TaxTMI 
TaxTMI 
2026 (9) TMI 1526
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.... engaged in the business of financing activity and trading in shares. It filed its return of income on 23.01.2012 declaring total loss of Rs. 2,88,673/-. The return was duly processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The case was selected for scrutiny and accordingly the assessment was completed u/s 143(3) of the Act determining the total income of the assessee at Nil vide order dated 13.03.2014. Subsequently the Assessing Officer reopened the assessment by recording the following reasons: 4. Accordingly, notice u/s 148 of the Act was issued and served on the assessee on 29.03.2018. The assessee in response to the same filed its return of income on 09.06.2018 declaring total income at Nil. Thereafter, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the assessee filed certain details. The Assessing Officer in the order passed u/s 143(3) r.w.s. 147 of the Act on 28.12.2018 made addition of Rs. 48,27,72,000/- u/s 68 of the Act on account of amounts received from the 22 companies as investment towards share capital in the assessee's company. While doing so, the Assessing Offi....
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....ngly dismissed. 6. So far as the legal ground that the re-assessment proceedings have been initiated on the basis of the report of the Investigation Wing and on borrowed satisfaction without any independent application of mind by the Assessing Officer is concerned, he also dismissed the same. As regards merit of the case, the Ld. CIT(A) upheld the addition made by the Assessing Officer. 7. Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before the Tribunal. 8. The Ld. Counsel for the assessee referring to the reasons recorded submitted that the Assessing Officer in the said reasons has mentioned that in this case the return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) / 144 of the Act as stipulated u/s 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the Act. Referring to the original assessment order passed u/s 143(3) on 13.03.2014, copy of which is placed at pages 1 to 5 of the paper book, he drew the attention of the Bench to the same and submitted that the reasons recorded by the Assessing Officer for initiation of re-assessment proceedings are not valid being based o....
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....e Assessing Officer is not in accordance with law. He also relied on the following decisions: i) CIT vs. Insecticides (India) Ltd. reported in (2013) 357 ITR 330 (Del) ii) Nitin Nema vs. PCIT reported in (2023) 458 ITR 690 (MP) iii) S V Jadhav vs. ITO reported in (2024) 163 taxmann.com 263 (Bom) iv) Akshar Builders and Developers vs. ACIT & Anr vide W P No.14490 of 2018 order dated 17.01.2019 v) ITO vs. Mrs. Maya Gupta vide ITA No.3435/Del/2013 order dated 13.12.2013 for assessment year 2003-04 v) ITO vs. M/s. Comero Leasing & Financial vide ITA No.4281/Del/2010 order dated 14.08.2014 15. So far as merit of the case is concerned, the Ld. Counsel for the assessee submitted that all the documents were filed before the Assessing Officer during the course of original assessment proceedings. Referring to the letter dated 13.06.2025 submitted before the Ld. CIT(A), copy of which is placed at pages 160 to 161 of the paper book, he submitted that full details were filed before the Ld. CIT(A) which he has not considered properly. Therefore, the order of the Ld. CIT(A) on merit also be set aside. 16. The Ld. DR on the other hand whi....
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....es, we have to see as to whether the reopening of the assessment is based on wrong appreciation of facts or not. 21. We find an identical issue had come up before the Hon'ble Gujarat High Court in the case of Sagar Enterprises vs. ACIT (supra) where the Hon'ble High Court has quashed the re-assessment proceedings on the ground that the reasons recorded were de hors the facts i.e. return not filed when the return was actually filed. The relevant observations of the Hon'ble High Court read as under: "6. On going through the reasons recorded and the documents which have been produced on affidavit, it is apparent that the reasons which are recorded are de hors the facts available on record. Mr. Mihir Joshi, learned standing counsel appearing on behalf of the respondent, stated that in para. 2 of the reasons recorded, the respondent has also referred to action under Section 132 of the Act which was carried out at the premises of one Shri G.D. Shah in February, 1992, and has submitted that at least that part of the reasons would survive vesting the respondent with jurisdiction to initiate and continue action under Section 147 of the Act. 7. On going through the entir....
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....ening the assessment. Any one reading the first paragraph in the reasons for re- opening would wonder how the filing of return of income and scrutiny assessment under Section 143(3) of the Act can be completed on the same date. It is therefore, clear that the sanction has been granted without application of mind. One more fact which appears from the reasons for re-opening that exposes total non application of mind by the sanctioning authority and also the person recording the reasons is it says that the assessee holds 0.01% i.e., 10 shares in itself. How can a company hold its own shares? This erroneous statement of fact in the reasons itself should have made the authority granting sanction to refuse granting the sanction. Moreover, in the petition, position before amalgamation and post amalgamation has been mentioned which is at variance with what is given in the reasons for re-opening. It is also alleged in the petition that change in shareholding pattern as recorded in the reasons for re-opening is erroneous. That has not been denied in the affidavit in reply. The reason to believe that income chargeable to tax has escaped assessment must be on correct fact. If....
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....ther, even when the same is pointed out by the Petitioner, the Assessing Officer in his order disposing of the objection does not deal with factual position asserted by the Petitioner. Thus, it would be safe to conclude that the Revenue does not dispute the facts stated by the Petitioner. On the facts as found, there could be no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment. 5. It is settled law as held by the Division Bench of this court in German Remedies Ltd. vs. Deputy Commissioner of Income Tax 2 that while granting approval it was obligatory on the part of the Principal Commissioner of Income Tax to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment order. 6. In view of the above, the impugned notice and consequential order justifying reasons recorded are unsustainable. The same are liable to be quashed and set aside. Hence, petition is allowed. Rule made absolute in terms of prayer clause - (a) and (b) which reads as under : (a) that this Hon'ble Court may be plea....
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....ed. Then, the declared income has wrongly been shown at Rs. 1,62,28,910/- as against the actually declared 'Nil' income. 8. Now, it is to be seen as to whether in such a scenario, the re-assessment proceedings are liable to be quashed as void, as contended by the assessee. 8.1 In this regard, under similar circumstances, in 'Smt. Monika Rani Vs the ITO, Ward-2, Kurukshetra', vide order (copy at the assessee's case laws Paper Book, pages 308 to 318) dated 28.02.2020, passed for assessment year 2010-11, in ITA No.582/CHD/2019, it was observed that from the reasons recorded, it was clear that the AO had issued the notice u/s 148 of the Act for the reason that the assessee had not filed her return of income and that the assessee had purchased a property for Rs. 1,49,02,500/- during Financial Year 2009-10; that further, the said reasons given by the AO for re-opening the assessment were not correct, since the assessee had filed the return of income on 30.03.2011, the copy of which had been placed in the assessee's compilation; that the assessee had also shown investment in agricultural land amounting to Rs. 52,20,000/- in her balance sheet as on 31.03.2010, cop....
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....ssessments on sole basis that assessee had not filed returns for years preceding to assessment year 2004-05 and, therefore, its income having escaped assessment, reopening of assessment was on basis of suspicion and non-existent and incorrect facts and it was invalid" 8.5 Further, in 'Ram Mohan Rawat' (supra), it has been held as follows : "Thus the reasons recorded by the AO for formation of belief that income assessable to tax has escaped assessment are based on two counts. One, the assessee has made bogus purchases and the second, that the purchases are not verifiable as the assessee has not filed the return of income. Thus the formation of belief is based on these two factual aspects that the assessee has made bogus purchases which are not verifiable as assessee has not filed the return of income. The reason for non verifiableness of the purchases made by the assessee due to non filing of the return of income as stated by the AO is absolutely incorrect and wrong and contrary to the record when the assessee has filed the return of income electronically on 29.10.2007. This fact was also subsequently accepted by the AO that the assessee filed the return of income....
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....initiation of the re-assessment proceedings through the incorrect reasons recorded and the entire re-assessment proceedings, culminating in the order under appeal are quashed as void ab initio. 11. Since the re-assessment proceedings stand quashed, as above, nothing further survives for adjudication. Ordered accordingly." 25. We find the Hon'ble Bombay High Court in the case of Dhiren Anantrai Modi Vs. ITO vide Writ Petition No. 3224 of 2019, order dated 15.12.2021 has quashed the reassessment proceedings which are passed on totally erroneous and incorrect facts and without non application of mind. The relevant observations of the Hon'ble High Court read as under: "1. Petitioner is impugning notice dated 26th March, 2019 issued under Section 148 of the Income Tax Act, 1961 (the Act) and the order dated 22nd October, 2019 disposing petitioner's objections to the re-opening. 2. Petitioner has challenged notice dated 26th March, 2019 on various grounds including non application of mind by the Assessing Officer while issuing notice. 3. We have considered the petition with documents annexed thereto, reply filed by respondent and also heard Mr. ....
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....a Dalal in ITA No. 7714 & 7490/Del/2019 and in the case of Keshav Saran Vs. ACIT in ITA No. 382/Del/2019. The various other decisions relied on by the Ld. Counsel for the assessee also support his case to the proposition that the re-assessment proceedings which are based on totally erroneous and incorrect facts and without application of mind are not in accordance with law and are liable to be quashed. So far as the argument of the Ld. DR that it was a typographical error and therefore the provisions of section 292B / 292BB will take care of the mistake is concerned, the same in our opinion, is not correct. We, therefore, quash the re-assessment proceedings on this ground. 27. Even otherwise also, we find after obtaining the details from the Investigation Wing the Assessing Officer has not applied his mind to the details received vis-à-vis the return filed by the assessee. It is an admitted fact that the assessment was completed u/s 143(3) and the Assessing Officer during the course of original assessment proceedings has called for various details in the questionnaire issued along with the notice u/s 142(1) to which the assessee has responded by filing the requisite detai....
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....ities in question which were returned back from the postal authorities as 'unserved'. 32. During the course of assessment proceedings the Assessing Officer observed that the assessee during the financial year 2012-13 relevant to assessment year 2013-14 has received funds totaling to Rs. 4,86,00,114/- from the following parties towards share capital and share premium: Sr. No. Name of the persons from whom funds received PAN Amount (in Rs. ) 1 M/s. Tanisha Suppliers Pvt Ltd AACCT9955C 20,00,000 2 Dristi Dealers Pvt Ltd AACCD6747N 60,00,000 3 Anup Agrawal (Prop. Anup Trading Co., SR trading company) AVPPA8424P 36,00,000 4 M/s. Axisline Agencies Pvt Ltd AAJCA3349Q 1,35,00,000 5 Gopal Das & Gautam Banerjee ATSPD3081D & AIFPB0197E 85,00,000 6 Raj Impex ATMPA6382Q 1,50,00,114 Total 4,86,00,114 33. After issue of notice the Assessing Officer also received information from other offices of Investigation Wings, Kolkata that the assessee has received funds totaling to Rs. 1,50,00,000/- from the following parties: Sr. No. Name of the persons from whom funds received PAN ....
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....ome chargeable to tax had escaped assessment. The reasons so recorded clearly demonstrate a live link between the information received and the formation of belief regarding escapement of income. 6.5 The contention of the appellant that the reopening is based on mere suspicion or borrowed satisfaction is therefore not acceptable. At the stage of initiation of proceedings u/s 147 of the Act, what is required is the existence of prima facie material giving rise to a reasonable belief, and not conclusive proof of escapement of income. The sufficiency of the material cannot be gone into at this stage. In the present case, the information received from the Investigation Wing, coupled with the AO's due diligence and verification from departmental databases, constituted "information" within the meaning of the proviso to section 148 and was adequate to justify initiation of reassessment proceedings. 6.6 The judicial precedents relied upon by the appellant are distinguishable on facts, as in those cases reopening was struck down either due to absence of any independent application of mind or lack of tangible material linking the appellant to the alleged transactions. In....
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....ically contended that no money was received during the relevant previous year from Gopal Das & Gautam Banerjee, Bandhan Saree, Anoop Agarwal and Shivashiv Deal Trade Pvt. Ltd. In support of this contention, the appellant submitted that he had submitted to the AO, copies of its bank statements and books of account for the relevant period, showing that no credits were received from the aforesaid persons/entities. During the appellate proceedings also, the appellant furnished the bank statements and relevant books of account. On examination of the said bank statements and cash book, it is observed that no corresponding credit entries appear in respect of these parties during the year under consideration. The AO has also not brought on record any independent bank material or documentary evidence conclusively establishing actual receipt of funds from these parties in the hands of the appellant. 7.9 Although the AO relied upon information received from the Investigation Wing, such information by itself, without corroboration from the appellant's bank account or other primary evidence, cannot conclusively establish receipt of funds. Further, the appellant has explained the in....
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....otal sum of Rs. 2,50,00,000/- was received from Raj Impex during the relevant previous year. The Assessing Officer, while framing the assessment, considered only Rs. 1,50,00,114/- for the purpose of addition. Since the fact of receipt of Rs. 2,50,00,000/- stands established from the appellant's own books, and the appellant has failed to satisfactorily explain the nature and source of the entire amount in accordance with section 68 of the Act, the contention of the AO that the balance amount of Rs. 99,99,886/- also represents unexplained cash credit is found to be justified and therefore accepted. The appellant has not brought any material on record to demonstrate that the remaining amount stands on a different footing or is otherwise explained. In view of this, income on this account is enhanced by Rs. 99,99,886/-. Penalty proceedings u/s 271(1)(c) in initiated for furnishing inaccurate particulars of income. 7.13 With regard to Ground No. 4, alleging non-consideration of submissions and a preset mindset on the part of the AO, I find no merit in this contention. The assessment records show that notices were issued, replies were called for, submissions were examined, an....
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....of Hon'ble Bombay High Court in case of Siemens Ltd vs. DCIT, [2025] 181 taxmann.com 448 (Bombay). 5. On the facts and circumstances of the case and in law, the Hon'ble PCIT (Central), Nagpur has erred by giving approval u/s 151 of the I.T. Act, 1961 on the basis of incorrect fact and in a mechanical manner, without independently verifying the facts of the reasons recorded that, there were no transactions done by the appellant with following parties of which approval was given: Sr. No. Particulars Amount 1 Mr. Anup Agarwal (Prop. Anup Trading Co., SR Trading Co.), PAN: AVPPA8424P Rs. 36,00,000/- 2 Mr. Gopal Das (PAN: ATSPD3081D) and Mr. Gautam Banerjee (PAN: AIFPB0197E) Rs. 85,00,000/- 6. On the facts and circumstances of the case and in law, the Ld. A.O. in the reasons recorded has mentioned that sanction to issue notice u/s 148 of the Act is required from Principal Commissioner of Income Tax (Central), Nagpur u/s 151 of the Act. However, the Ld. A.O. while issuing the notice u/s 148 of the I. T. Act, 1961 has erred by taking approval from the Hon'ble PCIT (Central), Pune. 7. On the facts and circumstances of the ca....
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....(Investment) is already disclosed by the appellant in its books of accounts. Therefore, making addition of same u/s 68 of the I.T. Act, 1961 is grossly incorrect, invalid and bad in law. 13. The appellant craves leave to add, alter, amend or modify any or all grounds till the disposal of the Appeal. 39. Grounds of appeal No.1 and 13 being general in nature are dismissed. The Ld. Counsel for the assessee did not press grounds of appeal No.3, 4, 6, 7 and 8 for which the Ld. DR has no objection. Accordingly, the above grounds are dismissed as 'not pressed'. 40. So far as the reasons challenging the validity of re-assessment proceedings are concerned, the Ld. Counsel for the assessee submitted that the reasons recorded are flawed. He submitted that the reasons must show on what basis the case of the assessee is being reopened. However, in the instant case the reopening of the assessment has been made only on the basis of the report of the Investigation Wing and without due application of mind. Referring to para 7.8 of the order of the Ld. CIT(A) he submitted that the Ld. CIT(A) has given a finding that the assessee during the year has not received any amount from Gopal D....
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....nt has been completed accepting such purchases, no addition u/s 68 can be made for such sale proceeds. He submitted that the assessee in the instant case has purchased the investments in earlier years which were disclosed as "investments' in the books of account and shown in the Balance Sheet. The assessee has sold certain investments during the year and the profit or loss has been duly accounted for in the books of account. Therefore, the amount received from the sale proceeds of investments which is neither loan nor deposit nor share application money, the provisions of section 68 are not applicable. He accordingly submitted that the Ld. CIT(A) is not justified in sustaining the addition made by the Assessing Officer. 43. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A). 44. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed its return of income on 23.01.2012 declaring total loss of Rs. 2,88,673/- which was processed u/s....
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..... Anup Trading Co., SR trading company) AVPPA8424P 36,00,000 4 M/s. Axisline Agencies Pvt Ltd AAJCA3349Q 1,35,00,000 5 Gopal Das & Gautam Banerjee ATSPD3081D & AIFPB0197E 85,00,000 6 Raj Impex ATMPA6382Q 1,50,00,114 Total 4,86,00,114 46. However, a perusal of the order of the Ld. CIT(A) shows that the assessee has not received any amount during the previous year from Gopal Das and Gautam Banerjee amounting to Rs. 85,00,000/- and Anup Agrawal amounting to Rs. 36,00,000/-. The relevant order of the Ld. CIT(A) at pages 7.8 and 7.9 reads as under: 7.8 Further, the appellant has specifically contended that no money was received during the relevant previous year from Gopal Das & Gautam Banerjee, Bandhan Saree, Anoop Agarwal and Shivashiv Deal Trade Pvt. Ltd. In support of this contention, the appellant submitted that he had submitted to the AO, copies of its bank statements and books of account for the relevant period, showing that no credits were received from the aforesaid persons/entities. During the appellate proceedings also, the appellant furnished the bank statements and relevant books of account. On e....
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....as proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration." 49. We find the Hon'ble Delhi High Court in the case of Signature Hotels P. Ltd. vs. ITO reported in (2011) 338 ITR 51 (Del) at paras 14 and 15 of the order has observed as under: "14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. Th....
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.... the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Ltd. (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted." 51. We find the Delhi Bench of the Tribunal in the case of ACIT vs. Shri Devesh Kumar vide ITA No.2068/Del/2010 order dated 31.10.2014 at para 19 of the order has observed as under: "19. In the light....
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....re, the amount received by the assessee on account of sale proceeds of investments in our opinion cannot be considered as unexplained cash credit u/s 68 especially when such investments were made in the preceding years which were shown in the Balance Sheet and it has been accepted by the Revenue since neither reopening proceedings were initiated nor any 263 proceedings have taken place. We, therefore, find force in the arguments of the Ld. Counsel for the assessee that the provisions of section 68 are not applicable to the amounts received towards sale proceeds of disclosed investments. We, therefore, hold that no addition u/s 68 is called for. We accordingly set aside the order of the Ld. CIT(A) and allow the grounds raised by the assessee challenging the addition on merit. The appeal filed by the assessee is accordingly allowed. 54. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open Court on 17th July, 2026. ============= Document 1 ANNEXURE Reasons for reopening of the assessment in the case of M/s. Lombard Realty Pvt. Ltd. A.Y. 2011-12, (PAN: AABCL9202D) u/s 147 of the Income Tax Act: The above mentioned assessee has....
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....which has been recorded above paragraphs. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. Therefore, there is sufficient material on record, on the basis of which, I have reason to believe that assessee has not made full and true disclosure, resulting in escapement of income chargeable to tax to the extent of 23.17 Crores for A.Y.2011-12 within the meaning of section 147 of the IT Act. Hence, it is a fit case for initiation of proceedings u/s. 147 of the I.T. Act, 1961 by issuing notice u/s. 148 of the Income Tax Act. 1961. Date: 23.03.2018 (Vijay D. Gaikwad) Income Tax Officer-15(2) (2). Mumbai Document 2 GOVERNMENT OF INDIA MINISTRY OF FINANCE CHERCHE TAX DEFINANCE OFFICE OF THE PARTMENT COMMISSIONTHE ASSISTANT CENTRAL CIRCLE 1, AUR'BAD To LOMBARD REALTY PRIVATE LIMITED MUMBAI 400001,Maharashtra India PAN Assessment Year 2013-14 Dated: 22/09/2020 DIN & Letter No : ITBA/AST/F/17/2020-21/1028028361(1) AABCL9202D Sir/ Madam/ M/s, Subject: Reasons for p....
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....uiry/findings, it was stated that the transactions are unexplained and needs to be verified. (b) The DDIT(Inv.), Unit-6, Kolkata vide letter No. DDIT(Inv)/Kol/Unit-6/Anup Agarwal/2018-19/3063-71 dated 07.03.2019 has forwarded information that during investigation proceedings in the case of Anup Agarwal (Prop. of Anup Trading Co., S.R.Trading Co.). It has been informed by the DDIT(Inv.), Unit-6, Kolkata that the entities opened current accounts with Brabourne Road Branch of the Dhanlaxmi Bank Ltd. during 2010-11 and large value of transactions without having any economic rationale, including RTGS and inter-se-transfers are seen in these accounts. Then the funds from this account were transferred to the bank account of the beneficiary companies. The company Lombard Realty Pvt. Ltd. is one of the beneficiary company and indicative amount is Rs.36,00,000/ -. On the basis of enquiry/findings, it was stated that all the entities are shell/paper entity whose bank accounts have been used to providing accommodation entities in form of share capital/premium, unsecured loan, bogus billing, bogus LTCG/STCL etc. On the basis of enquiry/findings, it was stated that the transactions are unexpl....
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....sfer keeping low balance in the account. The indicative amount is Rs. 1,50,00,114/ -. On the basis of enquiry/findings, it was stated that the the beneficiary company have brought into their regular books of accounts in the guise of back their unaccounted income There was no other financial rationale behind such transactions and the transactions are sham transactions. On the basis of enquiry/findings, it was stated that the transactions are unexplained and needs to be verified. 3. Analysis of information collected/received: On verification of data available with this office, it is seen that assessee had performed huge financial transaction and during the financial year 2012-13 i.e assessment year 2013-14, total incoming funds are to the tune of Rs. 4,86,00,114/ -. The extent of such accommodation entries taken may be much more. This is because, the assessee may have taken accommodation entries in other bank accounts from other such bogus concerns, which needs to enquired. Thus, the assessee has entered into suspicious and prima-facie bogus financial transaction, which has been done to suppress its profit. 4. Enquiries made by AO as sequel to information collected/received:....