LAKSHMI DEALMARK PVT. LTD.,KOLKATA V. I.T.O., WARD - 11(1), KOLKATA

ITA 2410/KOL/2024

AI Insights

The case involves Lakshmi Dealmark Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The appeal was related to the reassessment proceedings initiated by the AO under section 147 of the Income Tax Act, 1961, based on information from the investigation wing about the assessee receiving funds from alleged shell companies. The AO made an addition of Rs. 56,00,000 under section 68 of the Act, which the assessee contested. The CIT(A) upheld the AO's decision, leading the assessee to approach the ITAT. The ITAT found merit in the assessee's arguments regarding the lack of comprehensive replies to objections and the procedural lapses in the reassessment proceedings, particularly concerning the approvals for issuing the notice under section 148.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315622 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A DETAILED SHOW CAUSE NOTICE DATED .. WHICH
• Keywords: Set aside; Reassessment proceedings; Unexplained cash credit; Accommodation entries; Competent authority; Reason to believe; Borrowed satisfaction; Bogus
• Section: 147; 148; 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER I.T.A. No. 2410/Kol/2024 (Assessment Year 2014-15) Lakshmi Dealmark Private Limited, Diamond Arcade 68, Jessore Road, 2nd Floor, Unit- 207, Kolkata - 700055 [PAN: AACCL0680Q] ..............…...…………….... Appellant vs. The Income Tax Officer, Ward-11(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata - 700069 ..…................................. Respondent Appearances by: Assessee represented by : Abhishek Bansal, AR Department represented by : Amuldeep Kaur, Addl. CIT, Sr. DR Date of concluding the hearing : 30.04.2025 Date of pronouncing the order : 14.05.2025 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER 1. The present appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereinafter “the Act”), passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)”] vide order dated 01.11.2024 for AY 2014-15. 1.1 In this case, the assessee filed its return of income (ROI) for AY 2014- 15 on 31.03.2015, declaring a loss of Rs. 39,909/-. Subsequently, information was received by the Ld. AO from the investigation wing of income tax regarding the assessee receiving funds from several alleged shell companies. Thereafter, the Ld. AO initiated proceedings u/s 147 of the Act by issuance of notice u/s 148 of the Act dated 30.03.2021. Thereafter, the 2 ITA No. 2410/Kol/2024 Lakshmi Dealmark Pvt. Ltd. Ld. AO made an addition of Rs. 56,00,000/- u/s 68 of the Act. The assessee was aggrieved, not only with the addition of impugned amount but also with the assumption of jurisdiction by the Ld. AO as it was allegedly violative in terms of the mandate u/s 147 of the Act. 1.1 The assessee carried this matter before the Ld. CIT(A), where he not only challenged the impugned addition but also challenged the reopening of the case on several grounds. In this regard, the Ld. CIT(A) is seen to have dispose of the objections regarding the reassessment proceedings as under: “1. AO has received an information from DDIT(Inv), Kolkata, that appellant is involved as a beneficiary for AY 2014-15 in layering of various transactions of bogus/accommodation entries through shell/paper companies etc. which warrants for verification/reconciliation by AO as per law. 2. On receipt of information, AO has examined the same for its further verification/reconciliation as per law by conducting enquiries u/s. 133(6) of I. T Act, with prior appeal of Pr.CIT-4 (Kolkata). These enquiries were conducted with appellant to elicit the truth of such bogus transactions as per law for further necessary actions as per I. T Act. However, appellant failed to respond to AO, for 133(6) enquiries and thereby adducing reason to believe on the information received, resulting in issue of 148 notice after obtaining due approvals as per the due procedure as per facts as explained in assessment order by AO. 3. Appellant filed objection to 148 notice and same were duly disposed by AO vide his speaking order dated 11.03.2022. Further, even during the re-assessment proceedings, instead of filing information as called for, appellant kept on seeking for more material evidences and related details resulting in 148 notice of AO. For this also AO reasoned by giving a detailed show cause notice dated 25.03.2022, by adducing full material details / facts of DDIT (inv) as duly brought out of these facts as extracted as at pages (2) to (17) of the assessment order. Even for this show cause also, appellant merely re-iterated the earlier submissions and contended that these receipts of 28 lakhs as received from two parties of debtors/receivables and contends the same as warrants for no disallowance and adduced the same as not to be treated as money received by layering from shell companies etc. On examination of appellant reply, AO assessed the entire 56 lakhs as unexplained income as appearing against appellant as beneficiary as per the information available to AO as extracted as at page (14) of assessment order. Hence, on perusal of such facts of case/ assessment of AO in the assessment order against appellant during re-assessment order proceedings, it is clear that AO has not only used the material report of DDIT (Inv) and has also conducted his own enquiry u/s. 133(6) of I. T Act as per law. Thereafter, arrived at reasonable reasoning to adduce the correctness of report of DDIT (inv) thereby resulting in proper issue of 148 notice as per law. Even after this, appellant has filed objections and same were duly disposed by speaking order dated 11.03.2022 of AO as at page (2) of assessment order. Further, even the material base involving DDIT (inv), Kolkata, report is also put across to the appellant by a detailed show cause notice dated 23.03.2022 for which also appellant did not explain the transaction in its full spirit, except claiming the transactions as debtors receivable as received and merely attributed these debtors to sale of investments.” 3 ITA No. 2410/Kol/2024 Lakshmi Dealmark Pvt. Ltd. It is seen that the action of Ld. AO was affirmed at the first appellate stage. 1.2 Aggrieved with the action of Ld. CIT(A), the assessee has approached the ITAT with the following grounds: “1. For that the assessment order passed by the Ld. AO is bad in law as well as on facts. 2. For that the reassessment proceedings have been initiated merely on the basis of information received and without any independent application of mind and there was no live link or intelligible nexus between the information received and belief formed. 3. For that even otherwise, the reasons recorded by the Ld. AO are vague based upon which no reasonable belief can be formed to initiate proceedings u/s 147. 4. For that the Ld. AO erred in not providing the Assessee copies of approval obtained and standard proforma used for obtaining such approval implying that reassessment proceedings were initiated either without approval u/s 151 of the Act or the approval was granted mechanically. 5. For that the Ld. AO erred in disposing off the objection to the reassessment proceedings in cryptic manner without dealing with the contentions and issues raised by the assessee in its objection. 6. For that the assessment order passed by Ld. AO without seeking direction u/s 144A of the Act are bad in law in spite of specific request being made by the assessee. 7.For that the Ld. AO erred in making addition of Rs.56 Lakh based on information received whereas the said information was about Rs.28 Lakh only. As such the addition to the extent of Rs.28 Lakh is factually and apparently incorrect. 8. For that the balance addition of Rs.28 Lakh is also liable to be deleted as the amount was received form debtors and there was no case of unexplained cash credit. 9. For that the appellant craves leave to add, alter or withdraw any grounds of appeal on or before hearing of the appeal.” 2. Before us, the Ld. AR vehemently argued regarding the alleged illegal assumption of jurisdiction through initiation of proceedings u/s 147 of the Act in an illegal manner. The Ld. AR also relied on a paper book running to 136 pages. The Ld. AR pointed out that the Ld. AO did not give a comprehensive reply to the objections filed regarding the reopening of the case. In this regard, the Ld. AR drew our attention to pages 78 to 80 in which the assessee’s objections to the proceedings u/s 147 of the Act are seen to be recorded in detail. It was also pointed out that the Ld. AO did not share the details regarding the approvals obtained by the Ld. AO and 4 ITA No. 2410/Kol/2024 Lakshmi Dealmark Pvt. Ltd. also did not share as to the manner in in which the competent authority had approved for issuance of notice u/s 148 of the Act. Regarding the addition itself it was stated that the information received was only to the tune of Rs. 28,00,000/-, on the basis of which the Ld. AO had made an addition of Rs. 56,00,000/-. It was also averred that the amounts in question were received from debtors and did not deserve to be treated u/s 68 of the Act. The Ld. AR also relied on a number of authorities to canvass the point that the Ld. AO could not have initiated such proceedings on the basis of “borrowed satisfaction” and to emphasise that the “reason to believe” were not in consonance with the extant law. 2.1 The Ld. DR, on the other hand, relied on the orders of authorities below and also stated that the Ld. AO has recorded in page 14 of his order that the information was received from a credible source and after due verification the impugned addition was made. In fact, it was pointed out by the Ld. DR that it is recorded on page 16 of the Ld. AO’s order that the assessee did not produce any evidence regarding the impugned transactions and hence the impugned addition was made. The Ld. DR also pointed out that there is a detailed discussion in Ld. CIT(A) order on pages 5 and 6 (impugned order) as to why the assumption of jurisdiction by the Ld. AO was justified. 3. We have carefully considered the rival submissions and also gone through the records. It is seen from the impugned order that on pages 5 and 6 (extracted supra), the Ld. CIT(A) has given a detailed finding as to why he has affirmed the action of Ld. AO in terms of the appropriate exercise of jurisdiction u/s 147 of the Act. However, it is not clear whether the grievance ventilated through ground No. 4 (regarding approval of issuing notice u/s 148 of the Act) has been addressed or not. We also find that the Ld. AR’s contention regarding the impugned amounts representing sundry debtors could have some merit and, in this regard, the finding of the Ld. AO that complete details were not presented before him, persuade us to grant an opportunity to the assessee for getting the same verified. 5 ITA No. 2410/Kol/2024 Lakshmi Dealmark Pvt. Ltd. Thus, in light of the discussion here, we deem it fit to set aside the impugned order and remand the issue back to the file of Ld. AO for afresh assessment after sharing the details of approvals obtained prior to issuance of notice u/s 148 of the Act, as has been objected to by the assessee through Ground No. 4 before us. The Ld. AO would also address any other objections that the assessee may have regarding the assumption of jurisdiction and would also give the assessee an opportunity to present the facts regarding the impugned addition. Needless to say, the assessee would do well to cooperate with the Ld. AO to enable a correct determination of his income. 4. With these remarks, appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 14.05.2025 Sd/- Sd/- (Pradip Kumar Choubey) (Sanjay Awasthi) Judicial Member Accountant Member Dated: 14.05.2025 AK, Sr. P.S. Copy of the order forwarded to: 1. Lakshmi Dealmark Pvt. Ltd. 2. The Income Tax Officer, Ward-11(1), Kolkata, 3. CIT(A)- 4. CIT- 5. CIT(DR) //True copy// By order Assistant Registrar, Kolkata Benches "