TANUJ PROPERTIES PRIVATE LIMITED. ,KOLKATA vs. I.T.O, WARD-9(1), KOLKATA. , KOLKATA

order : February 19, 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 20.09.2023 of the National Faceless Appeal Centre [hereinafter referred to as the ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has taken the following grounds of appeal: “1. a) For that on the facts and in the circumstances of the case, the order u/s 147/143(3) was passed by the A.O who did not hold valid jurisdiction and therefore the impugned order being ab initio void deserves to be quashed. b) For that on the facts and in the circumstances of the case, the notice u/s 148 of the Act was issued in the name of non-existent entity and in Assessment Year : 2012-13 Tanuj Properties Pvt. Ltd. (successor to Darshan Tradelink Pvt. Ltd that view of the matter the consequent order passed u/s 147/143 (3) of the Act ought to be held to be bad in law. c) For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have held that the A.O did not satisfy the conditions precedent for reopening of assessment and for recording the reasons to form belief that income chargeable to tax had escaped assessment and for that reason the notice issued u/s 148 and the consequent order framed thereto was bad in law and deserves to be quashed. 2. a) For that on the facts and circumstances of the case and without prejudice to the above, the Ld. CIT(A) erred in disposing of the appeal on merits ex-parte without affording sufficient opportunity of being heard. b) For that on the facts and circumstances of the case and without prejudice to the above, the lower authorities erred in disallowing the loss of Rs.60,88,040/- incurred upon sale of shares while computing the taxable income.

3. A perusal of the above reproduced grounds of appeal would reveal that the assessee, inter alia, has contested the validity of reopening of the assessment u/s 147 r.w.s. 148 of the Act.

Assessment Year : 2012-13 Tanuj Properties Pvt. Ltd. (successor to Darshan Tradelink Pvt. Ltd “Your objection against issuance of notice u/s 148 of the Income Tax , 1961. And request to drop the proceedings is not accepted as the information has been received from PDIT(Inv), Kolkata after proper verification and Notice u/s 148 had been issued after scrutinizing the reasons recorded and this also needs more verification. In view of the above, your objection against the issuance of notice u/s 148 is hereby rejected.” 4.1 The Assessing Officer thereafter framed the assessment and treated the loss incurred by the assessee in respect of sale of shares of M/s SV Electric which was subsequently changed as M/s Nivyah Infrastructure and Telecom Services Limited. The ld. CIT(A) confirmed the disallowance so made by the Assessing Officer.

Assessment Year : 2012-13 Tanuj Properties Pvt. Ltd. (successor to Darshan Tradelink Pvt. Ltd In response to the said reasons, the assessee filed objections, wherein, it was categorically pleaded that the assessee did not transact with the shares of M/s Nivyah Infrastructure and Telecom Services Limited and in fact the assessee had traded earlier in the case of M/s SV Electric which later on changed to M/s Nivyah Infrastructure and Telecom Services Limited. It was also brought to the knowledge of the Assessing Officer that the information mentioned by the Assessing Officer in the reasons recorded was not correct as the assessee did not earn any long- term capital gains, rather, the assessee has incurred loss in transaction of the said shares. However, the Assessing Officer has summarily rejected the objections without application of mind. The ld. counsel, in this respect, has submitted that the satisfaction of the Assessing Officer was a borrowed satisfaction. The Assessing Officer after receipt of any information of escapement of income was supposed to correlate the said information with the assessment records of the assessee then was required to form a belief regarding the escapement of income of the assessee. Further, the original assessment in this case was completed u/s 143(3) of the Act and the assessment was reopened after four years from the end of the relevant year which is hit by First Proviso to section 147 of the Act and that there was no allegation in the notice that any income chargeable to tax has escaped assessment because of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. In this case, the assessee duly disclosed capital loss incurred by the assessee in trading in shares of M/s SV Electric and nothing has been pointed out by the Assessing Officer that the income of the assessee has escaped assessment due to failure on the part of the assessee in disclosing fully and truly all material facts necessary for Assessment Year : 2012-13 Tanuj Properties Pvt. Ltd. (successor to Darshan Tradelink Pvt. Ltd assessment. The ld. counsel has further submitted that under similar circumstances, wherein, the assessee has traded in shares of M/s SV Electric in the reasons recorded, the name of M/s Nivyah Infrastructure and Telecom Services Limited was mentioned and the assessee’s objections were summarily rejected by the Assessing Officer without considering the contentions of the assessee. The Hon’ble Bombay High Court in exactly similar circumstances in the case of “South Yarra Holdings vs. ITO & anr.” in Writ Petition No.3398 of 2018 dated 01.03.2019 has held that the Assessing Officer was required to examine the information received in the context of the facts on record and if such an exercise would have been done and the Assessing Officer would have come to the conclusion that there was failure on the part of the assessee to disclose truly and fully all material facts necessary, only then he would have been justified in issuing the notice u/s 148 of the Act. The Hon’ble Bombay High Court, therefore, held that the reopening of the assessment was hit by First Proviso to section 147 of the Act. The Hon’ble Bombay High Court also held that since the Assessing Officer has not applied his mind to the information received in the context of the facts on record, therefore, the notice issued u/s 148 of the Act was also bad in law and therefore, the Hon’ble Bombay High Court quashed the notice and assessment framed u/s 148 of the Act.

5.1 The ld. counsel has further invited our attention to the decision of the Coordinate bench of the Tribunal in the case of “M/s Samridhi Stocks Pvt. Ltd. vs. ITO” in order dated 08.08.2023, wherein, under similar facts and circumstances, where the loss was incurred by the assessee on account of trading in shares of M/s SV Electric, however, the assessment was reopened based on information that the assessee had earned long-term capital gains by Assessment Year : 2012-13 Tanuj Properties Pvt. Ltd. (successor to Darshan Tradelink Pvt. Ltd sale of shares of M/s Nivyah Infrastructure and Telecom Services Limited. The Coordinate Kolkata Bench of the Tribunal vide order dated 08.08.2023 has held that the reopening of the assessment as bad in law. The relevant part of the order of the Coordinate Bench of the Tribunal is reproduced as under:

“We also note that the scrip of S.V. Electricals Ltd. was converted into M/s Nivyah Infrastructure and Telecom Services Pvt. Ltd. and the assessee has in fact dealt in share of S.V. Electricals Ltd. and not M/s Nivyah Infrastructure and Telecom Services Pvt. Ltd.. We also note that in the second last para the AO has simply stated that on the basis of information received from DDIT(Inv), Unit-8(3), Mumbai, the case is reopened. In our opinion, the reasons recorded by the AO are without any application of mind and without recording his own satisfaction and in fact it was a case of borrowed satisfaction as received from DDIT(Inv), Unit-8(3), Mumbai which is not permissible under the law. The case of the assessee finds support from the decision of Hon’ble Bombay High Court in the case of South Yarra Holdings (supra) wherein from same script , the Hon’ble Bombay High Court has held that it was a case of reopening of assessment on the basis of suspicion of other and not on AO’s own satisfaction. The relevant part is extracted below: 3. For the Assessment Year 2011-12 the petitioner filed its return of income on 29.9.2012 declaring an income of Rs.12.52 lacs (rounded off). The return was taken up for scrutiny assessment by the Assessing Officer. On 1.11.2013 the Assessing Officer passed an order under section 143 (3) of the Act enhancing the petitioner's income to Rs.20.14 lacs.

4. Thereafter on 29.3.2018, the Assessing Officer issued the impugned notice seeking to re-open assessment for A.Y.2011-12. The reasons in support of the impugned notice as communicated to the petitioner reads thus:- "Reasons for reopening u/s 148 for A.Y.2-011-12 is provided as under :

2.2. The DDIT (Inv) has traded in the above script namely M/s Nivyah Infrastructure & Telecom Services Ltd during the F.Y. 2010-11 to the tune of Rs.35040000000000000000. 2.3. The DDIT (Inv) Unit - 8 (3) Mumbai has given a finding that enquiries have been conducted in the penny scrip namely M/s Nivyah Infrastructure & Telecom Services Ltd vis-a-vis facilitating introduction of unaccounted income of members of beneficiaries in the form of exempt Capital gain or Short term Capital Loss in their books of account. These transactions are mostly in view of cash of equal amount and commission is charged over and above at certain fixed percentage for providing such accommodation entry. These accommodation entries were taken from various beneficiaries for introducing their unaccounted cash into their books of accounts without paying the due taxes. 2.4 The detailed investigation report containing the modus operandi of tax evasion through penny stock and discussion in entry operators from brokers and scripts has been provided along with the letter of DDIT (Inv) Mumbai. 2.5. Our assessee is one of the beneficiary who have availed accommodation entries by way of traded in shares to the tune of Rs.3504000,000000000005 in M/s Nivyah Infrastructure & Telecom Services Ltd with a view to ultimately reduce tax liability and or to bring capital in the form of equity or debt or tax exempt income or a combination of the above transaction, therefore, it is necessary to verify the actual amount of bogus LTCG analyzing the D- mat statement and bank account statement.

4. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue the notice u/s148 has been obtained separately from the Pr.Commissioner of Income Tax as per the provisions of section 151 of the Act.

5. Notice u/s 148 was issued with prior approval of Pr.Commissioner of Income Tax-6 Mumbai."

5. On receipt of above reasons on 9.8.2018, the petitioner filed its objections to the reasons in support of the impugned notice and in particular pointed out that the Assessment Year : 2012-13 Tanuj Properties Pvt. Ltd. (successor to Darshan Tradelink Pvt. Ltd assessee had dealt with a company called "S.V.Electricals Ltd" and not with M/s Nivyah Infrastructure & Telecom Services Ltd. The name of company "S.V.Electricals Ltd" had subsequently changed on 14.2.2012 to M/s Nivyah Infrastructure and Telecom Ltd. It had also pointed out in its objection that during the regular assessment proceedings, details of the petitioner's dealing in scrip namely "S.V.Electricals Ltd" had been submitted during the regular assessment proceedings. The objections primarily proceeds on the basis, that the reasons as recorded, display total non- application of mind while forming reason to believe, this as during the relevant time, there was no company by the name "M/s Nivyah Infrastructure and Telecom Services Ltd" in which the petitioner could have dealt. The petitioner's objections were rejected by the Assessing Officer by passing an order on 28.9.2018. The order on objections, does not deal with the petitioner's primary contentions that the petitioner had not dealt with any company by name "M/s Nivyah Infrastructure and Telecom Services Ltd" during the period relevant to the subject assessment. This order dated 28.9.2018 disposing of the objections is completely silent on the above objections while RNG 5/7 5-wp3398.18 rejecting the petitioner's objections.

6. The respondent's Assessing Officer has filed an affidavit-in reply dated 5.2.2019 of the Assessing Officer. However, the reply does not deal with this objection taken in the petition. Nevertheless, Mr.Suresh Kumar the learned counsel for the revenue submits that all these issues will be subject of consideration during the re-assessment proceedings. Thus, this Court should not interfere at this stage.

7. In the result, the appeal of the assessee stands allowed. Kolkata, the 19th February, 2024.