ACIT, CIRCLLE-34, KOLKATA vs. SUBHAS KUMAR KEDIA, KOLKATA

Facts in brief are that the assessee filed his return of income for the Assessment Year 2016-17 on 27.09.2016 showing total income at Rs.65,42,380/- which was processed u/s. 143(1) on 30.04.2017. The AO had credible Information received as uploaded on insight portal by DDIT/ADIT(Inv), 6(3), Mumbai, regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal/expiry trades in illiquid stock options/derivatives resulting in non-genuine business loss/gains to the beneficiary assessees and that the present assessee is a beneficiary party to such manipulation. From the data made available under Project Falcon on the ITBA, the AO found that the assessee has booked fictitious profits in equity/derivative trading of Rs. 13,68,850/- which have been executed through the same broker, M/s V.G. CAPITAL MARKET PVT. LTD. on the Bombay Stock Exchange. Another 4 Information was received by the AO as uploaded on insight portal by DIT(I&CI), Kolkata, which showed that the assessee has purchased an immovable property for a sum of Rs.1,75,00,000/- during the financial year 2015-16 and the Dissemination Report stated that the assessee has not submitted reply to the notices in the matter issued by Directorate of Income tax(I &CI)), Jaipur. Based on the above information, a notice u/s 148 of the Act was issued on 31.03.2021, which was well within the extended period of limitation for issue of such notice as per CBDT Notifications issued on various dates. The notice was issued after following the due provisions of Sections 147 to 151 of the Act, as they existed prior to the amendments made in Finance Act, 2021. In response to the same the assessee filed ITR on 20-04-2021, declaring total income of Rs. 65,42,380/- as returned originally. It is pertinent to state that assessee had filed writ petition bearing WPA No.19951/2021 before the Hon'ble Calcutta High Court challenging the notice u/s 148 of the Act dated 31.03.2021, which was received by him on 01.04.2021 was predated but issued on 01.04.2021 when the new amended provisions of Finance Act, 2021 had come Into operation. The Hon'ble Calcutta High Court accepting the plea of the assessee and treating the notice u/s 148 of the Act dated 31.03.2021 to be issued on 01.04.2021 quashed the same. Thereafter following decision of the Hon'ble Supreme Court in a common Order under Civil Appeal No. 3005/2022 dated 04.05.2022, in the case of Union of India & Ors. Vs. Ashish Agarwal & many others, , the Hon’ble Court has put hold over all such disputes and issued fresh 5 directions in regards to all such notices, irrespective of whether specific assessee had disputed the validity of any notice or not. The Hon’ble Apex Court has examined all the issues raised in detail regarding validity of the issue of Notice u/s 148 of the Act, under the old provisions during the extended period of time between 01.04.2021 and 30.06.2021. The Hon'ble Supreme Court, found that the notice issued u/s.148 of the Act to the respective assesses which were issued under un-amended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A(b) of the Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b) of the Act. The Hon’ble Apex Court directed that the AO shall, within thirty days from that date provide to the respective assesses information and material relied upon by the Revenue, so that the assesses could reply to the show-cause notices within two weeks thereafter. It was further provided in the said decision that the requirement of conducting any enquiry, if required, with prior approval of specified authority under section 148A(a) of the Act is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under section 148 of the un-amended Act from 01.04.2021 till date. The Court further directed that the AO shall thereafter pass orders in terms of section 148A(d) of the Act in respect of each of the concerned assessees: Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted). It was also held that 6 all defenses which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available. Subsequently, the CBDT vide Instruction No. 1/2022, Dated: 11.05.2022, instructed to issue such information and material in the eligible cases, as described therein. Accordingly, the information was provided to the assessee by the AO and assessee was directed to file response with satisfactory documents electronically through e-filing portal within two weeks time from the date of communication. The assessee replied the notice on 14.06.2022. Subsequently, an Order u/s 148A(d) of the Act was passed on 30-07-2022, and notice u/s 148 was issued on 05-08-2022, and the same was regularized by issue of Intimation dated 05-08-2022. In response to the notice u/s 148 dated 05-08-2022, the assessee filed ITR on 12-08-2022 by declaring total income of Rs.65,42,380/- as returned originally. Accordingly, notice u/s 143(2) of the Act was issued on 04-02-2023, as per guidelines. Finally after taking into account the contentions and submissions of the assessee and also the supporting evidences, the AO framed the assessment u/s.147 r.w.s.144B of the Act vide order dated 30.05.2023 by making two additions, (i) Rs.13,68,850/- u/s.68 of the Act being the bogus profit in equity/derivatives trading and Rs.75,60,00,000/- u/s.69 of the Act on the ground that the assessee has taken Rs.75,60,00,000/- as loan through accommodation entries in cash from different entities/persons shown in para 4.2.6.4 of the assessment 7 order. The AO made the said addition on the basis of finding of DDIT(Investigation) that total accommodation entries of loans by the assessee from different persons given in above para worked out to 98,96,00,000/- and after receiving loans shown by the assessee in return of income, the remaining amount was added. 3. In the appellate proceedings, the ld. CIT(A) allowed the appeal of the assessee on legal issue as well as on merit by observing and holding as under :- 5. Decision:

1 The ground of appeal 1 is general in nature hence is not being commented upon.

2 The appellant in his grounds of appeal 2 has challenged the juri iction of the notice u/s 148 issued by the AO.

2.1 The appellant has stated in his submission that the order passed by the AO u/s 148A (d) was passed after taking approval/sanction of the PCIT-5, Kolkata but as per section 151 (ii), the approval was to be taken from PCCIT. Therefore the order passed u/s 148A (d) and notice issued u/s 148 is invalid. The appellant has based his submission on the basis that the reopening has been done for A.Y. 2016-17 through notice u/s 148A(b) issued on 2.6.2022 and order u/s 148A(d) passed on 30.7.2022 which is after an expiry of five years and thus the approval of Pr.CCIT was required in this case. The appellant has relied on the following case laws of the Juri ictional Hon'ble Kolkata High Court in the cases of Fabulous Travel Services Pvt. Ltd. vs. ITO Ward 13(1) & others WPO/1037/2023 and K.K. Aggarwal and Sons HUF vs. ITO- Ward 30(1), Kolkata & others WPA 25770 of 2022. The Hon'ble Kolkata High Court in the case of Fabulous Travel Services Pvt. Ltd. in WPO/1037/2023 has held as under:

Since the issue is common to the above-captioned writ petitions, the broad facts concerning one of the matters le., titled Rajesh Gupta HUF v Asstt. CIT (WP (C) No. 7289 of 2023] are noted hereafter.

1 The petitioner/Hindu Undivided Family (HUF) filed its return of income (ROI) qua AY 2017-18 on 9-6-2017 declaring an income of Rs. 66,88,500/-, The ROI was processed by the revenue and an 9 intimation was issued to the petitioner/HUF under section 143(1) of the Act on 21-11-2017. 3.2 In the aftermath of the judgment in Union of India v Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC)/ [2023] 1 SCC 617, the revenue issued a notice dated 26-5- 2022 under section 148A (b) of the Act to the petitioner.

3 The petitioner filed a reply dated 14-6-2022 qua the said notice.

4 Thereafter, the revenue passed an order under section 148A (d) of the Act dated 29-7-2022 holding that income amounting to Rs. 4,37,56,000/-had escaped assessment. A consequential notice of even date i.e., 29-7-2022 was also issued to the petitioner under section 148 of the Act.

5 A perusal of the order under section 148A (d) and the notice under section 148 would show that they have been passed/issued after obtaining the prior approval of the Principal Commissioner of Income Tax-10, Delhi.

6 The petitioner approached the court via the aforementioned writ petition on 18-5-2023, inter alia, raising the issue with regard the approval of the specified authority being absent.

7 The petition came up for hearing before a coordinate bench [which included one of us i.e., Rajiv Shakdher J.] on 25-5-2023 and it was directed that there shall be a stay on the continuation of reassessment proceedings.

8 Thereafter, the petition was listed with the above-captioned batch of petitions on several dates and arguments were heard on behalf of the assessees and the revenue.

Counsel for the parties state that the reassessment proceedings were triggered by an authority not specified, as per the provisions of Section 151 (ii) of the Income-tax Act, 1961 [in short, "Act"].

1 in defence of the writ petitions, the revenue, inter alia, has relied upon Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [in short, "TOLA" and paragraphs 6.1 and 6.2(ii) of the Instruction No. 1 of 2022 dated 11-5-2022 issued by the Central Board of Direct Taxes (in short, "CBDT"].

In Ganesh Dass Khanna v. ITO [2023] 156 taxmann.com 417/2023: DHC: 8187-DB. we have ruled in favour of the assessees and against the revenue insofar as the issue concerning limitation was concerned.

1 Insofar as the batch which was considered in the aforementioned judgment, the alleged escaped income was less than Rs. 50,00,000/-. As far as the current batch of writ petitions is 10 concerned, concededly, the escaped income is more than Rs. 50,00,000/-

A faint argument is made on behalf of the revenue that the approval of the specified authority is not mandatory, which, in our opinion, is in the teeth of the provisions of the Act. In this behalf, the old Section 151 and the amended version of the provision (after Finance Act 2021) are made reference to.

1 For the sake of convenience, the provisions of Sections 148, 149 and 151, before and after amendment are extracted hereafter.

(1) No notice under section 148 shall be issued for the relevant assessment year,-

(1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.

(1) No notice under section 148 shall be issued for the relevant assessment year-

Specified authority for the purposes of section 148 and section 148A shall be,- (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

A careful perusal of the above extract would show that after amendment, section 151 has been split and the part which enjoins that the approval of the specified authonty is mandatory stands embedded 148. COME TAX DEPARTMER the first proviso to Section 13

1 The concerned specified authorities, charges, depending on the applicable timeframe, are adverted to in section 151 of the Act.

The first proviso to section 148 and section 151, when read conjointly, demonstrate the untenability of the submission made on behalf of the revenue.

We may also note that in Ganesh Dass Khanna's case (supra), we were considering the provision of Section 149 of the Act and have taken the view that since the escaped income was less than Rs. 50,00,000/-, the time limit as prescribed in section 149(1)(a) of the Act would apply.

As indicated above, the specified authority changes depending on the time Simit prescribed in Section 151 of the Act. It is on this account that there is linkage between ruling rendered in Ganesh Dass Khanna's case (supra) and the instant matters

It may also be noted that in Ganesh Dass Khanna's case (supra), we had recorded the stand of the revenue that the issue concerning limitation and the specified authority are "intertwined". For convenience, the relevant part of the judgement is extracted hereafter:

Clearly, the revenue advanced the argument of interlinkage between limitation and the ascertainment of the specified authority due to the plain language of the amended section 151 of the Act. Section 151, when read alongside the first proviso to section 148, brings the aspect of inextricable linkage to the fore.

1 Clauses (1) and (ii) of Section 151 of the amended Act (which has been extracted hereinabove) clearly specify the authority whose approval can trigger the reassessment proceedings. Thus, if three (3) years or less have elapsed from the end of the relevant AY, the specified authority who would grant approval for initiation of reassessment proceedings will be the Principal Commissioner or 14 Principal Director or Commissioner or Director. However, if more than three (3) years from the end of the relevant AY have elapsed, the specified authority for according approval for reassessment shall be the Principal Chief Commissioner or Principal Director General or, where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General.

2 That the approval is mandatory is plainly evident on perusal of the first proviso appended to Section 148 of the Act. the said proviso, at the risk of repetition, reads as follows:

3 In these cases, there is no dispute that although three (3) years had elapsed from of the end of the relevant AY, the approval was sought from authorities specified in clause (i), as against clause (ii) of section 151. 12.4 Before us, the counsel for the revenue continues to hold this position. The only liberty that they seek is that if, based on the judgement in Ganesh Dass Khanna's case (supra), the impugned orders and notices are set aside, liberty be given to the revenue to commence reassessment proceedings afresh.

Therefore, having regard to the aforesaid, the impugned notices and orders in each of the above-captioned writ petitions are quashed on the ground that there is no approval of the specified authority, as indicated in Section 151(ii) of the Act. The direction is issued with the caveat that the revenue will have liberty to take steps, if deemed necessary, albeit as per law.

Needless to add, the rights and contentions of both the sides will remain open, in the event the revenue triggers reassessment proceedings.

The above-captioned writ petitions are disposed of, in the aforesaid terms.

2.4 The appellant has also challenged the assessment order on the ground that before passing the assessment order a draft assessment order was required to be passed by the AD who passed the order after issuing a show cause notice. The appellant has relied on the judgment of the Juri ictional Hon'ble Kolkata High Court in the case of ITO. Ward 44(2)- Kolkata vs. Debajyoti Bhattacharya, MAT 2095 of 2023 with I.A. No. CAN 1 of 2023 with I.A. No. CAN 2 of 2023. 6.2.5 I have considered the order u/s 148A (d) & assessment order passed by the AO and the submissions made by the appellant. On perusal of the order u/s 148A (d) dated 30.7.2022 passed by the AO it is seen that the same has been passed with the approval of Pr. CIT-5 Kolkata. I have gone through the submissions of the appellant and after the perusal of the same and respectfully following the judgment of the juri ictional High Court of Kolkata and the other Hon'ble Courts as cited above it is held that the AO was required to take the approval of the PCCIT before issuing the order u/s 148A (d) and notice u/s 148. In view of the same the order passed by the AO u/s 148A (d) and all the subsequent proceedings are quashed. The ground of appeal 2 is allowed.

2.6 As the assessment has been set aside on the basis that the order u/s 148A (d) has not been passed with the approval of the competent authority as prescribed by the law, the issues raised by the appellant concerning the non-issuance of notice u/s 148 by the NAFAC and the non-passing of the draft assessment order by the AO are not being commented upon.

3 Although the assessment order of the AO has been quashed as discussed above the appeal is being decided on merits also.

4 The appellant in his grounds of appeal 3 to 7 has assailed the AO for making an addition of Rs. 13,68,850/- u/s 68. As all the grounds of appeal are related they are being adjudicated together for the sake of convenience and to avoid repetition.

4.1 The AO during the course of the assessment proc proceedings made an addition of Rs. 13,68,850/- being the fictitious 16 profit earned by the appellant through the broker M/s V.G. Capital Market Pvt. Ltd. The AO based his addition on the ground that the findings have been made by DDIT (Inv.) under Project Falcon and established beyond doubt that the transactions made by the appellant with M/s V.G. Capital Market Ltd. are sham transactions. The AO held that merely fumishing of contract notes, demat account, bank account does not make the transactions genuine.

4.2 The appellant in his submission has stated that he had entered into transactions in shares via VG Capital Market P Ltd. which resulted in profit of Rs. 16,64,106/- and not Rs. 13,68,850/- as alleged. He stated that he had paid tax at maximum marginal rate 1.e.30% plus surcharge on Rs. 16,64,106/- and the transactions of Rs. 13,68,850/- are already included in transaction of Rs. 16,64,106/-. The appellant has also given the details of the transactions entered into by him and also correlated the transactions with the information which is the basis of the addition made by the AO. The appellant has elaborated that out of the 14 transactions carried out by him through VG Capital Market Pvt. Ltd. the department had information about transactions from sr. no. 1 to 9 of his table only but had no information about five transactions mentioned in sr. no. 10 to 14 of the chart submitted by him. The appellant has pleaded that Rs. 13,68,850/- had already been offered to tax by him the same amount can be taxed again. The appellant has relied on a catena of judgments in support of his contention.

4.3 I have considered the submission of the appellant and the assessment order passed by the AO. After the perusal of the same i agree with the contention of the appellant that no income can be taxed twice. In view of the same the AO is directed to verify the contention of the appellant by comparing the chart submitted by the appellant with the information available with the him and if the amount of Rs. 13,68,850/- has already been offered to tax by the appellant in his return of income to delete the addition of Rs. 13,68,850/- made by the AO. The grounds of appeal 3 to 7 are allowed for statistical purpose.

5 The appellant in his grounds of appeal 8 to 15 has assailed the AO for making an addition of Rs. 75,60,00,000/- by incorrectly invoking section 69A, without providing an opportunity of being heard before proposing variation, adding the loan transaction as income, not providing the complete report of DDIT (Inv.), not providing the details of alleged transactions, without providing an opportunity of cross examination and adding the entire sum on conjectures without the name of the appellant appearing in the allegation documents

5.1 The AO during the course of the assessment proceedings made an addition of Rs. 75,60,00,000/-as he held that the appellant was beneficiary of the unaccounted cash loan transactions carried out through finance brokers Sanwaria & Kasera. The addition of the 17 AO was based on the information forwarded to him by DDIT (Inv.), Unit 2(4), Kolkata dated 18.11.2022. The AO had issued SCN dated 19.5.2023 based on the information received from DDIT. The appellant submitted his reply to the same but the same was not accepted by the AO who completed the assessment proceeding by making an addition of Rs. 75,60,00,000/- u/s 69A of the Income Tax Act.

5.2 The appellant in his submission during the appellate proceedings has raised the following contentions in respect of the addition of Rs. 75,60,00,000/- made by the AO

The AO has issued the showcause with proposed variation without providing any opportunity of explaining the same. The appellant has submitted that during the assessment proceedings no notice u/s 142(1) regarding the addition of Rs. 75,60,00,000/- was asked but the issue was directly raised in the show cause notice issued

The appellant was given less than a day's time to respond to the proposed variation of Rs. 75.60 cr. The appellant has stated that SCN proposing the said variation has been signed on 19.5.2023 at 22.41 hrs and with no working day in between the response was sought on 22.5.2023 by 16.30 hrs. The appellant has also cited a number of cases in support of its contention

The appellant has further stated that the AO has made the addition on the basis of the probable suspicious transactions without any definite finding and the suspicious transactions do not contain the name of the appellant. The appellant has submitted that in the information received expressions used are potential lender or borrower status, probable unique names. As per the appellant on perusal of the said information it is apparent that the allegation is not based on any fact whatsoever but is merely "Potential", "Probable", and "Possible" and the allegation is about a mere possibility-probability-potentiality from which no person could bonafide and in law infer or form any opinion that the appellant had borrowed any or alleged sum of Rs. 75.60 cr from any unknown/undisclosed person in the relevant year, as alleged or at all. The Appellant has relied on the decision of the Division bench of the juri ictional Hon'ble Kolkata High Court in the case of Girdhar Gopal Dalmia vs. UOI & Others (2023) 150 taxmann.com 54 (Calcutta) wherein the Hon'ble High Court in the case emanating from the same report, which is the basis of the addition of Rs. 75.60 cr in the case of the appellant, has held that the reopening of the assessment was bad as it was based on certain alleged 'potential cash borrowings and certain alleged 'possible' financial transactions. The relevant portion of the Han ble Kolkata High Court order is as below:

If the assessing office fails to obey the directions issued by the Court, stringent action should be taken and it is not clear as to 18 whether the Principal Commissioner of Income-tax is aware that in his field formations, such officers are functioning. These are all sufficient grounds to quash the order dated 25th August, 2022. But, however, this being a second round of litigation, we are constrained to go a step further to consider as to whether there was any justification for reopening the assessment. Reopening of the assessment is alleged to have been based upon Information given by the Deputy Director of Income Tax (Inv.) Unit-2(4), Kolkata dated 21st January, 2022. In paragraph 4 of the said report, it has been stated as follows:-

Name : GIRDHAR GOPAL DALMIA/DALMIA LAMINATORS LTD.

From the above information, it is not clear as to how reopening of the assessment could have been resorted to. The report is as vague as possible as it states that possible financial transactions could be deduced and decoded from hard copies obtained from DDIT. Further, it says there is potential cash borrowed from various lenders and the probable names of the group have been mentioned and set out without any particulars. Assuming that material was available as annexures to the said report of the DDIT, such documents should have been made known to the assessee so as to enable them to give an effective reply.

As could be seen from the communication dated 21st January, 2022 referred above, in more than one place the authority has used the word "potential" and also the word "probable". The Hon'ble Supreme Court in Lucknow Development Authority v. M.K. Gupta 19 A.I.R. 1994 SC 787 considered the meaning of the word "potential". It was pointed out that the word "potential" has been defined in the Oxford Dictionary as "capable of coming into being, possibility. In Black's Law Dictionary, it is defined as "extending any possibility but not in Act". It was further pointed out that the said word would mean to be naturally and probably expected to come into existence at some future time, though not now existing. "Possibility" has been defined in "WHARTON" to mean expectation, an uncertain thing which may or may not happen. Under the provisions of the Income- tax Act, tax is levied on the actual income of the previous year and the facts must be taken as they existed during the previous year. It is relevant to take note of the decision of the Hon'ble Supreme Court in Sir Kikabhai Premchand v. CIT (1953) 24 ITR 506 (SC) page 506 wherein it was held that the State has no power to tax the potential future advantage and all it can tax is income, profits and gains made in the relevant accounting year. This decision if applied to the facts and circumstances of the case on hand, the only conclusion that can be arrived at is to hold that the reopening of the assessment was bad as it was based on certain alleged "potential" cash borrowings and certain alleged "possible" financial transactions. That apart, the assessing officer did not independently apply its mind to the information furnished by the DDIT which he is required to do while exercising the power to reopen an assessment.

5.3 I have considered the assessment order of the AO and the submission made by the appellant. After the perusal of the submission of the appellant and respectfully following the decision of the juri ictional Division bench of the Hon'ble High Court of Kolkata in which the Hon'ble High Court has set aside the reopening of an assessment based on the same report of the DDIT which is the basis of the addition made in the case of the appellant the addition of Rs.75,60,00,000/- is set aside. The grounds of appeal 8 to 15 are allowed.

6 The grounds of appeal 16 and 17 are general in nature hence are not being commented upon.

7 The appellant vide his prayer dated 31.1.2024 had pleaded for admission of additional grounds of appeal 18 and 19. In the interest of natural justice the same was forwarded to the AO for his comments vide this office letters dated 24.4.2024, 14.5.2024 and 22.5.2024. However no reply has been received from the AO. It is also seen that the appellant has also not pressed for these grounds of appeal. In view of the same the grounds of appeal 18 and 19 are not being adjudicated upon. 20 7. The appeal is allowed.

Ld. CIT-DR strongly relied on the order of AO and submitted that the case of the assessee has been reopened after following the decision of the Hon’ble Apex Court in the case of Ashish Agrawal (Civil Appeal No.3005/2022) dated 04.05.2022 though legal position was subsequently changed by the subsequent decision of the Hon’ble Apex Court in the case of Rajeev Bansal (Civil Appeal No.8629 of 2024, reported in 167 taxmann.com 70 (SC), which has been predominantly relied upon by the CIT(A) while allowing the appeal of the assessee on legal issue as well as by the AR of the assessee in defense of his arguments. Ld. CIT-DR, therefore, prayed that the order passed by the AO was in accordance with the provisions of law as interpreted by the Hon’ble Supreme Court in the case of Ashish Agrawal(supra) and accordingly the same may kindly be restored by setting aside the order of the ld. CIT(A). 5. On the other hand, ld. counsel for the assessee vehemently submitted before us while supporting the order passed by the ld. CIT(A) a that the order passed by the ld. CIT(A) is very reasoned and speaking order which is passed in consonance with the provisions of the Act. Ld. AR submitted that the notice u/s.148 of the old regime was issued on 01.04.2021, which was quashed by the Hon’ble Kolkata High Court in a writ petition filed by the assessee. Ld. AR submitted that the department applying the Apex Court decision in the case of Ashish Agrawal treated the notice u/s.148 of the Act as deemed notice u/s.148A(b) of the Act and provided the reasons for reopening on 02.06.2022. It was further 21 submitted by the ld. AR that in view of the decision of Rajeev Bansal (SC)(Supra), it is settled that TOLA didn't apply to AY 2016-17 where the escaped income was more than Rs. 50 lakh. Since after 1.4.2021, the time limit for cases where escaped Income was more than Rs. 50 lakh was 31.3.2023 (as applicable in the present facts), the department conceded before the Apex Court in Rajeev Bansal case that TOLA is not applicable for AY 2016-17 where the escaped income was more than Rs 50 lakh since the 6 year period had not expired during TOLA period. In Para 19 of the SC decision, the revenue has conceded that TOLA shall not apply to cases where the six year time limit was not falling between 20.3.2020 to 31.3.2021. It was also submitted by the ld. AR that in the present case, since TOLA was not applicable to AY 2016-17 as escaped income was more than Rs. 50 lakh, the department could not have deemed the notice under sec 148 as notice under sec 148A(b). Thus, the proceedings in consequence thereto viz order under sec 148A(d), notice under sec 148 and order under sec 147 were invalid and beyond juri iction. Ld. AR has filed his written submissions which read as under :- Notice under sec 148 of the old regime was issued on 1.4.2021 and thus Calcutta HC in a writ petition by the assessee quashed the notice. Later, the department applying the Apex Court decision of Ashish Agarwal deemed the notice under sec 148 as deemed notice under sec 148A(b) and provided the reasons for reopening on 2.6.2022. However, in view of the decision of Rajeev Bansal (SC), it is settled that TOLA didn't apply to AY 2016-17 where the escaped Income was more than Rs. 50 lakh. Since after 1.4.2021, the time limit for cases where escaped Income was more than Rs. 50 lakh was 31.3.2023 (as applicable in the present facts), the department conceded before the Apex Court in Rajeev Bansal case that TOLA is not applicable for AY 2016-17 where the escaped income was more than Rs 50 lakh since the 6 year period had not 22 expired. In Para 19 of the SC decision, the revenue has conceded that TOLA shall not apply to cases where the six year time limit was not falling between 20.3.2020 to 31.3.2021. Thus in the present case, since TOLA was not applicable to AY 2016-17 as escaped income was more than Rs. 50 lakh, the department could not have deemed the notice under sec 148 as notice under sec 148A(b). Thus, the proceedings in consequence thereto viz order under sec 148A(d), notice under sec 148 and order under sec 147 are invalid and beyond juri iction.

This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned. Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under section 148-A." Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148, These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.

......Though the Explanation 3 inserted by the amendment empowers the assessing officer to assess the income in respect of any issue which has escaped assessment when such issue comes to his notice subsequently in the course of the proceedings under section 147 notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section 2 of section 148, the prerequisite is there should be a valid notice. Admittedly, in the case on hand, the natice was held to be not sustainable. If that be so, the assessing officer cannot be stated to be empowered to make a roving enquiry into other issues which according to him came to his notice during the reassessment proceedings. The foundation of a reassessment proceeding is a valid notice and if this notice is held to be invalid the entire edifice sought to be raised on such foundation has to collapse.

If the assessing office fails to obey the directions issued by the Court, stringent action should be taken and it is not clear as to whether the Principal Commissioner of Income-tax is aware that in his field formations, such officers are functioning. These are all sufficient grounds to quash the order dated 25th August, 2022. But, however, this being a second round of litigation, we are constrained to go a step further to consider as to whether there was any justification for reopening the assessment. Reopening of the assessment is alleged to have been based upon an information given by the Deputy Director of Income Tax (Inv.) Unit-2(4), Kolkata dated 21st January, 2022. In paragraph 4 of the said report, it has been stated as follows:-

Name: GIRDHARGOPALDALMIA/DALMIA LAMINATORS LTD

As could be seen from the communication dated 21st January, 2022 referred above, in more than one place the authority has used the word "potential" and also the word "probable". The Hon'ble Supreme Court in Lucknow development Authority Versus M.K. Gupta A.I.R. 1994 SC 787 considered the meaning of the word "potential". It was pointed out that the word "potential" has been defined in the Oxford Dictionary as "capable of coming into being, possibility. In Black's Law Dictionary, it is defined as "extending any possibility but not in Act". It was further pointed out that the said word would mean to be naturally and probably expected to come into existence at some future time, though not now existing. "Possibility" has been defined in "WHARTON" to mean expectation, an uncertain thing which may or may not happen. Under the provisions of the Income Tax Act, tax is levied on the actual income of the previous year and the facts must be taken as they existed during the previous year. It is relevant to take note of the decision of 26 the Hon'ble Supreme Court in Sir Kikabhal Prenchand Versus Commissioner of Income Tax (Central) Bambay, (1953) 24 ITR 506 (SC) page 506 wherein it was held that the State has no power to tax the potential future advantage and all it can tax is income, profits and gains made in the relevant accounting year. This decision if applied to the facts and circumstances of the case on hand, the only conclusion that can be arrived at is to hold that the reopening of the assessment was bad as it was based on certain alleged "potential" cash borrowings and certain alleged "possible" financial transactions. That apart, the assessing officer did not independently apply its mind to the information furnished by the DDIT which he is required to do while exercising the power to reopen an assessment.

Despite direction issued earlier, only copies of two statements have been given. The appellant has submitted his reply taking note of the veracity of the allegations in those documents, which were supplied. Therefore, the reopening proceedings could not have been done based on assumptions and presumptions as could be seen from the above material.

Therefore, we are of the considered view that the entire reopening proceedings commencing from issuance of the notice under section 148A(b) and culminating in the order under section 148A(d) of the Act dated 25th August, 2022 is a clear abuse of the process of law.

For the above reasons, the appeal along with the connected application are allowed and the order passed in the writ petition is set aside and consequently, the entire reopening proceedings commencing from issuance of the notice under section 148A(b) and culminating in the order under section 148A(d) of the Act dated 25th August, 2022 are quashed."

After hearing the rival contentions of the parties and perusing the material available on record, we find that during the course of hearing before the Hon’ble Apex Court in the case of Rajeev Bansal (supra), admittedly, it is settled that TOLA didn't apply to AY 2016-17 where the escaped Income was more than Rs. 50 lakh. Since after 1.4.2021, the time limit for re-opening the cases where escaped Income was more than Rs. 50 lakh was 31.3.2023, the department conceded before the Apex Court in Rajeev Bansal case that TOLA is not applicable for AY 2016-17 where the escaped income was more than Rs 50 lakh since the 6 year period had not expired during TOLA period. In Para 19 of the SC decision, the revenue has conceded that TOLA shall not apply to cases where the 28 six year time limit was not falling between 20.3.2020 to 31.3.2021. Thus in the present case, since TOLA was not applicable to AY 2016-17 as escaped income was more than Rs. 50 lakh, therefore the department could not have deemed the notice under sec 148 as notice under sec 148A(b). Thus, the proceedings in consequence thereto viz order under sec 148A(d), notice under sec 148 and order under sec 147 are invalid and beyond juri iction. We note that after 01.04.2021 the time limit for the re-opening the cases where the proposed addition was more than Rs. 50 lakh was 31.03.2023 and this was considered before the Hon’ble Apex Court wherein it has been held that TOLA is not applicable for A.Y.2016- 2017 where the escapement of income is more than 50 lakhs since the period has not been expired. 7. Further we note that while passing the order u/s.148A(b) of the Act, the AO has not taken the approval in consonance of provisions of Section 151 of the Act. The AO has passed order u/s.148 of the Act and issued notice u/s.148 of the Act after taking approval from PCIT-5, Kolkata whereas in terms of new law operative from 01.04.2021, approval was required to be taken from PCCIT/CCIT. Even on this ground, the order passed u/s.148A(b) of the Act and notice issued u/s.148 of the Act are invalid. This issue has been settled by the hon’ble Supreme Court in the case of Rajeev Bansal (supra) wherein the Hon’ble Apex Court, after taking cognizance of the issue vis-à-vis the decision of Ashish Agarwal and CBDT Instruction 1 of 2022 has, clarified on the issue of sanction as under :- 29 81. This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned. Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under section 148-A." Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148, These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.

We also note that the decision of the Hon’ble Apex Court has been further followed by the coordinate benches of the Tribunal in the cases of Manish Financial, passed in ITA No.5055&5050/Mum/2024, dated 02.12.2024 and Surya Ferrous Alloys Pvt. Ltd., 169 taxmann.com 736 (Mum), wherein it has been held that since the notice u/s.148 of the Act was issued beyond three years, the approval should have been obtained from the Pr Chief Commissioner of Income Tax. The coordinate benches have held that the notice issued taking approval from PCIT is invalid. We further note that the hon’ble Kolkata High Court has expressed similar views in the cases of Fabulous Travel Services Private Limited v ITO Ward 13(1) & Ors. WPO/1037/2023, K K Agarwal and Sons HUF v ITO, Wd 30(1) Kolkata & Ors., WPA 25770 of 2022. 9. We further note that the reasons mentioned in the order passed u/s.148A(d) of the Act, for issuing notice under sec 148 dated 5.8.2022 does not survive after the CIT(A) order as the addition was deleted by ld CIT(A). Therefore the addition on other issues not forming part of order 30 u/s 148A(d) cannot be made by the AO. We note that notice u/s.148 of the Act was issued on 05.08.2022 on two counts namely one the income from derivative trading of Rs. 13,68,850 and another reason being purchase of immovable property of Rs. 1.75 crore. We note that while framing the assessment the AO did not make any addition in respect of second reason i.e. purchase of immovable property of Rs.1.75 crores whereas the addition was made in respect of bogus profit from derivative transactions on account of pre-mediated trading on the Bombay Stock Exchange by engaging in reversal/expiry trades in illiquid stock options/derivatives, however, the same was deleted by the ld. CIT(A) in the appellate order and the issue is not before the ITAT. We note that the only ground before the ITAT was the addition of Rs.75.60 crores which was not subject matter of the reasons for reopening and, therefore, the reopening of assessment is illegal as has been held by the Hon’ble Juri ictional High Court in the case of CIT(E) v. B.P.Poddar Foundation for Education (2023) 148 taxmann.com 125 (Calcutta), wherein the Hon’ble High Court has held as under :- 14. ......Though the Explanation 3 inserted by the amendment empowers the assessing officer to assess the income in respect of any issue which has escaped assessment when such issue comes to his notice subsequently in the course of the proceedings under section 147 notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section 2 of section 148, the prerequisite is there should be a valid notice. Admittedly, in the case on hand, the natice was held to be not sustainable. If that be so, the assessing officer cannot be stated to be empowered to make a roving enquiry into other issues which according to him came to his notice during the reassessment proceedings. The foundation of a reassessment proceeding is a valid notice and if this notice is held to be invalid the entire edifice sought to be raised on such foundation has to collapse. 31 9. Considering the above facts and circumstances, we are inclined to uphold the order of the ld. CIT(A) by dismissing legal proposition raised before us by the revenue. 10. So far as merits of the case are concerned, we note that the assessee was stated to be the borrower of the money from various parties/entities aggregating to Rs.75.60 crores. We note that the AO has invoked the provisions of Section 69A of the Act while making the addition which is applicable to the assessee which is found to be the owner of money, bullion, jewellery or other valuable article and the assessee could not offer any explanation about the sources thereof. In the present case, the assessee is stated to be a borrower of cash loans from various parties and therefore , could not be said to be owner of money, bullion, jewellery or other valuable article. Accordingly we uphold the order of the ld. CIT(A) on this issue by relying on the decision of the coordinate bench of the Tribunal in the case of Nath Chatterjee v ITO ITA No. 298/Kol/2020 dated 25.2.2021. 11. We further note that the addition was made on the basis of probable suspicious transactions without any definite finding and the suspicious transactions did not mention the name of the assessee. In our opinion, no addition can be made on the basis of potential cash borrowings and possible or probable transactions. This issue has been settled by the Hon’ble Juri ictional High Court in the case of Girdhar Gopal Dalmia v. UOI 150 taxmann.com 54 on the basis of the same search of Sanwaria and Kasera Group and held that addition basedon the report of the 32 Investigation Wing which is based on "potential cash borrowings and 'possible' financial transactions is not called for and set aside the reassessment proceedings. We further note that the assessee had not been provided any opportunity of cross examination which was specifically requested by the assessee for cross examination of the persons whose statements have been relied upon by the department, thereby causing the miscarriage of justice. Besides, the reopening of the assessment has been made on the basis of borrowed satisfaction of investigation wing without any independent application of mind by the AO as there was no enquiry or application of mind by the AO to the information received from the Investigation Wing and thus on this score also the reopening of assessment is invalid and nullity in the eyes of law. Therefore, considering the above facts and circumstances and the various decisions discussed above, we are inclined to uphold the order of the ld. CIT(A) on merit also. Thus, the appeal of the revenue is dismissed. 12. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 17/04/2025. (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) न्यानयक सदस्य / JUDICIAL MEMBER लेखा सदस्य/ ACCOUNTANT MEMBER