Loading judgment…
Facts
The assessee's case was reopened by the AO under Section 147 based on information about receipt of Rs. 10,00,000/- from another entity. The assessee had initially filed a return declaring a loss and later filed a return in compliance with the Section 148 notice. The assessee's appeal was against the invalid reopening of the assessment.
Held
The Tribunal held that the reasons recorded by the AO for reopening were cryptic and based on borrowed satisfaction without independent application of mind. The notice under Section 148 and the subsequent assessment were deemed invalid and a nullity. The Tribunal also noted that the show cause notice was defective as the assessee's name was not mentioned as a beneficiary.
Key Issues
Whether the reopening of assessment under Section 147 was valid on the grounds of borrowed satisfaction and lack of independent application of mind by the AO.
Sections Cited
147, 148, 139(1), 250
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “SMC” BENCH,KOLKATA
Appearances by: Assessee represented by : Miraj D Shah, AR Department represented by : Monalisa Pal Mukherjee, Sr. DR Date of concluding the hearing : 18.12.2025 Date of pronouncing the order : 23.12.2025 O R D E R The present appeal filed by the assessee arises from order dated 24.02.2025passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)].
The only issue raised by the assessee during the course of hearing is against the invalid reopening of assessment u/s 147 of the Act by the AO which was confirmed by the Ld. CIT(A).
After hearing the rival contention and perusing the material available on record. We find that the case of the assessee has been reopened by the AO u/s 147 of the Act by issuing notice u/s 148 of the Act on 06.05.2020. The assessee filed return of income u/s 139(1) of the Aalekah Supply Pvt. Ltd. Act on 26.09.2013 and declared loss of Rs. 15,00,000/-. Thereafter, the assessee filed return in compliance to notice u/s 148 of the Act on 02.06.2020 declaring the same as was declared u/s 139(1) of the Act. We have perused the reasons recorded by the AO. We find that the same are very cryptic, non speaking and recorded without application of mind and that at best can be considered to be based upon the borrowed satisfaction as AO has not recorded his satisfaction. For the sake of ready reference these are extracted below:
Credible information was received by this office from DDIT (Inv.)/Kol/Unit-2(1), Kolkata in the case of Shri Kailash Mondal & related beneficiary entities vide letter no. DDIT (Inv.)/Kol/Unit-2(1)/Info/2019-20/2269 dated 27.02.2020. Wherein it has been reported that the assessee has received Rs. 10,00,000/- from Radharani Vyapaar Pvt. Ltd.
On perusal of above reasons reveals that no satisfaction has been recorded by the AO while recording the reasons to believe that as to how the income has escaped assessment. We note that there is not live link between the information and reasons to believe. Therefore, it is a case of borrowed satisfaction without application of mind. In our opinion, reopening assessment has been made merely on borrowed satisfaction which rendered the notice u/s 148 of the Act as well as assessment framedto be invalid and nullity. Therefore, considering these facts and circumstances the reopening of assessment is void ab initio and invalid in the eyes of law on the ground of non application of independent application of mind to the information received from the wing as well as on barrowed satisfaction. The case of the assessee finds support from the decision in the case PCIT Vs Meenakshi Overseas Pvt Ltd (2017) 82 taxmann.com 300 (Del). In the said decision, Hon'ble Delhi High Court has held that where the reasons to believe contain not the reasons but the conclusions of the AO one after the other and there was no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The Hon'ble High Court has held that the conclusions of the Aalekah Supply Pvt. Ltd. AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a borrowed satisfaction. Besides the case of the assessee is squarely covered by the decisions of CIT vs. SFIL Stock Broking Ltd. in [2010] 325 ITR 285 (Del), GRD Commodities Ltd Vs PCIT (2023) 149 taxmann.com 223(Cal), PCIT Vs Shodiman Investment Pvt Ltd (2018) 93 taxmann.com 153 (Bom) and Sarthak Securities Co Pvt Ltd. Vs ITO (2010) 329ITR 110(Del).
We have also examined show cause notice issued by the AO a copy of which is available on page no. 1 to 4 dated 25.03.2022, wherein we observe that the AO in para 2.1 stated that as per the information received cash was deposited in different proprietorship firms in which Shri Kailash Mondal is sole proprietor and further transferred to various proprietorship concerns finally reaching the following 5 companies:
(i) M/s Kohinoor Merchants Pvt. Ltd. (ii) M/s Kamakhya VyaparPvt. Ltd. (iii) M/s Kanhaiya Commotrade Private Limited (iv) Albino Commerce Private Limited and (v) M/s Odssey Sales Private Limited
We note that nowhere the name of the assessee has been mentioned to the beneficiary of Rs. 10.00 lacs from any of these 5 companies. Therefore, even the show cause notice issued to the AO is defective and therefore the addition made on the basis of said show cause notice cannot be sustained.
In result, appeal of the assessee is allowed.
Order pronounced on 23.12.2025