GULMOHAR TOWERS PRIVATE LIMITED,KOLKATA V. INCOME TAX OFFICER, WARD 10(2), KOLKATA

ITA 976/KOL/2025

AI Insights

Gulmohar Towers Private Limited appealed against the order of the National Faceless Appeal Centre, Delhi, which pertained to the assessment year 2011-12. The primary contention was the invalid reopening of the assessment under Section 147 of the Income-tax Act, 1961. The reassessment was based on information from the investigation wing about alleged accommodation entries involving shell companies. The Tribunal found that the reasons recorded for reopening the assessment were vague and did not establish a clear link between the information received and the alleged escapement of income. Furthermore, the Tribunal criticized the mechanical approval process by the Principal Commissioner of Income Tax, which lacked an independent application of mind.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835849 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2025
• Other Referred Cases: PCIT Vs Meenakshi Overseas Pvt Ltd, CIT vs. SFIL Stock Broking Ltd, GRD Commodities Ltd Vs PCIT, PCIT Vs Shodiman Investment Pvt Ltd, Sarthak Securities Co Pvt Ltd. Vs ITO, M/s. Ganesh Ganga Vs. ITO, United Electricals Co. Pvt Ltd. Vs Commissioner of Income Tax, Commissioner of Income Tax Jabalpur Vs S Goyanka Lime & Chemical Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.N. BARNWAL
• Assessee Lawyers: S. JHAJHARIA
• Keywords: Condonation of delay; Reasonable cause; Reassessment proceedings; Question of law; Reopening of assessment; Accommodation entries; Competent authority; Tangible material; Borrowed satisfaction; Bogus
• Section: 147; 148; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No. 976/KOL/2025 (Assessment Year: 2011-12) Gulmohar Towers Private Limited Room No.105, 1st Floor, 7, Mangoe Lane, Surendra Mohan Ghosh Sara, Kolkata-700001, West Bengal Vs. Income Tax Officer, Ward 10(2) Aaykar Bhawan, Kolkata-700069 West Bengal (Appellant) (Respondent) PAN No. AACCG9168L Assessee by : Shri S. Jhajharia, AR Revenue by : Shri P.N. Barnwal, DR Date of hearing: 04.11.2025 Date of pronouncement: 02.02.2026 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 10.102024 for the AY 2011-12. 2. At the time of hearing, we observe from the appeal folder that there is a delay of 126 days for which the condonation petition along with affidavit was filed. The counsel of the assessee explained the reasons for delay in filing the appeal by referring to the affidavit of the assessee which was due to the rectification petition filed before ld. Printed from counselvise.com Page | 2 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 CIT(A) for non-disposal of ground no. 1 on legal issue but the same was rejected. The Ld. D.R did raise any objection to the condoning the delay on the ground that this is not the reasonable cause for late filing of appeal. After hearing the rival contentions and perusing the materials available on record, we find that the delay is for bonafide and genuine reasons and hence, we condone the delay and adjudicate the appeal in the ensuing paras. 3. The only issue raised in ground no.1 is against invalid reopening of assessment u/s 147 of the Act made by the AO. The assessee has also assailed the order of ld. CIT (A) simply setting aside the issue to the file of the ld. AO without deciding the same on merit. 3.1. The facts in brief are that the assessee is a private limited company and has filed the return of income on 26.09.2011, declaring total income at ₹12,23,346/-, which was processed u/s 143(1) of the Act on 11.01.2012. Subsequently, the assessment was reopened u/s 147 of the Income-tax Act, 1961 (hereinafter referred to “the Act”) by issuing notice u/s 148 of the Act on 30.03.2018, on the ground that the income chargeable to tax amounting to ₹43,32,00,000/- has escaped assessment. The assessee complied with the said notice issued u/s 148 of the Act by filing the return of income and also requested the ld. AO to supply the reasons recorded for reopening of assessment. The reasons were accordingly supplied by the ld. AO to the assessee. The case of the assessee was reopened after the ld. AO received information from the investigation wing that Shri Anand Sharma, was involved in giving accommodation entries through paper/ shell companies of which assessee is one of the beneficiaries. The ld. AO received information that Shri Anand Sharma has been Printed from counselvise.com Page | 3 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 giving accommodation entries in the form of sale of shares which were purchased by various companies, managed and controlled by said operator. The AO was issued the questionnaire during the course of assessment proceedings which was not complied with by the assessee resulting into passing the ex-parte order by the ld. Assessing Officer. The ld. AO on the basis of available information added the entire amount of sale consideration received by the assessee from sale of shares/ investments amounting to ₹43,32,00,000, which according to the ld. AO was arranged by Shri Anand Sharma an entry operator. 3.2. In the appellate proceedings, the ld. CIT (A) restored the issue to the file of the ld. AO without deciding the legal as well as the issue on merit despite the assessee furnishing all the details and documents before the ld. appellate authority. 3.3. After hearing the rival contentions and perusing the materials available on record, we find that in this case the reopening of assessment has been made by the ld. AO u/s 147 of the Act by recording the reasons to believe u/s 148(2) of the Act which are extracted below for the sake of ready reference:- Blank Printed from counselvise.com Page | 4 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 “ Printed from counselvise.com Page | 5 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 3.3.1. We observe from the above reasons recorded that in the first para the ld. AO referred to the information received from the investigation wing and in the second para the ld. AO referred to the return of income of the assessee and noted that there is change of ownership of the company. The ld. AO also noted that the assessee has sold investments to shell/ paper companies without any profit or loss on such sale of investments. In third para the ld. AO noted that the assessee has not made true and full disclosure of the material necessary for determination of its income chargeable to tax and finally held that the income to the tune of ₹43,32,00,000/- has escaped assessment and it is a fit case for provisions of Section 147 of the Act. We observe from the above reasons that the reasons recorded by the ld. AO are very vague and generic and based on the suspicion rather than any correct and concrete material being on record that income has escaped assessment. The ld. AO noted in the reasons that assessee has sold investments in shell companies/ paper companies during the year amounting to ₹43,32,00,000/- and since the ownership to the assessee company was changed during the year and considering the fact that during the year the investments were sold at no profit or no loss and thus the income has escaped assessment. In our opinion, the reopening of assessment cannot be made based on such incomplete reasons as objective satisfaction of the ld. AO is not there. The ld. AO has not recorded as to how the investments sold during the year of ₹43,32,00,000/- would be treated as escaped income of the assessee. Therefore, the reopening of assessment based on the above said decisions cannot be sustained. The ld. AO has also not recorded as to how the money received from the sale of investments Printed from counselvise.com Page | 6 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 which were purchased in the earlier assessment years were bogus. Therefore, the ld. AO could not distinguish the sale of investments and receipt of income. We also note that on the one hand the ld. AO noted that the income of the assessee has escaped assessment which means that the case of the assessee is covered u/s 147(a) of the Act, whereas the ld. AO has in fact invoked the provisions of Section 147(b) of the Act noting that the there was a failure on the part of the assessee to disclose fully and truly all material facts qua the sale of investments. Therefore, there was no tangible material on record which suggests the escapement of income. We observe that there was non-application of independent mind by the ld. AO, lack of rational link between the information received and reasons recorded. Therefore, such inadequate reasons cannot be allowed to form basis for assumption of jurisdiction u/s 147 of the Act. In the present case, the ld. AO has merely acted on the information received from investigation wing without any independent application of mind and this in fact case of borrowed satisfaction which is not permissible under the Act. Therefore, considering these facts and circumstances the reopening of assessment is void ab initio and invalid in the eyes of law on the ground of non application of independent application of mind to the information received from the wing as well as on barrowed satisfaction. The case of the assessee finds support from the decision in the case PCIT Vs Meenakshi Overseas Pvt Ltd (2017) 82 taxmann.com 300 (Del). In the said decision, Hon'ble Delhi High Court has held that where the reasons to believe contain not the reasons but the conclusions of the AO one after the other and there was no Printed from counselvise.com Page | 7 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The Hon'ble High Court has held that the conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a borrowed satisfaction. Besides the case of the assessee is squarely covered by the decisions of CIT vs. SFIL Stock Broking Ltd. in [2010] 325 ITR 285 (Del) ,GRD Commodities Ltd Vs PCIT (2023) 149 taxmann.com 223(Cal), PCIT Vs Shodiman Investment Pvt Ltd (2018) 93 taxmann.com 153 (Bom) and Sarthak Securities Co Pvt Ltd. Vs ITO (2010) 329ITR 110(Del). 4. The last limb of the argument of the ld. AR is that the sanction by the ld. PCIT is mechanical and without application of mind. For the sake of ready reference, we extract the approval granted by the ld. PCIT as under:- Blank Printed from counselvise.com Page | 8 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 Printed from counselvise.com Page | 9 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 4.1. A perusal of the above sanction accorded u/s 151 of the Act reveals that CIT has simply noted that “Satisfied on the reasons recorded by AO that it is a fit case for action u/s 147/148 of the Income-tax Act, 1961. Hence, proposed action is approved”. We note that the ld. PCIT has not recorded his own satisfaction while granting the approval u/s 151 of the Act and therefore, the purpose of providing the mechanism of granting approval by the higher authority to the reopening of assessment cannot be considered as valid approval if the sanction is accorded in such a manner which involved no-application of mind and granting in a mechanical manner. The granting of approval in such a manner would defeat the very purpose of safeguard provided in the Act against any wrong re- opening. . In our considered opinion the said mistakes on the part of the AO while recording reasons are fatal and cannot be allowed to be cured even by setting aside the assessment. We also note that even the competent authority u/s. 151 of the Act which is in the present case has accorded the approval in a mechanical manner ashe has failed to notice these mistakes while granting approval. In our opinion, the said casual reopening of assessement can not be allowed as by resorting to the reopening of assessment the revenue unsettles the already settled assessment. The case of the assessee finds support from the decision namely M/s. Ganesh Ganga Vs. ITO, ITA No. 1579/Del/2019, AY 2010-11 dated 07.11.2019. The said decision has been passed by the coordinate bench by following decision of Delhi High court in the case of United Electricals Co. Pvt Ltd. Vs Commissioner of Income Tax 258 ITR 317(Del). In the said decision the hon’ble Delhi has held that approval granted by the additional commissioner u/s 151 of the Act by stating “Yes I am satisfied that it Printed from counselvise.com Page | 10 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 is a fit case issue of notice u/s 148 of the Act” is without application of mind by the additional commissioner of income tax . Similarly in the case of Commissioner of Income Tax Jabalpur Vs S Goyanka Lime & Chemical Ltd (2015) 56 taxmann.com 390(M.P.) , the Hon’ble Apex court has dismissed the SLP of the revenue on the same reason because the Joint Commissioner of Income Tax recorded satisfaction in mechanical manner and without application of mind. In view of the facts and circumstances as stated above and the ratio laid down in the various decision as discussed above, we are inclined to quash the reassessment proceedings. 4.2. In view of the facts and circumstances as stated above and the ratio laid down in the various decisions as discussed above, we are inclined to quash the reassessment proceedings 4.3. So far as the merits of the case are concerned, we find that these shares were held since earlier assessment years (since A.Y. 2007-08) and have been shown in the balance sheets in the successive assessment years. We note that during the year the assessee has only sold these shares and monetized the investments. Therefore, the addition cannot be made u/s 68 of the Act and the money cannot be treated as unexplained money as has been held by Hon'ble High Court in case of PCIT vs. Tulsyan and Sons (P.) Ltd. [2025] 174 taxmann.com 37 (Calcutta)[16-04-2025], ITAT/239/2024 in IA No. GA/2/2024 vide order dated 16th April, 2025 which has been followed by the coior. In the said case the addition made by the ld. AO on account of sale of investment was deleted by the ld. CIT (A) and the Tribunal confirmed the order of the Printed from counselvise.com Page | 11 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 ld. Assessing Officer. The Hon'ble High Court while deciding the issue held as under: - We have heard Mr. Aryak Dutta, learned standing counsel assisted by Mr. Soumen Bhattacharjee, learned standing counsel for the appellant and Mr. J. P. Khaitan, learned senior advocate assisted by Mr. Pratyush Jhunjhunwalla, learned advocate for the respondent. The short issue which falls for consideration is whether the learned tribunal was right in affirming the order passed by the Commissioner of Income Tax (Appeals)- 21, Kolkata [CIT(A)] dated 10.5.2023 by which the assessee’s appeal was allowed and the addition made under section 68 of the Act was deleted. The Assessing Officer made the addition by invoking section 68 of the Act on the ground that the assessee failed to discharge its onus to establish identity, creditworthiness and genuineness of the transaction in respect of the money received through cash trail. The CIT(A) in course of hearing the appeal called for a remand report from the Assessing Officer and in the said remand report the Assessing Officer has in no uncertain terms accepted the receipt of the impugned sum on account of sale proceeds of investment. The Assessing Officer verified the investment sold which are shown in the balance-sheet for the financial year 2010-11 in Schedule-4 of the balance-sheet and after considering these facts it was stated that the assessee had sold shares held by way of the investment during the year to M/s. Shivshakti Communications and Investment Pvt. Ltd. and Carnation Tradelink Pvt. Ltd. and it is not a receipt of unsecured loan. This fact, apart from other factual details, were considered by the CIT(A) and by an elaborate order dated 10.5.2023 the appeal filed by the assessee was allowed. The tribunal on its part re-examined the factual position and took note of the findings rendered by the CIT(A) and concurred with the same. We also find that the tribunal has also examined thefactual position and took note of the remand report as called for by the CIT(A) which confirmed the alleged sum is on account of sale of investment and not otherwise. Thus, we find no question of law much less substantial question of law arises for consideration in this appeal. Accordingly, the appeal fails and the same is dismissed. Consequently, the connected application stands closed. 4.4. Since, the facts of the case before us vis-à-vis, facts of the decisions cited above are substantially similar and therefore, we respectfully following the ratio laid down in the above decision , even on merits the assessee has a strong case in its favour. Printed from counselvise.com Page | 12 ITA No. 976/KOL/2025 Gulmohar Towers Private Limited; A.Y. 2011-12 4.5. Considering the above facts and circumstances in the light of the above decisions, we are inclined to quash the reopening of assessment as CKIT(A). 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 02.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 02.02.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "