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Facts
The assessee, M/s Mittal Cotspin Ltd., filed a 'nil' income return for AY 2014-15. The assessment was reopened based on information about high-value financial transactions and alleged accommodation entries from Shri Nawal Kishore Jalan. The AO made an addition of Rs. 1,79,80,000/- under Section 68 for bogus unsecured loans, and another addition for share premium which was later deleted by the CIT(A). The reopening was challenged on the grounds that the information related to AY 2015-16, not AY 2014-15, and the reopening was done after four years without specific failure of disclosure.
Held
The Tribunal held that the information forming the basis for reopening pertained to AY 2015-16, not the relevant AY 2014-15, and the AO's reasons were contradictory. Since the assessment was reopened after four years and a scrutiny assessment under Section 143(3) was already completed, the AO failed to establish that the assessee did not disclose fully and truly all material facts. Therefore, the reopening of the assessment was held to be bad in law, and the additions were not sustainable on merits as no transactions were found for AY 2014-15.
Key Issues
1. Whether the reopening of assessment under Section 147 was valid when the information for escapement of income pertained to a different assessment year. 2. Whether the reopening of assessment after four years, when a scrutiny assessment was completed, was valid without specific findings of failure to disclose material facts by the assessee. 3. Whether the addition under Section 68 for alleged accommodation entries was sustainable on merits.
Sections Cited
Section 68, Section 143(1), Section 143(2), Section 143(3), Section 147, Section 148, Section 151, Section 153
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 25.06.2025 passed for assessment year 2014-15.
The assessee has taken two grounds of appeal, namely ; A.Y.2014-15 2 a) The ld.CIT (Appeals) has erred in upholding the re- opening of assessment. b) The ld.CIT (Appeals) has erred in confirming the addition of Rs.1,79,80,000/- which was added by the AO with the aid of Section 68 of the Income Tax Act.
The brief facts of the case are that assessee has filed its return of income electronically on 30.11.2014 declaring ‘nil’ income. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) dated 18.09.2015 was issued and served upon the assessee. The ld. AO has passed the assessment order on 19.12.2016 u/s 143(3) of the Income Tax Act. Thereafter, the AO has reopened the assessment and the reasons for re-opening the assessment are placed on page No. 10 and 11 of the Paper Book, which read as under :
“Subject: Supply of reasons for reopening of the assessment - A.Y. 2014-15- Reg. Refer to your letter dated 13.12.2021 regarding requested to communicate reason for re-assessment under section 147 The reasons for reopening of your assessment for A.Y. 2014-15 as recorded is as under:- "1 The assessee is a Limited company and it had filed return showing total income of Rs.Nil for the AY 2014-15 electronically.
Information in this case the case has been marked in insight portal under the category High Risk/CRIU/VRU information wherein the DIT(S) has uploaded information that the assessee had made high value financial transactions.
As per information available on Insight Portal as well as documents disseminated, it is noticed that a search & seizure operation was conducted in the case of Sh. Nawal Kishore Jalan, Kolkata based entry operator on 21.05.2018. The statement of Sh. Nawal Kishore Jalan was recorded and admitted that he was A.Y.2014-15 3 engaged in providing accommodation entry in form of bogus unsecured loan, bogus investment and bogus LTCG to various beneficiary with the help of shell companies controlled and managed by him. Some beneficiaries have received the accommodation entries in the form of bogus Unsecured loan/Share Capital /LTCG/STCL wherein M/s Mittal Cotspin Ltd. is the one of the beneficiaries.
Perusal of the information received from Investigation Wing, it is clear that the assessee has received accommodation entries of Rs.1,79,80,000/- on account of Unsecured loan taken from Sh. Nawal Kishore Jalan and their shell companies controlled and managed by it during the F. Y 2013-14 relevant to the A.Y. 2014- 15.
In view of the above facts, the return of income filed by the assessee and information passed by Investigation Wing have been examined and it is found that the transaction received on account of accommodation entries from Shell companies during F.Y 2014-15 relevant to the A.Y. 2015-16. Therefore, I have sufficient form of 'Reason to believe' to frame my opinion. The information available with this office has been analyzed and I have framed my opinion after due application of all the facts and mind. I have independently examine the records and information of the assessee and after verification it is clear that the assessee has received accommodation entries amounting to Rs.1,79,80,000/- on account of bogus unsecured loan, therefore, the income to the above extent has escaped assessment.
In view of the facts, discussed above, it is concluded that the assessee has received the accommodation entries on account of bogus unsecured loan amounting to Rs. 1,79,80,000/-. Therefore, I have reason to believe that an amount of Rs.1,79,80,000/-received on account of bogus unsecured loan as well as other income which comes to the notice during the course of assessment proceedings, which is chargeable to tax for the A.Y. 2014-15 has escaped assessment within the meaning of provisions of section 147 of the Income Tax Act, 1961.
Escapement of income chargeable to tag in relation to any assets' (including financial interest in any entity): Not Applicable.
Applicability of the provisions of section 147/151 to the facts of the case: In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. According, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been, recorded above (refer paragraph 6). It is pertinent to mention here that in this case, the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s 2(4) of the Act was made and the return of income was only processed u/s 143(1) of the Act In view of the above, provisions of clause (b) of explanation to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case, more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from the Pr. Commissioner of Income Tax as per the provisions of section 151 of the Act."
A.Y.2014-15 4 Yours faithfully, Additional / Joint / Deputy / Assistant Commissioner of Income Tax/ Income-tax Officer, National Faceless Assessment Centre, Delhi.”
The ld. counsel for the assessee while impugning the orders of Revenue Authorities submitted that though assessment was reopened for the reason that assessee has availed benefit of accommodation entry from an entry operator Shri Nawal Kishore Jalan of Calcutta, which information percolated to the AO later on. In the assessment order, he has made two additions. One, on account of taking alleged accommodation entry of Rs. 1,79,80,000/- and the second addition has been made of Rs.93,94,000/- on account of share premium received by the assessee. The AO was of the view that company has reported share premium of Rs.1,65,48,000/- out of which Rs.71,54,000/- was received in assessment year 2013-14 and Rs.93,64,000/- in the accounting period relating to assessment year 2014-15. The AO has, thus, made addition of Rs.93,64,000/- but on appeal, ld.CIT (Appeals) has deleted this addition.
With regard to re-opening of assessment, ld. counsel for the assessee submitted that AO has failed to take cognizance A.Y.2014-15 5 of proper details. The observations in the reasons are contradictory. In paragraph No.3, he was of the view that this alleged accommodation entry has been taken during accounting period relevant to assessment year 2014-15 but immediately in paragraph No.4, he observed that these entries pertain to assessment year 2015-16. Thus, AO was not possessing specific particulars for harbouring this belief. Thereafter, ld. counsel for the assessee took us through assessment order, paragraph No.5.2 and pointed out that at page 8, ld. AO has noticed all the entries taken by the assessee from Shri Nawal Kishore Jalan but perusal of these entries would indicate that none of the entry pertains to assessment year 2014-15. The starting entry is dated 25.09.2014 and last entry is 18.10.2014. This is the accounting period relevant to assessment year 2015-16 and not for assessment year 2015-16. He further contended that no entries are available during the accounting period of this assessment year in its books of account or bank statement. Thus, AO has erred in harbouring the belief that income has escaped assessment for assessment year 2014-15.
The ld. DR was unable to controvert this fact from the record.
A.Y.2014-15 6 7. We have duly considered the rival contentions and gone through the record carefully. A perusal of Section 147 of the Income Tax Act would indicate that it contemplates that AO has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year. He may, subject to the provisions of Section 148 to 153 of the Act assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which come to his notice subsequently in the course of re-assessment proceedings. The opening line of this Section demonstrates that there should be an information possessed by the AO which has a live nexus with formation of belief that income has escaped assessment. The AO was not possessing any information exhibiting escapement of income for assessment year 2014-15. The ld.CIT (Appeals) has failed to appreciate this aspect while dealing with this issue in paragraph Nos. 18 to 21. The ld.CIT (Appeals) has emphasized on the alleged information collected by the AO but failed to verify that none of the transaction relates to accounting year relevant to this year, hence, nothing can be added in assessment year 2014-15. We have specifically taken cognizance of these A.Y.2014-15 7 details from page No. 8 of the assessment order where all the transactions have been reproduced by the AO.
7.1 It is further observed that it is a case where earlier scrutiny assessment was made and notice u/s 148 has been issued after expiry of four years from the end of the relevant assessment year i.e. 30.03.2021. Thus, assessee is protected by the 1st proviso appended to Section 147 as it was applicable in assessment year 2014-15. The interdiction provided in the proviso puts an embargo upon the powers of the AO to reopen an assessment in case where four years have expired from the end of the relevant assessment year and scrutiny assessment was passed u/s 143(3). Such assessment can only be reopened if income has escaped assessment on account of failure of the assessee to disclose fully and truly all material facts necessary for his assessment. In the reasons, AO has nowhere emphasized which material fact was not disclosed by the assessee fully and truly. Thus, we are of the view that AO was not possessing any material for the accounting year relevant to assessment year 2014-15 which can authorize him to harbour the belief that income has escaped assessment. Even otherwise, on merit, no addition can be made because nothing has been received by the assessee from Shri Nawal A.Y.2014-15 8 Kishore Jalan in the accounting year relevant to assessment year 2014-15. Accordingly, re-opening of the assessment is bad in the eyes of law as well as additions not sustainable on merit. We allow the appeal of the assessee and quash the re- assessment order.
In the result, appeal is allowed. Order pronounced on 04.02.2026.
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam”