ZILAXO INDIA PVT. LTD.,,KOLKATA vs. ITO, WARD 13(1),, KOLKATA

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ITA 2910/KOL/2025Status: DisposedITAT Kolkata07 May 2026AY 2019-202014 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal quashed the reopening of assessment, holding that the Assessing Officer relied on borrowed satisfaction and failed to conduct independent inquiries before reopening and making additions. Consequently, the additions made to the assessee's income were deleted.

What were the facts?

The assessee company claimed purchases of Rs. 26,35,000/- from a company identified as a shell entity providing accommodation entries. The Assessing Officer reopened the assessment based on information from the Investigation Wing, adding the purchase amount and a commission to the assessee's income.

What were the issues?

Whether the reopening of assessment was valid without independent inquiry by the Assessing Officer, and if the additions based on third-party information without verification are sustainable.

Which sections of the Income-tax Act were involved?

Section 147,Section 69C,Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA

Before: Shri Duvvuru RL Reddy, Vice-(KZ)

The present appeal is directed at the instance of assessee against the order of Id. Commissioner of Income Tax (Appeals),

National Faceless Appeal Centre (NFAC), Delhi, dated 08.10.2025 passed for Assessment Year 2019-2020.

2.

Facts in brief are that the assessee is a Private Limited Company, which is engaged in the business of providing Ayurvedic treatment, physiotherapy and related health and wellness services. The assessee-Company filed its return of income on 28.10.2019 declaring income of Rs.17,95,430/-and deemed total income under AMT/MAT amounting to Rs.22,10,954/-. On the basis of information available with the department, the case of assessee was reopened after recording reasons and taking necessary approval from the competent authority. Notice under section 148 of the Income Tax Act was issued to the assessee on 12.04.2023. Brief facts are that the assessee-company had made bogus purchase of Rs.26,35,000/- during FY 2018-19, from the company M/s. Karanpriya Commercial Pvt. Limited. This company is used for providing the accommodation entry in guise of bogus purchase etc. by Sri Niraj Nathani, Kolkata based entry operator, who in his sworn statement recorded before the DDIT(Inv.), Unit-2(1), Kolkata on 20.01.2022 under section 131 of the Income Tax Act admitted t4hat he had provided accommodation entry in the guise of unsecured loan to his clients in lieu of commission. He admitted that M/s. Karanpriya Commercial Pvt. Limited is shell company. Notice under section 142(1) was issued to the assessee along with questionnaire. However, no compliance was made by the assessee. Further show-cause notice was issued for making compliance on or before 07.01.2025, asking as to why his case may not be finalized on the basis of material/information available on record

and to the best of judgment in absence of any explanation/clarification on his end. No reply was furnished by the assessee and remained silent. In absence of any justification/explanation supported by documentary evidence to establish the genuineness and creditworthiness of the entity from whom purchases have been made by it, the entire amounts of purchases i.e. Rs.26,35,000/- from M/s. Karanpriya Commercial Pvt. Ltd. remained unexplained in the hands of assessee and was added to the total income as unexplained expenditure under section 69C of the Act. With regard to the commission @ 5% of the unexplained purchases, i.e. 5% on Rs.26,35,000/-, which is Rs.1,31,750/- being commission paid to M/s. Karanpriya Commercial Pvt. Ltd. considered as assessee’s unexplained expenditure and also added to the total income of the assessee by the ld. Assessing Officer. Thus finally, ld. Assessing Officer determined the total taxable income of the assessee at Rs.45,62,180/-.

3.

On being aggrieved, the assessee preferred an appeal before the CIT(Appeals). The ld. CIT(Appeals) upheld the order of ld. Assessing Officer regarding accommodation entry in respect of expenses amounting to Rs.26,35,000/- as the assessee claimed bogus expenses using the accommodation entries/bills provided by the entity controlled by Shri Niraj Nathani. With regard to the estimation of commission payment of Rs.1,31,750/- being 5% of the transaction value of Rs.26,35,000/-, the ld. CIT(Appeals) deleted the payment of commission saying that the same appears

to be on ad hoc basis without any underlying material evidence indicating commission payment.

4.

On being aggrieved, the assessee preferred an appeal before the ITAT. It was the submission of the ld. Counsel for the assessee that the ld. Assessing Officer erred in reopening the assessment under section 147 of the Act without having any fresh tangible material and merely relying upon information from the Investigation Wing, which was copied and pasted everything and that too twice. He pleaded that the reopening was based on borrowed satisfaction and suffers from lack of independent application of mind and is liable to be quashed. The ld. Counsel pleaded that inspite of furnishing primary evidences, including the invoice issued by M/s. Karanpriya Commercial Pvt. Ltd., relevant ledger account, bank payment details, audited financial statements and records of TDS deduction, ld. Assessing Officer disallowed the advertisement expenditure of Rs.26,35,000/- by treating as a bogus purchase. He pleaded that there was no escapement of income and loss of revenue to the Department and argued that the action of ld. Assessing Officer in once again disallowing the same expenditure amounts to taxing the same sum twice and as per settled principle of law that once the amount has already been offered to tax by the assessee cannot be brought to tax again. Ld. Counsel also pleaded regarding addition of Rs.1,31,750/- towards commission of purchase value, but there was no evidence to show that the assessee paid commission and the ld. Assessing Officer without any material on record made the

addition on presumptions and surmises and naturally is liable to be quashed. The ld. Assessing Officer did not reject the books of account and without rejecting books of account, he made the disallowance and the ld. Assessing Officer cannot disallowance specific expenditure. The ld. Counsel also pleaded that no independent enquiry was conducted by the ld. Assessing Officer and simply based on the third party’s report, he made the addition, which is liable to be deleted. Ld. Counsel at the time of hearing submitted that firstly ld. Assessing Officer wrongly treated the sum of Rs.27,66,750/- as unexplained income for not disclosing transactions supported by invoices and ledger entries. Secondly levied surcharge @ 25% on the so called 115BBE income, though the assessed income of Rs.45.62 lakh is far below the Rs.2 crores threshold prescribed in law for such surcharge, which levy is without jurisdiction. Thirdly, computation sheet reflects net tax payable at Rs.27,86,238/- whereas as per demand notice issued recovered Rs.37,30,930/-, for which difference is nearly Rs.9.5 lakhs and no working or statutory justification was provided, which is misapplication of charging provisions, and is liable to be set aside. The ld. Counsel pleaded to quash the re-assessment proceedings and delete the additions of Rs.26,35,000/- made towards alleged bogus purchases and Rs.1,31,750/- towards alleged commission and also vacate the demand of Rs.37,30,930/- raised vide notice under section 156 dated 28.02.2025 and also to cancel the initiation of penalty proceedings and relief from levy of interest. Ld. Counsel pleaded before the Bench at the time of hearing to set aside the order of ld. CIT(Appeals)

5.

On the other hand, ld. Departmental Representative relied on the order of ld. CIT(Appeals) and pleaded to uphold the order of ld. CIT(Appeals) as the assessee claimed bogus expenses using the accommodation entries/bills provided by the entity controlled by Shri Niraj Nathani and the expenditure claimed by the assessee was bogus using the accommodation bills provided by the entry provider M/s Karanpriya Commercial Pvt. Limited and the claim of appellant is devoid of any merit.

6.

I have heard both the sides and perused the material available on record. Perusal of the reasons recorded are as follows:-

6.1. The reasons recorded are nothing but cut and paste of the information received by the ld. Assessing Officer from the DDIT(Investigation). The reasons recorded, which compared with the order under section 148A(d), which specifically shows that again the ld. Assessing Officer is relying only upon the information and materials received from the Office of DDIT(Investigation), Unit- 2(1), Kolkata. The ld. Assessing Officer has done no independent enquiry, no reasons recorded speak of any independent enquiry done by the ld. Assessing Officer in respect of the information provided by the DDIT(Investigation), Unit-2(1), Kolkata. The so- called enquiries done by the ld. Assessing Officer as mentioned in the order under section 148A(d) shows that the ld. Assessing Officer has only gone through the information and has done nothing more. It is trite law that the reasons recorded by the ld. Assessing Officer must be after the due verification enquiry by the ld. Assessing Officer and enquiry must less as semblance of an enquiry. The reopening cannot be held to be valid and consequently the same stands quashed. The transaction with M/s. Karanpriya Commercial Pvt. Limited has clearly recorded in the books, the bills are available and the purchases have been categorically mentioned in the accounts. The purchases representing the advertisement expenses as clearly mentioned in the accounts. It has also been mentioned here that the ld. Assessing Officer has done nothing to even examine the said so- called Shri Niraj Nathani, but has blindly relied upon the information provided by the DDIT(Investigation), Unit-2(1), Kolkata for not only reopen the assessment but also making the addition. No enquiry before reopening has been done and no enquiry after

reopening has been done and blind reliance has been placed on information, which has been provided to the ld. Assessing Officer by the DDIT(Investigation), wherein the reopening has clearly been done on the basis of borrowed satisfaction and not on the independent enquiry by the ld. Assessing Officer, this being so, the reopening is found to be invalid and consequently the same stands quashed. Consequently, the consequential assessment shall stand quashed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 07/05/2026.

Sd/- (Duvvuru RL Reddy) Vice-President (KZ) Kolkata, the 7th day of May, 2026 Copies to :(1) Zilaxo India Pvt. Limited, 26, Ram Kamal Sen Lane, Jorasanko, Kolkata-700073 (2) Income Tax Officer, Ward-13(1), Kolkata, Aayakar Bhwan, P-7, Chowringhee Square, Kolkata-700069 (3) CIT(A), NFAC, Delhi; (4) CIT - , Kolkata; (5) The Departme `ntal Representative; (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha

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