M/S SUNCITY NIKETAN PVT.LTD.,KOLKATA V. INCOME TAX OFFICER, 5(1), KOLKATA, KOLKATA

ITA 2101/KOL/2024

AI Insights

The case involves M/s Suncity Niketan Pvt. Ltd, which appealed against the order of the National Faceless Appeal Centre (CIT(A)) confirming an addition of Rs.17,99,28,555 to the assessee's income, treated as unexplained income from unknown sources. The primary legal issues revolved around the validity of the reopening of the assessment and the absence of a notice under section 143(2) of the Income Tax Act. The Tribunal examined the reasons for reopening the assessment, which were found to be vague and based on unverified information from the Investigation Wing. The Tribunal also noted that identical reasons had previously led to a reassessment for a different year, where no additions were made after considering the assessee's objections. The Tribunal concluded that the reopening was not justified and the subsequent additions were not sustainable on merits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28737 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: Adbhut Vinimay Private Limited vs. ITO, Ward 4(3), Kolkata, ACIT vs. Hotel Blue Moon, PCIT vs. Nopany & Sons, PCIT vs. Cosmat Traders (P) Ltd., PCIT vs. Dart Infrabuild (P) Ltd., PCIT vs. Staunch Marketing P Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Reassessment proceedings; Unexplained cash credit; Block assessment; Reason to believe; Borrowed satisfaction; Procedural lapse
• Section: 147; 148; 144; 143(3); 292BB; 143(2); 250; 64; 68; 13; 139; 207

Judgement Text

" आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Sanjay Awasthi, Accountant Member I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd………………....….......…....………....Appellant 5, Clive Row, Kolkata -1. [PAN: AAPCS4157E] vs. ITO, Ward-5(1), Kolkata......................................................…..…..... Respondent Appearances by: Shri Manoj Kataruka, Advocate, appeared on behalf of the appellant. Shri Subhendu Datta, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : December 12, 2024 Date of pronouncing the order : February 07, 2025 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 06.12.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal is aggrieved by the action of the ld. CIT(A) in confirming the addition of Rs.17,99,28,555/- made by the Assessing Officer by treating credits in the account of the assessee as income of the assessee from unexplained sources. The assessee apart from challenging the validity of the additions made/confirmed by the lower authorities on merits, has also contested the very validity of the reopening of the assessment order as well as the validity of the assessment order for want of issue of notice u/s 143(2) of the Act. I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 2 3. Since the legal issue taken by the assessee hits at the very validity of the assessment order, therefore, the same is taken first for adjudication. 4. At the outset, the ld. counsel for the assessee has invited our attention to the reasons recorded by the Assessing Officer for reopening of the assessment, contents of which are reproduced for the sake of ready reference: “Reasons for reopening of the assessment in case of MS. SUNCITY NIKETAN PVT. LTD. PAN: AAPCS4157E for A. Y. 2013-14 U/s.147 of the Act. The assessee filed its return of income on 25/09/2013 for the A. Y. 2013- 14 declaring total income of Rs.3,950/- Processing us.143[1] of the Act was completed on 14/04/2014 accepting the returned income. No scrutiny assessment has been made in this case. In the case, on the basis of enquiry and information in the possession of the undersigned which has been received from ADIT(Inv.), Unit-3[2], Kolkata vide letter dated 27/02/2019 wherein it has been stated that as per credible information held with them that M/s. Suncity Niketan Pvt Ltd, M/s. Manikala Dealmark Pvt. Ltd., M/s. Romed Developers Pvt. Ltd, M/s. Devghar Baarter Pvt. Ltd, M.A. financial Service Pvt. Ltd. and Megapix Vintrade Pvt. Ltd., funds are routed through various accounts of companies. It seems that money comes from the real estate companies and values are in round amount and do not reflect genuine transaction. Bank statement of the assessee having account number 01900210006894 and others maintained with UCO Bank it was found that there are multiple credits took place during the year under consideration raises suspicion of transaction. The source of the amount and parties name with nature of payment to whom payments/transfer made through these accounts needs verification. Total amount credited in the said accounts during different financial, years and sales-turnover & profit before tax as shown by the assessee has been mentioned in the information. The returned income and profit of the above said assessee compares are very meagre or negligible which creates suspicion. On perusal of the Information it appears that M/S. SUNCITY NIKETAN PVT. LTD. PAN: AAPCS4157E has been credited Rs.17,99,28,555/- in its bank account during the F. Y. 2012-13 corresponding to A. Y. 2013-14. A comprehensive investigation/enquiries and verification of data possessed by the department and after applying mind, the undersigned has reasons to believe that the assessee M/S. SUNCITY NIKETAN PVT. LTD. PAN: AAPCS4157E is a beneficiary to the tune of Rs.17.99.28.555/- I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 3 who has capitalized its unaccounted monety by way of accommodation entry through lairing of fund during the F.Y.2012-13 relevant to A.Y.2013-14. Hence, on the basis of the information collated and the analysis done I am of the view that the assessee company has not disclosed the true and full income. In view of the same, in terms of the Proviso to Section 147 of the Act, I have reason to believe that income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and in the light of the clarificatory provisions of Explanation 1 of the said Proviso, the above income is required to be re-assessed as per the provisions of section 147 of the I. T. Act, 1961.” 4.1 The ld. counsel has further invited our attention to page 15 of the assessment order to submit that the assessee had duly filed the objections against the said reasons recorded by the Assessing Officer, the relevant part of which is reproduced as under: “c) Our assessment for assessment year 2012-13 for also reopened on the basis of the same set of information and an order u/s 143(3)/147 passed on 18/12/2019. A copy of the said order wherein the Assessing Officer has duly accepted our replies is attached for your ready reference. d) Please be informed that we are in business of Investment and Finance and the Nature of transactions are that of purchase and sale of investments. e) The said bank account is duly disclosed in our income tax return and all transactions are reflected in the regular books of accounts. f) The said receipts are genuine business receipt of the assessee whereby we have had sold our investments acquired in previous year to the said companies and the said receipts are duly accounted for and recorded in the books of accounts of the assessee. g) We would also like to draw your kind attention to the recent judgement by \"D\" Bench of Income Tax Appellate Tribunal, Kolkata in Adbhut Vinimay Private Limited versus ITO, Ward 4(3), Kolkata (ITA No.2484/Kol/2817) whereby learned member has deleted the addition made by ITO u/s section 68 on account of sale of assets/investment acquired during earlier years (a copy of the said judgement is enclosed for your ready reference. Precisely, we submit that- i. The reasons recorded by you are vague, scanty and ambiguous and do not show any live link between the reasons and the alleged escapement of income. I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 4 ii. From the recorded reasons mentioned above it transpires that the Investigations wing has presumed that we are a beneficiary person which is without any iota of evidence or without any conclusive proof of any wrong doing on our part. iii. The reasons recorded by you for issue of Notice under section 148 are not your reasons but borrowed satisfaction from Investigation Wing and the re-assessment proceedings based on such borrowed reasons is without jurisdiction, illegal and void ab initio and is liable to be dropped. iv. There is no evidence to show that any person had received cash in respect of the alleged transactions and/or any other sum whatsoever against amount received by the assessee company. v. that we have not understated any of its income for the said financial year under consideration, i.e. FY.2012-13 (A.Y 2013-14), vi. that no income has escaped assessment within the meaning of Section 147 of the Income Tax Act 1961, vii. that the said notice has been issued merely on suspicion and not on believe and we object to such Issuance of notice u/s 148 of the Income tax Act 1961 and request your good self to drop the said proceedings under the act after verifying the information at your end. Please acknowledge the same & oblige. Should you require any further information please let us know.” 4.2 The ld. counsel further invited our attention to page 35 of the paper-book, which is a copy of assessment order for earlier assessment year 2012-13 to show that the identical reasons were recorded for reopening of the assessment for assessment year 2012-13. The ld. counsel has further invited our attention to page 31 of the paper-book which is a copy of assessment order dated 18.12.2019 passed u/s 143(3)/147 of the Act to submit that on identical reasons as recorded for the assessment year under consideration, the reassessment for assessment year 2012-13 was reopened. However, after considering the submissions of the assessee, no additions were made by the Assessing Officer and the returned income was accepted by the Assessing Officer. The ld. counsel has duly demonstrated that for the year under consideration, the assessee had filed objections against the reopening of the assessment. He has also demonstrated that for the identical I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 5 reasons, the assessment for immediately preceding year i.e. assessment year 2012-13 was reopened and the Assessing Officer did not make any addition on the same issue in an order passed u/s 143(3)/147 of the Act dated 18.12.2019. At this stage, the ld. counsel has further invited our attention to the impugned assessment order dated 31.03.2022 to show that the Assessing Officer totally skipped the aforesaid facts in the assessment order. He did not decide the objections filed by the assessee and even failed to discuss about the filing of the same and that the additions have been made in a summarily manner without any discussion. He has demonstrated that the Assessing Officer has totally failed to mention as to the alleged nature of the transactions done by the assessee and as to from whom the assessee had received any alleged cash credits. He has submitted that even though the Assessing Officer has passed the order u/s 144 of the Act as best judgment assessment, however, the minimum requirement was that the Assessing Officer should have examined the accounts of the assessee and correlate the same with the bank statements etc. to point out that which of the credits were allegedly unexplained income of the assessee. 5. We find merits in the above contentions of the ld. AR. The assessment order in this case is totally cryptic. Even though the assessment order has been passed u/s 144 of the Act still, the Assessing Officer was supposed to discuss as to the relevant transactions and should have also correlate the same with the books of account of the assessee as well as bank account of the assessee and should have mentioned at least as to from whom the assessee has received the unexplained cash credits etc. Even the most peculiar point is that on identical reasons, the assessment for assessment year 2012- 13 was reopened, however, in the assessment order, no additions were made on this issue. Even the assessee had duly filed objections in this respect but the Assessing Officer failed to decide the objections and I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 6 passed the impugned cryptic assessment order. Therefore, in our view, the reopening of the assessment in this case was bad in law and the same is liable to be quashed on this score alone. Even on merits, the impugned additions are not sustainable. 6. The second legal ground taken by the assessee is that no notice u/s 143(2) of the Act has been issued before passing the impugned assessment order. The ld. counsel has invited our attention to page 13 of the paper-book, which is the copy of the e-proceedings, whereby, the assessee has demonstrated that the assessee had duly requested the Assessing Officer/Faceless Assessment Centre to provide the copy of the notice u/s 143(2) of the Act as the assessee till date has not received any copy of the notice issued u/s 143(2) of the Act. Even the ld. counsel has invited our attention to the relevant para of the objections filed by the assessee, wherein, the assessee has duly mentioned in the very first para of the objections that the assessee has not received any mandatory notice u/s 143(2) of the Act. Even there is no mention in the assessment order that any notice u/s 143(2) of the Act has ever been issued to the assessee. Even, the ld. DR could not bring out any evidence on the file to show that any notice u/s 143(2) of the Act was ever issued to the assessee. The assessee having duly taken the aforesaid plea that no notice u/s 143(2) of the Act was issued to the assessee and there is a complete silence about it in the assessment order, which duly proves that no notice u/s 143(2) of the Act has ever been issued to the assessee in this case. The Hon’ble Supreme Court in the case of ‘ACIT vs. Hotel Blue Moon’ reported in 321 ITR 362 (SC) held that the issue of notice u/s 143(2) is sine qua non to assume jurisdiction to proceed with the assessment in a case. The assessment carried out without issuing any notice u/s 143(2) of the Act in such cases will be bad in law. Reliance in this respect can be placed on the decision of Jurisdictional Calcutta High Court in the case of ‘PCIT vs. I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 7 Nopany & Sons’ reported in [2022] 136 taxmann.com 414 (Calcutta) and in the case of ‘PCIT vs. Cosmat Traders (P) Ltd.’ reported in [2023] 146 taxmann.com 207 (Calcutta). 6.2 Further, the issue is also covered by the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Dart Infrabuild (P) Ltd. in IT Appeal No.10 of 2022 order dated 17.11.2023, wherein, it was held as under: “15.2 The absence of notice, under Section 143(2), impregnates the proceedings with a jurisdictional defect and, hence, renders it invalid in the eyes of the law. This position is no longer res integra, as demonstrated by the observations made in Principal Commissioner of Income-tax v. Shri Jai Shiv Shankar Traders (P.) Ltd. (2015) 64 taxmann.com 220 (Delhi): \"12. The narration of facts as noted above by the court makes it clear that no notice under section 143(2) of the Act was issued to the assessee after December 16, 2010, the date on which the assessee informed the Assessing Officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Act. 13. In DIT v. Society for Worldwide Interbank Financial Telecommunications [2010] 323 ITR 249 (Delhi), this court invalidated a reassessment proceeding after noting that the notice under section 143(2) of the Act was not issued to the assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under section 143(2) of the Act only after the return filed by the assessee is actually scrutinised by the Assessing Officer. 14. The interplay of sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court in CIT v. Rajeev Sharma [2011] 336 ITR 678 (All) it was held that a plain reading of section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act. It was observed (page 687): \"The provisions contained in sub-section (2) of section 143 of the Act is mandatory and the Legislature in its wisdom by using the word „reason to believe' had cast a duly on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under section 148, it shall be mandatory for the Assessing Officer to serve a notice under sub-section (2) of Section 143 assigning reason therein . . . I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 8 in absence of any notice issued under sub-section (2) of section 143 after receipt of fresh return submitted by the assessee in response to notice under section 148, the, entire procedure adopted for escaped assessment, shall not be valid.\" 15. In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All), it was held as under: \"10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from April 1, 2008. Section 282BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated In any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him ; or ii) not served upon him in time ; or (iii) served upon him in an improper manner. IN other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to section 292BB of the Act, however, carves out an exception to the effect that the section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292BB of the Act cannot obviate the requirement or complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdiction itself would be invalid.\" 16. In the same decision in Salarpur Cold Storage (P.) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not \"a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.\" 17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 341/210 Taxman 78 (Mad.) (Mag.). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. However, the Assessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act. Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 9 explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. It was observed that: \"Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act.\" 18. As already noticed, the decision of this Court in Vision Inc. (supra) proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of \"service\" of notice was concerned and not with regard to failure to \"issue\" notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act.” 6.3 Reliance can also be placed on another decision of the Hon’ble Delhi High Court in the case of PCIT vs. Staunch Marketing P Ltd. in IT Appeal No.935 of 2015 order dated 28.04.2017 wherein, the Hon’ble Delhi High Court in para 14 has held as under: 14. In any event, factually the Assessee filed a return pursuant to notice issued under Section 148 of the Act, notwithstanding that it may not have filed a return in the first place under Section 139 of the Act for the AY in question. Once a return is filed notice under Section 143 (2) of the Act to the Assessee is mandatory prior to framing an assessment. The question of framing an assessment ex parte without even issuing a notice under Section 143(2) of the Act did not arise. The mandatory nature of that requirement is settled not only by the decision of the Supreme Court in the case of ACIT v. Hotel Blue Moon (supra) but also by a decision of this court in Commissioner of Income Tax-08 v. Jai Shiv Shankar Traders Pvt. Ltd. (2016) 388 ITR 448 Del. I.T.A. No.2101/Kol/2024 Assessment Year: 2013-14 M/s Suncity Niketan Pvt. Ltd 10 7. In view of the aforesaid position of law, the impugned assessment order is hereby quashed and even on merits there is no justification on the part of the Assessing Officer to make the impugned additions and the same are accordingly ordered to be deleted. 8. In the result, the appeal of the assessee stands allowed. Kolkata, the 7th February, 2025. Sd/- Sd/- [Sanjay Awasthi] [Sanjay Garg] लेखा सदèय/Accountant Member ÛयाǓयक सदèय/Judicial Member Dated: 07.02.2025. RS Copy of the order forwarded to: 1. M/s Suncity Niketan Pvt. Ltd 2. ITO, Ward-5(1), Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "