Loading judgment…
Facts
The assessee, Primerose Traders Pvt. Ltd., filed an appeal against the order of the Ld. CIT(A) for Assessment Year 2012-13. The primary issue revolves around the reopening of assessment initiated by the Assessing Officer (AO) under Section 147 of the Income Tax Act, 1961. The AO made significant additions to the assessee's income based on alleged unexplained cash credits, stemming from transactions with Dhankalash Vanijya Private Limited and Oasis Complex Private Limited.
Held
The Tribunal noted that the Ld. CIT(A) had passed a non-speaking order, failing to consider the assessee's submissions and evidence. The Tribunal found that the reopening proceedings were initiated based on "borrowed satisfaction" and that the additions were made for different reasons than initially stated in the reasons for reopening. The Tribunal also observed discrepancies in the amounts and the basis of additions made by the AO. Therefore, the issues were restored to the file of the Ld. CIT(A) for re-adjudication.
Key Issues
Whether the reopening of assessment under Section 147 was valid and whether the additions made under Section 68 for unexplained cash credit were justified.
Sections Cited
250, 147, 143(1), 143(3), 148, 68, 271(1)(b), 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
Present for: Appellant by : Shri Manish Tiwari, FCA Respondent by : Shri Raja Sengupta, CIT-DR Date of Hearing : 26.08.2025 Date of Pronouncement : 27.08.2025 O R D E R Per Bench : This is an appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [hereinafter referred to as “the Ld. CIT(A)”] in Appeal No.CIT(A), Kolkata- 2/11113/2019-20 dated 27.06.2024 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y 2012-13.
Shri Manish Tiwari, FCA represented on behalf of the assessee and Shri Raja Sengupta, DR represented on behalf of the revenue.
3. It was submitted by the ld. AR that the assessee has challenged the reopening of the assessment. The assessee has also filed written submission before the ld. CIT(A), it is shown at pages 1 to 8 of the paperbook, the contents of which is as follows:
In the instant case, the appellant is a private limited company and engaged in the business of investment and finance. The appellant company filed its return of Income for the assessment year 2012-13 on 08.12.2012 declaring total Income at Rs. 8,860/-. The return was properly processed u/s 143(1) of the I.T. Act 1961 with the same disclosed Income. Thereafter, notice 148 was issued on 27.03.2018 and after proper compliance on the part of the appellant company, the AO passed the assessment order on 18.12.2018 under section 143(3)/147 of the IT Act, 1961 on the same total income of Rs. 8,860/-. Subsequently, with great surprise the appellant company again received fresh notice under section 148 of the I.T. Act on 29.03.2019. So, it is clear that the appellant company had received the second notice under section 148 within a period of 100 days from the completion of the last assessment under section 143(3)/147 of the IT Act. However, the appellant company again filed a fresh return in response to notice under section 148 of the IT Act, 1961 and disclosed the same total income of Rs. 8,860/-. During the second reopening assessment proceedings, also the appellant made proper compliance. Ultimately, the AO passed assessment order under section 147/143(3) on 27.12.2019 and assessed the total income at Rs. 6,35,08,860/-. At the time of the passing of the assessment order, the AO made two additions. These additions are:- a) Addition of unexplained cash credit under section 68 of the Act for Rs. 97,00,000/- b) Addition of unexplained cash credit under section 68 of the Act for Rs. 5,38,00,000/- Being aggrieved by these baseless and whimsical additions the appellant company filed appeal before the appellate authority in respect of eight grounds. The ground wise submission furnished below:- Ground No. 1, 2 and 3 These three grounds are closely related so one consolidated submission furnished for these three grounds. Those three grounds incorporated due to erroneous initiation of proceedings under section 147 and subsequent passing of order under section 147/143(3) of the IT Act, 1961 dated 27.12.2019. In this case, the appellant company received fresh notice under section 148 of the Act on 29.03.2019 and in response to that notice the appellant company filed return of Income on 30.04.2019. But in spite of written requisition dated 06.05.2019, the appellant company received the reason of reopening" on 08.11.2019. So, it is evident that the appellant company received the reason for reopening almost after six and half months from the date of requisition.
Now on thorough perusal of the "reason of reopening" it gathered that AO alleged that the appellant company M/s Primerose Traders Private Limited is the beneficiary of Rs.97,00,000/- by taking unaccounted money transfer during financial year 2011-12 relevant to assessment year 2012-13 from M/s. Dhankalash Vanijya Private Limited, PAN: AADCD6545K and as the sum of Rs. 97,00,000/- escaped assessment, so the AO initiate reopening proceedings. On receipt of the reason of reopening an objection letter to proceedings under section 147 was filed on 22.11.2019 and In that letter the A/R of the appellant company specifically stated at para 2 - "2. The assessee company is not aware about any transaction with Dhankalash Vanijya Pvt Ltd and hence, we would request you to provide a copy of such information received in the interest of justice. Further, it is also stated that the assessee company's transaction if at all any with Dhankalash Vanijya Pvt Ltd cannot be added to its total income merely on the basis of unverified information received, until and unless there is any concrete and credible evidence to prove any irregularity in the transaction undertaken, and hence no adverse inference should be drawn in this regard.
It has been alleged in the recorded reasons for reopening of assessment that the assessee company has taken unaccounted money transfers from a company, M/S Dhankalash Vanijya Pvt Ltd to the tune of Rs.97,00,000/- during FY 2011-12. We would request you to provide the date of such transaction when the assessee company has received the amount of Rs.97,00,000/- from Dhankalash Vanijya PvtLtd in order to enable the assessee to verify the alleged transaction with its Books of Account and also to ascertain whether the assessee has actually received the amount of Rs.97,00,000/- from Dhankalash Vanijya private limited during FY 2011-12 relevant to AY 2012-13 which is not traceable as per assessee company's records but forms the entire basis of re-opening of the assessee company's case for AY 2012-13.
It is further stated that in case you cannot find that alleged amount of Rs.97,00,000/- from Dhankalash Vanijya Private Limited was received by the assessee company during the relevant FY, the proceedings U/S 147 Initiated in the instant case should be dropped in the interest of justice." So, it is evident that in the objection letter dated 22.11.2019 the A/R mainly raised three issues. 1.) The appellant company had no transaction with Dhankalash Vanijya Private Limited and had not received Rs. 97,00,000/-. The A/R also requested the AO to provide the copy of information. 2.) The A/R requested the AO to provide the dates on which the Appellant Company received the money.
3.) If the AO is unable to provide the details then to drop the proceedings under section 147 of the Act, 1961. In reply to objection letter dated 22.11.2019 of the A/R, the AO disposed of the objection in writing vide his letter dated 14.12.2019. But interestingly, the AO was unable to give comment on to the point reply of the three issues raised by the A/R. Rather, the AO incorporated many case laws which is not at all relevant to the specific three issues raised by the appellant company. So, it is clear though the AO disposed of the objection letter dated 22.11.2019, but unable to give any light on the alleged transaction with Dhankalash Vanijya Pvt. Ltd. Moreover, in the reason of AO, there was no mention but in the objection disposing letter dated 14.12.2019, the AO for the first time raised the name of Oasis Complex Private Limited and alleged that the appellant company had made unexplained transaction with M/s Oasis complex Private Limited, but here also unable to provide any evidence or documents which can substantiate the allegation. Further, ignoring the reason of reopening the AO vide his show cause letter dated 12.12.2019 and 17.12.2019 raised the issue of bogus transaction with M/s Oasis Complex Private Limited but unable to provide any specific details about his allegation. Ultimately, the AO treated the credits as bogus and made the addition of Rs.97,00,000/- as unexplained cash credit under section 68 of the IT Act, 1961. Hence, from the above discussion, it is clear that the AO re-open the case on the basis of receipt of money of Rs. 97,00,000/- from Dhankalash Vanijya Private Limited, PAN: AADCD6545K but ultimately the AO made addition of Rs. 97,00,000/- in respect of alleged bogus transaction with Oasis Complex Private Limited. This is definitely erroneous. The assessment was re-open for one reason and ultimately made addition for another reason, this practice is not allowable and acceptable. Moreover, the very basis of assessment under section 147/143(3) dated 27.12.2019 is the notice under section 148 of the Act. Now here that notice 148 of the Act is erroneous. So, the assessment order under section 147/143(3) dated 27.12.2019 which is based on the notice under section 148 is also erroneous and bad in law, so In the light of the above discussion, humbly prayer is kindly quashed the erroneous and bad in law assessments order under section 147/143(3) dated 27.12.2019. Furthermore, another point to mention here in this case, the DDIT, Investigation Kolkata forwarded the information to the AO that the appellant company had received unaccounted money to a sum of Rs, 97,00,000/- from Dhankalash Vanilya Private Limited. On the basis of this information and without conducting any separate enquiry, Investigation, verification by its own the AO formed his satisfaction that the appellant company had received unaccounted money of Rs. 97,00,000/- from Dhankalash Vaniya Private Limited. So, it is clear that on the basis of investigation and satisfaction of another authority, the AO formed his satisfaction and initiated the opening proceedings u/s 147 of the Act, 1961 and issued notice under section 148 of the IT Act 1961. This is nothing but "borrowed satisfaction". As per following case laws any action on the basis of "borrowed satisfaction" is erroneous and bad in law. The case laws are:- 1.) ACIT vs Dhariya Construction Company, 328 ITR 51 (Supreme Court) 2) Sashi Shekhar Saraf vs ACIT, Circle 45, ITAT (Kol) 3) ACIT Vs. Devesh Kumar, ITAT, Delhi So, the initiation of reopening proceedings under section 147 of the IT Act, 1961 and issue of notice under section 148 of the IT Act, 1961 by the AO on the basis of borrowed satisfaction is erroneous and bad in law. So humble prayer is that the erroneous and bad in law initiation of reopening proceedings and issue of notice u/s 148 of the Act on the basis of "borrowed satisfaction" by the AO may kindly be quashed. Ground No. 4 This ground incorporated due to erroneous and unjustified addition of Rs. 97,00,000/- as unexplained cash credit under section 68 of the IT Act, 1961. In this case, the AO made addition of Rs. 97,00,000/- in respect of sale proceeds of equity shares to Oasis Complex Private Limited. The AO made this addition out of misconception and non-application of mind. In this case, the AO had issued two show-cause notices dated 12.12.2019 and 17.12 2019 and in both the letters the AO asks the appellant company to explain why the receipt of Rs. 97,00,000/- from Oasis Complex Private Limited should not be added as Bogus transaction. In reply to these two show cause letters, the AR of the appellant company filed reply letter dated 20.12.2019. A photo copy of the letter dated 20.12.2019 is enclosed herewith for your ready reference as Annexure - 'A’. In the reply letter, the AR clearly stated that the appellant company sold listed equity shares to M/s Oasis Complex Private Limited and the sale proceeds were properly credited in the bank account and also clearly reflected in the Audited Financial Statement and Income Tax Return of the appellant company. In the same reply letter the AR further submitted that the appellant company raised share capital with premium totalling to Ra. 12,43,00,000/- (Approx) during the financial year 2008-09 (assessment year 2009-10). It ls also submitted that with this fund, the appellant company made Investment in equity shares, It Is further submitted that the entire net worth of the company was added by the AO as per assessment order dated 19.03.2015 for the assessment year 2009-10. It is also narrated by the A/R of the appellant company that if the AO made addition again of Rs. 97,00,000/- for assessment year 2012-13. Then there will be double addition of the same proceeds. Not only that this, the submission of the A/R was submitted through online process to the office of the AO. A copy of the evidence of submission of reply ls enclosed herewith for your kind perusal as Annexure-'B'.
But in the assessment order page 2 second part of para 3 the AO stated: - Thereafter the assessee was show caused on 17.12. 2019 but the assessee company did not comply within the stipulated time. Penalty proceeding initiated u/s 271(1)(b) of the IT Act. Further, the assessee was show caused on 12.12.2019 but the assessee company did not comply within the stipulated time." But the above narration by the AO Is not at all correct and true reflection of the assessment proceedings. The AO Issued show cause letter dated 17.12.2019 fixing the date of submission on or before 20.12.2019 accordingly the AR furnished his reply dated 20.12.2019 covering both the show cause letters dated 12.12.2019 and 17.12.2019, but in spite of that, the AO had stated that the appellant company had not been furnished any reply. This ls not proper and true reflection of the progress of assessment proceedings. Not only that in this process, the AO ignored the submission dated 20 12. 2019 by the appellant company. Furthermore, this ls to submit that the AO in the assessment order consisting of 26 pages, unable to furnish any explanation or details regarding his contention that the transaction with Oasis Complex Private Limited is not a genuine one. The AO was not able to bring any evidence or documents in the record which can prove the non-genuineness of the transaction with Oasis Complex Private Limited. This is further to submit that in the very lengthy assessment order, the AO mentioned the facts of the case with Oasis Complex Private Limited only in para 3 of page 2 & 3 and para 2 of page 3 and para 8 of page 25 of the assessment order. Except this part of assessment order, the AO was not able to write anything regarding the facts and merits of the addition of Rs. 97,00,000/-. For your ready reference full details of shares and relevant sale proceeds sold to Oasis Complex Private Limited is enclosed herewith again as Annexure-C even the alleged amount of Rs. 97,00,000/- received from Oasis Complex Pvt. Ltd. ls incorrect as is apparent from the ledger of Oasis Complex Pvt Ltd. maintained by the assessee. It can be seen that the assessee sold shares of 3 companies namely Premium Tradecom Pvt. L1d., Energy Commosale Pvt. Ltd. and Penguin Tradecom Pvt. Ltd. amounting to Rs. 1,06,00,000/- to Oasis Complex Pvt Ltd. and the payments were received in bank. Thus, the addition of Rs. 97,00,000/- as against the actual sum received of Rs. 1,66,00,000/- is clear non-application of mind and incorrect. Hence, the baseless, whimsical. predetermined, non-application of mind and one-sided treatment of transaction with Oasis Complex Private Limited as bogus and addition of Rs. 97,00,000/- under section 68 as unexplained cash credit may kindly be deleted.
This fact also can be mentioned here that in the instant case notice under section 148 was issued in respect of bogus transaction with Dhankalash Vanijya Private Limited for Rs.97,00,000/-. But the AO ultimately made addition of the same amount of Rs.97,00,000/- in respect of alleged bogus transaction with Oasis Complex Private Limited. So, the total re-assessment proceeding is bad in law and the same may Kindly be deleted. Ground Nos, 5, 6&7 Here, ground number 5, 6 and 7 are closely related, so a consolidated submission furnished for these 3 separate grounds. These 3 grounds incorporated in grounds of appeal due to erroneous addition of Rs.5,38,00,000/- as unexplained cash credit under section 68 of the IT Act, 1961. In the submission related to ground number 1, 2,3 and also related to ground number 4 above, it had already been mentioned that in this case the reopening proceedings initiated and also issued notice under section 148 on the allegations of undisclosed transaction with Dhankalash Vanljya Private Limited to tune of Rs. 97,00,000/-. But the present issue is different and this is related to the total investment in equity shares of Rs 12,42,00,000/- and subsequent sale of the same and conversion of the sale proceeds as loan to a tune of Rs. 5,38,00,000/-, According to AO, this conversion of shares to loans/advances of Rs. 5,30,00,000/- is highly suspicious and considering the applicant company as a shell company, the AO added the full sum of Rs.5,38,00,000- In the lengthy assessment order containing 26 pages, the AO mentioned the issue only at para 9 of page 25, The AO made total discussion of 12 lines in respect of this issue and made astronomical addition of Rs.5,38,00,000/- In this case, this issue was not in the reason of reopening and in the assessment order, the AO had not mentioned any further approval from the higher authority regarding the Coverage of the new issue. Not only that the AO had not bring any evidence or documents in record which can substantiate that the AO undertaken new issues with the approval of the proper authority. So, it is clear that in a very casual manner and whimsically the AO made addition in respect of issues which were beyond the scope of reopening and scope of notice under section 148 of the IT Act, 1961. So, the addition of Rs. 5,38,00,000/- as unexplained cash credit under section 68 of the IT Act, 1961 r.w.s 115BBE of the Act is beyond jurisdiction and such beyond Jurisdiction addition is obviously bad in law. So in such a situation, humble prayer is the beyond jurisdiction and bad In law addition of Rs.5,38,00,000/- by the AO may kindly be deleted.
Here, as per return of income of the appellant company and also as per balance sheet of the appellant company, the figure under the head long-term loans and advances is Rs. 6,38,98,630/-, But the AO considered the figure at Ra. 5,38,00,00/-. From where the AO obtained the figure of Rs. 5,38,00,000/- is not clear. Moreover, the AO had not narrated how and from where instead of figure of Rs. 6,38,98,630/- got the figure of Rs. 5,38,00,000- This also indicated that in a very casual manner, the AO completed the assessment and made beyond jurisdiction huge addition to a tune of Rs. 5,38,00,000/-. From the above narrated facts, it is evident that the AO had made the addition only for the sake of addition, not for any other purpose. Without prejudice to the above para, It is further submitted that the AO made high-pitched addition of Rs. 5,38,00,000/- only on the basis of "highly suspicious" idea. The AO did not even bother to explain In the assessment order why the issue is highly suspicious and it is accepted fact that on the basis of suspicion, no addition can be made Furthermore, at para number 9 of page 25 of the assessment order, the AO narrated:- “…………………….The assessee company was requested to explain the same issue but failed to explain the same with documentary evidences” But this contention of the AO is not correct. In the show cause letter dated 22.12.2019, the AO first time raised this issue and asked the appellant company to furnish explanation etc within 24.12.2019. In response to that show cause the AR of the appellant company vide his letter dated 24.12.2019 at para 2 stated that the details were provided by the AR In his letter dated 20.12 2019. Now the extract of reply letter dated 20.12.2019para second, page first & second of the AR Is reproduced here- "It is apparent from the financial statement that the entire net worth of the assessee company which is Rs. 1243 crores (approx..) consists of Equity Share Capital and Share Premium in the form of Reserve & Surplus. The share capital was raised in FY 2008-09 and the proceeds were used for making investment in equity shares. The entire share capital and share premium raised by the assessee company which represents its total net worth and capital have already been added as income of the assessee company vide Order dated 19.03.2015 passed was 144/263/143(3)/147 of the Income Tax Act, 1901. Now since the investment were made out of share capital and premium raised by the assessee which have already been added to its total income, any further addition on account of investment on sale of investments will result in duplicity of addition and therefore, would not be in the interest of justice Wo would therefore request your goodself not to make any addition in the instant case on account of proceeds received from sale of investment as the source of fund for making investment has already been added to the total income of the assessee company."
So the contention of the AO is not correct and the issue was covered by the AIR in his letter dated 20.12.2019. All these facts indicated that in a very casual and without applying his mind and in a predetermined mindset and only for the sake of addition the AO made huge addition of Rs. 5,38,00,000/-. Such type of whimsical, baseless and one sided addition may kindly be deleted.”
4. It was submitted by the ld. AR that while disposing off the appeal of the assessee, the ld. CIT(A) specifically failed to consider any explanations and any evidences produced by the assessee. It was submitted that the issue can be restored to the file of the ld. CIT(A) for re-adjudication after considering the submission of the assessee and after considering the paperbook and evidences filed and also granting adequate opportunity of being heard.
In reply, the ld. DR submitted that the ld. CIT(A) has passed a very speaking order.
We have considered the rival submissions. A perusal of the order of the ld. CIT(A) clearly shows that the ld. CIT(A) has not mentioned anything about the written submission filed by the assessee nor the evidences produced before him. A perusal of the paper-book filed by the assessee shows that the assessee has filed a paper-book containing 1 to 41 pages. In the written submission at page no.3 of the paperbook, the assessee has categorically mentioned regarding the objection letter dated 22.11.2019 relied by the assessee before the Assessing Officer, the same is reproduced as follows:
In reply to objection letter dated 22.11.2019 of the A/R, the AO disposed of the objection in writing vide his letter dated 14.12.2019. But interestingly, the AO was unable to give comment on to the point reply of the three issues raised by the A/R. Rather, the AO incorporated many case laws which is not at all relevant to the specific three issues raised by the appellant company. So, it is clear though the AO disposed of the objection letter dated 22.11.2019, but unable to give any light on the alleged transaction with Dhankalash Vanijya Pvt. Ltd. Moreover, in the reason of AO, there was no mention but in the objection disposing letter dated 14.12.2019, the AO for the first time raised the name of Oasis Complex Private Limited and alleged that the appellant company had made unexplained transaction with M/s Oasis complex Private Limited, but here also unable to provide any evidence or documents which can substantiate the allegation.
A perusal of the said written submission clearly shows that this has not been considered by the ld. CIT(A) in his order. Further, the claim of the ld. DR that the Assessing Officer has considered and decided the objections of the assessee in respect of reopening will not stand to support the order of the ld. CIT(A) in so far as the appeal before the ld. CIT(A) is appellate proceedings against the order of the Assessing Officer. In these circumstances as it is noticed that the ld. CIT(A) has passed a non-speaking order. We are of the view that the issues in this appeal must be restored to the file of the ld. CIT(A) for re-adjudication. It would also worthwhile to mention here that the ld. CIT(A) should consider the submissions and the evidences submitted by the assessee before passing a speaking order. With these directions, the issues in this appeal are restored to the file of the ld. CIT(A) for re-adjudication after granting the assessee adequate opportunity of being heard.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court 27th August, 2025.