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Facts
The assessee filed a nil return for AY 2009-10. The case was reopened under Section 147 based on information from an investigation wing about accommodation entries of ₹1.70 Crores provided by Mr. Santosh Kumar Shah. The Assessing Officer treated the amount as unexplained cash credit and added it to the assessee's income under Section 144, which was upheld by the CIT(A).
Held
The Tribunal quashed the reopening of assessment, holding that the reasons recorded by the Assessing Officer under Section 148(2) were vague, scanty, and lacked independent application of mind, relying on a similar decision by a co-ordinate bench. The legal grounds raised by the assessee regarding the invalidity of the reopening were allowed, rendering other grounds on merits unadjudicated.
Key Issues
Whether the reopening of assessment under Section 147/148 was valid when the reasons recorded by the Assessing Officer were vague, scanty, and demonstrated a lack of independent application of mind.
Sections Cited
147, 148, 143(3), 139(1), 144, 148(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
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 26.05.2023 for the AY 2009-10.
The only issue pressed at the time of hearing by the ld. Counsel for the assessee is against the invalid assumption of jurisdiction u/s 147 of the Act without the precedent conditions being fulfilled by the ld. Assessing Officer.
The facts in brief are that the assessee filed the return of income u/s 139(1) of the Act on 23.09.2009, declaring nil income and loss of
In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee, though the legal issue was not raised.
After hearing the rival contentions and perusing the materials available on record, we find that the assessment has been reopened by recording the reasons to believe u/s 148(2) of the Act which in our opinion are vague and scanty only based on the information received
“During the course of the proceeding under section 147/ 143(3) of the Income Tax Act, 1961 it is seen that the assessee failed to offer satisfactory explanation about the nature and sources of credit of sums-credited to the bank account No- 191010200008046 with Axis Bank (Ay. 2008-09) During the financial year 2008-09 (Α.Υ. 2009-10) a sum of ₹1.70 Crores was credited to said bank account, the sources of which is also not clear. There was a Search & Seizure operation carried out by the Investigation Wing at the business premises of Sri Santosh Kumar Shah at 9/12, Lal Bazar Street, Block-E, 2nd floor, Kolkata-700 001 and at his residence at 22, Lake Town, Block-B. Flat No. 4A & SA, Kolkata-700 089. During the course of Search & Seizure operation, statements of various persons viz Sri Gopal Ranjan Saha Roy, an employee of Sri Santosh Kumar Shah, Sri Barun Nahar Roy, former director of Edward Supply Private Limited, Sn Vinod Kumar Shah, a relative of Shri Santosh Kumar Shah and Shri Santosh Kumar Shah were recorded. All the above named persons have deposed on oath that the companies controlled/run by Shri Santosh Kumar Shah were engaged in providing accommodation entries in the form of share capital, loans etc. Shri Santosh Kumar Shan himself admitted that he was engaged in providing entry of bogus share application/loans. During the course of Search & seizure operation, a total number of 404 bank accounts in the name of various companies were found. As a result of the search, it was emerged that the bank accounts were used as a tool of layering the transactions from receiving cash and issuing cheques. The bank account sated as above is one out of 404 bank account found in the premises of Santosh Kumar Shah during the course of search operation conducted. Sri Shah and his associates have admitted in the statement recorded on oath that they used to use all accounts found, for accommodation entries The previous address of the assessee company was the address of Santosh Kurnar shah as well. The modus operandi has also been explained. The parties wanted for accommodation entries of share capital or loan paid the amount in cash and Shri Shah deposited the cash in the bank accounts maintained by him in the name of various companies/individuals and after layering the money into some of the bank accounts, the money was paid as share capital or loan to the party paid the money in cash. The total deposits made into the bank accounts maintained by Shri Shah and his associates piled up to 1102.62 crores. This fact was admitted before the Settlement Commission. As such I have reason to believe that the assessee's income chargeable to tax has escaped assessment and this is a fit case for invoking the provisions of Section 147 of the Income Tax Act, 1961 Accordingly, proposal is submitted before the Ld. Pr.CIT, Kolkata 2, Kolkata for his kind approval, if satisfied.”
“6. After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act. The assessee did not comply with the said notice by filing the return of income. We have perused the reasons recorded for reopening of assessment u/s 148(2) of the Act, the copy of which is available at page no. 66 of the paper book, which revealed that the ld. AO after extracting the report of the investigation, simply recorded in three lines that I have reason to believe that assessee’s income chargeable to tax has escaped assessment, meaning thereby the ld. AO has not recorded his satisfaction and reasons are vague, unambiguous and scanty. We note that no details/information have been recorded as from whom the money was received and when it was received. In our opinion the re-assessment can be not be made on vague, scanty and ambiguous reasons recorded. The case of the assessee is squarely covered by the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (supra). Further, it is a case borrowed satisfaction and non- application of mind by the ld. AO too. We observe that the ld. AO has simply, after extracting the report from the investigation wing, noted that income of the assessee has escaped assessment. For the sake of ready reference, the reasons recorded are extracted below: - “Annexure During the course of the proceeding under section 147/143(3) of the Income Tax Act, 1961 it is seen that the assessee failed to offer satisfactory explanation about the nature and sources of credit of sums- credited to the bank account No. 191010200012290 with Axis Bank (A-Y. 2008-09).
Since, we have already allowed the appeal of the assessee on legal issue, therefore, we are not adjudicating the grounds raised on merit and are being left upon to be decided on later stage if need arises for the same.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 25.03.2025.