LAKSHMI DEALMARK PVT. LTD.,KOLKATA vs. I.T.O., WARD - 11(1), KOLKATA

Appearances by: Assessee represented by : Abhishek Bansal, AR Department represented by : Amuldeep Kaur, Addl. CIT, Sr. DR Date of concluding the hearing : 30.04.2025 Date of pronouncing the order : 14.05.2025 O R D E R

PER SANJAY AWASTHI, ACCOUNTANT MEMBER

1.1 In this case, the assessee filed its return of income (ROI) for AY 2014- 15 on 31.03.2015, declaring a loss of Rs. 39,909/-. Subsequently, information was received by the Ld. AO from the investigation wing of income tax regarding the assessee receiving funds from several alleged shell companies. Thereafter, the Ld. AO initiated proceedings u/s 147 of the Act by issuance of notice u/s 148 of the Act dated 30.03.2021. Thereafter, the Lakshmi Dealmark Pvt. Ltd. Ld. AO made an addition of Rs. 56,00,000/- u/s 68 of the Act. The assessee was aggrieved, not only with the addition of impugned amount but also with the assumption of jurisdiction by the Ld. AO as it was allegedly violative in terms of the mandate u/s 147 of the Act.

1.1 The assessee carried this matter before the Ld. CIT(A), where he not only challenged the impugned addition but also challenged the reopening of the case on several grounds. In this regard, the Ld. CIT(A) is seen to have dispose of the objections regarding the reassessment proceedings as under:

“1. AO has received an information from DDIT(Inv), Kolkata, that appellant is involved as a beneficiary for AY 2014-15 in layering of various transactions of bogus/accommodation entries through shell/paper companies etc. which warrants for verification/reconciliation by AO as per law.

3. Appellant filed objection to 148 notice and same were duly disposed by AO vide his speaking order dated 11.03.2022. Further, even during the re-assessment proceedings, instead of filing information as called for, appellant kept on seeking for more material evidences and related details resulting in 148 notice of AO. For this also AO reasoned by giving a detailed show cause notice dated 25.03.2022, by adducing full material details / facts of DDIT (inv) as duly brought out of these facts as extracted as at pages (2) to (17) of the assessment order. Even for this show cause also, appellant merely re-iterated the earlier submissions and contended that these receipts of 28 lakhs as received from two parties of debtors/receivables and contends the same as warrants for no disallowance and adduced the same as not to be treated as money received by layering from shell companies etc. On examination of appellant reply, AO assessed the entire 56 lakhs as unexplained income as appearing against appellant as beneficiary as per the information available to AO as extracted as at page (14) of assessment order. Hence, on perusal of such facts of case/ assessment of AO in the assessment order against appellant during re-assessment order proceedings, it is clear that AO has not only used the material report of DDIT (Inv) and has also conducted his own enquiry u/s. 133(6) of I. T Act as per law. Thereafter, arrived at reasonable reasoning to adduce the correctness of report of DDIT (inv) thereby resulting in proper issue of 148 notice as per law. Even after this, appellant has filed objections and same were duly disposed by speaking order dated 11.03.2022 of AO as at page (2) of assessment order. Further, even the material base involving DDIT (inv), Kolkata, report is also put across to the appellant by a detailed show cause notice dated 23.03.2022 for which also appellant did not explain the transaction in its full spirit, except claiming the transactions as debtors receivable as received and merely attributed these debtors to sale of investments.”

1.2 Aggrieved with the action of Ld. CIT(A), the assessee has approached the ITAT with the following grounds:

“1. For that the assessment order passed by the Ld. AO is bad in law as well as on facts.

2. For that the reassessment proceedings have been initiated merely on the basis of information received and without any independent application of mind and there was no live link or intelligible nexus between the information received and belief formed.

3. For that even otherwise, the reasons recorded by the Ld. AO are vague based upon which no reasonable belief can be formed to initiate proceedings u/s 147.

4. For that the Ld. AO erred in not providing the Assessee copies of approval obtained and standard proforma used for obtaining such approval implying that reassessment proceedings were initiated either without approval u/s 151 of the Act or the approval was granted mechanically.

on or before hearing of the appeal.”

2. Before us, the Ld. AR vehemently argued regarding the alleged illegal assumption of jurisdiction through initiation of proceedings u/s 147 of the Act in an illegal manner. The Ld. AR also relied on a paper book running to 136 pages. The Ld. AR pointed out that the Ld. AO did not give a comprehensive reply to the objections filed regarding the reopening of the case. In this regard, the Ld. AR drew our attention to pages 78 to 80 in which the assessee’s objections to the proceedings u/s 147 of the Act are seen to be recorded in detail. It was also pointed out that the Ld. AO did not share the details regarding the approvals obtained by the Ld. AO and Lakshmi Dealmark Pvt. Ltd. also did not share as to the manner in in which the competent authority had approved for issuance of notice u/s 148 of the Act. Regarding the addition itself it was stated that the information received was only to the tune of Rs. 28,00,000/-, on the basis of which the Ld. AO had made an addition of Rs. 56,00,000/-. It was also averred that the amounts in question were received from debtors and did not deserve to be treated u/s 68 of the Act. The Ld. AR also relied on a number of authorities to canvass the point that the Ld. AO could not have initiated such proceedings on the basis of “borrowed satisfaction” and to emphasise that the “reason to believe” were not in consonance with the extant law.

2.1 The Ld. DR, on the other hand, relied on the orders of authorities below and also stated that the Ld. AO has recorded in page 14 of his order that the information was received from a credible source and after due verification the impugned addition was made. In fact, it was pointed out by the Ld. DR that it is recorded on page 16 of the Ld. AO’s order that the assessee did not produce any evidence regarding the impugned transactions and hence the impugned addition was made. The Ld. DR also pointed out that there is a detailed discussion in Ld. CIT(A) order on pages 5 and 6 (impugned order) as to why the assumption of jurisdiction by the Ld. AO was justified.

Lakshmi Dealmark Pvt. Ltd. Thus, in light of the discussion here, we deem it fit to set aside the impugned order and remand the issue back to the file of Ld. AO for afresh assessment after sharing the details of approvals obtained prior to issuance of notice u/s 148 of the Act, as has been objected to by the assessee through Ground No. 4 before us. The Ld. AO would also address any other objections that the assessee may have regarding the assumption of jurisdiction and would also give the assessee an opportunity to present the facts regarding the impugned addition. Needless to say, the assessee would do well to cooperate with the Ld. AO to enable a correct determination of his income.