MAITHAN CERAMIC LTD.,KOLKATA V. ACIT, CIRCLE 7(1), KOLKATA

ITA 1944/KOL/2025

AI Insights

Maithan Ceramic Limited appealed against the order of the CIT(A), National Faceless Appeal Centre, Delhi, which pertained to the assessment year 2011-2012. The primary contention was regarding the reopening of the assessment by the Assessing Officer based on a Suspicious Transaction Report (STR) linked to M/s Vista Dealcom Pvt. Ltd., which allegedly involved accommodation entries. The Tribunal examined various documents and submissions, including the tax audit report, loan confirmations, and the reasons recorded for reopening the assessment. The Tribunal concluded that the reopening was justified as the assessee had not adequately disclosed material facts necessary for a proper assessment, and the loan transactions were not substantiated as genuine.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 824559 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 26-08-2025
• Other Referred Cases: NDTV Ltd. vs. DCIT, Allom Extrusions vs. CIT, Simplex Concrete Piles (India) Ltd. & Geo Miller & Co. Ltd. vs. Dy. CIT & Ors., Pradip Kr. Jajodia HUF vs. ITO Ward 44(1), Kolkata, CIT vs. Paramjit Kaur, PCIT vs. GKN Driveshafts (India) Ltd., ITO vs. Lakhmani Mewal Das
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANDEEP LAKRA
• Assessee Lawyers: P. K. HIMMATSINGHKA
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings; Question of law; Period of limitation; Reopening of assessment; TDS; Accommodation entries; Reason to believe; Time period of passing order; Tangible material; Borrowed satisfaction
• Section: 147; 148; 143(3); 142(1); 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER आयकर अपील सं/ITA No.1944/KOL/2025 (निर्धारण वर्ा / Assessment Year : 2011-2012) Maithan Ceramic Limited, 9, Ideal Centre, AJC Bose Road 6th Floor, Kolkata-700017 Vs ACIT, Circle-7(1), Kolkata PAN No. :AADCG 6018 J (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) निर्धाररती की ओर से /Assessee by Shri P.K.Himmatsinghka, AR रधजस्व की ओर से /Revenue by : Shri Sandeep Lakra, Sr. DR सुनवाई की तारीख / Date of Hearing : 01/01/2026 घोषणा की तारीख/Date of Pronouncement : 01/01/2026 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 14.07.2025 for the assessment year 2011-2012. 2. It was submitted by the ld.AR that the assessee had taken a loan of Rs.1 crore from M/s Nidhi Agro P. Ltd. during the impugned assessment year. Ld. AR drew our attention to page No.90 of the paper book which showed the confirmation of accounts and the loan having been taken on 02.07.2010, the same reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 2 3. Ld.AR further drew our attention to page No.10 to the paper book which is the Schedule “C” and Schedule “D” too the balance sheet Printed from counselvise.com ITA No.1944/KOL/2025 3 representing secured loan and unsecured loan. In Schedule “D” representing unsecured loan, the loss is shown consolidated as loan from companies of Rs.5 crores, which reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 4 4. Ld.AR further drew our attention to page No.37 of the paper book which shows the particulars of loan/deposit taken/repaid during the year. It was the submission that this is apart of the tax audit report representing the details of loan and interest paid and the TDS, the same reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 5 5. Ld.AR further drew our attention to page No.58 of the paper book which is a copy of the notice issued u/s.142(1) of the Act dated 30.04.2013, which reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 6 6. Ld.AR further drew our attention to page No.59 of the paper book which is the details of documents called for in the said notice u/s.142(1) of the Act. It was the submission that in the item No.5 the details of unsecured loan raised during the financial year 2010-2011 indicating the names, complete postal address and PAN numbers of the creditors were called for, the same reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 7 7. Ld.AR further drew our attention to page No.60 of the paper book which is the letter dated 17.12.2013 from Nidhi Agro Private Limited to the DCIT, Central Circle-VI, Kolkata confirming the details of the loan. The same reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 8 8. Ld.AR further drew our attention to page No.76 of the paper book which is a copy of the assessment order passed u/s.143(3) of the Act on 28.03.2024. It was the submission that no addition in respect of said unsecured loan have been made by the Assessing Officer. The ld. AR subsequently drew our attention to page Nos.81 to 89 of the paper book which are the copies of the reasons recorded for the reopening of the assessment. The reads as under :- Printed from counselvise.com ITA No.1944/KOL/2025 9 Printed from counselvise.com ITA No.1944/KOL/2025 10 Printed from counselvise.com ITA No.1944/KOL/2025 11 Printed from counselvise.com ITA No.1944/KOL/2025 12 Printed from counselvise.com ITA No.1944/KOL/2025 13 Printed from counselvise.com ITA No.1944/KOL/2025 14 Printed from counselvise.com ITA No.1944/KOL/2025 15 Printed from counselvise.com ITA No.1944/KOL/2025 16 Printed from counselvise.com ITA No.1944/KOL/2025 17 9. Ld. AR further drew our attention to page 92 of the paper book which is a copy of the assessment order for the assessment year 2010-2011 in the case of the assessee. It was the submission that in the said assessment order the Assessing Officer had recognized that the bank account of ICICI bank by M/s Vista Dealcom Pvt. Ltd. was opened only on 01.11.2010 which was subsequent to the providing of the loan by Nidhi Agro Pvt. Ltd. to the assessee. Ld. AR also drew our attention to page No.54 of the paper book which is a copy of the loan repayment details, which reads as follows :- Printed from counselvise.com ITA No.1944/KOL/2025 18 10. It was the submission that Nidhi Agro Pvt. Ltd. had repaid on 23.01.2012 and TDS had also been deducted. It was submitted by the ld.AR that at the outset, the reasons recorded clearly showed that the Assessing Officer was doing fishing and roving enquiry which is not permissible for the purpose of reopening. It was also the submission that in view of the first proviso to the provisions of Section 147 of the Act, as the Assessing Officer has not mentioned any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, therefore, the reopening of the assessment is liable to be treated as invalid. It was also submitted that the assessee having already provided all the details in the course of original assessment, therefore, the reopening of the assessment was only on the basis of a change of opinion. It was also submitted that the assessee is only required to disclose all material facts and is not obligated to assist the Assessing Officer in drawing inferences. It was also the submission that non-disclosure of secondary facts is irrelevant for the purpose of invoking reassessment. Ld.AR placed reliance on the decision of the Hon’ble Supreme Court in the case of NDTV Ltd., reported in (2020) 424 ITR 607 (SC). 11. Ld. AR also drew our attention to the decision of the Hon’ble Jurisdictional High Court in the case of Allom Extrusions, passed in ITA No.268 of 2024 dated 17.12.2024 to submit that the loans having been repaid, the genuineness should not be questioned any further. 12. We have gone through the judgment of the Hon’ble Jurisdictional High Court in the case of Allom Extrusions, referred to supra, and it must Printed from counselvise.com ITA No.1944/KOL/2025 19 be mentioned here categorically that this is not the finding of the Hon’ble Jurisdictional High Court. It is an interpretation made by the ld.AR to the said decision of the Hon’ble Calcutta High Court. The Hon’ble High Court has dismissed the appeal on the ground that there was no error in the order of the Tribunal and no question of law much less substantial question of law arises for consideration. Consequently, this decision is not of any help to the assessee. 13. Ld.AR also placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of Simplex Concrete Piles (India) Ltd. & Geo Miller & Co. Ltd., reported in 262 ITR 605 (Cal-HC) to submit that the proviso to section 147 of the Act provides that no action shall be taken after the expiry of four years unless the contingencies provided as satisfied. Ld.AR also filed his brief synopsis which reads as follows :- MAITHAN CERAMIC LIMITED PAN: AABCM7759A Asst. Yr. 2011-12 Brief Synopsish before ITAT, Kolkata (1) Submission in Respect of Loan Transaction - Α.Υ. 2011-12 The assessee is engaged in the business of manufacturing and dealing in refractory goods. For the Assessment Year 2011-12, the assessee filed its return of income under Section 139(1) of the Income-tax Act, 1961, declaring a total income of 28,82,17,350/-, The return was duly accompanied by audited financial statements and a tax audit report. The case was selected for scrutiny, and the assessment was completed under Section 143(3) vide order dated 28.03.2014. (Page-76 to 79) During the relevant financial year, the assessee availed a loan of ₹1 crore from M/s. Nidhi Agro Pvt. Ltd. (PAN: AAACN8759L) on 02.07.2010 through proper banking channels. The loan was raised to meet the financial requirements of the business. Interest of Printed from counselvise.com ITA No.1944/KOL/2025 20 ₹7,47,945/- was paid on the said loan, on which TDS of 274,795/- was duly deducted under Section 194A of the Act. (Page-90) During the course of the assessment proceedings, notice/s 142(1) issued seeking details of unsecured loan raised during the financial year 2010-11, indicating the name(s), complete postal address and PAN(s) of the loan creditors, the assessee furnished the loan confirmation and produced its bank statements to substantiate the receipt of the loan. Further, the Assessing Officer initiated independent verification by issuing notice under Section 133(6) to the lender. In response, M/s. Nidhi Agro Pvt. Ltd., vide its letter dated 17.12.2013, confirmed the loan transaction, owned up the payment of loan, and furnished all relevant supporting documents. (Page-60). The assessment was finally framed u/s 143(3) vide order dated 28-03-2014 (Page-76 to 79) The said loan was returned / repaid on 23-01-2012 much prior to re-opening of the case u/s 148 dated 23-03-2018 through banking channel, disclosed in Tax Audit Report (Page -54). (2) Reopening of Assessment under Section 148 – Α.Υ. 2011-12 Subsequently, the Ld. Assessing Officer issued a notice under Section 148 of the Income-tax Act, 1961 dated 23.03.2018 for the Assessment Year 2011-12, based on information received from the Director of Income Tax (Investigation), Unit-1(3), Kolkata. The reasons recorded for reopening the assessment are summarized below: (Page-81 to 89) \"One Suspicious Transaction Report was received from FIU-IND, New Delhi regarding suspicious transaction made by one paper company, M/s. Vista Dealcom (P) Ltd. in bank account no. 129005000024 maintained with ICICI Bank, Central Avenue branch, Kolkata, 112, CR Avenue, Kolkata. The directors of the company are Samir Das and Sunny Singh. During course of investigation, it was unearthed that Bank account of the said company was utilized for layering fund and providing accommodation entry to the beneficiaries. In this regard, statement of Dummy Directors namely Samir Das, Chandan Chakraborty, Naveen Jain, Hruda Nanda Behera, Arindam Dutta who were also directors in the companies used for layering of Fund, Entry operation Sri Mayank Daga and Sri Sureshj Kumar Jain were recorded wherein they admitted that they were engaged in providing accommodation entry to the beneficiaries. M/s. Maithan Ceramics Ltd is one beneficiary company which was provided accommodation entry of Rs. 1 Crore from F.Y. 2009-10 to 2012-13. The said beneficiary company having transaction with these sale/paper companies namely Vista Dealcom Pvt. Ltd. Printed from counselvise.com ITA No.1944/KOL/2025 21 Dolphin Vintrade Pvt. Ltd. Maxworth Vinimay Pvt. Ltd. Carnation Distributors Pvt. Ltd. Gaurav Dealers Pvt. Ltd. Ranjoli Vintrade Pvt. Ltd. Avon Vanijya Pvt. Ltd. Flaxo Tie-Up Pvt. Ltd. Naveen Dealcom Pvt. Ltd. Rudraksh Dealers Pvt. Ltd. Satyatej Vyapaar Pvt. Ltd. Payment made by any of these above shell companies to Ms Maithan Ceramics Ltd shows that the actual unaccounted money belongs to M/s Maithan Ceramics Ltd which was routed back to its books of accounts. Since, the above information furnished by the Investigation Wing, Kolkata is only indicative in nature and not specifically assessee- wise, separate investigation and verification for each assessee, as alleged in the report is necessary, Further, on the basis of above report this office had re-opened the case of the assessee for A.Y 2010-11, wherein during the re-assessment proceedings, bank statement of M/s. Vista Dealcom Pvt. Ltd. was called for from ICICI Bank, Central Avenue Branch, Kolkata. On perusal of the bank statements, cash was found deposited on regular basis and in turn funds in the form of RTGS/Cheques, were found rotated among the companies mentioned in the report such as Maxworth Vinimay Pvt. Ltd, Gaurav Dealers Pvt. Ltd., Flaxo Tie- Up Pvt. Ltd, etc., against the matching amount of cash deposits. Therefore, on the basis of the above reports as well as the finding from the records available in this office in respect of the said assessee M/s Maithan Ceramic Ltd., I have sufficient reason to believe that the assessee company has furnished inaccurate particulars of income and income chargeable to tax has escaped assessment for the assessment year 2011-12 within the ambit of the provisions contained in section 147 of the Act and as such, I am personally satisfied that it is a fit case for reopening u/s 147 of the IT Act, by way of issuance of notice u/s 148 of the IT Act.\" (3) Submission: Invalid Reopening Based on Suspicious, Arbitrary and Vague Reasoning-A.Υ. 2011-12 The notice under Section 148 dated 23.03.2018 for A.Y. 2011-12 was issued solely on the basis of a Suspicious Transaction Report (STR) generated by the FIU-IND, New Delhi, in respect of M/s. Vista Dealcom Pvt. Ltd., maintaining ICICI Bank Account No. 129005000024 at Central Avenue Branch, Kolkata. The report alleged that cash was regularly deposited into the said account and subsequently routed through RTGS/cheque transfers to companies Printed from counselvise.com ITA No.1944/KOL/2025 22 like M/s. Maxworth Vinimay Pvt. Ltd., Gaurav Dealers Pvt. Ltd., and Flaxo Tie-Up Pvt. Ltd. The Ld. AO concluded that the assessee, M/s. Maithan Ceramics Ltd., was a beneficiary of accommodation entries amounting to 1 crore during FYs 2009-10 to 2012-13. The recorded reasons are vague, arbitrary, ambiguous, suspicious, doubtful and lack any specific or direct nexus with the assessee. The reopening has been initiated merely to conduct a fishing and roving enquiry (para 2.1 of page 81 of reason record specify - since information furnished by the Investigation Wing, Kolkata is only indicative in nature and not specifically assessee-wise, separate investigation and verification for each assessee, as alleged in the report is necessary, which is impermissible in law. The reasons fail to specify the exact date or nature of the alleged transaction, and do not establish any live link between the information received and the income alleged to have escaped assessment. Key submissions in support of invalidity of reopening: a. No Transaction with Vista Dealcom Pvt. Ltd. The assessee has never had any financial transaction or business dealing with M/s. Vista Dealcom Pvt. Ltd. This is evident from the assessee's books of accounts and confirmed by enquiry conducted by the AO for A.Y. 2010-11. b. Bank Account of Vista Dealcom Pvt. Ltd. was Opened After the Alleged Transaction Date The ICICI Bank Account No. 129005000024 of Vista Dealcom Pvt. Ltd. was opened only on 01.11.2010, as confirmed by ICICI Bank in response to a notice issued under Section 133(6) by DCIT, Circle 7(1), Kolkata during the reassessment proceedings for A.Y. 2010- 11. In contrast, the assessee had taken a loan of ₹1 crore from M/s. Nidhi Agro Pvt. Ltd. on 02.07.2010, i.e., much before the opening of the alleged account. Therefore, the alleged accommodation entry through Vista Dealcom could not have been the source of the said loan. c. Reopening on Identical Grounds Already Dropped for A.Y. 2010- 11 A similar reopening was initiated for A.Y. 2010-11 based on the same investigation report and allegations. However, after due verification, the Ld. AO dropped the reassessment proceedings under Section 147 vide order dated 31.12.2017. The relevant portion of the said order is reproduced below: Printed from counselvise.com ITA No.1944/KOL/2025 23 \"...the account in question, through which suspicious transaction was reported, was opened only on 01.11.2010. Therefore, the assessee's submission of not having any transaction with Vista Dealcom Pvt. Ltd. during FY 2009-10 is found correct. Hence, no adverse inference is drawn...\"(page-94 of paper book) This finding is binding and directly applicable to the current year under appeal, as the very same allegation and parties are involved. d. No Tangible Material Indicating Income Escapement The reopening is based on a generic investigation report without any specific or incriminating material against the assessee. It lacks any independent application of mind by the AO to form a belief that income has escaped assessment. This is contrary to settled judicial principles laid down by the Hon'ble Supreme Court in PCIT v. GKN Driveshafts (India) Ltd. [2003] 259 ITR 19 (SC) and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The Hon'ble Delhi High Court in the case of Commissioner of Income-tax, IV v. Insecticides (India) Ltd [2013] 357 ITR 330 (Delhi) upheld the order of the ITAT Delhi Bench in ITA Nos. 2332- 2333/Del/2010 held that \"The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment.\" The assessee had not taken loan from alleged company M/S. Vista Dealcom (P) Ltd. The loan taken by appellant was from M/S Nidhi Agro (P) Ltd., the transaction of said loan was examined and verified by AO in a scrutiny proceeding /s 143(3), order framed and were accepted. Hon'ble jurisdictional Kolkata ITAT judgement in Pradip Kr. Jajodia HUF vs. ITO Ward 44(1), Kolkata ITA 190 to 192/Kol/2024 dated 30-12-2024 held \"The reasons to believe regarding the escapement of the income should be based on certain tangible material and it should not be mere pretence of the Assessing Officer. The reasons to believe does not mean reason to suspect. Reopening of the assessment is not permitted for making fishing and roving enquiries. Reopening is not permissible on the basis of borrowed satisfaction of the Assessing Officer That such reasons to believe must have a material bearing on the question of escapement of Income. It does not mean a purely subjective satisfaction of the assessing authority, such reason should be held in good faith and cannot merely be a pretence. The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational Printed from counselvise.com ITA No.1944/KOL/2025 24 connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are \"reason to believe\" and not \"reason to suspect\". Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute \"reason to believe\" has been summed up by the hon'ble Supreme Court in the case of \"Income Tax Officer v Lakhmani Mewaldas\" (1976) 103 ITR Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs Paramjit Kaur (2008) 311 ITR 38 (P&H), wherein, making identical observations. Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assesace had escaped assessment, the issuance of notice w/s 148 of the Act was not valid. Reliance in this respect can also be placed on the decision of the Hon'ble Delhi High Court in the case of PCTT Vs. Meenakshi Overseas itd. 395 ITR 677 (Dei.) and of the Hon'ble Bombay High Court in the case of Hindusthan Lever Lad. Vs. R. B. Wadkar, Asst. CIT reported in 268 ITR e. Loan Transaction Already Verified in Scrutiny Assessment The loan of 21 crore from M/s. Nidhi Agro Pvt. Ltd. was thoroughly examined during the original assessment under Section 143(3) and was accepted after verification, including confirmation, bank statements, TDS deduction, and the lender's response under Section 133(6). Hon'ble Supreme Court has laid down the test in the CIT v Kelvinator India Ltd. 320 ITR 561, whether the A.O had tangible material to come to the conclusion that there is an escapement of income from assessment. The Supreme Court has held that the 'reason to believe' that any income chargeable to tax has escaped assessment cannot be in the nature of power to review (4) No quantification of escaped income in the reason recorded by the AO - Notice issued u/s 148 dated 23.03.2018 is barred by time limitation SEND L'd AO at para -4 (page-84 of paper book) in the reason recorded concluded as under Printed from counselvise.com ITA No.1944/KOL/2025 25 \"Therefore, on the basis of the above reports as well as the finding from the records available in this office in respect of the said assessee M/s Maithan Ceramic Ltd., I have sufficient reason to believe that the assessee company has furnished inaccurate particulars of income and income chargeable to tax has escaped assessment for the assessment year 2011-12 within the ambit of the provisions contained in section 147 of the Act and as such, I am personally satisfied that it is a fit case for reopening u/s 147 of the IT Act, by way of issuance of notice u/s 148 of the IT Act.\" Upon plain reading of the above reason, it is evident that AO has not quantified the amount of escaped income. Sec. 149 of the pre- amended provision debar the revenue to initiate reopening proceedings beyond the period of four(4) years from the end of relevant asst. year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupee or more. The appellant would like to quote sec. 149 of income tax act as existed prior to substitution by Finance Act 2021 as under: Sec. 149 Time Limit for notice- (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; Upon reading of the above provision, no notice u/s 148 can be issued beyond the period of four (4) years from the end of relevant assessment years unless income found to have escaped assessment amounts to one lakh or more. In the present case, notice u/s 148 has been issued on 23.03.2018 and the relevant four- year limitation period under the Section 149 expired on 31.03.2016. The notice dated 23.03.2018 is therefore time-barred being issued beyond the period of 4 years from the end of relevant asst. year 2011-12. Hon'ble ITAT Kolkata relied on Delhi ITAT in Bir Bahadur Singh Sijwali vs. ΙΤΟ ΙΤΑ 3814/Del/2011 dt. 20-01-2015 \"It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be Printed from counselvise.com ITA No.1944/KOL/2025 26 deleted from the reasons so recorded. Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. vs R.B. Wadkar ((2004) 268 ITR 332], has, inter alia, observed that \"It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons.\" Their Lordships added that \"The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence\". Therefore, the reasons are to be examined only on the basis of the reasons as recorded. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly, at the stage of recording the reasons for reopening the assessment, all that is necessary is the formation of prima facie belief that an income has escaped the assessment and it is not necessary that the fact of income having escaped assessment is proved to the hilt. What is, however, necessary is that there must be something which indicates, even if not establishes, the escapement of income from assessment. It is only on this basis that the Assessing Officer can form the belief that an income has escaped assessment. Merely because some further investigations have not been carried out, which, if made, could have led to detection to an income escaping assessment, cannot be reason enough to hold the view that income has escaped assessment. It is also important to bear in mind the subtle but important distinction between factors which indicate an income escaping the assessments and the factors which indicate a legitimate suspicion about income escaping the assessment. The former category consists of the facts which, if established to be correct, will have a cause and effect relationship with the income escaping the assessment. The latter category consists of the facts, which, if established to be correct, could legitimately lead to further inquiries which may lead to detection of an income which has escaped assessment. There has to be some kind of a cause and effect relationship between reasons recorded and the income escaping assessment. While dealing with this aspect of the matter, it is useful to bear in mind the following observations made by Hon'ble Supreme Court in the case of ITO Vs Lakhmani Mewal Das [(1976) 103 ITR 437], \"the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into Printed from counselvise.com ITA No.1944/KOL/2025 27 sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment.\" (5) Notice under Section 148 dated 23.03.2018 is barred by limitation, bad in law, and liable to be quashed under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. As per the unamended provision of Section 147 (applicable for the relevant assessment year), where an assessment has been completed under Section 143(3), no reassessment can be initiated after four years from the end of the relevant assessment year unless the income has escaped assessment due to failure on the part of the assessee to: File a return under Section 139, or Disclose fully and truly all material facts necessary for the assessment. The assessee acted bonafide in disclosing all materials facts during original assessment conducted u/s 143(3) of IT Act. The reason recorded by the A/O nowhere alleged that there was failure on the part of assessee to disclose fully & truely all material facts necessary for assessment which consequently lead to escapement of income. Proviso to Sec. 147 provides a complete bar for reopening an assessment, which has been made initially u/s 143(3) of the act, after the expiry of four years from the end of relevant assessment year where there was no failure on the part of the assessee to disclose fully & truly all material facts necessary for assessment. Thus in order to re-open an assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. In the instant case notice u/s 148 has been issued in 23.03.2018 i.e. after the lapse of 4 years from the end of relevant assessment year 2011-12. Therefore, the conditions specified in sec. 147 is not complied. The re-opening proceeding in the instant case was not in consonance of law. CBDT circular no. 549 dt. 31-10-1989 182 ITR (ST) 29 on income escaping assessment, sub para (iv) 7.1 which reads as under after the amendment of sec. 147 w.e.f. 01-04-1989. \"A proviso to the new section provides that an assessment, which has been completed under section 143(3) or section 147, ie, a Printed from counselvise.com ITA No.1944/KOL/2025 28 scrutiny assessment, can be reopened after the expiry of four years from the end of the relevant assessment year only if income has escaped assessment due to the failure on the part of the assessee to file a return of income or to disclose fully and truly all material facts necessary for his assessment.\" c. No Allegation of Failure to Disclose Material Facts On a plain reading of the recorded reasons, nowhere has the Assessing Officer alleged any failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. The AO has not even made a casual remark or whisper in this regard. Thus, the mandatory jurisdictional condition under the first proviso to Section 147 not adhered. This legal position has been consistently upheld by multiple High Courts and the Hon'ble Supreme Court: d. Judicial Precedents (i) NDTV Ltd. v. DCIT (2020) 424 ITR 607 (SC): The Hon'ble Supreme Court held that once the assessee has disclosed all primary facts, it is not obligated to assist the AO in drawing inferences. Non-disclosure of secondary facts is irrelevant for the purpose of invoking reassessment. \"The assessee had disclosed all primary facts before the AO and it was not required to give any further assistance to AO by disclosing of other facts. It was for the AO at this stage to decide what inference should be drawn from the facts of the case. The Hon'ble court relied on the decision in the case of Calcutta Discount Co. Ltd. vs. ITO 41 ITR 191 wherein it was held that non disclosure of other facts which may be termed as secondary fact is not necessary.\" (ii) Tao Publishing Pvt. Ltd. v. DCIT (2015) 370 ITR 135 (Bom HC): \"The reasons supplied do not disclose that there was any failure on the part of the Petitioner to provide all the material facts... Once this was not the basis for issuance of notice, it cannot be held against the Petitioner\" (iii) Sound Casting Pvt. Ltd. v. DCIT (2012) 250 CTR 119 (Bom HC): \"The Bombay High Court quashed reopening where the AO did not allege any failure to disclose material facts.\" (iv) CIT v. Orient Craft Ltd. (2013) 354 ITR 536 (Del HC): The Delhi High Court held: Printed from counselvise.com ITA No.1944/KOL/2025 29 \"There is no whisper in the reasons recorded, of any tangible material which came to the possession of the AO subsequent to the assessment, It reflects an arbitrary exercise of power under Section 147,\" (v) Jurisdictional Calcutta High Court in Simplex Concrete Piles (India) Ltd.' (2) Geo Miller & Co. Ltd. v. Dy. CIT & Ors. 262 ITR 0605 (Cal-HC) \"The proviso to section 147 provides that no action shall be taken after the expiry of four years unless the contingencies provided are satisfied. It is contended on behalf of the respondent that none of the conditions provided in the proviso to section 147 as submitted could be attracted in the present case. Therefore, the period of four years' embargo provided in the proviso cannot be stretched even though this provision might be subject to sections 148 to 153. Even after making the provision of section 147 subject to sections 148 to 153 a proviso has been added by which an exception has been carved out. The principal section cannot be read without the proviso, which qualifies the principal section. The qualification is expressed in mandatory form. It has used the expression \"no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year\" (a) Limitation Period Expired The original assessment was completed under Section 143(3), vide order dated------- and the relevant four-year limitation period under the first proviso to Section 147 expired on 31.03.2016 (31.03.2012+4 years) The notice dated 23.03.2018 is therefore time-barred being issued beyond the period of 4 years from the end of relevant asst. year 2011-12. The impugned reassessment notice: Was issued after expiry of 4 years from the end of the relevant assessment year; Does not allege any failure by the assessee to disclose fully & truly all material facts necessary for its assessments Is based on information already considered in original proceedings; Therefore, fails to meet the jurisdictional conditions under the law. Accordingly, the reassessment proceedings are without jurisdiction, barred by limitation, and are liable to be quashed ab initio. (6) Mechanical Approval under Section 151 - Impermissible and Invalid Printed from counselvise.com ITA No.1944/KOL/2025 30 The reopening of assessment under Section 147 of the Income Tax Act suffers from a fundamental jurisdictional defect, as the mandatory sanction under Section 151 was granted in a mechanical and perfunctory manner, without due application of mind. The reason recorded by the AO is general in nature without quantifying the amount of escaped income. Furthermore, the approval obtained under Section 151 appears to have been granted-in a purely mechanical fashion, without any independent application of mind by the sanctioning authority. The Hon'ble Supreme Court in Union of India v. Rajeev Bansal [469 ITR 46 (SC)] has laid down the principle that: \"Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assessees from harassment resulting from the mechanical reopening of assessments.\" Grant of sanction by the appropriate authority is a pre-condition for assessing officer to assume jurisdiction u/s 148 to issue a re- assessment notice. A statutory authority may lack jurisdiction if it does not fulfil the preliminary conditions laid down under the statute, which are necessary to the exercise of its jurisdiction. There cannot be any waiver of a statutory requirement or provision that goes to the root of the jurisdiction of assessment. An order passed without jurisdiction is a nullity. Any consequential order passed or action taken will also be invalid and without jurisdiction. Thus, the power of assessing officers to reassess is limited and based on the fulfilment of certain preconditions. In the present case, the reasons recorded for reopening are based solely on the alleged deposit of suspicious cash in the bank account of M/s. Vista Dealcom Pvt. Ltd. (ICICI Bank A/c No. 129005000024). However, this entity has no financial or business nexus with the assessee. It is pertinent to note that the said bank account was opened in November 2010, whereas the alleged transaction between the assessee and M/s. Nidhi Agro Pvt. Ltd. took place in June 2010 -nearly 4-5 months prior. Thus, there is a complete absence of any live link or tangible material connecting the assessee with the alleged suspicious cash deposits. L'd AO had initiated the reopening proceedings in the immediate previous year 2009-10 (asst. year 2010-11) on the same allegation that suspicious cash were deposited in M/s. Vista Dealcom Pvt. Ltd. ICICI Bank a/c 129005000024. L'd AO conducted the enquiry from ICICI bank and dropped the reopening proceeding for asst. year Printed from counselvise.com ITA No.1944/KOL/2025 31 2010-11(as explained supra) since impugned bank a/c was opened in Nov. 2010, not found live link with assessee financial transaction. Initiating reassessment proceedings solely on the basis of third- party transactions, with which the assessee has no business connection, amounts to an arbitrary exercise of power and is contrary to settled judicial principles. In view of the above, the reopening of assessment suffers from lack of valid jurisdiction owing to: (a) Mechanical grant of approval without application of mind, and (b) Absence of any tangible nexus between the assessee and the alleged transaction. (c) Receipt of loan Rs. 1 crore from M/s. Nidhi Agro Pvt. Ltd. was accepted after verification in an earlier scrutiny proceeding framed u/s 143(3). Accordingly, the reassessment proceedings are liable to be quashed as bad in law. (7) Once loan is repaid, there can be no adverse inference Since the subjected loan from Nidhi Agro (P) Ltd. was repaid on 23- 01-2022 (Page -4 of paper book) through banking channel, TDS was also deducted upon payment of interest, the AO had examined the loan transaction by issuing notice u/s 133(6) in a initial scrutiny proceeding made u/s 143(3), no adverse information can be taken about the genuineness of loan amount and reverse can not initiate re-opening proceeding on the basis of vague and suspicious. Judicial precedent (a) Delhi F Bench ITAT, Real Innerspring Technologies (P) Ltd. vs. ACIT 647/Del/2023 dated 22-03-205 held :- \"The addition were made only on the basis of alleging that the loan taken by the assessee from the above said two companies are only accommodation entries and assessee's own money was routed through these companies with the help of accommodation entry providers. On careful note, the accommodation entries are taken which will remain in the books account and they will ultimately written off over the period of time. These loans were normally not repaid. From the above, it is clear that the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan, the assessee has only Printed from counselvise.com ITA No.1944/KOL/2025 32 utilised the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs and all the transactions can not be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee. (b) Gujrat High Court Amee Mahasukhlal Parekh vs. ITO Spl Civil application 18254 of 2022 (23-09-2024) (c) Gujrat High Court Vijay Ramanlal Sanghvi vs. ACIT 330 ITR 424/146 taxmann.com 55(Guj.) (HC) (8) Submission on Merits (a) Loan Transaction - Fully Verified and Accepted in Original Assessment The assessee had taken a loan of ₹1,00,00,000/- through banking channels on 02.07.2010 from M/s. Nidhi Agro Pvt. Ltd. This transaction was duly disclosed in Form 3CD (Tax Audit Report) for the financial year ended 31.03.2011 with transaction of Nidhi Agro Pvt. Ltd. duly highlighted for ready reference. Relevant supporting documents including loan confirmation and bank statements were submitted to the Assessing Officer (AO) during the regular scrutiny assessment u/s 143(3) of the Act. Ld. AO issued notice u/s 142(1) dated 30-04-2013 asking details of loan taken. The AO, in the course of assessment, also conducted enquiries u/s 133(6) with the lender. M/s. Nidhi Agro Pvt. Ltd. confirmed the loan transaction to the Assessing Officer vide reply letter dated 17.12.2013 (copy at Page-60 enclosed. The loan was subsequently repaid along with interest (net of TDS) through banking channels on the following dates: Date Amount 21.06.2011 6,73,150 23.01.2012 1,00,00,000 27.03.2012 7,30,327 These repayments were also disclosed in the Tax Audit Report for year ending 31-03-2012 (copy at Page-54). After thorough verification and examination, the Ld. AO accepted the genuineness of the loan transaction in the original assessment enclosed (at Page -76 to 79) (9) Loan Repaid in F.Y. 2011-12-No Addition Justified u/s 68 Printed from counselvise.com ITA No.1944/KOL/2025 33 It is respectfully submitted that no addition under section 68 of the Income Tax Act is warranted in the present case, as all loan transactions were duly repaid during the Financial Year 2011-12. This position is firmly supported by judicial precedents: (a) Hon'ble Calcutta High Court (Jurisdictional High Court) in PCIT vs. Alom Extrusion Ltd., ITA/268/2024 dated 17.12.2024, held as under: \"The Tribunal, after thoroughly examining the factual details and relying upon the findings of the CIT(A), categorically observed that all the loans had been repaid. The CIT(A)'s order was detailed and comprehensive, having considered all relevant facts. The Tribunal not only referred to the pertinent portions of the CIT(A)'s findings but also independently assessed and affirmed the correctness of such findings. We therefore find no error in the Tribunal's decision and are of the view that no question of law, much less a substantial question of law, arises for consideration in this appeal.\" This judgment clearly reinforces that where loans have been duly repaid and such findings have been concurrently affirmed by both the CIT(A) and the Tribunal, no addition under section 68 is sustainable. (b) Hon'ble Gujarat High Court in PCIT vs. Ambe Tradecorp Pvt. Ltd., R/Tax Appeal No. 318 of 2022 dated 11.07.2022, similarly held: \"When the Books of Accounts clearly recorded the identity of the lender, the source of the fund, and the fact that the loan was received and subsequently repaid, the Assessing Officer was not justified in doubting the creditworthiness of the creditor. The AO had in fact ignored relevant and material evidence on record.\" In view of the above submission, various case laws relied upon the notice issued u/s 148 dated 23-03-2018 is without jurisdiction, illegal, bad in law, liable to be quashed. Reassessment order passed u/s 147/143(3) dated 30.12.2018 is also liable to be annulled. The addition of ₹1 crore made u/s 68 is also liable to be deleted. 14. It was further submitted by the ld.AR that as per the proviso to Section 149(1)(b) of the Act, the Assessing Officer has to specify the quantum of the income escaping the assessment if he proposes to reopen Printed from counselvise.com ITA No.1944/KOL/2025 34 the assessment. It was the submission that the reasons recorded does not specify the quantum of escapement. 15. On this point, it was informed to the ld.AR that the reason recorded clearly showed in the las paragraph being para 4 that the Assessing Officer has specifically mentioned that he has sufficient reason to believe that the assessee company has furnished inaccurate particulars of income and income chargeable to tax as escaped assessment for the assessment year 2011-2012 is within the ambit of the provisions of Section 147 of the Act. It was then informed to him that this clearly shows that the Assessing Officer has complied with the proviso to Section 147 of the Act. 16. in regard to the submission that this is a fishing and roving enquiry, it was brought to the attention of the ld.AR that the Assessing Officer has specifically mentioned in para 2.1 that the Assessing Officer had reopened the case of the assessee for the assessment year 2010-2011 wherein during the reassessment proceedings the bank statement of M/s Vista Dealcom Pvt. Ltd. had been verified and the funds are found to be protected through and it is therefore not a fishing and roving enquiry but a very clear cut finding and the result of the investigation done by the AO. 17. In regard to the claim of the assessee that the quantum of income escaping assessment has not been brought out. It was informed to the ld.AR that in para 2 the Assessing Officer has specifically mentioned that the assessee is one of the beneficiary company which was provided accommodation entry of Rs.1 crore from the assessment year 2009-2010 to 2012-2013. It was then informed to the ld. AR as to whether he desires Printed from counselvise.com ITA No.1944/KOL/2025 35 to argue on merits. On this point, ld. AR submitted that he was not ready to argue on merits. It was then informed to the ld. AR that the arguments in the case having been made and the same cannot be treated as part-heard and if he so desired, he could argue on merits. However, ld. AR though initially sought adjournment and when it was informed to him that arguments have already been mentioned and no adjournment shall be granted, then he requested that the matter may be kept at 4.00 PM so that he could be able to argue on merits. Consequently, the matter is treated as part-heard and posted for hearing at 4 PM today. Ld.AR was specifically informed that non-appearance at 4 PM will lead to the completion of the hearing and the order being completed in the open court. 18. The matter was heard at 4 PM as requested by the ld.AR and it was submitted by the ld. AR that he has not been able to obtain any paper to substantiate his case on merits and, therefore, he is relying on the legal issue as raised. 19. In reply, ld. Sr. DR vehemently supported the orders of the ld. Assessing Officer and ld.CIT(A) and submitted that both the authorities below have passed reasoned order which should be upheld. 20. We have considered the rival submissions as made by both the sides and we are of the view that the reopening as done by the Assessing Officer is validly done, insofar as the proviso to Section 147 of the Act does not come to the rescue of the assessee. It is also noticed that the decision relied upon by the ld. AR in the case of NDTV Ltd., referred to supra, does not apply to the facts as mentioned by the assessee. The assessee admittedly Printed from counselvise.com ITA No.1944/KOL/2025 36 has not proved that the loan taken from M/s Nidhi Agro Pvt. Ltd. was a genuine loan. This being so, we uphold the order of the ld. Assessing Officer and that of the ld. CIT(A) and dismiss the appeal of the assessee. 21. In the result, appeal of the assessee is dismissed. Order dictated and pronounced in the open court on 01/01/2026. Sd/- (RAKESH MISHRA) Sd/- (GEORGE MATHAN) लेखा सदस्य/ ACCOUNTANT MEMBER न्यधनयक सदस्य / JUDICIAL MEMBER कोलकाता Kolkata; ददनाांक Dated 01/01/2026 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलार्थी / The Appellant- 2. प्रत्यर्थी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ड फाईल / Guard file. सत्यापपत प्रतत //True Copy// Printed from counselvise.com "