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Facts
The assessee filed its return for AY 2018-19. Information revealed that the 'Oneworld group' provided bogus entries, including an unsecured loan of Rs. 22.58 Crores to the assessee through M/s Aneri Fincap Ltd. Based on this, the AO initiated reassessment proceedings under Section 148A(b) and issued a notice under Section 148, making an addition of Rs. 22.58 Crores as unexplained cash credit under Section 68.
Held
The Ld. CIT(A) quashed the reassessment proceedings, finding them illegal and void ab-initio as the information relied upon did not directly implicate the assessee, and the transaction was previously scrutinized in the original assessment. The ITAT upheld the CIT(A)'s order, dismissing the revenue's appeal, noting that the reopening was done mechanically without proper investigation or application of mind and that the statement relied upon did not relate to the assessee.
Key Issues
Whether reassessment proceedings initiated under Section 148A/148 are valid when based on third-party information of bogus loan entries which did not directly implicate the assessee, especially after scrutiny in original assessment and without independent investigation by the AO.
Sections Cited
139(1), 131, 148A(b), 148A(d), 148, 143(2), 142(1), 143(3), 68, 147, 132
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the revenue against the order of Commissioner of Income Tax (Appeals)-27, Kolkata (hereinafter referred to as the Ld. CIT(A)] dated 28/06/2024 for AY 2018-19.
Assessment Year: 2018-19 Flex Trade Pvt. Ltd.
Brief facts of the case of the assessee are that assessee had filed its original return of income u/s 139(1) of the Act on 08.10.2018 declaring a total income of Rs.11,54,450/-. Later, a credible information was received by the AO that a group of companies named ‘Oneworld group’ was engaged in providing entry to other several dummy entities by bogus purchase and sales without no actual movement of goods and the group was controlled and managed by Shri. Rajesh G. Mehta who is one of the famous entry operators of Kolkata. The said information was unearthed by the investigation wing, Kolkata in pursuant to a search operation. Post search enquiry had also revealed that the said entity had provided entry to M/s Aneri Fincap Ltd., which is also a bogus entity. M/s Aneri Fincap Ltd., in turn provided entry to the assessee i.e., M/s. Flex Trade Pvt. Ltd. through providing of an unsecured loan of Rs.22,58,75,343/-. Subsequent to the search, statement of Shri Rajesh G. Mehata was recorded u/s 131 of the Act on 08.11.2019 wherein he stated that he was the CEO of M/s. Aneri Fincap Ltd. (AFL) and various other entities and that these companies were engaged in providing bogus purchase & sale bill to various entities. Based upon the statement, the AO issued notice u/s 148A(b) of the Act on 15.03.2022 to the assessee company inferring that the assessee company, M/s. Flex Trades Pvt. Ltd. was a beneficiary of bogus loan entries provided by AFL to the tune of Rs. 22,58,75,343/-. After that, the AO had passed an order u/s 148A(d) of the Act on 26/03/2022 after taking approval from the specified authority and issued notice u/s 148 of the Act on 26/03/2022. In response to the same, the assessee had filed the return of income on 17.06.2022 declaring total income as earlier at Rs.11,54,450/-. Subsequently, the AO had issued and served all the statutory notices u/s 143(2) & 142(1) of the Act on the assessee in timely manner. In response to the aforesaid notice, the assessee furnished written submission and the same was perused by the AO. Later, the AO had passed the assessment order u/s 143(3) of the Act on 17/03/2023 determining a total Income of Rs.22,70,29,793/-, and served on the assessee. On perusal of the assessment order, it is observed that the AO had made only one addition viz. a) Unexplained cash credit u/s 68 of the Act of Rs.22,58,75,343/- in respect of bogus unsecured loan received during the year by the assessee company from Aneri Fincap Ltd. Assessment Year: 2018-19 Flex Trade Pvt. Ltd.
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been allowed by holding that the reopening is illegal hence all the consequential proceedings are void and ab-initio.
Being aggrieved and dissatisfied the revenue preferred an appeal before us.
The Ld. D.R challenges the impugned order on the following grounds:
1.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in decision to set-aside the reopening proceedings u/s 148A(d) of the Act and subsequent proceedings u/s 147 of the Act in respect of the case of the assessee relevant to A. Y. 2018-19.
2. That the revenue reserves its rights to substantiate, modify, delete, supplement and/or alter the grounds at any time of the appeal proceedings.
Contrary to that the Ld. A.R supports the impugned order thereby submitting that the AO in the present case initiated the reassessment proceedings mechanically based on the alleged information that Shri Rajesh G Mehta managed and controlled M/s Aneri Fincap Pvt. Ltd. and based on such information, AO straightway concluded that M/s Aneri Fincap Pvt. Ltd. is paper company and that M/s Flex Trade Pvt. LTd. was one of the beneficiary and bogus loan entries provided by M/s Aneri Fincap Pvt. Ltd.. The AR submits that in fact there are absolutely no details / mail for evidence based on which the AO routed such conclusion and the Ld. CIT(A) has rightly quashed the proceedings by holding that notice issued is completely illegal. The Ld. A.R further submits that the assessment of the assessee company was competed u/s 143(3) of the Act on 24.03.2021 and on the specified enquiry the assessee company had provided a relevant records and documents in support of its transaction with M/s Aneri Fincap Pvt. Ltd. which were duly scrutinized and enquired into by the AO during the original assessment proceedings and there was no adverse inference was drawn by the AO in respect of transaction with M/s Aneri Fincap Pvt. Ltd.. The Ld. AR further submits that the assessee taken loan of Rs. 22.50 crores from M/s Aneri Fincap Pvt. Ltd. being a non-banking financial company registered with Reserve Bank of India in the original course of business and the loan i) PCIT vs. Sreeleathers (2022) ii) MOvish Realtech Pvt. Ltd. vs. DCIT iii) ITO vs. Ska Techinfra Pvt. Ltd. dated 20.01.2025 iv) Mohd. Gyasuddin vs. ITO, Ward- 30(2), Kolkata The Ld. A.R further submits that the Ld. CIT(A) in its finding has not only discussed the facts rather discussed the law and thereafter held that reopening is illegal.
Upon hearing the submission of the counsel of the respective parties, we have perused the impugned order as well as facts of the assessee and there is no denying to this fact that the assessee gave befitted reply to the notice u/s 148A of the Act in which he has clearly stated that M/s Aneri Fincap Pvt. Ltd. is a BSE listed company, a company is a non-banking financial company registered with RBI and company is regularly filed his return of income. It is pertinent to mention here that the assessee company is also NBFC company and he borrowed a sum of Rs. 22.50 crores from M/s Aneri Fincap Pvt. Ltd. in the month of March, 2018 that reveals from the confirmation of the account. It is further important to mention here that the loan was received by the assessee through banking channel and interest of Rs. 9,72,603/- was paid on the loan. The loan was reported by the tax auditor in the tax audit report, disclosed in the audited financial statement for FY 2017-18 and the same was duly scrutinized and examined by the AO during the course of regular assessment proceedings. We have gone through the notice u/s 142(1) dated 10.12.2020 and 11.01.2021 and find that the basis of drawing satisfaction against the assessee to issue of notice u/s 148A is a mechanical and without any application of mind. It is further pertinent to mention here that in the order u/s 148A(d) dated 26.03.2022 the AO has admitted that reopening was done without any investigation and enquiry. The statement of Shri Rajesh G Mehta relied upon was in fact in the context of One World Group of companies and do not refer to or relates to the Assessment Year: 2018-19 Flex Trade Pvt. Ltd. assessee company in any manner. We have gone through the order passed by the Ld. CIT(A) and find that the Ld. CIT(A) has discussed this issue at length and also considered the the judgment passed by the Hon’ble Calcutta High Court. The operative portion of the CIT(A)’s finding is as follows:
“5.2.1. I have gone through the assessment order as well as the submission of the assessee. On examining the same, it is observed that the assessee had contended that the reopening proceedings was bad in law. The Notice under section 148A(b) of the Act dated 14.03.2022 issued by the Assessing Officer and the resultant order under section 148A(d) of the Act dated 26.03.2022 passed in pursuant thereto, are both illegal, invalid, bad-in-law and without jurisdiction in as much as there were no material or information to suggest that the appellant income chargeable to tax has escaped assessment. 5.2.2. The assessee placed reliance on the judgement of the Hon’ble Delhi High Court in the case of ‘Movish Realtech Private Ltd. vs. DCIT [ W.P. (C) 5865/2023’, wherein vide judgment dated 08-05-2023 the Hon’ble Delhi High court had set aside order passed under section 148A(d) and consequential notice issued under section 148 in another case involving M/s. Aneri Fincap Ltd. of Oneworld Group. The relevant portion of the judgement is as under: “Section 68, read with sections 147 and 148, of the Income-tax Act, 1961 - Cash credits (Loan) - Assessment year 2019-20 - Pursuant to a search conducted at 'Oneworld group entities', it was noted that assessee was a beneficiary of an accommodation entry provided in form of bogus loans - It was alleged by revenue that bogus accommodation entry was provided by AFL Ltd. - It was also noted that AFL was one of several entities controlled by an accommodation entry provider i.e., one, 'R' - Further based on statement of 'R' revenue zeroed down on AFL, which, supposedly, lent money to assessee - In said back drop Assessing Officer issued notice under section 148 and initiated reassessment proceedings against assessee - It was noted from record that foundation for triggering reassessment proceedings qua assessee was statement of 'R' and said statement, by itself, did not lend any clarity as to whether Assessing Officer had underlying material available with him for reaching a conclusion that income chargeable to tax qua assessee had escaped assessment - Whether since search and seizure action under section 132 was not carried out against assessee such action was carried out against a third party and furthermore, assessee was not given opportunity of hearing, best way forward would be to set aside order passed under section 148A(d) and consequential notice issued under section 148 - Held, yes [Paras 15 to 18] [In favour of assessee]” 5.2.3. Based on the above decision of Hon’ble Delhi High Court in Movish Realtech Private Ltd. vs. DCIT [W.P. (C) 5865/2023] the reopening of assessment based solely on the statement of Shri. Rajesh G. Mehata is unlawful and without jurisdiction. The said statement does not in any way implicate the appellant or name the appellant as beneficiary of accommodation entries. The statement, by itself, did not lend any clarity as to whether Assessing Officer had underlying material available with him for reaching a conclusion that income chargeable to tax had escaped assessment. The reopening is thus illegal and all consequential proceedings illegal, and void ab initio. The assessment order u/s 147/143(3) is therefore liable to be quashed. 5.2.7. Hence, in view of the above discussions and judicial pronouncement of Hon’ble Delhi High Court in the case of Movish Realtech Private Ltd. vs. DCIT [W.P. (C) 5865/2023], set aside the reopening proceedings u/s 148A(d) of the Act. Following the corollary of the judgement, the reopening proceedings are to be treated as void-ab-initio. Hence, the proceedings u/s 147 of the Act are set-aside. Therefore, these grounds of appeal raised by the assessee are allowed.
Assessment Year: 2018-19 Flex Trade Pvt. Ltd. 7. Keeping in view the facts of the case and considering the order passed by the Ld. CIT(A), we do not find any infirmity in the impugned order. Accordingly, the appeal of the revenue is dismissed.
In the result, the appeal of the revenue is dismissed.
Order is pronounced in the open court on 13th October , 2025