PCIT Vs Event Developers Pvt. Ltd. (Calcutta High Court)
Calcutta High Court has overturned a decision by the Income Tax Appellate Tribunal (ITAT), ruling in favor of the revenue in the case of PCIT Vs Event Developers Pvt. Ltd. The court held that the reopening of an assessment under Sections 143 and 147 of the Income Tax Act, 1961, was valid when a company received a cash credit from a suspected “shell company” providing bogus Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG).
The appeal, filed by the revenue under Section 260A of the Income Tax Act, 1961, challenged an order dated May 3, 2024, passed by the ITAT “A” Bench, Kolkata, concerning the assessment year 2010-11. The core of the dispute revolved around whether the Assessing Officer (AO) had sufficient objective satisfaction and non-vague reasons to reopen the assessment.
Background of the Case: The case stemmed from a reassessment order dated December 15, 2017, issued by the Assessing Officer. The basis for reopening was information revealing that the assessee, Event Developers Pvt. Ltd., had received a credit of Rs. 1 Crore in its bank account from M/s. Rupak Developers Pvt. Ltd. during the financial year 2009-10. Subsequent investigation, including a survey operation carried out by the Mumbai Directorate (Investigation) on June 9, 2009, in the case of M/s. Rupak Developers Pvt. Ltd., indicated that the latter company conducted no business activities and was primarily used for providing “accommodation entries” to beneficiaries in the form of bogus LTCG/STCG on the sale of penny stock shares.
