DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2), KOLKATA, AAYAKAR BHAWAN POORVA vs. BHAGWAN DAS AGARWAL, KOLKATA

1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 19,95,500/- made by the AO under section 68 of the Act despite the fact that the assessee had failed to establish the identity and creditworthiness of the parties and the genuineness of the transactions?

2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 19,95,500/- made by the AO under section 68 of the Act and thus, has acted in contravention of the established and binding judicial precedent set by the Hon'ble Apex Court in the judgment dated 05/03/2019 in the in the case of PCIT vs NRA Iron Steels Pvt. Ltd.?

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 19,95,500/- made by the AO under section 68 of the Act and thus, has acted in contravention of the established and binding judicial precedent set by the Hon'ble Apex Court in the judgment dated 26/08/1971 in the case of CIT vs Durga Prasad More?

4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO, since the AO, in the assessment order, had pointed to the specific transaction and the assessee had failed to provide satisfactory response to the queries put forth by the AO. Further, the AO had also established in the assessment order that the assessee was a beneficiary of the trade reversal in illiquid options contracts which was being carried out by share brokers and entry operators acting in tandem to provide bogus profits and losses in lieu of commission. The Hon'ble Supreme Court through its judgment dated 08/02/2018, in the case of Rakhi Trading Pvt. Ltd., had recognized the modus operandi and ruled in favour of the revenue. Hence, the assessee was a beneficiary of accommodation entry which is in the nature of organized tax evasion, and comes under exception as per clause (h) of section 3.1 of CBDT Circular No. 05/2024 dated 15/03/2024, falling under the category of cases involving organized tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries.

5. The appellant craves the right to add, alter, amend or withdraw any ground of appeal before or at the time of hearing.

4 ITANo.1254/Kol/2025 8. It was submitted by the ld. CIT-DR that there was a search in the case of the assessee on 02.03.2015 and the assessee had been originally passed u/s.153A of the Act on 31.12.2017. Subsequently, an information received that the Directorate of Income Tax had conducted a project basis investigation, titled Project Falcon on various share brokers/entry operators. It was the submission that the Assessing Officer in page 4 para 2(e) has categorically brought out the facts by an intrusive action and the Project Falcon showed tax evasion and this was available with the Assessing Officer on 03.12.2019. It was the submission that the original assessment having been completed on 31.12.2017, fresh information has been received by the Assessing Officer on account of intrusive action conducted by the Income Tax Directorate and the report thereon dated 03.12.2019, which resulted into reopening of the assessment and issuance of notice u/s.148 of the Act on 26.03.2021. It was the submission that the ld. CIT(A) had deleted the addition admittedly by holding that the reopening was on the basis of a change of opinion. It was the submission that the ld. CIT(A) in page 14 of his order has held that in the reasons recorded there is no specific information pertaining to the assessee or the brokerage firm through whom such transaction was undertaken by the assessee. It was the submission that in page 12 of the order, the ld.CIT(A) has extracted the reasons recorded wherein the chart also categorically shows that the assessee has been identified as one of the beneficiaries of the reversal trade in illiquid contracts and has booked bogus losses during the impugned assessment year. It was the submission that in page 15 of the order ld.CIT(A) has taken a stand that the reopening was on the basis of 5 ITANo.1254/Kol/2025 change of opinion. It was further submitted that there was substantial evidence against the assessee and the order of the ld.CIT(A) is liable to be reversed.

10. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that in page 16 of the order the ld.CIT(A) has held that the reopening is quashed on account of the fact that there is no application of mind by the Assessing Officer and the satisfaction appears to be more akin to a ‘borrowed satisfaction’ without any live link to the facts of the case. The relevant findings of the ld. CIT(A) recorded in this regard are as under :- Applying the test in the present case, I find that the reason for reopening recorded by the Ld. A.O. is purely his subjective satisfaction, and the investigation report so received was copied without any assertion of his own independent examination of fact and conclusion thereof. There is no application of mind in any manner and his satisfaction appears to be more akin to a 'borrowed satisfaction' without any live link to the facts of the case.

11. A perusal of the grounds raised by the revenue clearly shows that the revenue has not challenged the action of the ld. CIT(A) in respect of allowing of the appeal on the ground of reopening. Admittedly, the reasons recorded are found from pages 7 to 13 of the order of the ld.CIT(A). The ld.CIT(A) has considered all the facts in respect of the reopening and has 6 ITANo.1254/Kol/2025 quashed the reopening of the assessment. The revenue having not challenged the findings of the ld. CIT(A) in respect of reopening, we are of the view that on this ground also the appeal of the revenue is not sustainable and consequently the same stands dismissed.

12. In the result, appeal of the revenue is dismissed. Order dictated and pronounced in the open court on 09/09/2025.