SUMIT CHHABRA,KIRAN VIHAR, EAST DELHI V. ASSESSMENT UNIT, NAFAC, VIKAS BHAWAN DELHI

ITA 3556/DEL/2024

AI Insights

The case involves cross appeals by the assessee, Sumit Chhabra, and the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi, which arose from a reassessment order. The reassessment was initiated based on information that the assessee had engaged in bogus purchases amounting to Rs.2,37,43,753 during the Financial Year 2017-18. The Tribunal found that the reassessment was based on general information from the Investigation Wing without specific inquiry into the assessee's transactions. The Tribunal referenced a similar case, Sanjay Kaul Vs. The ITO, where it was held that general information without specific material regarding the assessee's involvement in tax evasion was insufficient to justify reassessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772540 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: Sanjay Kaul Vs. The ITO, Ward 24(4), New Delhi and Ors. W.P. (C) 11198/2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: GAURAV JAIN
• Keywords: Set aside; Bogus purchase; Reopening of assessment; Accommodation entries; Reason to believe; Tangible material; Borrowed satisfaction; Penny stocks; Bogus
• Section: 147; 148; 143(3); 69C

Judgement Text

"P a g e | 1 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER & SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No.3556/Del/2024 (Assessment Year: 2018-19) Sumit Chhabra Hno. 3, Kiran Vihar, Karkardooma,, Anand Vihar, S.O. Anand Vihar East Delhi – 110092 Vs. Assessment Unit, NaFac, Vikas Bhawan Delhi \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AECPC8652G Appellant .. Respondent ITA No.3879/Del/2024 (Assessment Years: 2018-19) ACIT, Vikash Bhawan Room No. 216, 2nd Floor, D Block, Vikash Bhawan, I.P. Estate, Delhi 110002 Vs. Sumit Chhabra H. No. 3, Kiran Vihar, Karkardooma, Delhi – 110092 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AECPC8652G Appellant .. Respondent Appellant by : Sh. Gaurav Jain, Adv. Sh. Tarun Chanana, Adv, & Sh. Rahul Prabhakar, Adv. Ms. Versha Sharma, Adv. Respondent by : Sh. Manish Gupta, Sr. DR Printed from counselvise.com P a g e | 2 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) Date of Hearing 12.08.2025 Date of Pronouncement 29.08.2025 O R D E R PER MADHUMITA ROY, JM: These cross appeals filed by the assessee and Revenue are directed against the common order passed by the Ld. National Faceless Appeal Centre (NFAC) Delhi dated 27.06.2024 arising out of the common Assessment Order dated 29.03.2023 passed by the Assessment Unit Income Tax Department, under Section 147 r.w.s 144B of the Income Tax Act for Assessment Years 2018-19. ITA No.3556/Del/2024 (AY: 2018-19) 2. The assessee, an individual filed its return of income under Section 139(1) of the Act dated 02.11.2018 for Assessment Year 2018-19 declaring total income at Rs.18,15,750/-. Subsequently, on the basis of information received accordance with the risk management strategy formulated by CBDT under the head CRIUV/VRI and by the Investigation Wing that the assessee has taken accommodation entries in the form bogus sales/purchase amounting to Rs.2,37,43,753/- during the Financial Year 2017-18 from one Shri Ashok Kumar, proprietor of M/s KB Enterprises, reassessment proceeding was initiated by issuing notice under Section 148A(b) of the Act dated 12.03.2022. It was further alleged that the assessee claimed purchases of Rs.18,84,05,346/- out of which purchases of Rs.2,37,43,753/- from Shri Ashok Kumar are bogus. The assessee thereafter submitted the bank statement, ledger account of M/s Printed from counselvise.com P a g e | 3 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) KB Enterprises in the books of assessee, purchase invoices along with written submission. The subject matter of reassessment proceeding relating to purchase was the subject matter of scrutiny. However, such purchase made by the assessee from M/s KB Enterprises was found to be bogus and added to the total income of the assessee under Section 69C of the Act. The Ld. CIT(A) restricted the addition @ Rs.6% of the entire addition of Rs.2,37,43,753/-. Hence, the instant appeal by the Revenue. 3. However, the assessee has challenged the maintainability of the reopening of assessment. Since, both the appeals relate to the same assessee these are heard analogously and are being disposed of by a common order. 4. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 5. The crux of the submissions made by the Ld. Counsel appearing for the assessee before us that the issuance of notice under Section 148A(b) is based on borrowed satisfaction on the information received in accordance with risk management strategy that the assessee has made bogus purchases without making any further inquiries suggesting that income chargeable to tax has escaped assessment. On 12.03.2022 notice under Section 148A(b) of the Act was served upon the assessee intimating the information received by the department suggesting income chargeable to tax for Assessment Year 2018-19 has escaped assessment within the meaning of Section 147 of the Act, the details of the Printed from counselvise.com P a g e | 4 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) information and inquiries made claimed to have been served upon the assessee along with the said notice issued by the ITO whereas the annexure appearing at page 2 of the paper book filed before us states that the assessee has taken accommodation entry in the form of bogus sales/purchase amounting to Rs.2,37,43,753/- during the Financial Year 2017-18. Relevant to mention that the basis of allegation was not at all clear whether it is from sale or purchase which is evident from such annexure to the notice dated 12.03.2022 appearing at page 1 of the paper book filed before us. The same is also evident from the order under Section 148A(d) of the Act dated 25.03.2022 appearing at page 3 onwards on the paper book filed before us. The contents of the said order dated 25.03.2022 is reproduced as follows: Printed from counselvise.com P a g e | 5 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) Printed from counselvise.com P a g e | 6 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) 6. Paragraph 2.1 of the said order speaks of information available with the office and only verification of status of return of income filed by the assessee from the e-portal, the department could gather that no assessment has been made earlier under Section 143(3)/147/144 of the Act. Further that it speaks of assessee undertook the financial transaction having gross financial implications of Rs.2,37,43,753/-. It further speaks of that “from the available information the estimated income of the assessee during the financial year should have been at least to the tune of Rs.2,37,43,753/-.” It further speaks of information of conducting search proceeding in the case of M/s KK Spun India Ltd. by the DDIT, Investigation Unit (1) New Delhi wherein various incriminating documents were gathered and examined. One Shri Aditya Jain being an accommodation entry operator had been found to provide accommodation entries to M/s KK Spun India Ltd. Summons were duly Printed from counselvise.com P a g e | 7 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) issued to Shri Aditya Jain and his statement was recorded on oath and in the post search proceeding Shri Aditya Jain admitted on oath that he has provided accommodation entries to various beneficiary in reverse of cash and received commission on the same. It further found many dummy proprietary concerns were used for the purpose of accommodation entries. Shri Ashok Kumar, proprietary of M/s KB Enterprises is one of such dummy entries who had provided accommodation entries to the assessee before us. The 5th paragraph of the said order specifically speaks of formation of opinion of escapement of assessment by the Ld. Assessing Officer solely on the basis of the above information and not independent application of mind by the Ld. Assessing Officer is evident from the same. Further that, it is the case of the assessee that the Ld. AO failed to appreciate the fact of assessment having been done under Section 143(3) of the Act which is evident from page 18 of the paper book filed by the assessee before us containing the said assessment order dated 24.04.2021 under Section 143(3) r.w.s 144B of the Act issued by the National e-Assessment Centre, Delhi itself. The AO has simply quoted the view of the DDIT, Investigation Unit -1, New Delhi on the search proceeding conducted in the case of M/s KK Spun India Ltd. where certain facts related to accommodation entries having been provided to such company by one Shri Aditya Jain. This particular information admittedly is arising out of search conducted on third party in the case of M/s KK Spun India Ltd. and no such copy of the information/investigation done by the DDIT Investigation Wing has been forwarded to the assessee. Moreso, the purchase was made from M/s KB Enterprise and not from Shri Ashok Jain as it is evident from the account ledger annexed at page 164 & 165 of the paper book filed before us and the details vouchers, bills, date of purchase, amount of purchase Printed from counselvise.com P a g e | 8 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) as reflecting from the said document in support the contention of the assessee. Thus, the case made out by the assessee that no inquiry has been conducted by the Ld. AO rather solely relying upon the report of the Investigation Wing on a search conducted in the case of M/s KK Spun India Ltd. the reopening of his assessment has been done by the Ld. AO which culminated into an order of addition is found to be correct. In this regard, we have considered the judgment relied upon by the Ld. AR passed by the Hon’ble jurisdictional High Court in the case of Sanjay Kaul Vs. The ITO, Ward 24(4), New Delhi and Ors. W.P. (C) 11198/2019 dated 30.05.2025, wherein the Ld. AO had initiated re-assessment proceeding under Section 148 of the Act by issuing notice completely relying on the information received from the Investigation Wing which reported that the shares of IISL was a penny stock and it was being rigged to provide bogus accommodation to the beneficiaries. While setting aside the impugned notice under Section 147 of the Act in that particular case the Hon’ble Court was pleased to observe as follows: “27. It is clear from the information received from the Investigation Wing and Mr. Anil Kedia, that the same was general in nature and did not point towards the involvement of the Petitioner in the arrangement of providing accommodation entry by contriving bogus short term capital loss. From the aforementioned information, it cannot be concluded that all the transactions with respect to the shares of IISL and SRK were sham in nature. Further, there is nothing to show that the information produced above was applicable to the Petitioner. 28. In the reasons provided for issuance of the impugned notice, the AO stated that the Petitioner had purchased the shares of SRK on 21.08.2013 at the average price of Rs. 167.63 per share and sold off at the average price of Rs. 35.05 per share on 24.03.2014, whereas the shares of IISL were purchased on 21.08.2013 at the average price of Rs. 41.10 per share and sold off at the average price of Rs. 8.26 per share on 06.03.2014. The AO concluded that through investments in the said shares, the Petitioner created bogus short term capital loss in order to evade tax liability. 29. Mere purchasing and selling of the shares by the Petitioner would not in itself lead to the conclusion that the transactions were fraudulently contrived to secure accommodation entries for evading tax liability. The conclusion arrived Printed from counselvise.com P a g e | 9 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) at by the AO is based on the suspicion created by the information that the shares of IISL and SRK are penny stocks. 30. However, the said information cannot be sufficient reason for the AO to believe that the Petitioner‟s income for AY 2014-15 had escaped assessment as it lacked specific material regarding Petitioner‟s income escaping the assessment. The impugned notice was issued based on general information derived from the report of the Investigation Wing and the statement of Mr. Anil Kedia, but no specific information regarding the Petitioner‟s involvement in the alleged arrangement for evading tax liability for AY 2014-15. Further, the materials based on which the said report was prepared have also not been placed on record by the Revenue. 31. As held in CNB FINWIZ LTD. v. DCIT, CIRCLE 6(1) (supra) relying upon the decision of the Supreme Court ITO & Ors. v. Lakhmani Mewal Das (supra), the “reason to believe” cannot be conflated with “reason to suspect” in arriving at the conclusion that the Petitioner‟s income has escaped assessment for AY 2014-15. As the concluded assessments cannot be reopened merely based on suspicion, we find that there is no tangible material to form the “reason to believe” that the Petitioner‟s income has escaped assessment in the present case. 32. Accordingly, the impugned notice is set aside. The Appeal is allowed in the aforesaid terms.” 7. In the instant case it is evident that the Ld. AO solely relying upon the report issued by the Investigation Wing forming reason to believe that the assessee has escaped assessment to the tune of Rs.2,37,43,753/- on account of bogus purchase. Neither the AO could establish that accommodation entries received by M/s KK Spun India Ltd. from Shri Aditya Jain has any link to supply by M/s KB Enterprises to the assessee. In fact, no inquiry has ever been conducted by the Ld. AO before forming such reason to believe of escaping assessment by the Printed from counselvise.com P a g e | 10 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) assessee for the year under consideration as stated hereinabove. The material, for formation of belief of escaping assessment are nothing but the report of the Investigation Wing which was further never been furnished to the assessee and therefore, in the absence of proper inquiry done by the Ld. AO formation of belief by the Ld. AO of escaping assessment by the assessee on bogus purchase is found to be not sustainable. Apart from that the order under Section 148A(d) was based on the incorrect assumption of fact of assessee never undergone any assessment under Section 143(3) of the Act whereas the assessment was duly framed in the case of the assessee under Section 143(3) of the Act by and under the order dated 24.04.2021 by NFAC wherein the purchases made by the assessee during the year under consideration was duly accepted. Had there been any proper investigation conducted by the AO, this particular fact would have certainly been discovered by him and he would have not come to the formation of belief of escaping assessment by the assessee on this ground. Under this facts and circumstances of the matter having regard to the order passed by the Hon’ble jurisdictional High Court in the case of Sanjay Kaul Vs. ITO (supra) and taking into consideration of this particular fact of non- application of mind by the Ld. AO and further no enquiry having been conducted by him, we find the reason to believe drawn solely on the basis of the DDIT Investigation Wing report is nothing but a borrowed satisfaction which renders the proceeding under Section 147/148 of the Act vitiated and the proceeding is, therefore, quashed. Printed from counselvise.com P a g e | 11 ITA Nos. 3556 & 3879/Del/2024 Sumit Chhabra (AY: 2018-19) ITA No. 3879/Del/2024 (AY: 2018-19) 8. As the assessee’s appeal is allowed by quashing the impugned proceeding the department’s appeal become infructuous and dismissed. 9. The appeal of the assessee is allowed and appeal of the Revenue is dismissed as infructuous. Order pronounced in the open court on 29.08.2025 Sd/- (Naveen Chandra) Sd/- (Madhumita Roy) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 29.08.2025 Rohit, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "