BHOOTNATH VINTRADE PVT. LTD.,DELHI vs. ITO, WARD-12(3), KOLKATA
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Income Tax Appellate Tribunal, KOLKATA BENCH ‘C’, KOLKATA
Before: Dr. Manish Borad & Shri Sonjoy Sarma]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘C’, KOLKATA [Before Dr. Manish Borad, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.A. No. 189/Kol/2024 Assessment Year : 2009-10 Bhootnath Vintrade Private Limited vs ITO, Ward-12(3), Kolkata PAN: AADCB 5629 G Appellant Respondent Date of Hearing 17.04.2024 Date of Pronouncement 11.06.2024 For the Assessee Shri Miraj D. Shah, AR For the Revenue Smt. Archana Gupta, Addl. CIT, Sr. DR ORDER Per Sonjoy Sarma, JM: The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre [hereinafter the “ld. CIT(A)”] dated 19.12.2023 passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2009-10. The assessee has raised the following grounds of appeal:
“1. For that in the facts and circumstances of the case the Appellate order passed was bad in law and same should be set aside. 2. For that in the facts and circumstance of the case Ld. Commissioner of Income Tax Appeals erred in upholding and confirming the addition of Rs.71,00,000 on account of unexplained cash credit u/s 68 of the Income Tax Act, 1961. The addition is not called for hence the same be reversed. 3. For that in the facts and circumstance of the case Ld. Commissioner of Income Tax Appeals erred in upholding and confirming the addition of Rs.11,990 on account of disallowance u/s 14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Rules, 1962. The addition is not called for hence the same be reversed.
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For that the facts and circumstances of the case the notice u/s 148 of the Income Tax Act 1961 was without jurisdiction and bad in law and hence the entire assessment order is bad in law and the same should be quashed. 5. For that the reopening of assessment u/s 148 of the Income Tax Act 1961 was bad in law and hence the reopening be declared to be bad in law and the reassessment order be quashed. 6. For that the reasons recorded before reopening of assessment u/s 148 of the Income Tax Act 1961 did not meet the test of law laid down by various courts and hence the reopening be declared to be bad in law and the reassessment order be quashed. 7. For that the reopening of assessment u/s 148 of the Income Tax Act 1961 was on borrowed satisfaction and not on any independent application of mind by the assessing officer and hence the reopening be declared to be bad in law and the reassessment order be quashed. 8. For that the reopening of assessment u/s 148 of the Incomne Tax Act 1961 was without any relevant material having link to escapement of income and hence the reopening be declared to be bad in law and the reassessment order be quashed. 9. For that the sanction u/s 151 of the IT Act 1961 before the reopening assessment u/s 148 of the Income Tax Act 1961 was mechanical and without application of proper mind and the sanction was bad in law and hence the reopening be held to be bad in law. 10. For that in the facts and circumstances of the case the Learned Commissioner of Income Tax Appeals erred in upholding that the material based on which the Ld Assessment Officer passed the assessment order are collected behind the back off the assessee and which were not provided during the course of assessment proceeding, thus material should be excluded/ignored for the purpose of this case. 11. For that in the facts and circumstances of the case the Learned Commissioner of Income Tax Appeals erred in upholding that the statement of third parties on which the Ld Assessment officer relied during the course of assessment proceeding were not subjected to cross examination for the assessee, thus the third party statement relied upon should be excluded/ignored for the purpose of this case.
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For that the facts and circumstances of the case, the notices issued and order passed were without jurisdiction and hence bad in law. Thus the notice and passed be quashed. 13. The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. 14. For that the facts and circumstances of the case the interest computed u/s 234 A/B/C/D of the IT act 1961 is over charged and wrongly calculated and or is not applicable to the assessee case hence the interest be deleted and or correctly computed. 15. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal.” 2. The assessee filed its original return of income electronically on 09.07.2009 showing total income of Rs. 510/-. The case of the assessee was reopened u/s 147 of the Act on the basis of information available with the DCIT (Inv.), Unit-3(4), Kolkata that the assessee-company had received funds by way of clearing and moved the funds out of bank immediately. It was also informed that the funds were received towards share application money from other companies and payments were made towards investment in shares of some other companies. It was further reported that the assessee was invested Rs. 25,00,000/- in acquiring shares of M/s. Topdeal Agencies Pvt. Ltd. It was also reported that assessee had invested Rs. 46,00,000/- in acquiring shares of M/s. Vertex Commotrade Pvt. Ltd. Therefore, the reasons to believe that investment in shares amounting to Rs. 71,00,000/- has been made from unaccounted income of M/s. Bhootnath Vintrade Pvt. Ltd. which has escaped assessment. During the course of re-assessment proceeding, the ld. AO
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furnished the copy of reasons for reopening of the case. In response to the notice ld. AR of the assessee appeared before the ld. AO furnished various details as asked for. However, the ld. AO was not impressed with the submission of the AR and find that assessee-company brought into its own unaccounted money into the form of share application money of Rs. 25,00,000/- from M/s. Banka Enterprises Pvt. Ltd. and another sum of Rs. 46,00,000/- from M/s. Komal Vinimay Pvt. Ltd. and same were treated as unexplained cash credit in the books of assessee- company u/s 68 of the Act and assessed the income of the assessee.
Before us, the ld. counsel for the assessee asserted strongly on the legal issue to submit that in the instant case, the ld. AO assumed jurisdiction over the assessee by issuing notice u/s 148 on 22.03.2016 based on information from DCIT (Inv.), Unit-3(4), Kolkata. However, alleged proceeding was not over followed by re- assessment proceeding or any further order from the end of AO. However, the ld. AO subsequently issued another notice upon the same assessee for the same assessment year and even on similar subject matter on 31.03.2016 on the basis of information received from DCIT (Inv.), Unit-3(4), Kolkata. Therefore, the alleged subsequent issuance of notice u/s 148 of the Act is bad in law within the provisions of law. The ld. AR stated that the second notice u/s 148 of the Act issued on 31.03.2016 on that date the assessment proceeding in response to the notice u/s 148 of the Act dated 22.03.2016 was pending and it is well
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settled law that when any notice is issued u/s 148 during the pendency of such notice no second notice u/s 148 can be issued as upheld by the Hon’ble Supreme Court in the case of Comunidado of Chcalim vs ITO (2001) 247 ITR 271 (SC). The ld. AR further stated that the ld. AO assumed jurisdiction on on the basis notice dated 31.03.2016 that assessee had invested Rs. 25,00,000/- in acquiring shares of M/s. Topdeal Agencies Pvt. Ltd. and further invested Rs. 46,00,000/- in acquiring shares of M/s. Vertex Commotrade Pvt. Ltd. based on information received from DCIT (Inv.), Unit-3(4), Kolkata. However, while making assessment, the ld. AO stated that the assessee-company brought into account its own unaccounted money in the form of share application money of Rs. 25,00,000/- of M/s. Banka Enterprises Pvt. Ltd. and Rs. 46,00,000/- from M/s. Komal Vinimay Pvt. Ltd. by treating it as unexplained cash credit in the hands of assessee making an addition u/s 68 of the Act. According to him there is almost confusion in the minds of ld. AO because at one hand he has recorded that assessee has invested of Rs. 25,00,000/- in acquiring shares of M/s. Topdeal Agencies Pvt. Ltd. and Rs. 46,00,000/- in acquiring shares of M/s. Vertex Commotrade Pvt. Ltd. but while framing the assessment concluded that assessee-company brought into account its own unaccounted money in the form of share application money of Rs. 25,00,000/- from M/s. Banka Enterprises Pvt. Ltd. and Rs. 46,00,000/- from M/s. Komal Vinimay Pvt. Ltd. and added alleged sum as unexplained cash credit in the hands of assessee u/s 68 of the Act. Therefore, the allegation made in the reasons is
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contrary if there was allegation of unaccounted money in the form of share application of Rs. 25,00,000/- from M/s. Banka Enterprises Pvt. Ltd. and Rs. 46,00,000/- from M/s. Komal Vinimay Pvt. Ltd. It is a supreme example of patent non- application of mind of the ld. AO in recording the impugned reasons as it is borrowed from the report of DCIT (Inv.), Unit-3(4), Kolkata by the ld. AO initiating the impugned proceedings.
Per contra, ld. DR placed reliance on orders of the authorities below.
We have heard the rival contentions and gone through the records. From the reference made to the reasons to believe recorded by the Ld. AO and the observations noted in the assessment order as extracted above, we note that in the instant case, the justification of Ld. AO is not amenable to reason since he did not satisfy the basic criteria of independent application of mind on the material supplied by the Investigation Wing, Kolkata. It is evident from the reasons recorded by the Ld. AO that the report supplied by the DCIT (Investigation), Kolkata not even verified by him and accordingly, the justification for initiating proceedings u/s. 147 of the Act ceases to exist.
5.1. Further, the statute requires that two ingredients are to be satisfied for assuming jurisdiction u/s. 147 of the Act. There should be prima facie "reason to believe" and there must be evidence that "Income has escaped assessment". The failure to satisfy or fulfill these conditions simultaneously would vitiate the
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entire proceeding. It is imperative that the significant word in the enactment relating to reassessment is 'belief' and not 'suspicion'. These essential elements are obviously and glaringly missing in the instant case which renders the reassessment proceedings as well as the order passed ex-facie null in law.
5.2. It is settled that before an AO can be said to have had reasons to believe that some income has escaped assessment, he should have relevant material before him from which he could have drawn such conclusion. His vague imagination that there might have been some escapement of income from assessment is not sufficient [CHHUGANMAL RAJPAL VS. S. P. CHALIHA (1971) 79 ITR 603 (SC)]. It is emphatically settled in this regard that there can be no doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Assessing Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Ld. AO would be acting without jurisdiction, if the reason for the belief that the conditions required to be satisfied do not exist or is not material or relevant to the belief required by the section [SHEO NATH SINGH VS. AAC. (1971) 82 ITR 147 (SC). In the case of PCIT Vs. Meenakshi Overseas (P) Ltd. [2017] 82 taxmann.com 300 (Del.) wherein it has been held as under:
“where reassessment was resorted to on basis of information from DIT (Investigation) that assessee had received accommodation entry but and there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate link between
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tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified.” 5.3. Ld. AO simply based his belief on the alleged report supplied by the DCIT, (Investigation), Kolkata for assuming jurisdiction u/s. 148 of the Act without adducing on record any evidence in support thereof and without any independent application of mind on the issue. It is an inalienable principle of law that the reasons recorded u/s. 148 of the Act should be based on credible material which must have a live link or nexus with the belief that there was escapement of income. There should be an independent application of mind on such material before recording the reasons and issuing notice u/s. 148 of the Act. The belief should be held in good faith and objectively; it cannot be a mere pretence.
Considering the facts on record and the contents of the reasons to believe recorded by the Ld. AO coupled with his general and casual observations without the conduct of any examination or verification as well as judicial precedents referred above, we hold that the crucial link between the information made available to the AO and the formation of belief is absent. There is no independent application of mind by the AO. Accordingly, the initiation of proceedings u/s. 147 r.w.s. 148 to reopen the assessment does not satisfy the requirements of the law. Ground no. 4 of appeal is on the legal issue is allowed. Since no submissions have been made by both the parties on the merits of the case and the legal issue is allowed in favour of the
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assessee and remaining grounds are rendered academic in nature, hence, not adjudicated upon.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11.06.2024. Sd/- Sd/-
(Dr. Manish Borad) (Sonjoy Sarma) Accountant Member Judicial Member Dated: 11.06.2024 Biswajit, Sr. PS Copy of the order forwarded to: 1. Appellant- Bhootnath Vintrade Private Limited, A-1/74, Ground floor, Panchsheel Enclave, South Delhi-110017. 2. Respondent – ITO, Ward-12(3), Kolkata. 3. Ld. CIT 4. Ld. CIT(A) 5. Ld. DR
