OMPRAKASH DARUKA,RANIGANJ V. ITO, WARD 3(1), , ASANSOL

ITA 685/KOL/2025

AI Insights

The case involves an appeal by Omprakash Daruka against the order of the CIT(A), National Faceless Appeal Centre, Delhi, which pertained to the reopening of his assessment for the Assessment Year 2013-2014. The reopening was based on information received from the DIT (Investigation), Kolkata, suggesting that the assessee was a beneficiary of accommodation entries in the form of Long Term Capital Gain. The Tribunal noted that the reasons recorded for reopening the assessment were identical to those in the case of the assessee's wife, Anju Daruka, which had previously been quashed by the Tribunal. The Tribunal found the reasons for reopening in the current case to be vague and lacking in specific details about the transactions, thus not meeting the legal requirements for a valid reopening under sections 147 and 148 of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711446 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2013-2014
• Other Referred Cases: Anju Daruka vs. ITO, CIT Vs. Insecticides (India) Ltd., Signature Hotels (P.) Ltd. vs. CIT, Commissioner of Income-tax vs. Atul Jain
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKAR NASKAR
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Reassessment proceedings; Question of law; Reopening of assessment; Capital Gains; Sham transactions; Accommodation entries; Earning of tax free income; Reason to believe; Borrowed satisfaction; Bogus
• Section: 147; 148

Judgement Text

" आयकर अपीलीय अधिकरण, “एस.एम.सी” न्यायपीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH KOLKATA श्री जाजज माथन, न्याययक सदस्य क े समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER आयकर अपील सं/ITA No.685/KOL/2025 (नििाारण वर्ा / Assessment Year :2013-2014) Omprakash Daruka, C/o S.N.Ghosh & Associates, Advocates, 2, Garstin Place, 2nd Floor, Suite No.203, Off Hare Street Kolkata-700001 Vs ITO, Ward-3(1), Asansol PAN No. : ACQPD 1122 L (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) नििााररती की ओर से /Assessee by : Shri Somnath Ghosh, AR राजस्व की ओर से /Revenue by : Shri Shankar Naskar, Sr. DR सुनवाई की तारीख / Date of Hearing : 24/07/2025 घोषणा की तारीख/Date of Pronouncement : 24/07/2025 आदेश / O R D E R This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 04.02.2025 for the Assessment Year 2013-2014. 2. Shri Somnath Ghosh, ld.AR appeared on behalf of the assessee and Shankar Naskar, ld. Sr.DR appeared on behalf of the revenue. 3. It was submitted by the ld. AR that the assessee is challenging the reopening of the assessment. Ld. AR drew my attention to page 96 of the paper book which is the copy of reasons recorded which reads as under :- Printed from counselvise.com ITA No.685/Kol/2025 2 Printed from counselvise.com ITA No.685/Kol/2025 3 4. It was the submission of the ld. AR that on identical reasons the coordinate bench of the Tribunal in the case of wife of the assessee has quashed the reopening in the case of Anju Daruka reported in [2025] 173 taxmann.com 91 (Kolkata-Trib), wherein the coordinate bench of the Tribunal has in paras 8 to 11 held as follows :- 08. We have heard the rival contentions and perused the materials available on record. The undisputed facts are that the case of the assessee was reopened u/s 147 read with section 148 of the Act after recording reason to believe u/s 148(2) of the Act by the AO. The above reopening was done after the ld. AO received information from the DIT (Investigation) Kolkata that assessee is beneficiary of accommodation entries in the form Long Term Capital Gain. The reasons recorded are available at page no. 42 of the paper book, which has been challenged by the assessee to be vague, scanty and ambiguous. For the sake of ready reference same is extracted below:- \"(i) The assessee has filed its return of income for the Assessment Year 2013-14 disclosing total income of Rs.2.02,150/- on 23/07/2013. During the A.Y.2013-14 the assessee has disclosed income from business & profession amount to Rs.2,55,874/- and from other sources at Rs.58,578/- and deduction under Chapter VIA of Rs.1,12,305/-. The assessee has filed its return of Income for the assessment year 2014-15 and 2015-16 disclosing total income of Rs.2,17,940/- and Rs.4,86,060/- respectively. The return of income for the A.Y.2013-14 was duly processed on 18/12/2013 at total income of Rs.2,02,150/- resulting NIL Demand/Refund. (ii) Survey actions were conducted by the DIT (Investigation), Kolkata on various hsare brokers during which the share brokers have accepted their role in the entire scheme of providing accommodation entries of bogus LTCG/STCG in case of penny stock \"BSR Finance & Construction Limited.\" (iii) From the in-depth analysis of the return filed by the assessee for the A.Y.2013-14, Investigation reports, statements of the share brokers involved, the exist providers, related shell companies, sham transactions along with statement of related persons in the scheme it emerges that the assessee has taken accommodation entry of pre-arranged bogus LTCG of around to Rs.11,87,522/- during the F.Y.2012-13 in the scrip of \"BSR FINANCE & CONSTRUCTION LIMITED.\" Printed from counselvise.com ITA No.685/Kol/2025 4 (iv) Show cause notice for initiation of proceedings u/s 147 was issued on 15/10/2018 for necessary compliance on or before 15/11/2018, but the assessee has failed to comply with the show cause notice. (v) On examination of the Return of Income filed by the assessee, it is found that the assessee has disclosed income from business & profession amount to Rs.2,55,874/- and income from other sources amount to Rs.58,578/-in its return of income for the A.Y.2013-14. It is evident from the records that the assessee had claimed exempt income amount to Rs.11,87,522/- for LTCG In its ITR (Schedule El) filed for the A.Y.2013-14. (vi) On the basis of above discussion, I have every reason to believe that the income chargeable to tax has escaped assessment to the extent of Rs.11,87,522/-, coming within the meaning of section 147 read with proviso thereto, by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As the time limit for issue of notice as provided u/s 149(b)(iii) is expiring on 31.03.2020, your honour is requested to sanction permission u/s 151 read with proviso thereto to issue notice u/s 148 of the Income Tax Act, 1961 for the A.Y.2013-14.\" 09. On perusal of the above reasons it is revealed that the ld. AO has only recorded the facts of the assessee as to the return of income and source of income. Thereafter, he noted the information received from the DIT. Thereafter, the ld. AO noted that the assessee is beneficiary of bogus Long Term Capital Gain/ Short Term Capital Gain and has earned ₹11,87,522/- in the script of M/s BSR Finance & Construction Ltd. The ld. AR then concluded that he has reason to believe that the income the income has escaped assessment. 010. In our option, the above reasons are not complete as the details of transactions, such as date of transactions, the person from whom the money has been received and where the transactions have been transacted and how the assessee is beneficiary of bogus Long Term Capital Gain. We find merit in the contention of the assessee that the reopening has been made on the basis of vague reasons as it the reasons mentioned only that the assessee is beneficiary of Long Term Capital Gain of ₹11,87,522/- in the script of M/s BSR Finance & Construction Ltd. and no other details were mentioned and therefore, the reasons recorded were not sufficient as the AO has not recorded his satisfaction and it is, in fact, a case of borrowed satisfaction. The case of the assessee find support from the decision of CIT Vs. Insecticides (India) Ltd. (supra), wherein the Hon'ble Court in para no. 8 and 9 has observed as under:- \"8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the same are reproduced: -- Printed from counselvise.com ITA No.685/Kol/2025 5 \"In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named company was involved in giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. In other words, the contents of the letter dated 16.06.2006 of the Director of Income- tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. 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. In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was the amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s Printed from counselvise.com ITA No.685/Kol/2025 6 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we may rely upon the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate the source of the capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scanty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the view we have taken above.\" 9. We do not see any reason to differ with the view expressed by the Tribunal. No substantial question of law arises for our consideration. The appeals are dismissed. There shall be no order as to costs.\" 011. The Hon'ble Delhi High Court while passing the said order has followed another decision relied on by the assessee in the case of Commissioner of Income-tax vs. Atul Jain (supra), wherein the Hon'ble Court has held that the ld. AO has to record his satisfaction and where the reasons recorded are vague and mechanical, the same are not valid reasons for reopening of assessment. The Hon'ble Court has held as under:- \"Looked at in the light of the decisions placed before us and the law laid down therein, it is necessary to appreciate the information available with the Assessing Officer in the present case. The only information is that the assessees had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. In so far as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him Printed from counselvise.com ITA No.685/Kol/2025 7 but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his \"reasons to believe\" is nothing more than a report given by him to the Commissioner of Income-tax. As held by the Supreme Court in Chhugamal Rajpal [1971] 79 ITR 603, the submission of a report is not the same as recording of reasons to believe for issuing a notice. The Assessing Officer has clearly substituted form for substance and, therefore, the action of the respondent falls foul of the law laid down by the Supreme Court in Chhugamal Rajpal [1971] 79 ITR 603 which is clearly applicable to the facts of these appeals. For these reasons, we are of the view that there is no error in the decision rendered by the Tribunal and no substantial question of law has arises for our consideration. Therefore, the appeals are dismissed.\" 5. It was the submission that the reasons recorded against assessee’s wife was also identical and in verbatim to the reasons recorded in the case of the assessee. It was the prayer that the notice issued u/s.148 of the Act is liable to be quashed and the reassessment proceedings is also liable to be quashed. 6. In reply, ld Sr. DR submitted that this a case of penny stock and he also vehemently supported the orders of the Assessing Officer and ld. CIT(A). 7. I have considered the rival submissions. As it is noticed that the coordinate bench of the Tribunal, being Division Bench, in the case of assessee’s wife namely Anju Daruka (supra), has already quashed the reassessment proceedings which are identical and in verbatim to the reasons recorded in the assessee’s case, respectfully following the decision of the coordinate bench of the Tribunal in the case of Anju Daruka Printed from counselvise.com ITA No.685/Kol/2025 8 (supra), the reopening of the assessment is held to be bad in law and the same stands quashed. Consequently, the consequential assessment also stands quashed. 8. In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 24/07/2025. Sd/- (जाजज माथन) (GEORGE MATHAN) न्यानयक सदस्य / JUDICIAL MEMBER कोलकाता Kolkata; ददनाांक Dated 24/07/2025 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : आदेशािुसार/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ज फाईल / Guard file. सत्यापपत प्रयत //True Copy// Printed from counselvise.com "