case, is hit by the first proviso to Section 147 of the Act and, therefore, the same is held bad in law. Therefore, the reopening of the assessment in this case is held as bad in law on both counts, firstly, on account of no valid reasons/borrowed satisfaction/non application of mind by the AO, secondly, being hit by first proviso to Section Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 20 147 of the Act, hence the consequential assessment order passed u/s. 143(3) r.w.s.147 of the Act is also bad in law and the same is hereby quashed. 9.1. Since we have decided the legal issue relating to validity of the re- opening of the assessment in favour of assessee, therefore we, at this, do not deem it necessary to discuss the factual merits as the same has been rendered academic in nature. The appeal of the assessee stands allowed on this legal ground. 10. Before parting, it is pertinent to mention here that the assessee has raised another legal ground that, in this case, re-opening has been made on the basis of various material/information collected during the course of search action in the case of Dishman Group and under the circumstances, the only recourse available with the Department was to proceed against the assessee u/s. 153C of the Act and that the re-opening of the assessment u/s. 148 was not justified on this score also. However, we have already held that the re-opening of the assessment in this case is bad in law being based on borrowed satisfaction of the AO and also being hit by first proviso to section 147 of the Act, hence, at this stage, no adjudication is made on this legal ground of appeal and the same is kept open and the assessee may raise this ground at proper stage, if need be. 11. With the above observations, the appeal of the assessee stands allowed. ITA No.425/Ahd/2024 – AY 2014-15 12. The assessee, in this appeal, has taken the following grounds of appeal: “1. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 21 which are initiated merely on the basis of information received from ADIT and statement of third party without appreciating that such details are not related to the appellant. The proceedings u/s 148 initiated in the present case are bad in law and required to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when such proceedings are on account of mere change of opinion since all relevant details were provided to AO during the course of original assessment proceedings and without any new tangible material on record of Assessing Officer. 3. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when reassessment proceedings cannot be conducted on the basis of search conducted in case of third party more particularly when no details related to appellant are found therein. The Ld CIT(A) ought to have treated notice u/s 148 as invalid as AO ought to have issued notice u/s 153C of the Act as proceedings have been initiated based upon documents found during the course of search at the premises of third party. 4. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unexplained unsecured loan for Rs.6,37,67218/- when appellant has established genuineness of same by providing all the necessary details and discharging onus casted by provisions of section 68 of the Act. The addition is required to be deleted. 5. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition relying upon statement of Mr Chirag Thakkar, ex-employee and Bharat Padiya, ex director of Dishman Group and such statements are already disowned by Dishman Group in search proceedings as well as subsequent assessment proceedings. The Ld CIT(A) ought to have appreciated that above referred persons were also terminated from company hence no reliance can be placed on their statements. 6. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition without providing cross examination of Mr Chirag Thakkar and Mr. Bharat Padia as entire addition has been made based upon their general statement recorded during the course of search and there is no corroborative evidence to suggest that cash has been exchanged against unsecured loan taken by appellant. Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 22 7. In law and in the facts and circumstances of the case, the Ld. CIT(A) has erred in dismissing the appeal of appellant without awarding opportunity of video hearing which was specifically requested by the appellant. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 13. A perusal of the above grounds and as submitted by both the Ld. Representatives of the parties, the facts and issues involved in the above appeal being identical to that has been discussed above while adjudicating the appeal of the assessee in ITA No.424/Ahd/2024 for AY 2013-14, hence, our findings given above will mutatis mutandis apply to this appeal also and, accordingly, the assessment order passed u/s.147 of the Act in the above appeal is also held bad in law and, therefore, is hereby quashed. ITA No.426/Ahd/2024 – AY 2015-16 14. The Assessee in this appeal has taken the following grounds of appeal: “1. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid which are initiated merely on the basis of information received from ADIT and statement of third party without appreciating that such details are not related to the appellant. The proceedings u/s 148 initiated in the present case are bad in law and required to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when such proceedings are on account of mere change of opinion since all relevant details were provided to AO during the course of original assessment proceedings and without any new tangible material on record of Assessing Officer. 3. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when reassessment proceedings cannot be conducted on the basis of search conducted in case of third party more particularly when no details related to appellant are found therein. The Ld CIT(A) ought to have treated notice u/s Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 23 148 as invalid as AO ought to have issued notice u/s 153C of the Act as proceedings have been initiated based upon documents found during the course of search at the premises of third party. 4. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unexplained unsecured loan for Rs.1,39,90,937/- when appellant has established genuineness of same by providing all the necessary details and discharging onus casted by provisions of section 68 of the Act. The addition is required to be deleted. 4.1 Without Prejudice to above, the Ld. CIT(A) ought to have appreciated that out of addition made on account of unexplained unsecured loan for Rs.1,39,90,937/-, actual loan procured during the year is Rs. 85,00,000/- and Rs.16,19,543/- pertains to repayment of loan. Instead of giving credit of repayment of loan, such amount has been added to income of the appellant. Therefore, Ld. CIT(A) has erred in not allowing credit of repayment of loan and making addition on account of same. 4.2 Without Prejudice to above, the Ld. CIT(A) ought to have appreciated that out of addition made on account of unexplained unsecured loan for Rs.1,39,90,937/-, Rs.38,71,394/- (net of IDS) pertains to interest provision on loan and such amount cannot be added to income of the appellant. 4.3 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition relying upon statement of Mr Chirag Thakkar, ex-employee and Bharat Padia, ex director of Dishman Group and such statements are already disowned by Dishman Group in search proceedings as well as subsequent assessment proceedings. The Ld CIT(A) ought to have appreciated that above referred persons were also terminated from company hence no reliance can be placed on their statements. 4.4 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition without providing cross examination of Mr. Chirag Thakkar and Mr. Bharat Padia as entire addition has been made based upon their general statement recorded during the course of search and there is no corroborative evidence to suggest that cash has been exchanged against unsecured loan taken by appellant. 5. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unexplained unsecured loan for Rs.25,00,000/-stated to be received from Shivansh Finserve Limited (earlier known as Man Sarovar Financial Service) when the appellant has not Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 24 procured any such loan but made investment in equity share of such entity. The addition is required to be deleted. 6. In law and in the facts and circumstances of the case, the Ld. CIT(A) has erred in dismissing the appeal of appellant without awarding opportunity of video hearing which was specifically requested by the appellant. 7. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 15. It is observed that in the year under consideration, the AO has issued notice u/s 148 of the Act primarily on the following two grounds: “(i) The Assessee has claimed non-genuine expenses of Rs.1,39,90,937/- in form of commission expenses; (ii) The AO had information from DCIT, Central Circle – 1(2), Ahmedabad, based upon search carried out in the case of Sanjay Shah and Jignesh Shah which revealed that Shivansh Finserve Limited was mainly engaged in business of arranging/facilitating/providing accommodation entries to various parties. As per above information, Assessee had entered into transactions of Rs.25,00,000/- with said company which was an accommodation entry. “ 15.1. It is observed that in reasons recorded, the allegation of the Assessing Officer for alleged escapement of income on account of non-genuine commission expenses was for Rs.1,39,90,937/-. During the course of reassessment proceedings as well as while filing objections to reasons recorded, the assessee has claimed that in year under consideration, there was no transaction of any commission payment with Dishman Group but there was a repayment of loan to Dishman Group for Rs.16.19 lacs. The Ld. AR further referred to ledger confirmation received from Dishman Group wherein, it was stated that a sum of Rs.85,00,000/- was received by the assessee as loan. In the Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 25 assessment order, the AO has made addition of Rs. Rs.1,39,90,937/- u/s 68 of the Act. Neither the nature of the transaction nor the figure of the amount of transaction match with that has been recorded by the AO in the reasons recorded. Even the AO while making the additions has also ignored these factual aspects. The facts and issue involved in the above appeal being identical to that has been discussed above while adjudicating the appeal of the assessee in ITA No.424/Ahd/2024 for AY 2013-14, hence, our findings given above will mutatis mutandis apply to this ground/issue also and, accordingly, the reopening of the assessment on this issue is also held bad in law. 15.2. Regarding the alleged escapement of income to the extent of Rs. 25,00,000/-, the Ld. AR for the assessee has invited our attention to page 26 of the paper book, comprising the audited annual accounts, wherein the assessee has duly disclosed an investment in the shares of M/s Mansarovar Financial Services Limited (formerly known as M/s Shivansh Finserve Limited) amounting to Rs. 25,00,000/-. The aforesaid investment is also reflected in the audited annual accounts pertaining to Assessment Year 2017-18. In the course of framing the assessment order, the AO has invoked the provisions of Section 68 of the Income-tax Act, 1961, and made an addition of Rs. 25,00,000/-. 15.3. It is not the case of the AO that the said investment was made out of any unaccounted income of the assessee. We fail to understand how, an investment made by the assessee, even in a penny stock company, out of its duly accounted funds, could be a case of escapement of income of the assessee. In this case, the assessee has not received any funds which could be said to have not accounted for by the assessee nor it is a case of claim of any bogus long term Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 26 gains by the assessee. Hence, it is not a case of any receipt or any income by the assessee and there is no question of any escapement of income on this issue. The AO, in this case, has merely placed reliance on information received from the AO of the concerned party, without undertaking any correlation or verification vis-à-vis the transactions duly recorded in the assessee’s books of account. The AO has failed to record reasons as to how the investment made by the assessee with aforesaid company was in the shape of accommodation entry and how the assessee has been benefitted, which has resulted into escapement of income. Thus the reopening of the assessment on this issue also is bad in law. Even the addition, on merits, apparently, as discussed above, is not sustainable. 15.4 Though the first proviso to section 147 is not attracted in this year, however, the reasons recorded for reassessment being based upon incorrect facts, without application of mind, without correlating information received by AO with transactions undertaken by the assessee and being based on borrowed satisfaction, hence, our findings given above while adjudicating the appeal of the assessee in ITA No.424/Ahd/2024 for AY 2013-14 in para-8.1, will mutatis mutandis apply to this appeal also and, accordingly, the assessment order passed u/s.147 of the Act in the above appeal is also held bad in law and, therefore, the same is hereby quashed. ITA No.427/Ahd/2024 – AY 2017-18 16. The Assessee in this appeal has taken the following Grounds of Appeal: “1. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid which are initiated merely on the basis of information received from ADIT and statement of third party without appreciating that such details are not related Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 27 to the appellant. The proceedings u/s 148 initiated in the present case are bad in law and required to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when reasons recorded for reopening present proceedings are incorrect. 3. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when such proceedings are on account of mere change of opinion since all relevant details were provided to AO during the course of original assessment proceedings and without any new tangible material on record of Assessing Officer. 4. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred considering the reassessment proceedings u/s 147 as valid when reassessment proceedings cannot be conducted on the basis of search conducted in case of third party more particularly when no details related to appellant are found therein. The Ld CIT(A) ought to have treated notice u/s 148 as invalid as AO ought to have issued notice u/s 153C of the Act as proceedings have been initiated based upon documents found during the course of search at the premises of third party. 5. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unexplained unsecured loan for Rs.1,55,00,000/-when appellant has not received any unsecured loan during the year. The addition is required to be deleted. 6. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unexplained unsecured loan for Rs1,55,00,000/-when during the year no fresh loan has been accepted and there is only repayment of Rs.1,05,00,000/-. The addition is incorrect and required to be deleted. 7. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition relying upon statement of Mr Chirag Thakkar, ex-employee and Bharat Padia, ex director of Dishman Group and such statements are already disowned by Dishman Group in search proceedings as well as subsequent assessment proceedings. The Ld CIT(A) ought to have appreciated that above referred persons were also terminated from company hence no reliance can be placed on their statements. Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 28 8. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition without providing cross examination of Mr Chirag Thakkar and Mr. Bharat Padia as entire addition has been made based upon their general statement recorded during the course of search and there is no corroborative evidence to suggest that cash has been exchanged against unsecured loan taken by appellant. 9. In law and in the facts and circumstances of the case, the Ld. CIT(A) has erred in dismissing the appeal of appellant without awarding opportunity of video hearing which was specifically requested by the appellant. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 17. The facts and issues involved in the above appeal are identical to that has been discussed above while adjudicating the appeal of the assessee in ITA No.426/Ahd/2024 for AY 2015-16. It is observed that in reasons recorded, the allegation of the Assessing Officer for alleged escapement of income on account of non-genuine commission expenses was for Rs.1.55 crores. During the course of reassessment proceedings as well as while filing objections to reasons recorded, the assessee claimed that in year under consideration, there was no transaction of commission with Dishman Group but there was a repayment of loan to Dishman Group for Rs.1.05 crores. The Ld. AR further referred to ledger confirmation received from Dishman Group wherein it was stated that only Rs.25,00,000 was received by the assessee as loan on 04/07/2016 which was repaid on the same date itself. Thus, in year under consideration there was a repayment of loan of Rs.1.05 crore by the assessee and not any receipt of loan from Dishman Group. While passing the Assessment Order the AO has made addition of Rs.1.55 crores u/s 69A of the Act, whereas, there is repayment of loan of Rs.1.05 crores. The reasons recorded are silent regarding alleged escapement of income. Thus, apart from Printed from counselvise.com ITA Nos.424, 425, 426 and 427/Ahd/2024 Arcoy Industries (India) P. Ltd. AYs : 2013-14, 2014-15, 2015-16 & 2017-18 29 reasons recorded for reassessment being based upon incorrect facts, without application of mind, with correlating information received by AO with transactions undertaken by the assessee and based on borrowed satisfaction, the reopening of assessment in this year is also held as bad in law. Our findings given above will mutatis mutandis apply to this appeal also and, accordingly, the assessment order passed u/s.147 of the Act in the above appeal is also held bad in law and, therefore, the same is hereby quashed. 18. In the result, all the captioned four appeals of the assessee are hereby allowed. Order pronounced on 23rd December, 2025. Sd/- Sd/- (Narendra Prasad Sinha) Accountant Member (Sanjay Garg) Judicial Member Ahmedabad, dated 23/12/2025 tcn* आदेश की !ितिलिप अ(ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0014 / The Appellant 2. \u0015\u0016थ\u0014 / The Respondent. 3. संबंिधत आयकर आयु / Concerned CIT 4. आयकर आयु (अपील) / The CIT(A)/(NFAC), Delhi 5. िवभागीय \u0015ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड! फाईल / Guard file. आदेशानुसार/BY ORDER, स\u0016ािपत \u0015ित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "