LEMONGRASS DEALTRADE PVT. LTD.,KOLKATA vs. DCIT, CIR. -5(1), KOLKATA

At the outset, we note that there is a delay of 160 days in fling the appeal before the Tribunal and ex-facie the appeal is barred by limitation by 160 days. After hearing the rival parties and perusing the facts as available in the duly sworn Affidavit which is Assessment Year: 2012-13 Lemongrass Dealtrade Pvt. Ltd.(Since Amalgamated with M/s Pancham Marketiers Pvt. Ltd. placed at page at 199-200 of PB ,we note that the delay was attributable to the fact that the Advocate Mr. R. Agarwal who was looking after the taxation matter who also attended the appellate proceedings before the Ld. CIT(A). He was not aware of the system of filing the appeal before the Tribunal and therefore, he has not given any advice to the assessee. The assessee approached Shri Soumitro Chowdhury, Advocate on 2nd week of April, 2024 for some tax consultancy and then Mr. Soumitra Choudhury advised the assessee to file appeal immediately along with condonation petition and hence the delay of 160 days. After considering the facts of the case and ratio laid down by the decision of Hon’ble Supreme Court in the case of Mst. Katiji & Ors. reported in (1987) 2 SCC 107 (SC), we are of the view that the appeal should not be rejected on the technical reasons and the substance must prevail over the technicalities. Accordingly, we condone the delay and admit the appeal for adjudication.

At the time of hearing the Ld. Counsel for the assessee pressed only ground no. 4 which is extracted as below:

Facts in brief are that the assessee filed its original return of income of 25.09.2012 declaring total income of Rs. 10,200/- which was selected for scrutiny and assessment u/s 143(3) was framed vide order dated 26.03.2015. Thereafter addition made in the assessment was reduced after giving effect to the order of PCIT u/s 264 of the Act and revised order was passed u/s 143(3) read with Section 264 on 27.07.2016. Thereafter, the case of the assessee was reopened u/s 147 after the AO received information that the assessee is beneficiary of accommodation entry from M/S Bhagyshree Vincom Pvt Ltd who has applied for 59000 equity shares . The AO finally made addition of Rs. 59,00,000/- vide order dated 27.12.2019 passed u/s 143(3)/147 of the Act on account of unexplained cash credit u/s 68 by holding that the money received from M/s Bhagyshree Vincom Pvt. Ltd. were not genuine.

The Ld. A.R vehemently submitted before us that the reopening of assessment in the present case was made apparently after the period of four years from the end of relevant assessment year. The Ld. A.R submitted that the assessment involved in the present case is AY 2012-13 and the assessment has been framed u/s 143(3) vide order dated 26.03.2015 wherein the addition of Rs. 8,72,15,000/- was made u/s 68 of the Act on account of unexplained share capital / share premium. The Ld. A.R also referred to the reasons recorded u/s 148(2) of the Act in order to form reasons to believe which is a mandatory requirement for reopening of assessment and the approval of the competent authority was also obtained. However, in the reasons recorded u/s 148(2) of the Act the AO has nowhere stated that the income has escaped assessment because of failure of the assessee to disclose any information fully and truly which was necessary for the assessment of income. The Ld. A.R submitted that since the assessment has been made u/s 143(3) vide order dated 26.03.2015 therefore, it was incumbent upon the AO to record a satisfaction to this effect that the income has escaped due to failure of the assessee to disclose fully and truly any material fact qua the said income which is missing in the reasons recorded and therefore, the reopening has not been made in accordance with the first proviso to Section 147 of the Act. The Ld. A.R therefore prayed that the reopening of assessment is ab-initio void and bad in law and may be quashed. In defense of argument the Ld. A.R relied on the decision of Hon’ble Supreme Court in the case of ACIT vs. CEAT Ltd. in [2023] 146 taxmann.com 108 (SC).

The Ld. D.R on the other hand relied on the orders of authorities below by submitting that the AO has made the re-opening only after receiving credible information and therefore, the legal issue raised by the assessee may be dismissed.

We have heard the rival contentions and perused the material available on record. The undisputed facts are that the assessment u/s 143(3) has been framed vide order dated 26.03.2015. Thereafter, the AO received information that the assessee is beneficiary of bogus accommodation entry to the tune of Rs. 59,00,000/- in the form of share application money received from M/s Bhagyashree Vincome Pvt. Ltd. and accordingly the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 25.03.2019. Apparently, the case was reopened after the lapse of four years from the end of relevant assessment year. Therefore, the reopening could only be made by the AO in accordance with the first proviso to section 147 of the Act. The first proviso to Section 147 provides that where an assessment has been framed u/s 143(3) of the Act, the reopening could only be made after a period of four years from the end of relevant assessment year if the escapement of income has resulted from the failure of the assessee to disclose fully and truly any material with respect to that income which was necessary for the purpose of assessment. However, in the present case, we note that there have been no such failure noted / recorded by the AO in the reasons recorded and therefore, the condition as envisaged in first proviso to section 147 of the Act have not been met. For the sake of ready reference the reasons recorded are extracted below:

Since we have allowed the appeal of the assessee on legal issue then the issues raised on merits are not being adjudicated at this stage and are being left open to be decided at later stage if the need arises for the same.

In the result, the appeal of the assessee is allowed.