DELIGHTFUL ESTATE DEVELOPERS LLP,KOLKATA V. ACIT CENTRAL CIRCLE 3.2, AAYAKAR BHAWAN POORVA, KOLKATA

CO 4/KOL/2025

AI Insights

The case involves appeals by the Revenue and a cross objection by the assessee, M/s Delightful Estate Developers LLP, against the order of the Commissioner of Income-tax (Appeals), Kolkata. The Revenue challenged the deletion of an addition of \\u20b972,89,457, while the assessee contested the legality of the reopening of the assessment under section 147 of the Income Tax Act, 1961. The reopening was based on the claim that the assessee had received accommodation entries amounting to \\u20b968,00,224. The Tribunal found the reasons for reopening the assessment to be vague and lacking specific details about the transactions, thus quashing the reopening and allowing the CO of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37534 (ITAT-KOLKATA)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT DATTA
• Assessee Lawyers: SUNIL SURANA
• Keywords: Reassessment proceedings; Unexplained cash credit; Reopening of assessment; Accommodation entries; Competent authority; Bogus
• Section: 147; 148; 68; 133(6); 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI SONJOY SARMA, JM ITA No. 2309/KOL/2024 (Assessment Year: 2017-18) ACIT, CC 3(2), Kolkata ACIT, Central Circle 3(2), Aaykar Bhavan Poorva, 5th Floor, 110, Shanti Pally, Kolkata-700107, West Bengal Vs. M/s Delightful Estate Developers LLP Hasting Chamber, 5 th Floor, Room No.5C, 7C, Kiran Shankar Roy Road Kolkata G.P.O. Kolkata-700001, West Bengal (Appellant) (Respondent) PAN No. AAMFD0344A CO No.04/KOL/2025 (Assessment Year: 2017-18) M/s Delightful Estate Developers LLP Hasting Chamber, 5 th Floor, Room No.5C, 7C, Kiran Shankar Roy Road Kolkata G.P.O. Kolkata-700001, West Bengal Vs. ACIT, CC 3(2), Kolkata ACIT, Central Circle 3(2), Aaykar Bhavan Poorva, 5 th Floor, 110, Shanti Pally, Kolkata-700107, West Bengal (Appellant) (Respondent) Assessee by : Shri Sunil Surana, AR Revenue by : Shri Rajat Datta, DR Date of hearing: 28.01.2025 Date of pronouncement : 04.03.2025 O R D E R Per Rajesh Kumar, AM: These are the appeals preferred by the Revenue and CO by the assessee against the order of the Commissioner of Income-tax Page | 2 ITA No. 2309/KO/2024 & CO No. 4/KOL/2025 Delightful Estate Developers LLP; A.Y. 2017-18 (Appeals), Kolkata-21 (hereinafter referred to as the “Ld. CIT(A)”] dated 04.06.2024 for the AY 2017-18. 02. The Revenue has filed the appeal against the order of ld. CIT (A) challenging the deletion of addition of ₹72,89,457/-, whereas the assessee has challenged by way of cross objection the legality of reopening of assessment by the ld. AO u/s 147 of the Act. Since, the assessee has raised legal issue in the ground no.3 qua reopening of assessment u/s 147 of the Act. Therefore, we are inclined to decide the first the legal issue raised in ground no.3 of the cross objection of the assessee. The said ground raised is as under:- “3. For that the proceedings u/s 147 initiated on the basis of vague reasons are not maintainable.” 03. The facts in brief are that the assessee filed the return of income on 21.07.2017 declaring total income at ₹ nil. Thereafter, a search action in case of Banka Group of companies was conducted on 25.05.2018, in which it was found that Mukesh Banka and is associated entities were engaged in providing accommodation entries and the assessee is the beneficiary of the said accommodation entries to the tune of ₹68,00,224/-. Accordingly, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31st March, 2021 after obtaining the approval of the competent authority. The assessee complied with the said notice by filing the return of income on 2nd April, 2021. Thereafter the statutory notices were issued and served upon the assessee. In Para no. 3 of the assessment order, the ld. AO extracted the details of unsecured loans received by the assessee from five entities aggregating and amounting to ₹68,00,224/- along with dates, addresses of the lenders and also details interest paid to them aggregating to ₹4,89,233/-. Thereafter Page | 3 ITA No. 2309/KO/2024 & CO No. 4/KOL/2025 Delightful Estate Developers LLP; A.Y. 2017-18 the ld. AO after discussing the each of the entities came to the conclusion that the loans were received from shell companies which were engaged in providing accommodation entries and therefore the said loans were treated as unexplained cash credit and added to the income of the assessee u/s 68 of the Act. Similarly, the interest paid on the said loans amounting to ₹4,89,233/- was also added to the income of the assessee as bogus interest paid to the entities not allowable u/s 37 of the Act in the assessment framed u/s 147 read with section 144B of the Act dated 28.03.2022. 04. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee on merit, however, the legal issue was not adjudicated. Hence, the Revenue’s appeal before us is against the deletion of addition while the assessee has challenged the validity of reassessment proceedings based on the vague and scanty reasons. 05. 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 on 31.03.2021, after obtaining the approval from the competent authority.From the perusal of the reasons recorded, a copy of which is attached at page no. 2 to 4 of the Paper Book, we observe that as per the information available with department, the assessee has taken accommodation entry to the tune of ₹68,00,224/- and accordingly, the AO has reasons to believe that the income of the assessee has escaped to that extent in terms of clause (b) of explanation 2 of Section 47 of the Act. For the sake of ready reference, the reasons are extracted below:- “2. A search & seizure/survey action in the case of Banka Group was conducted on 21.05.2018. Based on the findings gathered and subsequently brought on records, it is Page | 4 ITA No. 2309/KO/2024 & CO No. 4/KOL/2025 Delightful Estate Developers LLP; A.Y. 2017-18 found that Shri Mukesh Banka is the key person/controlling person who looks after day to day financial affairs and accommodation entry business of Banka Group. 3. During the course of post search verification of seized/impounded naturals, various paper/shell companies controlled and managed by Shri Mukesh Banka were identified. All these companies were categorically accepted by Shri Mukesh Banka as paper/shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Following the lead as obtained from the statements of Shri Mukesh Banka and the materials seized. during the course of search operation the bank accounts of the paper/shell companies controlled and managed by Shri Mukesh Banka was requisitioned from respective banks and analyzed. On verification of the bank accounts of paper/shell companies of Banka Group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogusunsecured loan or in other forms, from the paper/shell companies of Bankas Group 4. Further the financial analysis of such paper/shell companies of Banka Group from which such beneficiaries have been identified, has been carried out to ascertain their financial creditworthiness. The details of such financial analysis carried out company wise are provided in CD2 This led to revelation of various noticeable points like: (1) No profit accumulation in the company(s) across various financial years (1) No actual business done by the company(s) being zero turn over reported in various financial years (it) Most of the companies have shown income under the head Other Income which shows that these companies have no actual business activities and only getting interest income under the head other income for providing bogus unsecured loan to different beneficiaries (iv) The admission of Shri Mukesh Bunk vide is statement recorded u/s. 131/132(4) of the Income-tax Act, 1961 on 30.05.2018 and 19.07.2018 that these companies are paper/shell companies, controlled and managed by Shri MukeshBarka. (v) The directors of the companies are dummydirectores of Shri Mukesh Banka as per the statement of Shri Mukesh Banka recorded us 132(4) of the Income Act 1961 on 19.07.2018. (vi) These companies were found to be non-existent as per enquiry made by Inspector of Income Tax 5. Further, during the course of analysis and examination of the bank statements of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various bank accounts of paper/shell companies of Shri Mukesh Banka was clear bed and substantiated These findings got further authenticated from the statements of Shri Mukesh Banka regarding the pattern of cash withdrawals from his various companies: Huge withdrawal of cash from the bank accounts of Japer/shell companies of Banka Group clearly established the fact that withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group. The details of cash withdrawal which has been quantified company wise and year wise is enclosed in a CD-2. 6. Furtherongstall identified beneficiaries, the following assessees have been identified as beneficiaries whose jurisdiction lies with your charge Enclosed as ANNEXURE and provide the format given below). The details isbeing mentioned as under which requires further analysis, investigation and verification by the jurisdictional assessing Page | 5 ITA No. 2309/KO/2024 & CO No. 4/KOL/2025 Delightful Estate Developers LLP; A.Y. 2017-18 officers at their end as per provision of Income tax Act, 1961. So far as finalizing the quantum of concealed income is concerned, the Assessing Officer should not restrict himself to the findings incorporated in this report In this case, as per the information available the assessee has taken accommodation entry to the tune of Rs.68,00,224/- In view of the above, I have reasons to believe that the assessee's income to the tune of Rs. 68,00,224/- has escaped assessment as per clause (b) under Explanation 2 of section 147 of the I.T. Act, 1961 for the A.Y. 2017-18. Since, 4 years have not been passed from the end of the relevant Assessment Year, necessary approval is required from the Ld. Addl./Joint C.I.T., Range-32, Kolkata before issuing notice u/s 148, as per section 151(1) notice of the I.T. Act, 1961. Accordingly, the matter is being put up before the Ld. Addl./Joint C.I.T., Range-32, Kolkata for his kind perusal and necessary approval, if deemed fit.” 06. On perusal of the above reasons, we observe that the ld. AO has not completely mentioned the details of transactions which the assessee has entered into during the impugned year as accommodation entries such as the particulars as to person from whom/ entity from whom the money was received and when it was received etc. The ld. AO merely reproduced the information available with the department and recorded his so-called satisfaction in one line that on the basis of information available, the assessee has taken accommodation entry to the tune of ₹68,00,224/- which in our opinion is wrong and against the provisions of the Act. In our opinion, the reasons have to be unambiguous, unscanty and clear and should contain the details of transactions entered by the assessee such as the date of transaction, amount received, the person/ entity from whom received the money. However, all the information were not mentioned in the reasons recorded. Therefore, the reasons are sanctity, unambiguous and vague and the ld. AO acted merely on the basis of borrowed satisfaction without any independent application of mind. Therefore, we are of the view that the case of the assessee was invalidly Page | 6 ITA No. 2309/KO/2024 & CO No. 4/KOL/2025 Delightful Estate Developers LLP; A.Y. 2017-18 reopened u/s 148 of the Act. The case of the assessee find force from the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi), wherein the Hon'ble High Court has held that the reopening of assessment cannot be allowed on the basis of sanctity, vague reasons, where the ld. AO has not mentioned in the reasons recorded the details of transactions and also the details of persons / entity from whom the money was received by the assessee. Considering the facts of the case in the light of the above decision, we are inclined to quash the reopening of assessment and consequent order passed by the ld. Assessing Officer. Consequently, the appeal of the cross objection filed by the assessee is allowed on legal issue. 07. Even on merit, we note that the loans raised by the assessee were fully repaid and assessee has filed all the information/ evidences before the ld. AO but the ld. AO has not done any independent verification and so much so that that the notice u/s 133(6) of the Act were not issued and he merely relied on the statement recorded during the course of search u/s 132(4) of the Act that Mr Banks and his associate concerns were engaged in providing accommodation entries. Even the cross examination requested by the assessee was not granted and the ld. CIT (A) after taking int account all the facts allowed the appeal of the assessee by directing the ld. AO to delete the addition. On the other hand, the ld. DR submitted that the cross- examination was never asked for by the assessee which was rebutted by the assessee by referring to page no.23 of the Paper Book, which is a written submission dated 26.03.2022, wherein cross examination was specifically requested by the assessee before the ld. AO. We note that even cross examination requested vide letter dated 23.03.2022. Page | 7 ITA No. 2309/KO/2024 & CO No. 4/KOL/2025 Delightful Estate Developers LLP; A.Y. 2017-18 Therefore, we do not find any infirmity in the order of the ld. CIT (A) so far as the merits of the appeal are concerned. 08. In the result, the CO of the assessee is allowed and the appeal of the Revenue is dismissed as infructuous Order pronounced in the open court on 04.03.2025. Sd/- Sd/- (SONJOY SARMA) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 04.03.2025 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 "