SURYA PRAKASH TOSHNIWAL,KOLKATA vs. ITO, KOLKATA

order : 17.10.2023 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 16.01.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has taken following revised grounds of appeal

2. Without prejudice to ground no. 1, that the Ld. CIT(A) ought to have quashed the re-assessment proceedings inasmuch as there was lack of proper reasons to belief and/or applicability of independent mind on the part of the A.O.

3. For that the Ld. CIT(A) ought to have held that the entire re-assessment proceedings as invalid since the same was initiated on mere change of opinion on the same set of facts.

4. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs. 1,95,00,000/- on account of unsecured loan by wrongly treating the loan as unexplained cash credits u/s 68 of the Act.” A perusal of the above grounds of appeal would reveal that the assessee in this appeal, apart from contesting the validity of the reopening of the assessment being hit by the First Proviso to Section 147 of the Income Tax Act, has also contested the additions made/confirmed by the lower authorities of ₹19500000/- on account of unsecured loans by treating the same as unexplained income of the assessee.

Assessment Year: 2013-14 Surya Prakash Toshniwal “The assessee is an individual who filed its return of income for the relevant assessment year on 08.08.2013 declaring total income of Rs. 6,46,230/-. Information was received from the Directorate of Investigation, Kolkata that one company namely M/s Venus Financial Consultants Pvt. Ltd. maintained a current bank account no. 018705008559 with ICICI Bank with declaration of making business activity. On going through the bank statements of these concerns, it was observed that there were high value non-cash transactions made in the current account followed by immediate withdrawal by making fund transfers through RTGS. The total credit between 01.03.2012 to 16.02.2013 was approx. Rs. 13.21 Crores which were received from various entities, the investigation reported that these entities are shell companies run only on papers. These transactions didn't match with the declare profile of the company as the company has no creditworthiness. As per ITR it is showing income of Rs. 8,068/- and Rs. 10,106/- in the AY 2012-13 and 2013-14 respectively. Without having creditworthiness, during the FY 2012-13, the company M/s Venus Financial Consultants Pvt. Ltd. gave loan and advances to various persons/ entities total amount of Rs. 10.74 Crores. The investigation further stipulates that the account of M/s Venus Financial Consultants Pvt. Ltd. was purely used as the conduit for layering of unaccounted funds of various beneficiaries in the guise of unsecured loan. It was further disseminated that the assessee namely Surya Prakash Toshniwal is also one of the beneficiary of accommodation entries in the form of unsecured loan amounting to Rs. 5000000/- in the F.Y. 2012-13 relevant to A.Y. 2013-14 from paper company namely Venus Financial Consultants Pvt. Ltd. A notice u/s 133(6) of I.T. Act 1961 was issued to the assessee for furnishing, inter-alia, the complete details of its transactions made with Venus Financial Consultants Pvt. Ltd. pertaining to A.Y. 2013-14 with supporting documents. The assessee made a written submission in response to the notice u/s 133(6), which has been analyzed with respect to the materials available on records in this case. After analyzing the information received from Investigation Wing, written submission of the assessee in response to notice u/s 133(6) and other materials available on records, it has been found that the assessee has made transaction with M/s Venus Financial Consultants Pvt. Ltd. in the form of taking unsecured loan which was not repaid during the same year. The transactions cannot be considered genuine merely for the reason that they were carried out through banking channel in a known sequence with no apparent aberrations. In fact, it was the modus operandi just to give a semblance of genuineness and correctness of the transactions. Various judgments have also held that the money came by cheque and Assessment Year: 2013-14 Surya Prakash Toshniwal was paid through the process of banking transactions was not by itself of any consequences and sufficient enough to prove the genuineness of transaction. In view of the above, I have reason to believe that the assessee had suppressed its income to the tune of Rs. 5000000/- through availing accommodation entry in the guise of Unsecured Loan and by doing this, the assessee is found to have failed to disclose fully and truly all material facts necessary for its assessment. Thus, income to that extent of Rs. 5000000/- has escaped assessment in terms of section 147 of the Income Tax Act, 1961. It is true that the assessee had filed a copy of annual report and audited P&L A/c and balance sheet along with return of income where various information/ material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of accounts, annual report, audited P&L A/c and balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered now after the enquiries made by the Investigation wig, accordingly attracting provisions of Explanation 1 of section 147 of the Act. It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment. This fact is corroborated from the contents of notices issued by the A.O u/s 143(2)/ 142(1) during 143(3)/447 proceedings. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in annual report, audited P&L A/c, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For foretasted reasons, it is not a case of change of opinion by the A.O. In this case, since more than four years have lapsed from the end of assessment year under consideration, a proposal is put up before Ld. Pr. C.I.T.-12, Kolkata through Joint C.l.T., Range-36, Kolkata for seeking necessary sanction to issue notice u/s. 148 of the 1.T. Act, 1961 for the A.Y. 2013-14 as per the provisions u/s 151 of the I.T. Act, 1961.” A perusal of the above reasons recorded would show that there is no mention that as to what material facts necessary for his assessment for Assessment Year: 2013-14 Surya Prakash Toshniwal the assessment year under consideration have not been disclosed by the assessee which he was otherwise required to disclose. The gist of the reasons recorded for reopening of the assessment is that the information was received from Investigation Wing that there were high value non-cash transactions made in the current account followed by immediate withdrawal by making fund transfers through RTGS in the bank account of one company namely M/s Venus financial Consultants Pvt. Ltd. That the credits in the said company were received from various entities, which in the view of the Investigation Wing were shell companies. That the said company M/s Venus financial Consultants Pvt. Ltd. had given loan/advance to various persons, and that the assessee was one of the beneficiaries of accommodation entries in the form of unsecured loan amounting to ₹5000000/- in the financial year 2012-13. The Assessing Officer made pre-reopening enquiries by issuing notice u/s 133(6) of the Income Tax Act. In response, the assessee made written submissions and furnished the required documents. After analyzing the details submitted by the assessee, the Assessing Officer observed that the assessee had taken unsecured loan from the said M/s Venus financial Consultants Pvt. Ltd. However, the said loan was not repaid during the same year. The Assessing Officer, thereafter, held that the transactions cannot be considered genuine merely for the reason that it was carried out through banking channel in a known sequence with no apparent aberrations. The Assessing Officer merely on the above observations, formed the belief of escapement of income of the assessee of ₹5000000/- in respect of the aforesaid transaction. In the further paras of the reasons recorded, the Assessing Officer, himself has mentioned that the assessee has filed the required documents such as copy of annual report and audited P&L Assessment Year: 2013-14 Surya Prakash Toshniwal A/c and balance sheet along with return of income, wherein all the material information were disclosed; however, he observed that the requisite material facts were embedded in such a manner that material evidence could not be discovered by the Assessing Officer and could have been discovered now after the inquiries made by the Investigation Wing and that accordingly explanation 1 of section 147 of the act was attracted.