AHINSHA MANAGEMENT PVT. LTD.,KOLKATA vs. ITOM WARD-4(3), KOLKATA

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ITA 2/KOL/2024Status: DisposedITAT Kolkata24 February 2025AY 2010-117 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment under Section 147 of the Income Tax Act, 1961, was invalid. The Tribunal observed that the reasons recorded by the AO for reopening were vague, scanty, and ambiguous, lacking specific details such as the source and timing of the funds received. The AO had merely extracted the investigation wing's report and noted a 'reason to believe' that income had escaped assessment without demonstrating independent application of mind. The Tribunal found that the AO had acted on borrowed satisfaction, which is not permissible. Consequently, the Tribunal quashed the reopening of the assessment. As the appeal was allowed on this legal ground, other grounds raised by the assessee on merits were not adjudicated and were left open for future consideration if needed. The ratio decidendi is that reopening under Section 147 requires the AO to record specific reasons and demonstrate independent application of mind, not merely rely on information from other agencies without substantiation.

What were the facts?

The assessee, Ahinsha Management Pvt. Ltd., filed appeals against the orders of the National Faceless Appeal Centre, Delhi, for Assessment Years (AYs) 2009-10 and 2010-11. The appeals challenged the reopening of assessment under Section 147 of the Income Tax Act, 1961. For AY 2009-10, the Assessing Officer (AO) reopened the assessment by issuing a notice under Section 148 on March 31, 2016, after the assessee had filed a return declaring income of ₹998. The AO noted credits of ₹24,55,000 in the assessee's Axis Bank account during the financial year 2008-09, the source of which was unclear. This reopening was based on information from a search and seizure operation at the premises of Shri Santosh Kumar Shah, whose associates admitted to providing accommodation entries. The AO added ₹24,55,000 as unexplained cash credit under Section 68. The CIT(A) upheld the reopening and the addition. The appeals were filed against these orders.

What were the issues?

1. Whether the reopening of assessment under Section 147 of the Income Tax Act, 1961, was valid, considering the conditions precedent for assuming jurisdiction were not fulfilled, rendering the assessment void ab initio. Assessee's Contention: The assessee argued that the reopening was invalid because the reasons recorded by the AO lacked specific details regarding when and from whom the money was received. The AO allegedly acted on borrowed satisfaction without independent application of mind, merely reproducing the investigation wing's report. The assessee relied on the decision in CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi). Revenue's Contention: The revenue contended that the case was validly reopened by the AO based on information from the investigation wing indicating unexplained credits of ₹24,55,000 in the assessee's bank account.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 68,Section 144,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Somnath Ghosh, AR
For Respondent: Shri Sailen Samadder, DR
Hearing: 05.02.2025Pronounced: 24.02.2025
2.

The only issue raised in ground no.1 is against the order of ld. CIT (A) upholding the reopening of assessment u/s 147 of the Act, overlooking the fact that the conditions precedent for assumption of jurisdiction under section 147 were not fulfilled and therefore, the assessment framed u/s 147/ 144 of the Act is void ab initio, ultra virus and nullity in the eyes of law.

4.

In the appellate proceedings, the ld. CIT (A) also dismissed the appeal of the assessee. The ld. AR at the outset submitted that the case of the assessee has been invalidly reopened u/s 147 of the Act when necessary, conditions precedent for reopening being not fulfilled and satisfied. The ld. AR while referring to page no.66 of the paper book submitted in the reasons recorded by the ld. AO, he nowhere stated that when the money was received and from whom it was received and after reproducing the investigation wing report in the last para simply noted that ‘I have reason to belief that income of the assessee chargeable to tax has escaped assessment and thus, it is fit case for invoking the provisions of Section 147 of the Act’ and accordingly, proposal was submitted to the ld. PCIT, Kolkata for his kind approval. The ld. AR submitted that the ld. AO has acted on the borrowed satisfaction and there is no independent application of mind to the facts of the case. The ld. AR therefore in defence of his arguments relied on the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi) and prayed that the reopening of assessment may kindly be quashed.

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

7.

It is apparent from the above that there is no satisfaction or independent application of mind by the ld. AO to the information received. Moreover, the reasons are vague, scanty and ambiguous. Therefore, we are inclined to quash the reopening of assessment. Consequently, the appeal of the assessee is allowed.

8.

Since, we have allowed the appeal of the assessee on legal issue i.e. reopening of assessment being invalid and nullity in the eyes of law, the other grounds raised by the assessee on legal issue as well as on merits are not being adjudicated at this stage and are left open if the need arises for the same at a later stage.

02/KOL/2024 for A.Y. 2010-11

9.

The issues raised in this appeal are similar to ones as decided by us in A.Y. 2009-10. Accordingly, our decision, would apply mutatis mutandis to this appeal of assessee in as well. Hence, the appeal of assessee is allowed.

10.

In the result, both the appeals of the assessee are allowed.

Order pronounced in the open court on 24.02.2025.

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