NEHA DIWAN,HINDMOTOR V. ITO WARD - 23(1), HOOGHLY

ITA 630/KOL/2025

AI Insights

Neha Diwan appealed against the order of the Commissioner of Income Tax (Appeals) which confirmed the assessment made by the Income Tax Officer under sections 147, 144, and 144B of the Income Tax Act, 1961. The assessment included an addition of Rs. 91,00,000 as unexplained cash credit under section 68 of the Act, which the assessee contested as being a result of accommodation entries. The Tribunal noted procedural lapses in the handling of the assessee's compliance and the opportunity to present her case, leading to the decision to remit the case back to the CIT(A) for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772260 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: GKN Driveshafts (India) Ltd. vs. Income-tax Officer, Swati Bajaj vs PCIT, CIT Vs. Dataware Private Ltd., S.K. Bothra & Sons, HUF vs. Income-tax Officer, Ward-46(3), Kolkata
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARBITRARILY ALLEGING
• Keywords: Set aside; Business income; Opportunity of being heard; Revised return; Unexplained cash credit; Onus to prove; Principle of natural justice; Accommodation entries; Bogus
• Section: 147; 148; 144; 142(1); 271(1)(c); 68; 234B

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'सी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA श्री प्रदीप क ुमार चौबे, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan Vs. ITO, Ward-23(1), Hooghly (Appellant) (Respondent) PAN: ALYPD5828J Appearances: Assessee represented by : Ravi Chandra Mishra, Adv. Department represented by : S.B. Chakraborty, Sr. DR, JCIT. Date of concluding the hearing : 11-June-2025 Date of pronouncing the order : 25-August-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 22.01.2025, which has been passed against the order u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 31.03.2022. Printed from counselvise.com Page | 2 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. The Ld. CIT(A) erred in confirming the AO’s decision to treat the return filed u/s 148 as invalid on the ground of delayed e-verification, despite technical issues with the income tax portal. The return was duly uploaded and verified before the finalization of the assessment. The AO failed to appreciate the CBDT’s guidance to accommodate portal-related delays. 2. That the assessment order dated 31st March, 2022 passed by Ld. Income Tax Officer, National Faceless Assessment Centre, Delhi under section 147 r.w.s. 144 read with section 144B of the Income-tax Act and never served on the assessee determining the total income of the assessee at Rs. 93,45,920/- as against the returned income of Rs. 2,45,920/- is without jurisdiction, illegal, invalid, time barred and perverse being contrary to the facts and evidences on record. 3. That, the reassessment was initiated based on alleged information that the appellant received accommodation entries of ₹91,00,000 from M/s Shree Shyam Trading Company (Prop. Satya Narayan More, PAN: CRHPM0358P). The appellant submitted complete documentation including ledger, sale invoices, confirmations, and bank statements to prove the genuineness of the transactions. 4. That, without prejudice, the assessment order dated 31st March, 2022 passed by Ld. Assessing Officer under section 147 r.w.s 144 read with section 144B and u/s. 250 by CIT(A) of the Act for the Assessment Year 2016-17, is without jurisdiction, illegal, invalid and void-ab-initio being passed against the facts and laws applicable in the instant case and further being passed in violations of the settled Principles of Law and Natural Justice. 5. That the Notice dated 31st March, 2021 issued by the Assessing Officer under section 148 of the Act for the Assessment Year 2016-17 is a defective Notice in as much as the same was neither received in the mail registered with the income tax department nor the hard copy delivered to communication address recorded in the income tax department. It was only known to the assessee when logged in to the portal in the last week of Apr- 21. 6. That the impugned re-assessment proceedings initiated in pursuance to the Notice issued under section 148 of the Act is without jurisdiction, illegal and void-ab-initio in as much as the Assessing Officer failed to furnish the assessee the copy of the reasons, if any, recorded in the case of the assessee thereby not following the guidelines issued by Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. 2003 259 ITR 19 (SC). Printed from counselvise.com Page | 3 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. 7. That, the Ld. Assessing Officer and CIT(A) erred in making addition of Rs. 91,00,000/- as unexplained credit under section 68 read with section 115BBE of the Act to the total income of the assessee by arbitrarily alleging that the assessee failed to furnish any satisfactory explanation for the nature and source for the credit of Rs.91,00,000 (in) her books and thereby genuineness of the transactions in complete disregard of all the evidences furnished by the assessee to prove the same. 8. That the Ld. Assessing Officer and CIT(A), in absence of any legal and acceptable evidence in his possession, erred in treating the genuine transactions of the assessee of Rs. 91,00,000/- with Shree Shyam Trading Company (Prop. Satya Narayan More, PAN: CRHPM0358P) as unexplained credit under section 68 read with section 115BBE of the Act and further erred in adding the same to the total income of the assessee. 9. That the Ld. Assessing Officer and CIT(A) erred in not considering that the return of income filed by the Shree Shyam Trading Company (Prop. Satya Narayan More, PAN: CRHPM0358P) were not rejected by the Assessing Officer of said party and that the Assessing Officer has no jurisdiction to invoke the provisions of section 68 of the Act as held by the Hon’ble Calcutta High Court in the case of CIT Vs. Dataware Private Ltd.in ITAT No.263 of 2011, GA No.2856 of 2011 dated 21.09.2011. 10. That the various adverse findings and the conclusion of the impugned assessment order dated 22-Jan-2025 by CIT(A) and dated 31st Mar 2022 by Ld. Assessing Officer, are perverse based on surmises, conjectures, stories and gossips and are contrary to the facts of the case and evidences on record and therefore the Ld. Assessing Officer and CIT(A) erred in adversely using the same in determining the assessable income of the assessee in accordance with law. 11. The assessment is bad in law being passed in gross violation of natural justice. Despite submission of documents, invoices, confirmations, audit reports, the AO summarily dismissed the same without issuing any show cause or providing a fair opportunity of rebuttal. 12. The Ld. CIT(A) erroneously relied on the sales figure of the original return filed u/s 139(1) and ignored the revised return filed in response to notice u/s 148. The revised figures and documents clearly demonstrated the business transaction. Reliance solely on earlier return without examination of revised data is unjustified. 13. The Ld. Assessing Officer and CIT(A) erred in for not considering the audit report furnished under section 44AB and arbitrarily initiating penalty proceedings u/s 271B of the Act. 14. That Ld. Assessing Officer and CIT(A) erred in charging interest under section 234A and 234B of the Act which is not chargeable and/or excessively charged. Printed from counselvise.com Page | 4 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. 15. That the Ld. Assessing Officer arbitrarily initiated penalty proceeding under section 271(1)(b) of the Income Tax Act 1961. 16. That the Ld. Assessing Officer arbitrarily initiated penalty proceeding under section 271(1)(c) of the Income Tax Act 1961. 17. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before or at the time of hearing of appeal.” 3. Brief facts of the case are that as per the information available with the Income Tax Department, the assessee was found to be one of the beneficiaries of accommodation entries provided by M/s. Shree Shyam Trading Co. during the previous year relevant to the A.Y. 2016- 17. Therefore, based on the reasons to believe that the income chargeable to tax had escaped assessment, a notice u/s 148 of the Act was issued on 31.03.2021 but the assessee failed to comply with the notice issued and did not file the return of income within the timeline specified in the notice. Further, another notice u/s 142(1) of the Act was issued and served on the email of the assessee on 13.11.2021, which was also not complied with. The assessee requested for a copy of the reasons recorded which were supplied but as no valid return of income was filed in response to the notice u/s 148 of the Act, the Assessing Officer (hereinafter referred to as Ld. 'AO') completed the assessment to the best of judgment 144 r.w.s. 147 r.w.s. 144B of the Act on the materials available on record and after considering the details and explanations of the assessee filed. As per the information available with the Ld. AO, M/s. Vinayak Trading Co., a proprietary concern of the assessee, had received ₹91,00,000/- from Shri Satya Narayan More during the relevant previous year and had maintained a current account with RBL Bank Ltd., which was opened and operated only for the purpose of providing accommodation entries to the beneficiaries. The Ld. AO held that the above facts and circumstances, when read in Printed from counselvise.com Page | 5 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. conjunction with the failure of the assessee to furnish the requisite details for conducting cross verification of the claim led to the only conclusion that the undisclosed income of the assessee had been brought into the books through Shri Satya Narayan More who had maintained a current account with RBL Bank Ltd. which was opened and operated only for the purpose of providing accommodation entries to beneficiaries. The genuineness of the transaction with Shri Satya Narayan More was not proved and the mere fact that the money had come through banking channel did not make a transaction genuine as in the process of giving accommodation entries, the transactions were controlled and synchronized to benefit the targeted beneficiaries. Accordingly, a sum of ₹91,00,000/- was treated as unexplained cash credit u/s 68 of the Act and added to the total income of the assessee. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) and in response to the notices issued for hearing, the assessee filed written submission and placed reliance upon several judicial pronouncements, which has been reproduced in the order of the Ld. CIT(A). The appeal was belated but the Ld. CIT(A) condoned the delay and admitted the appeal for adjudication. The grounds relating to the assessment order never being served and thus being time barred and the notice not being received by the assessee were dismissed after going through the screen shots of the notices issued and examining the law in this regard. As regards the reasons for reopening not being provided, the same was dismissed after perusing that the reasons for reopening were proved along with the notice dated 10.03.2022 issued u/s 142(1) of the Act. Further, Ground no. 2 relating to violation of the principles of natural justice was also dismissed by holding as under: Printed from counselvise.com Page | 6 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. “6.6 Ground no. 2 challenges the order on the ground that the same has been passed in violation of the principles of natural justice. The appellant states that During the course of hearing, all the required documents as mentioned in the notice u/s. 142(1) i.e. copy of ledger, nature of transaction and corresponding purchase details along with invoice copies, corresponding ledger/confirmation of the party were submitted. Hence it was evident that all the credit is fully recorded and explained. It is also filed in the return of income u/s. 148. It is seen that as per information available with the AO, the appellant was a beneficiary of accommodation entries to the tune of Rs. 91,00,000/- from M/s Shree Shyam Trading Co, proprietorship concern of Shri Satya Narayan More. The appellant claims to have sold jute to M/s Shree Shyam Trading Co. and that Rs. 91,00,000/- represents sale proceeds. She has furnished a copy of the ledger of Shyam Trading Co, copies of invoices and copies of bank accounts showing receipt from this concern. She states that she has discharged her onus u/s 68. However, it is seen from the original return of income filed by the appellant that the total sales reported by her stand at Rs. 36,57,189/- In such a scenario, it is not clear how the appellant claims to have discharged her onus u/s 68. The explanation does not match the figures reported in her original return. 6.7 M/s Shree Shyam Trading company is a concern which is involved in providing bogus bills and accommodation entries. The very nature of an accommodation entry is complete paperwork to show transactions that actually did not take place. The decision of the Hon'ble Calcutta HC in Swati Bajaj vs PCIT [2022] 139 taxmann.com 352 (Calcutta) is the seminal decision on the doctrine of substance over form as applicable to organised racket of accommodation entries. Further, in this case, what is interesting to note is that in the original return of income filed on 22/03/2017, total sales have been shown as only Rs. 36,57,189/- as apparent from the screen shot reproduced below: …(copy of the screen shot is included)… When the total sales are only Rs. 36,57,189/-, the contention of the appellant that the credits in the bank account from M/s Shree Shyam Trading company totalling Rs. 91,00,000/- are sale proceeds, falls at the stage of preliminary examination of the return itself. The bills and vouchers showing purported sale to M/s Shree Shyam Trading company during the FY 2015-16 are clearly fabricated as the corresponding sales are not part of the turnover during the year, as per the original return. The credit entries in the bank account totalling Rs. 91,00,000/- are clearly not from sale proceeds. These entries remain unexplained and have been correctly added by the AO as unexplained credits. The addition made by the AO of Rs. Printed from counselvise.com Page | 7 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. 91,00,000/- is hereby upheld. The charge of lack of natural justice has already been dismissed in connection with the grounds of appeal adjudicated above. Hence ground no. 2 is dismissed.” 4. The appeal was accordingly dismissed. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before this Tribunal. 5. Rival contentions were heard and the submissions made and the paper book filed have been examined. Before us the assessee has filed the statement of facts in which it is submitted that the notice u/s 148 of the Act was defective, the Ld. AO failed to furnish the reasons and to follow the guidelines issued by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. Income-tax Officer [2002] 125 Taxman 963 (SC)/[2003] 259 ITR 19 (SC)/[2003] 179 CTR 11 (SC)[25-11-2002]. It is stated that the Ld. AO issued a notice u/s 142(1) of the Act dated 10.03.2022 to submit the entire set of documents which were already submitted on 10.02.2022 and 08.03.2022 and considered the return filed on 10.02.2022 as invalid without any proper reason. On 24.03.2022, a show cause notice was issued along with draft assessment order in complete disregard to submitted supporting documents, the already filed return and the tax audit report. In response to this notice, it was again reiterated that notice u/s 148 of the Act was neither received in mail registered with the Income Tax Department nor the hard copy was delivered on the recorded communication address. It was only known to the assessee when she logged in to the portal in the last week of April, 2021 as there was full lock down since 15.05.2021 to 15.06.2021 and partial lock down thereafter, due to Covid-19 which affected the consultation to deal with the notice. Further, as her business was already closed since the pandemic started and the office was not operational, access to the Printed from counselvise.com Page | 8 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. information was restricted or not readily available. The assessee submitted that the onus to disprove these evidences was on the Ld. AO and unless the Ld. AO brings on record any contrary evidence to show that the explanation and documentary evidences of the assessee were not satisfactory, the Ld. AO cannot treat the genuineness transaction as unexplained cash credit u/s 68 of the Act as held by the Hon'ble Calcutta High Court in the case of S.K. Bothra & Sons, HUF vs. Income-tax Officer, Ward-46(3), Kolkata [2011] 15 taxmann.com 298 (Calcutta)/[2011] 203 Taxman 436 (Calcutta)/[2012] 347 ITR 347 (Calcutta)[02-08-2011]. It is stated that the entire addition is unjustified as the Ld. AO failed to discharge the burden which had shifted to him after the assessee submitted sufficient evidence of identity, creditworthiness and genuineness of the transactions. The Ld. CIT(A) overlooked the mismatch in sales reported vs. sales made to Shree Shyam Trading Co., ignoring the revised return filed u/s 148 of the Act, which were not found by the Ld. AO to be false or fabricated. It is also submitted that the Ld. AO did not provide any legal and acceptable evidence in respect of the assessee’s involvement, connection or relation of any kind or nature whatsoever with the alleged modus operandi of accommodation entry or cash rotation. The assessee has further relied upon the following judicial pronouncements: i. State of Andhra Pradesh vs. M. Ramakrishtaiah & Co. - 93 STC 406 (SC) ii. CIT vs. Shri Narayani Chandrika Trust - 212 ITR 456 (Ker) iii. Government of Wood Works vs. State of Kerala 69 STC 62 referring to the decision and observations of Apex Court in the case of B. J. Shelat vs. State of Gujrat iv. The Hon'ble West Bengal Taxation Tribunal’s decision in the case of Mafatlal Industries Ltd. & Another vs. CTO & Others- 101 STC 461 v. Shanti Lal Ghodawat & Ors. Vs. ACIT - (2009) 126 TTJ (Jd) 135 vi. The Hon'ble Punjab & Haryana High Court’s decision in the case of CIT vs. M/s Ra Bahadur Kishore Chand & Sons - 2008 TMI – 3777 Printed from counselvise.com Page | 9 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. 5.1 It is submitted that similar view has been taken in the following decisions as well: i. CIT vs. Kappumalai Estate - (1998) 234 ITR 167 (Ker) ii. K. Joseph Jacob vs. Agrl. ITO & Anr. (1991) 190 ITR 464 (Ker) iii. Malayil Mills vs. State of Kerala - (TRC Nos. 15 and 69 of 1991) 6. As regards section 68 of the Act, the assessee in para 11 has submitted that as per section 68 of the Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. During the course of the hearing, all the required documents as mentioned in the notice u/s 142(1) of the Act i.e. copy of ledger, nature of transactions and corresponding purchase details along with invoice copies, corresponding ledger/confirmation of the party were submitted. Hence it was evident that all the credit is fully recorded and explained. It is also mention in the return of income filed u/s 148 of the Act. Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1 (SC), Roshan Di Hatti vs. CIT [1977] 107 ITR (SC), it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once the assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then the Ld. AO must Printed from counselvise.com Page | 10 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. do some inquiry to call for more details to invoke Section 68 of the Act. Hence, the amount of ₹91,00,000/- should not be considered as unexplained and added to income. Thus, the assessee submits that the said assessment order dated 31.03.2022 passed by Ld. Income Tax Officer, National Faceless Assessment Centre, Delhi u/s 147 of the Act, which was never served on the assessee determining the total income of the assessee at ₹93,45,920/- as against the returned income of ₹2,45,920/- is without jurisdiction, illegal, invalid, time barred and perverse being contrary to the facts and evidences on record. It is further submitted that the Ld. AO alleged that the assessee consistently failed to comply with the notices which is baseless and arbitrary in nature and the Ld. AO should have considered the responses submitted for adjournments as well. The Ld. AO failed to consider the hardship faced by everyone and the assessee in complying with the notices as despite technical glitches on the income tax portal, limited/restricted access to data sources due to the ongoing pandemic, all the responses were submitted along with required details and supporting. The Ld. AO also failed to consider the Tax Audit Report filed u/s 44AB of the Act on 15.02.2022. 7. We have considered the submissions made. The assessee could not make proper compliance before the Ld. AO and therefore, the assessment order was made u/s 144 r.w.s. 147 r.w.s. 144B of the Act. The assessee contends that there were technical glitches in uploading the return. The Ld. CIT(A) noted that in the case of the assessee, in the original return of income filed on 22.03.2017, total sales had been shown only at ₹36,57,189/-. Therefore, the contention of the assessee that the credits in the bank account from M/s. Shree Shyam Trading Co. being ₹91 Lakh are the sale proceeds falls at the stage of preliminary Printed from counselvise.com Page | 11 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. examination of the return itself. However, the Bench was of the view that in case the assessee was claiming the same as sale proceeds of shares, and the same was shown at ₹36,57,189/- in the return of income, the assessee ought to have been given an opportunity to reconcile the difference. Since for the reasons mentioned, proper compliance could not be made by the assessee either before the Ld. AO or before the Ld. CIT(A), therefore, in the interest of justice and fair play, the order of the Ld. CIT(A) are hereby set aside and remit the appeal to the Ld. CIT(A) to be decided afresh, who shall allow an opportunity of being heard to the assessee and also grant an opportunity of representing the case and be heard to the Ld. AO as per rule 46A of the Income Tax Rules, 1962, if required, and thereby pass an order in accordance with law. For statistical purposes, the appeal of the assessee is allowed. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 25th August, 2025. Sd/- Sd/- [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Dated: 25.08.2025 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 12 I.T.A. No.: 630/KOL/2025 Assessment Year: 2016-17 Neha Diwan. Copy of the order forwarded to: 1. Neha Diwan, 157/1, New Station Road, Hindmotor, Hooghly, West Bengal, 712223. 2. ITO, Ward-23(1), Hooghly. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "