Kedia Carbon Pvt. Ltd. Vs DCIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata, allowed the assessee’s appeal by quashing the reopening of the assessment under Sections 147 and 148 of the Income-tax Act for Assessment Year 2009-10. The Tribunal first admitted the additional legal grounds challenging the jurisdiction of the Assessing Officer (AO), holding that they raised purely legal issues requiring no further factual investigation and could be raised for the first time before the appellate authority.
The assessee’s case arose from the reopening of its completed assessment following a search conducted on the Kedia group. The AO reopened the assessment on the basis that the assessee had received share capital and share premium amounting to ₹15,11,35,000 through alleged accommodation entries from shell companies. The reassessment ultimately added the entire amount as unexplained cash credit under Section 68, and the Commissioner of Income-tax (Appeals) affirmed the addition on merits.
Before the Tribunal, the assessee challenged the validity of the reopening itself. It contended that the AO had acted solely on information received from the Investigation Wing without independently verifying the facts or applying his own mind. The assessee submitted that the reasons recorded for reopening contained several factual errors. According to the audited financial statements, the company had issued 15,90,000 equity shares of ₹10 each and had collected only ₹1,59,00,000, whereas the AO incorrectly recorded that shares were issued at a premium of ₹90 per share and referred to amounts that did not exist in the books of account. The assessee also argued that certain companies named in the reasons had never been allotted shares. It further submitted that the statements of alleged entry operators did not establish that they had provided accommodation entries to the assessee. Relying on judicial precedents, the assessee argued that reopening based on incorrect facts and borrowed satisfaction was invalid.
