KUSH TRADING & COMMERCE PVT. LTD., ,NEW BARRACKPUR vs. ITO, WARD 4(4), , KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 05.03.2025 for the AY 2014-15. 02. At the time of hearing, the ld. Counsel for the assessee pressed the ground no.4, challenging the reopening of assessment on the basis of notice issued u/s 148 of the Income-tax Act, 1961 (the Act) by the ld.
AO without juri iction.
03. The facts in brief are that the case of the assessee was selected for scrutiny to verify the genuineness of the transactions of Kush Trading & Commerce Pvt. ltd; A.Y. 2014-15

₹1,42,52,800/- comprising fictious loss of ₹1,14,40,800/- in equity /
derivative trading and accommodation entries of ₹28,12,000/- from M/s Tirumala Tradecom Pvt. ltd. The notice u/s 148A(b) of the Act was issued to the assessee on 25.05.2022, which was not replied by the assessee and thereafter notice u/s 148 of the Act was issued by recording the reasons in the order passed u/s 148A(d) of the Act that within the meaning and scope of Section 147 of the Act, the income has escaped assessment. Finally, the addition of ₹1,42,52,800/- was made comprising (i) loss on equity / derivative of ₹1,14,40,800/- and (ii) accommodation entries of ₹28,12,000/- from M/s Tirumala
Tradecom Pvt. ltd.
04. Aggrieved assessee preferred the appeal before the ld. CIT (A), who restored the issue to the file of the ld. AO on the ground that the ld.
AO has passed ex-parte order and directed the ld. AO to pass the assessment afresh.
05. The ld. AR challenged the reopening of assessment before us on the ground that no satisfaction has been recorded by the ld. AO in the order passed u/s 148A(d) of the Act on 26.07.2022, a copy of which is available at page no.65 to 69 of the Paper Book. The ld. AR while referring to the said order passed, submitted that no where in the said order the ld. AO has recorded his satisfaction. The ld. AR referred to the fourth line of page no. 5 of order u/s 148A(d) dated 26.07.2022, in which the ld. AO stated that the assessee has not given any submission regarding factual issues of fictious loss in equity/
derivative trading and intends to make submission on reopening and hence, no further argument of the contention of the assessee was presented at the time of assessment proceedings and thereafter,
Kush Trading & Commerce Pvt. ltd; A.Y. 2014-15

concluded that the assessee is adjudged to be a beneficiary to the extent the source information is concerned and has escaped assessment. The ld. AR therefore prayed that the said order passed by the ld. AO is invalid and cannot be basis for issuing notice u/s 148 of the Act for reopening the assessment of the assessee. The ld. AR further in defense of his argument relied on the decision of Hon'ble
Delhi High Court in case of Ratnagiri Gas and Power Private Limited Vs
ACIT in W.P.(C) 221/2023 vide order dated 02.05.2025. 06. The ld. DR on the other hand heavily relied on the orders of the ld.
lower authorities by submitting that the assessee was not co-operative and has not replied the notice issued u/s 148A(b) of the Act dated
25.05.2022 and therefore, the order passed u/s 148A(d) of the Act by the ld. AO on the basis of material available on record and therefore, the assessee should not be allowed to challenge the validity of the reopening of the assessment at this stage and the issue raised by the assessee may be dismissed.
07. After hearing the rival contentions and perusing the materials available on record, we observe that undisputedly, the assessee’s case was reopened u/s 148 of the Act vide notice dated 12.04.2021, after passing the order u/s 148A(d) of the Act dated 26.07.2022, a copy of which is available at page no. 65 to 69 of the Paper Book of the assessee. A perusal of the said order shows that the ld. AO has extracted the information received and thereafter has not recorded any satisfaction which is per-requisite for a valid order u/s 148A(d) of the Act for reopening of the assessment. Therefore, the reopening of the assessment was by issuing notice u/s 148 dated 12.04.2021 is invalid and cannot be sustained. Moreover, we note that nowhere the Kush Trading & Commerce Pvt. ltd; A.Y. 2014-15

ld. AO has noted that income escaped is represented in the form of asset. The case of the assessee is squarely covered by the decision of the Hon'ble Delhi High Court in case of Ratnagiri Gas and Power
Private Limited (supra), wherein the Hon'ble Delhi High Court has observed and held as under: -
“25. Thus, the first and foremost question to be addressed is whether the conditions as specified under Section 149(1)(b) of the Act are satisfied. As is apparent from the plain language of the said clause that, essentially, three conditions are required to be satisfied. First, that theAssessing Officer has in his possession books of account or other documents or evidence, which reveal that the income chargeable to tax has escaped assessment. Second, that the said evidence is to the effect that the income chargeable to tax that has escaped assessment is represented in the form of an asset.
And third, that the amount of income that has escaped assessment is or is likely to amount to 250 lakhs or more.
26. Explanation to Section 149(1) of the Act further explains that for the purposes of Clause (b) of Sub-section (1) of Section 149 of the Act, the expression 'asset' would include immovable property, being land or building or both, shares and securities, loans and advances and deposits in bank.
27. If we now examine the reasons for re-opening of the assessment as set out in the order passed under Section 148A(d) of the Act, we find that there is no evidence to support that the income, which has allegedly escaped assessment is represented in the form of an asset.”
08. Consequently, following the order of the Hon'ble Delhi High Court, we quash the reopening of assessment as made by the ld. AO.
09. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 30.07.2025. (PRADIP KUMAR CHOUBEY)
(RAJESH KUMAR)
(JUDICIAL MEMBER)
(ACCOUNTANT MEMBER)

Kolkata, Dated: 30.07.2025
Sudip Sarkar, Sr.PS
Kush Trading & Commerce Pvt. ltd; A.Y. 2014-15

Copy of the Order forwarded to:
1. The Appellant
2. The Respondent
3. CIT
4. DR, ITAT,
5. Guard file.
BY ORDER,//

Sr. Private Secretary/ Asst.