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Facts
The Revenue challenged the CIT(A)'s deletion of an addition of ₹9.41 crores made by the AO under Section 69A and a brokerage addition of ₹17.6 lakhs. The additions were based on information from a search and seizure operation at third-party premises, which allegedly revealed unaccounted cash transactions and identified the assessee as a potential investor/lender. The assessee filed a cross-objection challenging the validity of the reopening of assessment under Section 147.
Held
The Tribunal upheld the CIT(A)'s decision, ruling that there was no corroborating evidence to link the assessee to the alleged transactions, the documents were vague ('dumb documents'), and the AO failed to provide cross-examination or independently apply their mind. It further held that the reopening of assessment was invalid as it was based on vague information of 'potential' and 'probable' transactions from third-party premises, which did not trigger presumptions under Sections 132(4A)/292C against the assessee.
Key Issues
Whether additions under Section 69A for unaccounted investments and brokerage can be sustained based on uncorroborated third-party documents and statements; and whether the reopening of assessment under Section 147 was valid when based on 'potential' and 'probable' information without independent application of mind by the Assessing Officer.
Sections Cited
69A, 147, 148, 148A(b), 148A(d), 143(1), 143(3), 132(1), 132(4), 132(4A), 292C
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM
These Cross appeals preferred by the Revenue and assessee against the orders of the ld. Commissioner of Income-tax (Appeals), Kolkata-20 (hereinafter referred to as the “Ld. CIT(A)”] dated 26.09.2024 & 27.09.2024 for the AYs2016-17, 2019-20.
First, we will take the Revenue’s appeal, challenging the deletion of addition on merits as well as the ground no.5 and 6 raised by the assessee supporting the deletion of addition by the learned CIT (A).
At the outset, we observe that there is a delay in filing the appeal by 46 days by the Revenue, for which condonation petition was filed. After perusing the contents of the condonation petition, we are of the view that the delay is for bonafide and genuine reasons and therefore condoned by admitting the appeal for adjudication.
The facts in brief are that the assessee filed the return of income on 26.07.2016, declaring total income at ₹9,78,820/-, which was processed u/s 143(1) of the Act on 30.08.2016 accepting the returned of income. Subsequently, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148A(b) of the Act, by passing the order u/s 148A(d) of the Act and thereafter, issuing notice u/s 148 of the Act on 11.04.2023. The case of the assessee was reopened based
The assessee is filed the return of income on 25.04.2023, in compliance to notice issued u/s 148 of the Act declaring total income at ₹9,78,820/-. Thereafter, the learned AO issued statutory notices including questionnaire calling upon the assessee to file details/ documents explaining the said unrecorded transactions which was replied by the assessee vide letter dated 10.08.2023, which is also extracted by the learned AO from Para no.5. In the said letter, the
7. In the appellate proceedings, the learned CIT (A) deleted the addition after taking into consideration their replies, contentions and arguments of the assessee by observing and holding as under: -
“I find that the grounds for making additions u/s 69A is the statement of Umashankar Kasera and Praveen Kumar Kasera and the papers found in the search in their cases who were the Finance Brokers. I have looked into the statements of the finance brokers. I find from the recorded statements, the copy of which was filed before me that the finance brokers have not named the assessee anywhere as lender or borrowers. The counter name of any borrower or lender has also not been stated in their statement. In fact the search party has not raised any question with regard to the identity of the assessee. Not a single transaction has been identified which can be related to the assessee.
9. On the other hand, the learned Authorised Representative submitted that there are no evidences to show that assessee had ever made any investments by way of cash loans. The learned Authorised Representative submitted that it was the dissemination report of the investigation wing alone on the basis of which the department has concluded that the assessee had lent money to number of parties. The learned Authorised Representative stated that it is tried law that assessee cannot ask to prove the negative. The learned Authorised Representative submitted that it is for the department to bring the evidences on record to prove that investments were made by the assessee. Therefore, there was no evidence on record to justify the presumption of the learned AO. The learned Authorised Representative while supporting the order of the learned CIT (A) submitted that the learned CIT (A) has correctly analyzed the facts and have held that there was no evidence to show that investments were ever made by the assessee. The learned Authorised Representative also relied on the decisions as relied upon by the learned CIT (A) while deciding the merit on page no.14 of the appellate order. The learned Authorized
After hearing the rival contentions and perusing the materials available on record, we find that in this case the learned AO on the basis of dissemination report of the investigation wing noted that the assessee has entered into unrecorded cash transactions investing the undisclosed and unrecorded money to the various borrowers through brokers Sanwaria and Kasera. We note that the learned AO has not brought on any evidence on record to show that the assessee in fact was involved in any money lending by way of Rukasthrough finance brokersSanwaria and Kasera and only relied on the dissemination report of the Investigation Wing. We have also perused the evidences on record and also the statements recorded during the course of search on finance brokers Sanwaria and Kasera which has been extracted in the assessment order and find that nowhere finance brokers have ever stated the name of the assessee as lender of cash. We also note that no rukas were ever found and seized which corroborate the money lending by the assessee to various borrowers.
“10. So far as merits of the case are concerned, we note that the assessee was stated to be the borrower of the money from various parties/entities aggregating to Rs.75.60 crores. We note that the AO has invoked the provisions of Section 69A of the Act while making the addition which is applicable to the assessee which is found to be the owner of money, bullion, jewellery or other valuable article and the assessee could not offer any explanation about the sources thereof. In the present case, the assessee is stated to be a borrower of cash loans from various parties and therefore , could not be said to be owner of money, bullion, jewellery or other valuable article. Accordingly we uphold the order of the ld. CIT(A) on this issue by relying on the decision of the coordinate bench of the Tribunal in the case of Nath Chatterjee v ITO dated 25.2.2021.
We further note that the addition was made on the basis of probable suspicious transactions without any definite finding and the suspicious transactions did not mention the name of the assessee. In our opinion, no addition can be made on the basis of potential cash borrowings and possible or probable transactions. This issue has been settled by the Hon’ble Jurisdictional High Court in the case of Girdhar Gopal Dalmia v. UOI 150 taxmann.com 54 on the basis of the same search of Sanwaria and Kasera Group and held that addition based on the report of the Investigation Wing which is based on "potential cash borrowings and 'possible' financial transactions is not called for and set aside the reassessment proceedings. We further note that the assessee had not been provided any opportunity of cross examination which was specifically requested by the assessee for cross examination of the persons whose statements have been relied upon by the department, thereby causing the miscarriage of justice. Besides, the reopening of the assessment has been made on the basis of borrowed satisfaction of investigation wing without any independent application of mind by the AO as there was no enquiry or application of mind by the AO to the information received from the Investigation Wing and thus on this score also the reopening of assessment is invalid and nullity in the eyes of law. Therefore, considering the above facts and circumstances and the various decisions discussed above, we are inclined to uphold the order of the ld. CIT(A) on merit also. Thus, the appeal of the revenue is dismissed.”
11. We also note that there was no materials before the learned AO except the general observations by the investigation wing through the "This report may please be treated as indicative and not exhaustive. If any further clarification or documents, in this regard are required, it is requested to contact the Olo the ADIT(Inv) Unit 2-(4) Kolkata at e-mail id. Kolkata. Ddit.inv2.4@incometa.gov.in.
This information requires further verification at your end. Thereafter necessary action, as applicable may be taken as per Income tax Act."
Therefore, we find that the learned CIT (A) has rightly deleted the addition on the ground that there was no material before the learned AO to make the addition and addition was made only on the basis of surmises and junctures. Accordingly, the appeal of the revenue is dismissed and the ground no.6 and 7 of the Cross Objections are allowed.
CO No. 25/KOL/2025 013. The issue raised in ground no.1 to 4 is a legal issue and is against the invalid reopening of assessment by the learned AO u/s 147 of the Act.
The facts were already discussed and narrated in detail while disposing the Revenue’s appeal and ground no.6 and 7 of the Cross Objection of the assessee which are on merit.
After hearing the rival contentions and perusing the materials available on record, we find that notice u/s 148A(b) of the Act was issued on 17.03.2023, on the basis of search conducted in the case of “8. From the above information, it is not clear as to how reopening of the assessment could have been resorted to. The report is as vague as possible as it states that possible financial transactions could be deduced and decoded from hard copies obtained from DDIT. Further. it says there is potential cash borrowed from various lenders and the probable names of the group have been mentioned and set out without any particulars. Assuming that material was available as annexures to the said report of the DDIT, such documents should have been made known to the assessee so as to enable them to give an effective reply.
As could be seen from the communication dated 21st January, 2022 referred theve ord more than one place the authority least oned the word "potential" and also the Mrk "probable". The Hon'ble Supreme Court in Lucknow Development Authority Versus Mika Gupta A.I.R. 1994 SC 787 considered the meaning of the word "potential". It was pointed out that the word "potential" has been defined in the Oxford Dictionary as "capable of coming into being, possibility. In Black's Law Dictionary, it is defined as "extending any possibility but not in Act". It was further pointed out that the said word would mean to be naturally and probably expected to come into existence at some future time, though not now existing. "Possibility" has been defined in "WHARTON" to mean expectation, an uncertain thing which may or may not happen. Under the provisions of the Income Tax Act, tax is levied on the actual income of the previous year and the facts must be taken as they existed during the previous year. It is relevant to take note of the decision of the Hon'ble Supreme Court in Sir Kikabhai Prenchand Versus Commissioner of Income Tax (Central) Bombay, (1953) 24 ITR 506 (SC) page 506 wherein it was held that the State has no power to tax the potential future advantage and all it can tax is income, profits and gains made in the relevant accounting year. This decision if applied to the facts and circumstances of the case on hand, the only conclusion that can be arrived at is to hold that the reopening of the assessment was bad as it was based on certain alleged "potential" cash borrowings and certain alleged "possible" financial transactions. That apart, the assessing officer did not independently apply its mind to the information furnished by the DDIT which he is required to do while exercising the power to reopen an assessment."
If such was the explanation given by the assessee, it was the duty of the Assessing Officer to consider the explanation and give reasons as to why it is not acceptable. However, the Assessing Officer only states that the assessee has failed to substantiate the alleged amount of escaped income of Rs. 25,00,000/- is a genuine transaction. The order passed under Section 148A(d) is a nonspeaking order, outcome of total non-application of mind and it also reveals that the Assessing Officer had no material to controvert the explanation offered by the assessee that Brightmoon Supply Pvt. Ltd. is a NBFC and loan was taken during the assessment year 2019-20 and repaid along with interest in the same year and this was substantiated by the assessee by producing the ledger copy of a loan account. Thus, we find it is not a case where the power under Section 148 of the Act could have been invoked by the assessing officer. Accordingly, the appeal is allowed.
The case of the assessee also find support from the decision of Bomay High Courtin case of Mohanlal Champalal Jain vs. ITO reported in [2019] 102 taxmann.com 293 (Bombay) under similar circumstances has held as follows: - CO No. 26/KOL/2025 019. The issue raised in and CO No. 26/KOL/2025 are similar to ones as decided by us in CO No.25/KOL/2025. Accordingly, our decision would, mutatis mutandis, apply to the appeal of Revenue and CO of the assessee. Hence, the appeal of Revenue in is dismissed and CO of the assessee is allowed.
In the result, the appeals of the Revenue are dismissed and the COs of the assessee are allowed.
Order pronounced in the open court on 17.10.2025.