TaxTMI 
TaxTMI 
2026 (9) TMI 509
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....ited for Assessment Year 2013-14 as lead case wherein the assessee has raised the following grounds of appeal:- "1. That having regard to the facts and circumstances of the case, Ld. CIT (A) erred in law and on facts in confirming the addition of Rs. 27,49,00,000/- on the basis of incorrect reason recorded for re-opening of assessment and the re-opening of the assessment on the basis of information received from DDIT (Inv), Unit - 2(1), Kolkata and that too without confronting the same to appellant is without jurisdiction and consequent notice issued u/s 148 and the order passed in this case u/s 147 of the Income Tax Act is against the statutory provisions of Income Tax Act and is barred by limitation and is void ab-initio. 1.1 That having regard to the facts and circumstances of the case and in law the ld CIT (A) erred in confirming the addition of Rs. 23,95,00,000/- on account of unsecured loan received from Suhana Marketing Pvt Ltd ignoring the facts of thecase, explanation and evidence submitted during the course of assessment proceeding and ld CIT(A) also ignored the order of Hon'ble ITAT, Delhi vide appeal no.9726/Del/2019 dated 31/05/2023 and as such the im....
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....otice u/s 143(2) was issued and served on the assessee. Further, assessee filed its objections against the reopening of the assessment vide letter dated 08.02.2022 and the same was disposed off by the Assessing Officer on 11.02.2022. 4. The Assessing Officer observed that as per the information available with him, a perusal of the bank statement of Rangoli Sarees, JMTS Creations, Trustworthy Traders and Fasttrack Trading Co. in the Bank of India, it is observed that large amounts were credited/deposited mainly in cash in the bank account of above individual/proprietorship concerns which were further transferred to the bank accounts of Strenuous Suppliers Pvt. Ltd., Somya Commercial Pvt. Ltd., Shree Shyam Trader Pvt. Ltd. and Bholenath Tradelink Pvt. Ltd.. The Assessing Officer observed that on perusal of MCA website, it was observed that abovesaid four companies' names were struck off by the MCA. Further, he observed that the abovesaid companies are found to be non-filers of ITRs and further he observed that the above-stated companies have transferred funds to various beneficiary companies and one of them is M/s. Suhana Marketing Private Limited, who has then transferred funds t....
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.... received during AY 2013-14 from Suhana Marketing Pvt Ltd 3. As such it has already been held in the order passed u/s 263/143(3) that sum of Rs 95,00,000/- received as unsecured loan from Suhana Marketing Pvt. Ltd is not genuine and sum of Rs. 23,95,00,000/- received as share application money from Suhana, Marketing Pvt Ltd is genuine (the copy of account of Suhana Marketing Pvt Ltd in respect of unsecured loan and share application money is enclosed as Annexure-II. As such in the order passed u/s 263/143(3) during AY 2013-14 the addition in respect of sum of Rs. 95,00,000/- has already been made. Further the assessee company has not entered into transactions with various parties mentioned in the notice. The documentary evidence in respect of genuineness of amount received from Suhana Marketing P Ltd has already been submitted along with our earlier submission. 4. It may also be observed that the assessment of Suhana Marketing Pvt Ltd for AY 2013-14 has been reopened by Ward- 7(1). Kolkata (the reason recorded of Suhana Marketing Pvt Ltd is enclosed as Annexure-III). As the addition in respect of source is being made by the Income Tax Department in the hands of Su....
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....able income. In view of the above as all the credit has already been added in the order of Manish Merchant Pvt Ltd and as such no, addition can be made in the hands of assessee the source in respect of which have already been added to taxable income. Further the documentary evidence in respect of genuineness of amount received from Manish Merchant Pvt. Ltd. has already been submitted along with our earlier submission. 6. After considering the submissions of the assessee, AO observed that mere filing confirmation from the parties does not discharge the onus of the assessee and it cannot be believed that they lend their crores of rupees in an unrelated private company without any due diligence and no security against the above lending. Further he observed that credit worthiness and genuineness are not proved and the sources of the funds remains highly suspicious. With regard tothe case of Manish Merchant Pvt. Ltd. has already been established as an entry provider, therefore, in this case provisions of section 68 of the Act is attracted. Accordingly, he proceeded to make the addition u/s 68 of the Act read with section 115BBE of the Act. 7. Aggrieved with the above order, assess....
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....essment order so passed u/s 143(3) r.w.s. 153A of the Act for AY 2013-14 (in abated assessment), while addition was made in AY 2010-11(both orders passed simultaneously on 30.03.2016). 3. 30.03.2018 Order under section 263 of the Act was passed by PCIT, after examining the assessment records for all assessment years and a direction was given to AO for making an addition of a sum of Rs. 95, 00, 000/- with regards to unsecured loan received by the assessee - accompany. 4. 17.11.2022 The aforesaid order of PCIT was challenged by assessee before Hon'ble ITAT, however, the said appeal was withdrawn and as such, appeal of assessee was dismissed as withdrawn in ITA No. 3994/Del/2018. 5. 18.12.2018 Learned AO in pursuance to directions of PCIT u/s 263 of the Act, made an addition of a sum of Rs. 95, 00, 000/- on account of alleged unexplained unsecured loan from M/s Suhana Marketing Pvt. Ltd. and also a sum of Rs. 1, 90, 000/- as alleged commission on aforesaid loan (kindly see pages 4 to 8 of PB - I). 6. 31.05.2023 Hon'ble ITAT deleted the aforesaid addition by holding that assessee had sufficiently discharged the burden under section 68 of the Act and ....
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....take note of the fact that statement of Sh. Anand Kumar Sharma dated 06.02.2014 as mentioned in the reasons recorded was not on record of learned AO, as the same has never been provided by learned AO for rebuttal and cross examination. v) Further, even the so called statement of Sh. Anand Kumar Sharma dated 06.02.2014 an alleged accommodation entry provider was not provided to assessee company for rebuttal and even cross examination not provided, even though specifically demanded by assessee company vide reply dated 08.02.2022(kindly see pages 46 to 50, 50A to 50D, 51 and 56 to 57 of PB - I). vi) That further, learned AO has even failed to appreciate the fact that both the aforesaid companies had furnished replies along with documentary evidences before learned AO during the course of reassessment proceedings which have not been rebutted by learned AO neither statement of alleged accommodation entry provider was ever provided for rebuttal nor any cross - examination was provided(kindly see reply dated 07.01.2022 at pages 38 to 40 of PB - I and also reply dated 08.02.2022 at pages 44 to 45 of PB - I). 9. 16.03.2022 Learned AO in the impugned assessment ord....
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....tion in the regular course of assessment." PROPOSITION 2: Reopening on basis of Stale Information, as even though learned AO refers to DDIT (inv) Kolkata letter dated 12.03.2020, but it contains same old information that assessee company had taken accommodation entries from Kolkata Based Companies, which was already available on record of Revenue Authorities when abated assessment was framed u/s 153A/ 143(3) of the Act and which was also revised under section 263 of the Act for impugned AY 2013-14. Reliance is placed on following case laws: (i) Rasalika Trading and Investment Co. P. Ltd. vs DCIT (Delhi HC) reported in 365 ITR 447(kindly see pages 1 to 6 of PB - II) Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credit (Accommodation entries) - Assessment year 2005-06 - Assessee-company was engaged in business of investment and security - Assessing Officer completed assessment of assessee for assessment year 2005-06 under section 143(3) on 24-12-2007 - Subsequently he issued on assessee a notice under section 147 read with section 148 for reassessment - He recorded reasons to effect that (i) he received investigation report dated 13-3-2006 fr....
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....d. vs ACIT reported in 202 ITD 757. PROPOSITION 4: NON APPLICATION MIND BY AO IN THE REASONS RECORDED, SAME HAVE BEEN RECORDED ON THE BASIS OF INFORMATION RECEIVED FROM ADIT (INV), WITHOUT THERE BEING ANY TANGIBLE MATERIAL WHATSOEVER. i) Reopening on basis of Stale Information, as even though learned AO refers to DDIT (inv) Kolkata letter dated 12.03.2020, but it contains same old information that assessee company had taken accommodation entries from Kolkata Based Companies, which was already available when abated assessment was framed u/s 153A/ 143(3) of the Act dated 30.03.2016 and which was also revised under section 263 of the Act dated 30.03.2018 for AY 2013-14. ii) Only basis of learned AO is the statement of Sh. Anand Kumar Sharma dated 06.02.2014 which is much prior to the date of framing of assessment order u/s 153A/ 143(3) of the Act and also revision of order by PCIT u/s 263 of the Act. As such, there is no fresh tangible material rather it is only re-examination or reverification of same old material. iii) Factually incorrect reasons have been recorded, as even the amounts received from the alleged paper companies have been wrongly no....
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....justified and same was to be set aside - Held, yes [Paras 27, 29 and 30] [In favour of assessee] * PCIT vs. RMG Polyvinyl (I) Ltd. reported in 2017] 396 ITR 5(Delhi), it has been held as under: Recently, in its decision dated 26th May, 2017 in ITA No. 692/2016 Pr. CIT v. Meenakshi Overseas [2017] 82 taxmann.com 300 (Delhi), Delhi high court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the AO was a "borrowed satisfaction" and at best "a reproduction of the conclusion in the investigation report." As in the above case, even in the present case, the Court is unable to discer....
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....r, assessee seeks to submit that on the last date of hearing on 10.02.2026, learned CIT DR has furnished a paper book comprising of 104 pages in the case of M/s JPM Gas Ltd. (without any certificate and also not in case of M/s Jay Ace Ltd.), wherein, following documents have been brought on record for the first time before Hon'ble Tribunal: i) Statements of alleged entry operator Sh. Anand Sharma dated 02.07.2013 (pages 73 to 77), 06.01.2014 (pages 78 to 83) and 06.02.2014 (pages 84 to 97) and; ii) DDIT (Inv) Kolkata letter dated 12.03.2020 (pages 98 to 104) 2. At the outset, it is most humbly submitted that reliance was only placed by learned AO on statement dated 06.02.2024(not on other two statements in reasons recorded) and information dated 12.03.2020 provided by DDIT (Inv) Kolkata in the reasons recorded(kindly see pages 24 to 27 of PB - I). However, the same were never provided to assessee for rebuttal either before disposal of objections or during the course of reassessment proceedings. Kindly see pages 46 to 50 of PB - I at page 49 (emphasis supplied) for assessee's objections to reopening dated 08.02.2022 and pages 50A to 50D for disposal of obj....
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....easons to believe or what would be the result if it is not made available. 24. A Division Bench of the High Court of Delhi in SABH Infrastructure Ltd. v. Asstt. CIT [2018] 99 taxmann.com 409/[2017] 398 ITR 198 (Delhi), observed that large number of writ petitions are coming up before the Court challenging the reopening of assessment by the Revenue under section 147/148 of the Act and despite numerous judgments on the point the same errors are being repeated while issuing such notices. It, therefore, laid down the guidelines inter alia that where "reasons to believe" make a reference to another document, whether as a letter or report, such document and/or relevant portion of such report should be enclosed along with the reasons and that the exercise of considering the objections to the reopening of the assessment is not a mechanical ritual but a quasi-judicial function. 25. In view of the above decisions and one of the guidelines laid down therein, the supply of documents referred to in the reasons to believe becomes inevitable and in the event such documents are not supplied, it would be flagrant violation of the principles of natural justice. 26. A Divis....
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....hi and Bombay High Courts. 29. The submission of Shri Bissa that reasons to believe cannot be equated with the final conclusion and as long as the Assessing Officer has sufficient material to demonstrate that he had bonafidely formed the opinion that the income chargeable to tax has escaped assessment, the requirement of law stands satisfied is of no avail as there are no two opinions on the above aspect. Sufficiency of material is one thing and supply of the same is another, which is mandatory in nature. Therefore, the non-supply of the material referred to in the reasons to believe would be enough to render the proceedings bad, even though the material for forming the opinion may be sufficient. 30. The argument of Shri Bissa is that information furnished by the Deputy Director of Income Tax, Investigation, by itself is sufficient for reopening the proceedings, more particularly when the said information was confirmed from other sources. Again the sufficiency of the information is not in question, nor its confirmation. What is questionable is the effect of its non-supply, to which there is no answer. 31. Thus, in the light of the decisions of the Delhi a....
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....stigation report which may form the basis of the reasons and any enquiry conducted by the Assessing Officer on the same and if so, the conclusions thereof ; where the reasons make a reference to another document, whether as a letter or report, such document and/or relevant portions of such report should be enclosed along with the reasons ; the exercise of considering the assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed. iii) GKN Driveshafts (India) Ltd. vs ITO (SC) reported in 259 ITR 19 2.1 It is thus, submitted that the aforesaid statement and DIT (Inv) letter being produced for the first time before Hon'ble Tribunal needs to be excluded and deserves to be rejected since impugned proceedings have been initiated under section 147 of the Act and it is not a case of regular scrutiny assessment, as such, the aforesaid documents since formed the foundat....
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....ng the additional evidence by the Tribunal, is apposite? It is undisputed that rule 29 of the Rules is akin to Order 41 Rule 27(1) of the Code of Civil Procedure. The true test in this behalf, as laid down by the Courts, is whether the Appellate Court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought to be adduced. The legitimate occasion, therefore, for exercise of discretion under this rule is not before the Appellate Court hears and examines the case before it, but arises when on examining the evidence as it stands, some inherent lacuna or defect becomes apparent to the Appellate Court coming in its way to pronounce judgment, the expression 'to enable it to pronounce judgment' can be invoked. Reference is not to pronounce any judgment or judgment in a particular way, but is to pronounce its judgment satisfactory to the mind of Court delivering it. The provision does not apply where with existing evidence on record the Appellate Court can pronounce a satisfactory judgment (emphasis supplied)." 4. That further, it is most humbly submitted that it is not the function of Hon'ble ITAT to fill up ....
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....ate that no enquiry whatsoever was made by learned AO, whereas, all the documentary evidences are on record in respect of unsecured loan/ share capital issued to Manish Merchants Pvt. Ltd. and Suhana Marketing Pvt. Ltd. and even the said companies have duly replied during the course of reassessment proceedings in response to notices under section 133(6) of the Act. Still Assessing officer failed to conduct any scrutiny of the said documents or rebut the aforesaid evidences so filed by the assessee and the said subscribing companied, the addition made by the AO cannot be sustained. * Judgment of Hon'ble High Court of Delhi in the case of Pr. CIT vs. Laxmi Industrial Resources Ltd. reported in 397 ITR 106 (Del) * Judgment of Hon'ble High Court of Delhi in the case of CIT vs. Fair Finvest Ltd. reported in 357 ITR 146 (Del) * Judgment of Hon'ble High Court of Delhi in the case of PCIT vs Krishna Devi reported in 431 ITR 361. 8. That at the cost of repetition, and for brevity, the assessee seeks to also summarize its submissions made on earlier occasion in writing, wherein, following submissions were made: i) Reopening of assessment is unjust....
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....rd to not providing cross objection to the assessee during reassessment proceedings, ld. DR submitted that it isnot right on the assessee to make such demand. In this regard, he relied on the decision of ITAT, Mumbai Bench in the case of GTC Industries Ltd. vs. ACIT 65 ITD 380 and M/s. Andaman Timber Industries vs. CCE, Kolkatta II 281 CTR 214 (SC). 11. With regard to reliance on GKN Driveshafts (India) Ltd. vs ITO (SC) case on disposal of objections raised by the assessee for reopening of the assessment, ld.DR submitted that objections raised by the assessee are duly disposed off by the AO. Therefore, the AO has followed the due process of law. He brought to our notice page 11 of the first appellate order and para 5.1.3 of the order and submitted that ld. CIT (A) has brought on record that various cash deposits made by the alleged companies like Rangoli Sarees etc. and transferred to the bank account of four companies which are alleged to be controlled by Anand Kumar Sharma and subsequently these companies were found to be non-existing, struck off of names in the MCA website and noticed that they were having very meagre income. Since these companies transferred funds to Suhana ....
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....leged unexplained unsecured loan from Suhana Marketing Pvt Ltd along with related commission payments for getting accommodation entries. In appeal before ITAT, the coordinate bench deleted the above addition with the findings that the loan transaction is a genuine transaction. 15. Further observed that before initiating the proceedings u/s 148, the AO himself issued notices u/s 133(6) of the Act dated 16.03.2021 to M/s Manish Merchants Pvt. Ltd. and M/s Suhana Marketing Pvt. Ltd and after their response, not discussed the same in his order. On receipt of response from them dated 22.03.2021, he over looked the same and proceeded to issue further notice u/s 148 of the Act to initiate reassessment proceeding on 28.03.2021.We noticed that the issue raised in revision proceedings u/s 263 is exactly same as raised by AO in the present proceedings and all the relevant materials used to initiate proceedings also same. 16. We observed that the AO had relied upon the information received from Investigation Wing dated 12.03.2020 and the information contained in the above report from Investigation Wing is the same old information which was the basis of initiation of proceedings u/s 153A ....