KAILASH REGENCY PVT. LTD.,KOLKATA vs. I.T.O., WARD - 12(3), KOLKATA

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ITA 2514/KOL/2024Status: DisposedITAT Kolkata21 April 2025AY 2009-20103 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reasons recorded by the Assessing Officer for reopening the assessment under Section 147 were cryptic and vague. The AO had merely reproduced information received from the investigation wing regarding client code modification and concluded that income had escaped assessment without providing any details of the transactions entered into by the assessee. The Tribunal found a total non-application of mind on the part of the AO to the information received. Therefore, the reopening of assessment based on such cryptic and vague reasons could not be sustained. Consequently, the Tribunal quashed the reopening of assessment under Section 147 and the order framed under Section 143(3) of the Act dated 09.08.2016. The ratio decidendi is that reopening of assessment requires detailed application of mind by the AO to the information received, not mere reproduction of external information.

What were the facts?

The assessee, Kailash Regency Pvt. Ltd., filed its original return of income for Assessment Year 2009-10 showing total income at ₹nil. The Assessing Officer (AO) reopened the assessment under Section 147 of the Income Tax Act, 1961, based on information from the investigation wing, Ahmedabad, regarding client code modification (CCM) where the assessee had allegedly taken losses and shifted out profits. The AO recorded reasons to believe that income of ₹8,45,730/- had escaped assessment. After issuing statutory notices and receiving a reply, the AO made an addition of ₹11,76,345/- by rejecting the loss in future and option. The assessee's appeal to the National Faceless Appeal Centre (NFAC), Delhi, was dismissed. The assessee is now appealing the NFAC's order dated 06.11.2024.

What were the issues?

1. Whether the reopening of assessment under Section 147 of the Income Tax Act, 1961, is valid, considering the alleged violation of the Act's provisions? Assessee's contention: The assessee argued that the reopening was against the provisions of the Act and that the legal issue raised by them was not decided by the Ld. CIT(A). Revenue's contention: The judgment does not record any specific contentions from the revenue regarding the validity of the reopening or the legal issue raised by the assessee. The revenue was represented by Ms. Madhumita Das, DR.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA

Before: SHRI 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 06.11.2024 for the AY 2009-10.

2.

The assessee has challenged in ground nos.1 and 2, the order of ld. CIT (A) in not deciding the legal issue raised by the assessee which is against the reopening of assessment u/s 147 of the Act in violation of provisions of the Act.

3.

The facts in brief are that the assessee filed the original return of income on 21.09.2009, showing total income at ₹nil. The case of the assessee was reopened u/s 147 of the Act on the basis of report / information made by the investigation wing, Ahmedabad, in respect of client code modification after recording the reasons to believe and obtaining the permission from the competent authority. The statutory

4.

In the appellate proceedings also, the appeal of the assessee was dismissed by the appellate authority.

5.

After hearing the rival contentions and perusing the materials available on record, I find that the reopening was made by the ld. AO after recording reasons to believe, copy of which is available at page no. 1 and is extracted below for the sake of ready reference:-

Name of the Assessee: M/s. Kailash Regency Pvt. Ltd. PAN: AACCK2122Q, Assessment Year: 2009-10 This office has received information vide letter F.No.Search-15-16/13/Misc. Correspondence(Inv.)/Pr.CIT-2/Kol/9095-96 dt.21.03.2016 from DCIT, Hqrs.-2, Kolkata. In the information it is stated that in connection to Survey Report in respect of Client Code Modification (CCM) some assessee have taken losses and shifted out profits. As per the disseminated information of beneficiary client who have taken losses and shifted out profits have been provided financial year wise. The aforementioned assessee company's name also appears. The net reduction in income due to CCM is Rs.(-) 8,45,730/-which has been booked by the assessee during the F.Y-2008-09. In view of the above I have reason to believe that income of Rs.8,45,730/- has escaped assessment hence, notice u/s 148 of the Income-tax Act, 1961 is being issued after obtaining necessary approval from Ld.Pr.CIT-2, Kolkata. Sd/- ITO Ward 4(4), Kol

6.

On perusal of the above reason it is observed that the ld. AO has merely reproduced in Para no.2, the information received from the investigation wing qua client code modification and in para 3, he concluded that he has reason to believe that the income has escaped assessment to the extent of ₹8,45,730/-. In our view the reasons are

7.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 21.04.2025.

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