BEGRAJ AGARWAL & ORS HUF,KOLKATA vs. I.T.O., WARD - 34(1), KOLKATA, KOLKATA

Per 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 06.05.2024 for the AY 2013-14. 02. The issue raised in ground no.1, is against the order of ld. CIT (A) confirming the additions in the assessment order passed u/s 147 read with section 144B of the Act by ignoring the fact that the entire assessment proceeding u/s 147 of the Act were invalid and bad in law.
03. The facts in brief are that the assessee filed the return of income on 29.07.2013, declaring total income at ₹8,71,380/- under the head
Begraj Agarwal & Ors Huf; A.Y. 2013-14

income from other sources, after claiming deduction under Chapter
VIA amounting to ₹1,04,768/-. The return was processed u/s 143(1) of the Act. Thereafter the ld. AO received the information from Pr. DIT
(Investigation), Kolkata, vide letter dated 27.04.2015, that assessee had taken accommodation entries from M/S Sulabha Engg Ltd of bogus Long Term Capital Gain to the tune of ₹92,54,491/- and Short
Term Capital Gain of ₹1,79,400/- on the transactions of shares through Sulbha Engineering. The ld. AO noted as the assessee failed to disclose the Long Term Capital Gain / Short Term Capital Gain while filing the return of income for the impugned assessment year.
Therefore, he had reason to believe that the total income under the head capital gain to the tune of ₹94,38,891/-has escaped assessment within the meaning of Section 147 of the Act and accordingly, notice u/s 148 of the Act was issued on 31.03.2001, after obtaining the prior approval of the competent authority. The assessee filed the return of income in compliance on 30.04.2021, declaring the same income as was returned in the original return filed u/s 139(1) of the Act.
Thereafter the statutory notices were duly issued and served upon the assessee along with questionnaire. In compliance vide letter dated
11.03.2022 and 16.03.2022, the assessee furnished the copies of assessment order for A.Y. 2015-16 and tax paid u/s VSVS in form no.4 and form no.5 of the order under VSVS Rules, 2020. The assessee stated that it had purchased 3,000/- shares of Sulbha
Engineering and Ors. amounting to ₹1,80,208/-. The Long-Term
Capital Gain earned on the said shares during the A.Y. 2015-16, had been assessed and added back to the taxable income of the assessee in the assessment framed u/s 143(3) of the Act by ITO, Ward-31,
Kolkata. However, in order to avoid litigation the assessee opted for Begraj Agarwal & Ors Huf; A.Y. 2013-14

VSVS 2020 and paid the necessary taxes thereon. Therefore, the ld.
Counsel for the assessee stated that assessee had already offered the income on sale of shares of Sulbha Engineering and Ors. during A.Y.
2015-16 and therefore proceeding u/s 147 read with section 148 of the Act may be dropped. However, the ld. AO after discussing the reply of the assessee noted that the assessee has furnished purchase bill dated 28.03.2013, along with 3,000/- shares of Sulbha
Engineering and Ors. However he failed to furnish the details of Long
Term Capital Gain/ Short Term Capital Gain filed during the A.Y. 2013-
14. The ld. AO further stated that on perusal of the return of income filed for A.Y. 2013-14, the assessee has claimed an amount of ₹37,94,884/- as exempt being Long Term Capital Gain from transaction of shares, however, furnished no substantive evidences for the same. Thereafter, issue a show cause notice which was replied by the assessee vide letter dated 09.03.2022, stating that the reasons recorded for reopening are based on suspicions and surmises and therefore, bad in law. Therefore, the Long Term Capital Gain of ₹94,38,891/- was bogus and not matching with Long Term Capital
Gain filed during the A.Y. 2013-14 and accordingly, the same was treated as unexplained cash credit u/s 68 of the Act. The ld. AO finally added the amount of Long Term Capital Gain of ₹94,38,891/- to the income of the assessee in the assessment framed u/s 147 read with section 144B of the Act dated 30.03.2022. 04. In the appellate proceedings, the ld. CIT (A) also passed a very cryptic order stating all facts therein qua A.Y. 2015-16 and thereafter concluded that no interference is called for within the assessment framed by the ld. AO and thus, dismissed the appeal of the assessee.
Thus there was total non application of mind by the ld CIT(A).
Begraj Agarwal & Ors Huf; A.Y. 2013-14

Act by issuing notice u/s 148 of the Act on 15.02.2022 after recording reasons to belief the copy whereof is available at page no.41 and 42. The reasons recorded stated that assessment was reopened on the ground that the assessee has earned Long Term
Capital Gain and short term capital gain of ₹94,38,891/- on sale of Sulbha Engineering. The ld. AO thereafter acted on the said information and proceeded to reopen the assessment without any verification despite the fact that the replies of the assessee to the notices issued u/s 133(6) of the Act on two occasions were already available on record. The ld. Authorized Representative while referring to the copy of bank statement and profit and loss account stated that there was no sale of equity shares of Sulbha Engineering amounting to ₹94,38,890/- in the instant assessment year but the assessee had earned Long Term Capital Gain of ₹37,94,884/- on sale of shares of Paridhi Properties Ltd which was duly shown in the return of income.
The ld. Authorized Representative submitted that the reopening of proceedings u/s 147 read with section 148 of the Act were bad in law as the ld. AO after receiving information did not make any enquiry or independent application of mind on the information available on the assessment record. In defence of his argument the ld. Authorized
Representative relied on the following decisions:
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of Sulbha Engineering during the impugned year. Considering the facts and circumstances in the instant case, we are of the considered opinion that the case of the assessee was reopened invalidly without doing any enquiry or verification or without any independent application of mind despite the fact that the assessee had responded to the notices u/s 133(6) of the Act issued prior to the reopening of assessment by ITO ward 34(1) and all the details/ information were available with the AO. Therefore, we are quashing the reopening of assessment as well as the assessment framed u/s 147 read with section 144B of the Act. The case of the assessee find support from the decision of Hon'ble Punjab and Haryana High Court in case of Smt
Paramji Kaur (supra), wherein Hon'ble Court has held that the ld.
AO has not examined and corroborated the information received from survey circle before recording his own satisfaction on escaped income and initiated the reopening proceeding going on the basis of suspicion and therefore, it could not be said that same was based on belief that income chargeable to tax had escaped assessment. The court held that the ld. AO has to act on the reason to belief and not on the reason to suspect. The Hon'ble court upheld the order of the Tribunal, wherein the Tribunal concluded that the ld AO had failed to incorporate the material and his satisfaction for reopening of the assessment and therefore, reopening of the assessment is invalid.
Similarly in the case of Sfil Stock Broking Ltd. (supra), Hon'ble court held that where on the basis of information received from DIT(Investigation), the ld. AO reopened the assessment and from very so-called reasons it was not at all discernible whether the ld. AO had applied his mind independently to the information and independently arrived at a belief that on the basis of material available before him,
Begraj Agarwal & Ors Huf; A.Y. 2013-14

income has escaped assessment, the reopening is not justified. The Hon'ble Juri ictional High Court in the case of Signature Hotels P.
Ld. Vs. ITO Another(supra)has held that the ld. AO has acted on the report of investigation only and initiated the reopening proceeding by issuing of notice u/s 148 of the Act, the assessment was invalid.
Therefore, considering the facts of the assessee in the light of aforesaid decisions, we are inclined to quash the reopening of assessment as well as the consequent order passed by the ld.
Assessing Officer.
09. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15.01.2025. (PRADIP KUMAR CHOUBEY)
(RAJESH KUMAR)
(JUDICIAL MEMBER)
(ACCOUNTANT MEMBER)

Kolkata, Dated: 15.01.2025
Sudip Sarkar, Sr.PS
Copy of the Order forwarded to :

Sr. Private Secretary/ Asst.