INCOME TAX OFFICER WARD 4 1 KOLKATA, KOLKATA V. PANEL COMMERCE PVT LTD, KOLKATA

ITA 1292/KOL/2023

AI Insights

The case involves an appeal by the Income Tax Officer against the order of the CIT(A), which had partly deleted an addition made by the Assessing Officer under section 68 of the Income Tax Act, concerning unexplained cash credits amounting to ₹4.94 crores. The assessee, Panel Commerce Pvt. Ltd., was alleged to have transacted with a shell company, M/s Brahma Tradelinks Pvt. Ltd., and received accommodation entries. The Tribunal had previously quashed the reopening of the assessment for the same assessment year in a related appeal, which led to the dismissal of both the Revenue's appeal and the assessee's cross objection in the current proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25400 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Other Referred Cases: Adbhut Vinimay P Ltd. vs ITO, Ward-4(3), CIT vs SFIL Stock Broking Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVEER MADANAPPA
• Assessee Lawyers: SUNIL SURANA
• Keywords: Set aside; Reassessment proceedings; Question of law; Unexplained cash credit; Reopening of assessment; Search and seizure; Accommodation entries; Assessment record; Competent authority; Opportunity of cross examination; Tangible material; Borrowed satisfaction
• Section: 147; 148; 142(1); 143(2); 68; 131; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI SONJOY SARMA, JM ITA No.1292/KOL/2023 (Assessment Year: 2013-14) Income Tax Officer, Ward 4(2) Aaykar Bhavan, P-7, Chowringhee Square, Kolkata- 700069, West Bengal Vs. Panel Commerce Pvt. ltd. 4 Synagogue Street, 8th Floor, room No. 814, Kolkata-700001, West Bengal (Appellant) (Respondent) PAN No. AAGCP4413P CO No. 1/KOL/2024 (Arising in ITA No.1929/KOL/2023 for A.Y. 2013-14) Panel Commerce Pvt. ltd. 4 Synagogue Street, 8th Floor, room No. 814, Kolkata-700001, West Bengal Vs. Income Tax Officer, Ward 4(2) Aaykar Bhavan, P-7, Chowringhee Square, Kolkata- 700069, West Bengal (Appellant) (Respondent) Assessee by : Shri Sunil Surana, AR Revenue by : Shri Raghuveer Madanappa, DR Date of hearing: 30.01.2025 Date of pronouncement : 04.03.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue and CO by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 27.09.2023 for the AY 2013-14. Page | 2 ITA No.1292/KOL/2023 & CO No. 01/KOL/2024 Panel Commerce Pvt. Ltd; A.Y. 2013-14 02. The only issue raised by the Revenue is against the deletion of ₹4.94 crores by the ld. CIT (A) as made by the ld. AO u/s 68 of the Act on account of unexplained cash credit. 03. The facts in brief are that the assessee is engaged in the business of trading in equity shares and finances. The assessee filed the return of income on 10.09.2023, declaring total income at ₹27,180/-. Thereafter, the ld. AO received information that assessee had transacted with shell company M/s Brahma Tradelinks Pvt. Ltd., who was not having any real business activity at all. The ld. AO further noted that the genuineness of the transactions and identity, creditworthiness of the party from whom the assessee company received money could not be verified and therefore, transactions could not be treated as genuine. The ld. AO noted that the assessee company was beneficiary of accommodation entries given by M/s Brahma Tradelinks Pvt. Ltd. Accordingly, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 on 16.03.2020, after obtaining approval from the competent authority. The said notice was complied with by filing the return of income on 09.08.2020. Thereafter, the statutory notices were issued and served upon the assessee. Finally, an addition of ₹6,19,60,000/- crores were made on account of sale of shares by the assessee company to M/s Brahma Tradelinks Pvt. Ltd besides making addition of Rs. 6,55,000/- on account of cash deposits. 04. The ld. CIT (A) partly allowed the appeal of the assessee by confirming the addition to the extent of 1,25,00,000/- addition made on account of sale of shares , whereas the remaining addition of ₹4.94 crores has been deleted. Now, the Revenue is in appeal before us against the order of ld. CIT (A) partly deleting the addition, whereas Page | 3 ITA No.1292/KOL/2023 & CO No. 01/KOL/2024 Panel Commerce Pvt. Ltd; A.Y. 2013-14 the assessee filed the cross objection supporting the order of ld. CIT (A). 05. The ld. Counsel for the assessee at the outset submitted that the appeal of the assessee in the very same assessment year has been allowed by the Tribunal in ITA No. 1116/KOL/2023 for A.Y. 2013-14 vide order dated 08.02.2024, wherein the reopening of assessment has been quashed. The ld. AR therefore prayed that the appeal of the Revenue against the same appellate order passed by the ld. CIT (A) becomes infructuous and may kindly be dismissed as the very basis of the assessment has been demolished by the Tribunal. 06. The ld. DR on the other hand submitted that it is true that the Tribunal has decided legal issue in favour of the assessee by quashing the reopening of assessment, however, the appeal of the Department could not be clubbed with the assessee’s appeal and therefore, could not be decided together with the assessee’s appeal. The ld. DR prayed that the department has already moved a Miscellaneous Application for recalling the order of the Tribunal in assessee’s own appeal so that both the appeals could be clubbed and heard together. 07. After hearing the rival contentions and perusing the materials available on record, we find that the Tribunal vide order dated 08.02.2024, has quashed the reopening of assessment in this very assessment order meaning thereby that the very basis of the appeal of the Revenue has been demolished. For the sake of ready reference, the operative part of the said order of the ITAT is extracting below:- “2. Brief facts of the case are that the assessee company is involved in the business of trading of equity shares and finance. The assessee company has also filed its return of income for the assessment year in question declaring total income of Rs. 27,180/-. The ld. AO after getting information from the ADIT (Inv.), OSD, Unit4, Kolkata which reveals that assessee company had received Rs. 1,25,00,000/- from one M/s. Brahma Page | 4 ITA No.1292/KOL/2023 & CO No. 01/KOL/2024 Panel Commerce Pvt. Ltd; A.Y. 2013-14 Tradelink Pvt. Ltd. and it was also observed that cash deposit aggregating to Rs. 2.12 crores and RTGS credit aggregating Rs. 5.85 crores was made in the said account of M/s. Brahma Tradelink Pvt. Ltd. Accordingly, notice u/s 148 was issued followed by statutory notice issued u/s 143(2) as well as u/s 142(1) of the Act to the assessee by directing him to furnish the details about the nature of business, details of sales and purchase were made during the year along with particulars of books of accounts, copy of bank account statement etc. The assessee has also raised objection in the context of notice issued u/s 148 of the Act stating that no income has escaped within the meaning of section 147 of the Act as the alleged amount has been truly credited in the profit & loss account of the assessee. Howeverthe claim of the assessee was turn down by the ld. AO and after examining the various facts of the case additions were made in the following manner: ”“i. On account of sale of shares to UTC Marketing Pvt. Ltd. amounting to Rs. 24 lakhs. ii. Sachit Textiles Pvt. Ltd. as 10 lakhs. iii. M/s. Brahma Tradelink Pvt. Ltd. Rs. 1,25,00,000/-. iv. Various credits in the bank account to the tune of Rs. 2,78,00,000/-. v. Deposits made in the bank account of Rs. 6,55,000/-. vi. Unexplained credits to the tune of Rs. 1,82,60,000/-. By assessing the total income of the assessee at Rs. 6,26,42,180/-”. 3. Dissatisfied with the above order, assessee went into appeal before the ld. CIT(A) where the appeal of the assessee was partly allowed. 4. Feeling aggrieved by the above order assessee is in appeal before this Tribunal raising multiple grounds. Ground no. 1 & 2 are connected on which the ld. AR of the assessee stating before the bench that the reassessment proceeding initiated by the ld. AO is bad in law as the same has been done only on the basis of information received from Investigation Wing without making any enquiry by the AO prior to reopening of assessment. He further stated that in the case of assessee there was neither any independent application of mind by the AO nor any tangible material available on record to prove the fact that there was any escapement to the income of the assessee. He stated that the reopening as made in the case of assessee is on borrowed satisfaction which is not permitted under the provisions of law by inviting our attention to the judgement rendered by the Hon’bleHigh Court on the issue involved wherein clearly stated that where reopening was made on direction of the higher authority in such acase reopening was not valid. Accordingly, there was no plea whatsoever by the assessing officer that there was escapement of income. The ld. AO has not independently made up his mind in order to make assessment u/s 148 of the Act. The ld. AR further pointed out before this bench that while framing the assessment, ld. AO vaguely referred to the statement of two parties in the assessment order namely Shri Praveen & Akash Agarwal. However, their names were nowhere mentioned in the reasons recorded in the case of assessee. In such a situation, the statements were Page | 5 ITA No.1292/KOL/2023 & CO No. 01/KOL/2024 Panel Commerce Pvt. Ltd; A.Y. 2013-14 never confronted to the assessee in the entire reassessment proceedings to find out whether the assessee was named as beneficiary of accommodation entry made by them. In this context, the submission of the assessee is that assessee was never given any opportunity to cross-examine such persons on whose statements purported additions were made. In reference to the above context, the AR of the assessee relied on the judgement of the Hon’ble Apex Court as in the case of Andaman Timber Industries, Sunita Dhadda and Eastern Commercial Enterprises where clearly stated that reasonable opportunity of cross examination should be afforded to the assessee. Similarly, the ld. AO did not proceed further issuance of notice u/s 133(6) of the Act neither any summon was issued to the parties u/s 131 of the Act nor any Inspector was deputed to verify the transaction from the assessment record of the party. The alleged addition was made by the AO only because there was no compliance to the notices which was in fact issued almost after 8years of undertaking the transaction made with assessee. The assessee discharged its onus in order to prove the identity and genuineness of the transaction by filing all the sale bills, copies of the bank statement by proving the fact that transaction were madethrough banking channels, copy of ledger of the party and MCA Master data showing that the company was active and compliant company. Since the transaction of shares were shown as stock in trade in the asset side of the balance sheet and sale as revenue in profit & loss account. Therefore, the transaction cannot have been treated as unexplained cash credit u/s 68 of the Act in the case of assessee. In terms of the order passed by co-ordinate bench of ITAT Kolkata in the case of Adbhut Vinimay P Ltd. vs ITO, Ward-4(3) in ITA No. 2404/Kol/2017. 5. On the other hand, ld. DR supported the decision rendered by the authorities below and objected to the prayer made by the AR of the assessee before this bench. 6. We after hearing the rival submission of the parties and perused the material available on record notice that the facts of the case is similar to various judgments rendered by the assessee on the context that the reopening on borrowed satisfaction is not permitted as pronounced by the Hon’ble Delhi High Court in the case of CIT vs SFIL Stock Broking Ltd. stating in paragraph no. 8, 9 & 10 are as under: “8. After having heard the counsel for the parties, we are inclined to agree with the submissions made by the Respondent/assessee. We find that the Supreme Court in Rajesh Jhaveri (supra) made it absolutely clear that before an assessing officer issues a notice under section 148, thereby re-opening the assessment under section 147 of the said Act, he must have formed a belief that income had escaped assessment and that there must be some basis for forming such a belief. The Supreme Court made it clear that the basis of such belief could be discerned from the material on record which was available with the assessing officer. However, the Supreme Court in Rajesh Jhaveri (supra) did not say that it was not necessary for the assessing officer to form a belief and that the mere fact that there was some material on record was sufficient. 9. In the present case, we find that the first sentence of the so-called reasons recorded by the assessing officer is mere information received from the Dy. Director of IT (Inv.). The second sentence is a direction given by the very same Dy. Director of IT(Inv.) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Addl. CIT to initiate Page | 6 ITA No.1292/KOL/2023 & CO No. 01/KOL/2024 Panel Commerce Pvt. Ltd; A.Y. 2013-14 proceedings under section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons: ‘Thus, I have sufficient information in my possession to issue notice under section 148 in the case of M/s. SFIL Stock Broking Ltd. on the basis of reasons recorded as above. 10. From the above, it is clear that the AO referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice under section 148. We are afraid that these cannot be the reasons for proceeding under section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning para of the so- called reasons are mere directions. From the socalled reasons, it is not at all discernible as to whether the assessing officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration.” 7. We after applying the ratio of the aforesaid case find that the reasons recorded by the assessing officer as in the case of assessee mere information received from the borrowed satisfaction from ADIT (Inv.), OSD, Unit-4, Kolkata. The ld. AO do not apply his mind and make any independent enquiry in order to arrived at a plea that income had escaped assessment. Accordingly, applying the above proposition of law, the addition made in the hands of assessee is not tenable and we set aside the addition made in the case of assessee. Similarly assessee in the present facts of the case hasshown that shares were shown as stock in trade in assets side of the balance sheet which could not be treated as unexplained cash in the case of assessee. In terms of the jurisdiction tribunal order as in the case of ITAT Kolkata Adbhut Vinimay P Ltd. (supra) and accordingly the addition is not tenable by applying the ratio of the above facts in the case of assessee also. 8. The remaining issues are need no required to be adjudicated. Since in terms of our above finding, the reassessment proceeding itself is void ab initio. Therefore, there would be no legs to stand upon on the other issues. Accordingly, the other additions made in the case of assessee are also liable to be deleted. In terms of the above, the additions made in the case of assessee are hereby deleted and appeal of the assessee is hereby allowed. 9. In the result, the appeal of the assessee is allowed.” 08. Though the appeal of the assessee and Revenue should have been clubbed together and disposed off by common order, however, it was not pointed out at the time of hearing of the assessee’s appeal, that Revenue has filed any cross appeal and thus , the Tribunal quashed Page | 7 ITA No.1292/KOL/2023 & CO No. 01/KOL/2024 Panel Commerce Pvt. Ltd; A.Y. 2013-14 the reopening of assessment. Now, we feel that the recalling of the order in the MA filed by the Revenue would not serve any objective purpose as a very reasoned conscious decision has been taken by the Tribunal in 1116/KOL/2023 for A.Y. 2013-14 vide order dated 08.02.2024, wherein the reopening of assessment has been quashed. Hence, the appeal of the Revenue becomes infructuous and so is the cross objection filed by the assessee. 09. In the result, both the appeal of the Revenue and CO of the assessee are dismissed. 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 "