PRASANT DESAI,KOLKATA vs. DCIT, CIR. 61, KOLKATA
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Income Tax Appellate Tribunal, “A” BENCH KOLKATA
Before: Shri Sanjay Garg & Shri Rakesh Mishra
आयकर अपील�य अ�धकरण, कोलकाता पीठ ‘ए’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Rakesh Mishra, Accountant Member I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai……..……………….………...........………………....Appellant C/o Subash Agarwal & Associates, Advocate, Siddha Gibson, 1, Gibson Lane, Suite – 213, 2nd Floor, Kolkata – 700069. [PAN: ACYPD1511B] vs. DCIT, Circle-61, Kolkata.……………….…............................…..…..... Respondent Appearances by: Shri Siddharth Agarwal, Advocate, appeared on behalf of the assessee. Shri Arup Chatterjee, Addl. CIT- DR, appeared on behalf of the Revenue. Date of concluding the hearing : July 02, 2024 Date of pronouncing the order : September 25, 2024 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 26.02.2024 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has agitated against the confirmation of addition of Rs.75,00,000/- made by the Assessing Officer on account of unsecured loans received from M/s Festive Deal Trade Pvt. Ltd. treating the same as bogus.
The brief facts of the case are that the assessment of the assessee was reopened u/s 147 of the Act on the basis of information received by the Assessing Officer from the Investigation Wing that one Sri Mahesh Sharma, through his proprietorship concern M/s D P Trading, was
I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai providing accommodation entries to various persons including bogus loans. That the assessee was also one such beneficiary as the assessee had transacted Rs.75,00,000/- through the said concern. The Assessing Officer further noted that the assessee had filed Income Tax Return for A.Y 2013-14 with a total income of Rs.3912560/-. On analysis of the said information, the Assessing Officer formed the belief that the assessee has not reported the transaction of Rs.75,00,000/- as mentioned above. He, therefore, held that he has reasons to believe that the income of the assessee has escaped assessment and accordingly, reopened the assessment.
The ld. counsel, at the outset, has agitated against the validity of the reopening of the assessment. The ld. counsel in this respect has submitted that the assessee had duly replied to the show-cause notice issued that the assessee had not carried any financial transaction with Sri Mahesh Sharma or M/s D P Trading. Further, the assessee asked the Assessing Officer to provide the requisite information/details for cross-verification and reply thereof. However, the Assessing Officer noted that the office of the Assessing Officer was not fettered to provide all the information at primary stage of inquiry and entertain such pleas of assessee without his cooperation to come clean regarding bogus entry accepted by him from M/s D P Trading. The ld. counsel in this respect inviting our attention to the reasons recorded, which have been reproduced in para 2 of the assessment order has submitted that the only information available to the Assessing Officer was that the assessee had done a transaction of Rs.75,00,000/-. That the said information was not enough to form the belief that the income of the assessee has escaped assessment. The transaction of Rs.75,00,000/- may be for any reason and it cannot be considered that every transaction would result into same income. That even the Assessing Officer has not mentioned the nature of the transaction and did not 2
I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai correlate the said information with the accounts of the assessee. The ld. counsel has further submitted that the assessee had received a loan of Rs.75,00,000/- from M/s Festive Deal Trade Pvt. Ltd. and not from M/s D P Trading. Therefore, the information available to the Assessing Officer was vague and not enough to form the belief that the income of the assessee has escaped assessment.
The ld. DR, on the other hand, has relied upon the findings of the lower authorities.
We have considered the rival contentions and gone through the record. We note that under the relevant provisions of section 147 & section 148 of the Income Tax Act, for assuming jurisdiction to reopen an assessment by the Assessing Officer, there is a condition precedent that the Assessing Officer must have reasons to believe that the income of the assessee for that year has escaped assessment. It has been held time and again that the reasons to believe regarding the escapement of the income should be based on certain tangible material and it should not be mere pretence of the Assessing Officer. The reasons to believe does not mean reason to suspect. Reopening of the assessment is not permitted for making fishing and roving enquiries. The Assessing Officer, after receipt of alleged information received from the Investigation Wing was supposed to corelate the same with the records and other facts of the case and thereafter should have satisfied himself of escapement of income. Reopening is not permissible on the basis of borrowed satisfaction of the Assessing Officer. That such reasons to believe must have a material bearing on the question of escapement of income. It does not mean a purely subjective satisfaction of the assessing authority, such reason should be held in good faith and cannot merely be a pretence. The reasons to believe must have a rational connection with or relevant bearing on the formation of the
I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute "reason to believe" has been summed up by the hon’ble Supreme Court in the case of “Income Tax Officer v Lakhmani Mewaldas” (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs Paramjit Kaur' (2008) 311 ITR 38 (P&H), wherein, making identical observations, the Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notice u/s 148 of the Act was not valid. In the case in hand, the only information available to the Assessing Officer was that the assessee had done transaction of Rs.75,00,000/- with M/s D P Trading. Such information does not in any manner is sufficient to form the belief that the income of the assessee has escaped assessment. In view of the above discussion, the reasons pointed out by the Assessing Officer cannot be said to be the reasons "to form the belief" that income of the assessee had escaped assessment. Therefore, the reopening of assessment was bad in law and consequential assessment order is not sustainable and the same is accordingly quashed. The assessee, therefore, succeeds on legal ground. 7. Even on merits, the assessee asked the Assessing Officer to supply him the requisite information and details so that he may contradict the same, however, the Assessing Officer has refused to
I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai provide the details or information available with him. Even the assessee requested to provide the alleged statement of Shri Mahesh Sharma to the assessee and also asked for his cross-examination. However, the Assessing Officer declined the said request of the assessee to provide the statement of Shri Mahesh Sharma and his cross-examination stating that the statement of Shri Mahesh Sharma was not primary evidence and that the said statement was concerned only with modus operandi of such scam. That the department in this case did not act on the statement of Shri Mahesh Sharma and that it was only one of the circumstantial evidences. He, therefore, declined to provide the statement of Shri Mahesh Sharma to the assessee. A perusal of the assessment order reveals that except the information received from Investigation Wing, which was based on the statement of Shri Mahesh Sharma that he was providing accommodation entries through his proprietorship concern i.e. M/s D P Trading Company and that the assessee was one of the beneficiaries of the same, there was no other direct or any circumstantial evidence mentioned by the Assessing Officer in the impugned assessment order to hold that the assessee had received accommodation entries from the said Shri Mahesh Sharma. The assessee, on the other hand, time and again requested the Assessing Officer to provide him the requisite details and evidence so that he may be able to confront the same and file reply or explanation to the same, but the request of the assessee was rejected by the Assessing Officer. Even no opportunity of cross-examination was provided to the assessee. It has been held time and again that the addition solely on the basis of third party statement in an unrelated case, without any opportunity to the assessee to cross-examine the person making such statement, is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. Reliance
I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai in this respect can be placed on the decision of Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE reported in 281 CTR 214 (SC).
The Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax (Central) Vs Oriental Power Cables Ltd reported in (2022) 143 taqxmann.com 371 (SC) and Kishinchand Chellaram (AIR 1980 14 SC 2117) has held that adjudicating authority's denial of the assessee's claim to cross-examine the witnesses though the statements of those witnesses were made the basis of the order, was a serious flaw which nullified the order since it was a violation of the principle of natural justice.
In the case of Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, Hon'ble Supreme Court observed that “effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review.” The aforesaid decision makes it evident that, not only should the opportunity of cross-examination be made available, but it should be an effective cross examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with
I.T.A. No.735/Kol/2024 Assessment Year: 2013-14 Prasant Desai law, as cross-examination is an integral part and parcel of the principles of natural justice. 8. In view of the above discussion, the impugned additions are not sustainable and the same are accordingly ordered to be deleted. 9. In the result, the appeal of the assessee stands allowed. Kolkata, the 25th September, 2024. Sd/- Sd/- [Rakesh Mishra] [Sanjay Garg] लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member Dated: 25.09.2024. RS Copy of the order forwarded to: 1. Prasant Desai 2. DCIT, Circle-61, Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR),
//True copy// By order Assistant Registrar, Kolkata Benches
