Case Law Details
Neena Commercial Pvt. Ltd. Vs ACIT (OSD) (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT) Kolkata has ruled in favor of Neena Commercial Pvt. Ltd., quashing the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961. The case arose after the Assessing Officer (AO) reopened the assessment based on information alleging that the assessee had received accommodation entries amounting to ₹15 lakh. However, after examining the details, no addition was made regarding this amount. Instead, the AO made an unrelated addition of ₹6.38 crore related to the sale of shares of paper companies. The tribunal held that since no addition was made for the specific reason recorded for reopening, the AO lacked jurisdiction to introduce new additions.
The ITAT relied on several judicial precedents, including Jute Corporation of India Ltd. v. CIT (187 ITR 688) and National Thermal Power Co. Ltd. v. CIT (229 ITR 383), which allow assessees to raise legal issues at any appellate stage. Additionally, the tribunal cited CIT v. Infinity Infotech Parks Ltd. (Calcutta High Court), which followed CIT v. Jet Airways (Bombay High Court) and Ranbaxy Laboratories Ltd. v. CIT (Delhi High Court), establishing that if reassessment does not include the originally alleged escaped income, the AO cannot add new income independently.
The tribunal also noted that the AO’s recorded reasons were vague and ambiguous, lacking specifics such as the source of alleged accommodation entries. This was deemed insufficient to justify reopening, aligning with the Delhi High Court’s decision in CIT v. Insecticides (India) Ltd. (2013) 38 com 403, which invalidated reassessment based on incomplete reasoning. The ITAT concluded that the reassessment was invalid, emphasizing the importance of clear reasoning and jurisdictional limits in reopening assessments.
With this ruling, the ITAT Kolkata reaffirmed that reassessment proceedings must strictly adhere to procedural and legal requirements. Any deviation, including failure to justify reopening or jurisdictional overreach, can render the assessment invalid. Consequently, the appeal was allowed, and the reassessment was quashed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 09.10.2023 for the AY 2010-11.
2. At the outset, there is a delay of 4 days in filing the appeal. After hearing rival contentions and after considering the explanation offered by the assessee in the condonation application along with affidavit ,we note that the same is for sufficient and genuine reasons and can not be attributed to the assessee in any manner. Accordingly, the delay for 4 days is condoned and appeal is taken up for adjudication.
3. At the time of hearing, the assessee raised additional ground which is extracted below:
“That the ld. CIT(A) erred in law and on facts in upholding the order of the ld. AO wherein no addition has been made for the reason recoded u/s 148(2) of the Act and consequently, he ld. AO has no jurisdiction to make any other addition.”
4. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised an additional ground of appeal challenging the jurisdiction of the AO to make addition. In our opinion the issued raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts are required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities. The case of the assessee is squarely coverd by the decisions of the Apex court in the case of i) Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 , ii) National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 and also by the decision of Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal). Therefore we are inclined to admit the same for adjudication.
5. The facts in brief are that the assessee filed return of income on 09.2010. Thereafter, the ld. AO received the information from Director of Income Tax (Investigation), Unit-1, Ward-1(2), which states that huge cash was deposited in the different branches of ICICI in Kolkata and thereafter transferred to the different bank accounts maintained by Neena Commercial Pvt. Ltd. The information also stated that the assessee M/s Neena Commercial Pvt. Ltd. is a beneficiary company and received accommodation entry to the tune of ₹15 lac. Accordingly, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act after recording the reasons u/s 148(2) of the Act. The assessee compomplied with the said notice by submitting that the return filed u/s 139(1) of the Act on 29.09.2010, may be treated as return filed in compliance to notice u/s 148 of the Act. Thereafter, in the assessment proceedings, assessee filed all the details/information which were called for by the ld. AO and finally no addition was made in respect of Rs.15 lacs alleged to be accommodation entries taken by the assessee from Violent Tradelink Pvt. Ltd. which was the only issue in the reason recorded u/s 148 (2) of the Act though in the reasons recorded the details as to from whom the accommodation entry was received. However, the AO made the addition of ₹6,38,81,102/- on account of sale of shares of paper companies as unexplained cash credit.
6. The ld. AR vehemently submitted before us that the case of the assessee was reopened u/s 147 of the Act, by issuing notice u/s 148 of the Act, after obtaining the approval of the competent authority. The ld. AR submitted that the reasons were recorded u/s 148(2) of the Act, wherein the ld. AO has noted that the assessee is a beneficiary of accommodation entry of ₹15 lacs without mentioning the other details of the transactions such as to from whom it was received. The ld. AR submitted that in the assessment framed by the ld. AO u/s 143(3) read with section 147 of the Act dated 30.12.2017, no addition was made in respect of the said item of Rs. 15.00 lacs being stated to be accommodation entry which was subject matter of the reasons recorded u/s 148(2) of the Act. The ld. AR contended that once, the ld. AO has accepted the contention of the assessee as regards the issues mentioned in the reasons recorded for the income stated to have escaped assessment, then ld. AO has no jurisdiction in terms of explanation 3 of Section 147 of Act, to make any addition in respect of that income found during the course of assessment proceedings which according to the ld. AO has escaped assessment. The Ld. AR relied on the decision of Hon’ble jurisdictional High Court decision in the case of CIT Vs. M/s. Infinity Infotech Parks Ltd. in GA No. 1736 of 2014 dated 15.11.2022 and the decision of Coordinate Bench in the case of Ganesh Steel & Alloys in ITA No. 929/Kol/2023 dated 11.06.2024. In both the above decision the issue was decided in favour of the assessee after considering the following decisions namely; Ranbaxy Laboratories Ltd. Vs. CIT[2011] 12 taxmann.com 74 (Delhi), CIT Vs. Jet Airways (I) Ltd.[2021] 133 taxmann.com 233 (Bom).
7. Second argument of the ld. AR was that the assessment framed was based upon the reasons recorded u/s 148(2) of the Act which are totally silent about the nature of bogus entries and persons with whom the transactions have taken place due to which the income of the assessee have escaped assessment. The AR argued that the AO has recorded a very vague and ambiguous reasons which could not be allowed to unsettle a settled assessment. The ld AR argued that the information/materials on the basis of which the assessment was re-opened were not sufficient to re-open the assessment and therefore the re-opening has been done invalidly and may be quashed. The ld AR in defense of his arguments relied on the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (2013) 38 com 403 (Delhi).The ld. AR prayed that the case of the assessee may kindly be allowed on additional ground by quashing the assessment.
8. The ld. DR relied heavily on the orders of the lower authorities and submitting that the issue was never raised before the lower authorities and being raised by first time therefore, may be restored to the file of the ld. AO or ld. CIT (A).
9. We have heard the rival contentions and perused the materials available on record and observe that the AO has re-opened the assessment u/s 147 read with section 148 of the Act after recording reasons to believe qua the income which has escaped assessment. We further note that the AO having convinced after examining the evidences filed by the assessee during assessment proceedings did not make any addition while framing the assessment in respect of funds of Rs. 15.00 Lacs alleged to be received from shell company Violent Tradelink Pvt. Ltd. which was the subject matter of the reasons recorded. The AO however made addition of Rs. 6,38,81,102/- on account of sale of shares in paper companies. We note that the sale of shares in paper companies was not part of the reasons recorded u/s 148(2) of the Act. Therefore, when no addition is made for the escaped income as per the reasons recorded , then the AO has no jurisdiction to make any other addition in respect of item of income which has escaped assessment as discovered by the AO during the assessment. The case of the assessee finds support from the decision of Hon’ble jurisdictional High Court in the case of M/s. Infinity Infotech Parks Ltd. (supra) wherein the Hon’ble Calcutta High Court has held by following the decision of Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (supra) and also Hon’ble Delhi High Court decision in the case of Ranbaxy Laboratories Vs. CIT (supra) that ,where the income stated to be escaped by the AO which was the foundation for recording of reasons to believe, is not added in the assessment framed and reassessment order u/s. 147, then it is not opened to the AO to independently assess any other income, which comes to his notice subsequently during the course of re-assessment proceedings. The similar ratio has been laid down by the Coordinate Bench in Ganesh Steel & Alloys (supra) after following the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (supra).
10. We also note that the reasons were recorded by the AO in a very scanty and vague manner without mentioning the details of entire transactions such as from whom the accommodation entries were received. In our opinion considering the said vagueness in the reasons, the re-opening has been invalidly made as there was no sufficient information /materials before the AO. Therefore, we hold that the assessment has been re-opened invalidly without there being sufficient information or materials and is based upon vague and scanty reasons. The case of the assessee is squarely covered by CIT vs. Insecticides (India) Ltd. (supra)
11. Accordingly, we are inclined quash the re-opening of assessment.
12. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15.01.2025.
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