SUDHIR BANSAL, BHILAI,DURG V. ASSISTANT COMMISSIONER OF INCOME TAX-1(1), BHILAI, DURG

ITA 98/RPR/2025

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The case involves Sudhir Bansal, the appellant, contesting the reassessment order issued by the Assistant Commissioner of Income Tax-1(1), Bhilai, for the assessment year 2011-12. The primary legal contention was the validity of the reassessment proceedings under sections 147/148 of the Income Tax Act, 1961. The appellant argued that the reassessment was based on borrowed satisfaction without any independent application of mind by the Assessing Officer, which was supported by a letter from the Assistant Director of Income Tax (Inv.)-1, Raipur. The Tribunal, referencing several judicial precedents, concluded that the reassessment was not justified as it did not meet the legal standards of independent satisfaction required for such proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712397 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2011-2012
• Other Referred Cases: Principal Commissioner of Income-tax-5 Vs. Shodiman Investments (P.) Ltd., Principal Commissioner of Income-tax-6 v. Meenakshi Overseas (P.) Ltd., Well Trans Logistics India (P.) Ltd. v. Addl. Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: S.R. RAO
• Keywords: Reassessment proceedings; Reopening of assessment; Reason to believe; Tangible material; Borrowed satisfaction
• Section: 147

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.98/RPR/2025 Ǔनधा[रण वष[ / Assessment Year : 2011-12 Sudhir Bansal 8, Civic Centre, Bhilai, Dist. Durg-490 006 (C.G.) PAN: ADBPB3234H ........अपीलाथȸ / Appellant बनाम / V/s. The Assistant Commissioner of Income Tax-1(1), Bhilai (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri S.R. Rao, Advocate Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 24.07.2025 घोषणा कȧ तारȣख / Date of Pronouncement : 29.07.2025 Printed from counselvise.com 2 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM: The captioned appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 30.12.2024 for the assessment year 2011-12 as per the grounds of appeal on record. 2. In this case, the assessee has filed both legal grounds as well as grounds on merits. The Ld. Counsel for the assessee submitted that he would assail the legal ground first and if the said legal ground is answered affirmative, then the grounds on merits shall become academic only. 3. In this case, at the very outset, the Ld. Counsel for the assessee has assailed legal validity of the reassessment proceedings conducted by the department u/s. 147/148 of the Income Tax Act, 1961 ( for short ‘the Act’). It was submitted by the Ld. Counsel that as per the reasons recorded u/s. 148(2) of the Act, there is no independent satisfaction arrived at by the A.O in the “reasons to believe” that income of the assessee chargeable to tax has escapement assessment in respect of the assessee. In fact, there is no whisper in the reasons recorded that there is any independent application of mind by the A.O to arrive at a conclusion for reopening the case of the assessee u/s. 147/148 of the Act. That it can be clearly evidenced that the A.O has reopened the case of the assesse only on borrowed satisfaction Printed from counselvise.com 3 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 which may be termed as guesswork, surmises, perverse and arbitrary as per the mandate of Section 147/148 of the Act. 4. In this regard, the Ld. Counsel referred to the letter from the Assistant Director of Income Tax (Inv.)-1, Raipur which he writes to the Assistant/Dept. Commissioner of Income Tax, Circle-1(1), Bhilai, wherein in the said letter he states “accordingly, action u/s. 147 of the Income Tax Act, 1961 has to be taken in case of such beneficiaries for F.Y.2010-11 relevant to A.Y.2011-12 which is going to be time barred by limitation on 31st March, 2018.” The Ld. Counsel for the assessee contended that therefore, it is forced action taken by the department since it is clearly written that “……….action u/s. 147 of the Income Tax Act, 1961 has to be taken in case of such beneficiaries for F.Y.2010-11 relevant to A.Y.2011- 12………”. 5. In this regard, the Bench had directed the Ld. Sr. DR to furnish a report from the A.O. The Ld. Sr. DR submitted a report dated 06.03.2018 which has been placed on record. For the sake of completeness, the said report is made part of this order: Printed from counselvise.com 4 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 Printed from counselvise.com 5 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 6. We have heard the submissions of the parties herein and perused the material available on record. In this case of the assessee was reopened u/s. 147/148 of the Act as per information of the Commercial Tax Department, Chhattisgarh i.e. on borrowed satisfaction and no satisfaction regarding escapement of income recorded by the A.O in the “reasons to believe” as per his independent application of mind. It is settled legal position that the reassessment order shall be vitiated so as to be bad in law and void ab initio where the case of an assessee was reopened without any independent application of mind or on borrowed satisfaction by the A.O. In fact, in the “reasons to believe”, there is no whisper about any Printed from counselvise.com 6 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 satisfaction recorded by the assessee regarding escapement of income in respect of the assessee. 7. In such scenario, we find that the Hon’ble High Court of Bombay in the case of Principal Commissioner of Income-tax-5 Vs. Shodiman Investments (P.) Ltd., [2018] 93 taxmann.com 153 (Bombay) has held that where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT (Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled position in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction. For the sake of clarity, the relevant observation of the Hon’ble High Court are culled out as follows: “13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- Printed from counselvise.com 7 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction.” 8. Further, the Hon’ble High Court of Delhi in the case of Principal Commissioner of Income-tax-6 v. Meenakshi Overseas (P.) Ltd., [2017] 82 taxmann.com 300 (Delhi) has held that where reassessment was resorted to on basis of information from DIT (Investigation) that assessee had received accommodation entry but and there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified. For the sake of clarity, the relevant observation of the Hon’ble High Court are culled out as follows: “24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act.” 9. Also, the Hon’ble High Court of Delhi in the case of Well Trans Logistics India (P.) Ltd. v. Addl. Commissioner of Income-tax, [2024] 166 taxmann.com 72 (Delhi) on the similar issue has held and observed as follows: Printed from counselvise.com 8 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 “24. We may note that the Assessing Officer after reproducing the information received from DDIT, (Investigation) Unit, drew the conclusion of escapement of income. In the case of Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316/291 ITR 500 (SC), the Supreme Court had explained that expression \"reason to believe\" would mean justification to know or suppose that income had escaped assessment. While, it is correct that it is not necessary for the Assessing Officer to finally ascertain whether income had escaped assessment, nonetheless, the Assessing Officer must have sufficient cause to believe that it has. 25. In the present case, as may be seen, there is no \"close nexus\" or \"live link\" between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the Revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment.” 10. Considering the facts and circumstances of the case and aforementioned judicial pronouncements, we are of the considered view that reopening of the assessment u/s.147/148 of the Act by the A.O without recording any independent satisfaction per-se on borrowed satisfaction is bad in law and void ab initito, hence quashed. 11. Since the reassessment is quashed thereafter all the other proceedings becomes non-est in the eyes of law. As the legal issue has been answered in favour of the assessee therefore the grounds on merits becomes academic only. Printed from counselvise.com 9 Sudhir Bansal Vs. ACIT-1(1), Bhilai ITA No.98 /RPR/2025 12. As per the aforesaid terms the grounds of appeal raised by the assessee stands allowed. 13. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 29th day of July, 2025. Sd/- Sd/- ARUN KHODPIA PARTHA SARATHI CHAUDHURY (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 29th July, 2025. SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ /The Appellant. 2. Ĥ×यथȸ /The Respondent. 3. The Pr. CIT-1, Raipur (C.G.) 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 5. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. Printed from counselvise.com "