RAUDRAMUKHI COMMERCE PVT. LTD.,KOLKATA V. I.T.O., WARD - 4(1), KOLKATA

ITA 2023/KOL/2024

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Raudramukhi Commerce Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, Delhi, which upheld the AO's decision to reopen the assessment for AY 2013-14 under section 147 of the Income Tax Act. The AO had received information from the DDIT (Investigation) that the assessee had received accommodation entries, which led to the reopening. The Tribunal noted that the AO did not demonstrate any live link between the material received and the formation of reason to believe that income had escaped assessment. The Tribunal referenced similar cases where it was held that reopening based on presumption and surmises without clear findings as to escapement of income is unjustified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126895 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Other Referred Cases: M/s Sakaar Commercial Pvt. Ltd. Vs. ITO, MLB Commercial Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHUMITA DAS
• Assessee Lawyers: SOMNATH GHOSH; SARNATH GHOSH; ARS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Reopening of assessment; Accommodation entries; Reason to believe; Tangible material; Borrowed satisfaction; Satisfaction; Dismissed; National Faceless Appeal; Transfer; Deleted; ADIT
• Section: 147; 148; 48; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM ITA No. 2023/KOL/2024 (Assessment Year: 2013-14) Raudramukhi Commerce Pvt. Ltd. C/O. S.N. Ghosh & Associates, Advocates, 2, Garstin Place, 2nd Floor, Suite No.203, Off Hare Street, Kolkata, West Bengal, 700001 Vs. I.T.O., Ward - 4(1) Aayakar Bhawan, P-7, Chowringhee Square, Kolkata, West Bengal, 700069 (Appellant) (Respondent) PAN No. AAFCR6446R Assessee by : Shri Somnath Ghosh & Shri Sarnath Ghosh, ARs Revenue by : Ms. Madhumita Das, DR Date of hearing: 17.04.2025 Date of pronouncement : 24.04.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.01.2024 for the AY 2013-14. 02. At the outset, I observe that there is a delay of 196 days in filing the appeal by the assessee for which condonation petition was filed. It was stated in the condonation petition that Registered office of the company was transferred from Kolkata to Mumbai and thereafter the income tax jurisdiction was also transferred from Kolkta to Mumbai and the taxation matters were assigned to Chartered Account Shri Pawan Mallawat, when the CIT passed the order. The said counsel of the assessee suggested that appeal has to be filed in Mumbai Beeches. However, another counsel suggested that the appeal has to be filed in Kolkata as Page | 2 ITA No.2023/KOL/2024 Raudramuki Commerce Pvt. Ltd; A.Y. 2013-14 the ld. AO who passed the assessment order is located in Kolkata jurisdiction and this is how the delay in filing the appeal has happened and finally, the appeal was filed on 27.09.2024 with a delay of 194 days. 03. After considering the reasons stated before us and rival contentions of the parties, I am of the view that the delay in filing the appeal is genuine and for bonafide reasons and therefore, the same is condoned. 04. The only issue raised at the time of hearing by the counsel of the assessee is against the order of ld. CIT (A) upholding the order of ld. AO where the jurisdiction u/s 147 of the Act was invalidly exercised. 05. The facts in brief are that the assessee filed the return of income on 27.09.2013, declaring total income at ₹7,760/-. The case of the assessee was reopened u/s 147 of the Act by issue of notice u/s 148 of the Act on 10.3.2021, but there was no compliance to the said notice pertinent to state that the assessee’s case was reopened u/s 147 of the Act after a specific information was received by the ld. AO that assessee has ploughed back his own funds through accommodation entries from M/s Pramodanah Goods Pvt. Ltd., from whom the assessee has received ₹25 lacs. Accordingly, the statutory notices including the questionnaire were issued. There was no compliance on the part of the assessee and finally, the amount received from the said company was treated as unexplained cash credit u/s 68 of the Act. 06. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee when the assessee failed to respond on various opportunities granted by the ld. CIT (A). 07. After hearing the rival contentions and perusing the materials available on record, I find that the assessee has received ₹25 lacs from the above said party in liew of sale of shares during the year. Pertinent to state that these shares were brought in the preceding assessment year. The Page | 3 ITA No.2023/KOL/2024 Raudramuki Commerce Pvt. Ltd; A.Y. 2013-14 ld. AR submitted before us that the case of the assessee has been invalidly reopened by the ld. AO by referring to the copy of the reasons recorded which are available at page no. 48 to 51. The ld. AR stated that the information received by the ld. AO from DDIT (Investigation) Wing, Unit-3(4), Kolkata, was acted upon by AO by issue notice u/s 148 of the Act without any application of mind and recorded conclusion that income of ₹25 lacs has escaped assessment. I note that the ld. AO has noted the information received from the DDIT (Investigation) in the reasons recorded and nowhere recorded his satisfaction therefore, I find merit in the contention of the assessee that the reasons have been recorded by the AO without any independent application of mind and accordingly, the reopening is invalid and nullity in the eyes of law. I also find that the reasons recorded are based upon presumption and surmises without recording a clear-cut finding as to escapement of income. The case of the assessee is squarely covered by the decision of the co-ordinate bench in the case of M/s Sakaar Commercial Pvt. Ltd. Vs. ITO in ITA No. 2184/KOL/2019 vide order dated 21.12.2022, wherein similar issue has been decided in favour of the assessee. The operative part of the said decision is extracted below:- “9. We have heard the rival submissions and perused the material on record and the reason recorded u/s 148(2) of the Act a copy of which is placed at page 28 of PB. We find from the perusal of the reasons that AO has simply discussed the issue that information was received from ADIT (Inv), Unit-4(1), Kolkata vide letter dated 26.03.2018 and the fact that the assessee has received Rs. 10,00,000/- from Surya Commotrade Pvt. Ltd. through its bank account. We note that the AO has discussed in reason the transaction in the bank account of third party and no where recorded a satisfaction that the amount which is received by the assessee of Rs. 10,00,000/- has escaped assessment. Thus, we find merit in the contentions of the Ld. A.R. that reason recorded are based upon presumption and surmises without recording a clear cut finding as to escapement of income. The case of the assessee finds support from the decision of Co-ordinate Bench of Gauhati in the case of MLB Commerical Pvt. Ltd. (supra). The operative part is reproduced as under: “8. I have heard the rival contentions and gone through the records. In this case as noted above, the Assessing Officer received some information from the Investigation Wing that the assessee had brought back some unaccounted income to the tune of Rs.4,00,000/- through shell companies. However, which Page | 4 ITA No.2023/KOL/2024 Raudramuki Commerce Pvt. Ltd; A.Y. 2013-14 were those shell companies has not been mentioned in the reasons recorded. The ld. AR has pointed out that the assessee during the year did not get any profit on the alleged shares held/sold by him. The shares were sold by the assessee at cost price, therefore, there was no question of routing any unaccounted income by way of share profit. A perusal of the reasons recorded reveals that the Assessing Officer did not correlate the information received by him from the Investigation Wing with the Income-Tax Return/accounts of the assessee. He reopened the assessment on the basis of borrowed satisfaction without verifying about the genuineness of the information received. Such an information from Investigation Wing may give the Assessing Officer the reasons to suspect, but the same does not constitute reasons to believe, until and unless the Assessing Officer satisfies himself about veracity of the information received from the Investigation Wing so as to form the belief that the income of the assessee for the year under consideration has escaped assessment. The necessary ingredients of forming belief by the Assessing Officer of escapement of income are missing in this case. Therefore, the reopening of the assessment being bad in law, the assessment order is quashed. The consequential additions made by the Assessing Officer are accordingly ordered to be deleted.” Similarly, we note that there is no application of mind by the AO to the information received and whatever has been supplied to the AO has been taken as it is without any independent application of mind by AO and thus AO has failed to demonstrate any live link between the material received and formation of reason to believe that income had escaped assessment. The case of the assessee find support from the decision of Delhi High Court in the case of Meenakshi Overseas Pvt. Ltd. (supra) wherein it has been held that where there is no independent application of mind by the AO to tangible material and conclusion of AO was reproduction of the investigation report, reasons failing to demonstrate link between tangible material and formation of reason to believe that income has escaped assessment , the reassessment is unjustified. In view of the legal proposition as discussed above, we are inclined to quash the reopening of assessment order for the reasons of non-recording of any reason to believe and re-opening the case on borrowed satisfaction. 10. In the result, the appeal of the assessee is allowed.” Accordingly, I am inclined to quash the reopening of assessment. 08. In the result, the appeal of the assessee is allowed on legal issue. Order pronounced in the open court on 24.04.2025. Sd/- (RAJESH KUMAR) (ACCOUNTANT MEMBER) Kolkata, Dated: 24.04. 2025 Sudip Sarkar, Sr.PS Page | 5 ITA No.2023/KOL/2024 Raudramuki Commerce Pvt. Ltd; A.Y. 2013-14 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "