LEMONGRASS DEALTRADE PVT. LTD.,KOLKATA V. DCIT, CIR. -5(1), KOLKATA

ITA 947/KOL/2024

AI Insights

The case involves Lemongrass Dealtrade Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) - NFAC, Delhi, concerning the assessment year 2012-13. The primary issue was the legality of the reopening of the assessment under Section 148 of the Income Tax Act, 1961, after a lapse of four years, which the assessee contended was based on borrowed satisfaction and not on any independent application of mind by the assessing officer. The Income Tax Appellate Tribunal, Kolkata, examined whether the reopening met the statutory requirements, particularly the first proviso to Section 147, which allows reopening beyond four years only if the income has escaped assessment due to the assessee's failure to disclose material facts.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469659 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 29-04-2024
• Other Referred Cases: Mst. Katiji & Ors. vs. M/s. Pancham Marketiers Pvt. Ltd., ACIT vs. CEAT Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Reopening of assessment; Bogus Share capital; Revision of order; Borrowed satisfaction; Bogus
• Section: 147; 148; 143(3); 68; 131; 264

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ “सी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA Įी राजेश क ुमार, लेखा सटèय एवं Įी Ĥदȣप क ुमार चौबे, ÛयाǓयक सदèय क े सम¢ [Before Shri Rajesh Kumar, Accountant Member &Shri Pradip Kumar Choubey, Judicial Member] I.T.A. No. 947/Kol/2024 Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd. (Since amalgamated with M/s Pancham Marketiers Pvt. Ltd. ) (PAN: AACCL 0123 E) Vs. ITO, Ward-2, Shillong (Now DCIT, Circle-5(1), Kolkata Appellant / ) अपीलाथȸ ( Respondent / Ĥ×यथȸ Date of Hearing / सुनवाई कȧ Ǔतͬथ 19.09.2024 Date of Pronouncement/ आदेश उɮघोषणा कȧ Ǔतͬथ 09.10.2024 For the Appellant/ Ǔनधा[ǐरती कȧ ओर से Shri Soumitra Choudhury, Advocate Shri P. Sarkar, Advocate For the Respondent/ राजèव कȧ ओर से Shri Ankur Goyal, JCIT, Sr. D.R ORDER / आदेश Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 22.09.2023 for the AY 2012-13. 2. At the outset, we note that there is a delay of 160 days in fling the appeal before the Tribunal and ex-facie the appeal is barred by limitation by 160 days. After hearing the rival parties and perusing the facts as available in the duly sworn Affidavit which is 2 I.T.A. No.947/Kol/2024 Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd.(Since Amalgamated with M/s Pancham Marketiers Pvt. Ltd. placed at page at 199-200 of PB ,we note that the delay was attributable to the fact that the Advocate Mr. R. Agarwal who was looking after the taxation matter who also attended the appellate proceedings before the Ld. CIT(A). He was not aware of the system of filing the appeal before the Tribunal and therefore, he has not given any advice to the assessee. The assessee approached Shri Soumitro Chowdhury, Advocate on 2nd week of April, 2024 for some tax consultancy and then Mr. Soumitra Choudhury advised the assessee to file appeal immediately along with condonation petition and hence the delay of 160 days. After considering the facts of the case and ratio laid down by the decision of Hon’ble Supreme Court in the case of Mst. Katiji & Ors. reported in (1987) 2 SCC 107 (SC), we are of the view that the appeal should not be rejected on the technical reasons and the substance must prevail over the technicalities. Accordingly, we condone the delay and admit the appeal for adjudication. 3. At the time of hearing the Ld. Counsel for the assessee pressed only ground no. 4 which is extracted as below: “For that the reopening of assessment u/s 148 of the I.T. Act, 1961 after a lapse of 4 years was on borrowed satisfaction and not on any independent application of mind by the assessing officer and hence the reopening be declared to be bad in law and the reassessment order be quashed.” 4. Facts in brief are that the assessee filed its original return of income of 25.09.2012 declaring total income of Rs. 10,200/- which was selected for scrutiny and assessment u/s 143(3) was framed vide order dated 26.03.2015. Thereafter addition made in the assessment was reduced after giving effect to the order of PCIT u/s 264 of the Act and revised order was passed u/s 143(3) read with Section 264 on 27.07.2016. Thereafter, the case of the assessee was reopened u/s 147 after the AO received information that the assessee is beneficiary of accommodation entry from M/S Bhagyshree Vincom Pvt Ltd who has applied for 59000 equity shares . The AO finally made addition of Rs. 59,00,000/- vide order dated 27.12.2019 passed u/s 143(3)/147 of the Act on account of unexplained cash credit u/s 68 by holding that the money received from M/s Bhagyshree Vincom Pvt. Ltd. were not genuine. 3 I.T.A. No.947/Kol/2024 Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd.(Since Amalgamated with M/s Pancham Marketiers Pvt. Ltd. 5. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by holding that the opening of assessment was beyond the period of four years by the AO after satisfying the conditions as provided in first proviso to section 147 of the Act. 6. The Ld. A.R vehemently submitted before us that the reopening of assessment in the present case was made apparently after the period of four years from the end of relevant assessment year. The Ld. A.R submitted that the assessment involved in the present case is AY 2012-13 and the assessment has been framed u/s 143(3) vide order dated 26.03.2015 wherein the addition of Rs. 8,72,15,000/- was made u/s 68 of the Act on account of unexplained share capital / share premium. The Ld. A.R also referred to the reasons recorded u/s 148(2) of the Act in order to form reasons to believe which is a mandatory requirement for reopening of assessment and the approval of the competent authority was also obtained. However, in the reasons recorded u/s 148(2) of the Act the AO has nowhere stated that the income has escaped assessment because of failure of the assessee to disclose any information fully and truly which was necessary for the assessment of income. The Ld. A.R submitted that since the assessment has been made u/s 143(3) vide order dated 26.03.2015 therefore, it was incumbent upon the AO to record a satisfaction to this effect that the income has escaped due to failure of the assessee to disclose fully and truly any material fact qua the said income which is missing in the reasons recorded and therefore, the reopening has not been made in accordance with the first proviso to Section 147 of the Act. The Ld. A.R therefore prayed that the reopening of assessment is ab-initio void and bad in law and may be quashed. In defense of argument the Ld. A.R relied on the decision of Hon’ble Supreme Court in the case of ACIT vs. CEAT Ltd. in [2023] 146 taxmann.com 108 (SC). 7. The Ld. D.R on the other hand relied on the orders of authorities below by submitting that the AO has made the re-opening only after receiving credible information and therefore, the legal issue raised by the assessee may be dismissed. 4 I.T.A. No.947/Kol/2024 Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd.(Since Amalgamated with M/s Pancham Marketiers Pvt. Ltd. 8. We have heard the rival contentions and perused the material available on record. The undisputed facts are that the assessment u/s 143(3) has been framed vide order dated 26.03.2015. Thereafter, the AO received information that the assessee is beneficiary of bogus accommodation entry to the tune of Rs. 59,00,000/- in the form of share application money received from M/s Bhagyashree Vincome Pvt. Ltd. and accordingly the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 25.03.2019. Apparently, the case was reopened after the lapse of four years from the end of relevant assessment year. Therefore, the reopening could only be made by the AO in accordance with the first proviso to section 147 of the Act. The first proviso to Section 147 provides that where an assessment has been framed u/s 143(3) of the Act, the reopening could only be made after a period of four years from the end of relevant assessment year if the escapement of income has resulted from the failure of the assessee to disclose fully and truly any material with respect to that income which was necessary for the purpose of assessment. However, in the present case, we note that there have been no such failure noted / recorded by the AO in the reasons recorded and therefore, the condition as envisaged in first proviso to section 147 of the Act have not been met. For the sake of ready reference the reasons recorded are extracted below: “Financial Year 2011-12, Assessment year 2012-13 M/s Lemongrass Dealtrade Pvt. Ltd. 20.03.2019 A credible information has been received from the Dy Director of Income-tax (Inv) Unit4(1) Kolkata vide his letter F.No. DIT/U-4(1)/Kol/Whitepetals/2018-19/9065 dated 01-03-2019 wherein he has stated that during the investigation the statement of Shri Rajesh Kumar Agarwala a well known entry operators of Kolkata recorded on Oath under section 131 of the Income-tax A.ct,1961 and in his statement he has admitted that he is an entry operator, having his office at Kolkata. During the course of statement he has admitted that his source of income is from commission earned in lieu of giving service in the form of giving cheques to his clients in return for cash. He has also admitted that he along with his team members was operating the some paper companies which had provided book entry to M/s Whitepetals Deal Trade Private LimtedAAacW2837P) and M/s Lemongrass Deal Trade Private Limited(AACCL0123E) is also one such benficiari company have brought back his unaccounted income into their regular books of accounts in the form of bogus shares transactions. It is seen that the assessee M/s Lemongrass Deal Trade Private Limited(AACCL0123F) during the AY 201213 has made invested Rs.5900100000 in the form of purchase shares with M/s 5 I.T.A. No.947/Kol/2024 Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd.(Since Amalgamated with M/s Pancham Marketiers Pvt. Ltd. Whitepetal Deal Trade Private 1irntedAABCW2837P) are not genuine. It is seen that cash was deposited at one point followed by transfer the funds to desired destination through banking channel either by clearing/transfer and RTGS. These are the operator driven transaction which resulted into entry received by beneficiary companies books. For obtaining entries in the books beneficiary provides cash to operator which was deposited in the individual or dummy proprietorship accounts followed by transfer to accounts of different concern either by clearing/transfer and RTGS. It has been established that the companies, from whom share premium has been received by M/s Whitepetal Deal Trade Private Limited (AABCW2837P) are not genuine. It is further seen that during the year assessee company i.e. M/s Lemongrass Deal Trade Private Limited(AACCI0123E) filed return of income for the A.Y 2012-13 has shown only return income of Rs. 10,203,00/-.” A perusal of the above reasons reveal that the reopening of assessment has been made in contravention of the conditions as enumerated in first proviso to section 147 and accordingly the re-opening is void ab-initio ,invalid and has to be quashed. The case of the assessee finds support from the decision of Hon’ble Supreme Court in the case of ACIT vs. CEAT Ltd. (supra). 9. Since we have allowed the appeal of the assessee on legal issue then the issues raised on merits are not being adjudicated at this stage and are being left open to be decided at later stage if the need arises for the same. 10. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 9th October, 2024 Sd/- Sd/- (Pradip Kumar Choubey /Ĥदȣप क ुमार चौबे) (Rajesh Kumar/राजेश क ुमार) Judicial Member/ÛयाǓयक सदèय Accountant Member/लेखा सदèय Dated: 9th October, 2024 SM, Sr. PS 6 I.T.A. No.947/Kol/2024 Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd.(Since Amalgamated with M/s Pancham Marketiers Pvt. Ltd. Copy of the order forwarded to: 1. Appellant- Lemongrass Dealtrade Pvt. Ltd. (since amalgamated with M/s Pancham Marketiers Pvt. Ltd.) 3rd Floor, Room No. 314, 19, Synagogue Street, Kolkata- 700001 2. Respondent – ITO, Ward-2, Shillong (Now DCIT, Circle-5(1), Kolkata) 3. Ld. CIT(A)- NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "