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2025 Supreme(Online)(Cal) 2857
CALCUTTA HIGH COURT
T.S SIVAGNANAM, CJ, BIVAS PATTANAYAK, J
PRINCIPAL COMMISSIONER OF INCOME TAX-2, KOLKATA – Appellant
Versus
GILLANDERS ARBUTHNOT AND CO. LTD. – Respondent
ITAT/67/2025 | IA NO: GA/2/2025
For the Appellants/Petitioners: Mr. Amit Sharma
For the Respondents: Mr. Pratyush Jhunjhunwala, Ms. Sretapa Sinha
The Tribunal's ruling that reopening of an income tax assessment was unjustified due to lack of evidence for income escaping taxation.
Headnote:(A) Income Tax Act, 1961 - Section 260A - Reopening of assessment - Validity - Revenue challenged the Tribunal's decision quashing the reopening of the assessment based on new tangible evidence - The Tribunal found that the books of accounts were not rejected, and no substantial questions of law arose - Appeal dismissed. (Paras 4, 14)
(B) Reopening of Assessment - Circumstances under which reopening can be justified - The Tribunal held that the reopening of assessment was unjustified as the documents provided by the assessee were ignored and no substantial evidence of income escaping assessment was established. (Paras 10, 11)
Facts of the case:
The assessee's income was assessed as nil initially; however, subsequent reopening of assessment by the Assessing Officer was based on a 'suspicious transaction report' which was contested. The Tribunal allowed the appeal, concluding that reopening was unlawful due to the lack of merit in the AO's claims.
Findings of Court:
The reopening of the assessment was unjustified as the books of accounts had not been rejected, and the Tribunal's decision was upheld. The appeal is without merit.
Issues: Whether the Tribunal was justified in quashing the reopening of the assessment based on previously recorded transactions and whether proper consideration was given to the evidence in the matter.
Ratio Decidendi: The Tribunal recognized the lack of justification in the reopening of assessment due to the absence of rejection of the documents and concluded that the transactions were valid.
Result: Appeal dismissed.
HON'BLE JUSTICE BIVAS PATTANAYAK DATE : 8th July, 2025.
Mr. Amit Sharma, Adv.
…for appellant Mr. Pratyush Jhunjhunwala, Adv.
Ms. Sretapa Sinha, Adv.
…for respondent.
The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated May 3, 2024 passed by the Income Tax Appellate Tribunal “C” Bench, Kolkata (the Tribunal)
in ITA /493/Kol/2023 for the assessment year 2009-10.
The revenue has raised the following substantial questions of law for consideration :
a) Whether on the facts and in the circumstances of the case, the Learned Tribunal was justified in law to quash the reopening of assessment on account of lack of reason to believe that the income has escaped assessment ignoring the findings of the Assessing Officer based on information being set of fresh and new tangible evidence?
b) Whether on the facts and in the circumstances of the case, the Learned Tribunal was justified in law to hold the reopening of assessment as invalid due to change of opinion since the recorded transactions in books were already subjected to scrutiny despite the fact that the reopening was initiated on the basis of new information received from ITO (Inv) much after the completion of regular assessment wherefrom the transactions in question were found to be bogus in nature?
c) Whether on the facts and in the circumstances of the case, the Learned Tribunal was justified in law to quash the reassessment proceeding without appreciating and considering the fact that the assessee had delved into fictitious and suspicious transaction failing thereby to establish the genuineness of the transaction?
We have heard Mr. Amit Sharma, learned standing counsel appearing for the appellant/revenue and Mr. Pratyush Jhunjhunwala, learned counsel appearing for the respondent/assessee.
The short issue which falls for consideration is whether the reopening of the assessment was validly done and whether the learned Tribunal was justified in allowing the assessee’s appeal and setting aside the reopening of the assessment. The assessee during the year under consideration had made purchases of cotton from M/s. S.R. Sales Corporation, located in Haryana. The assessee filed a return of income showing total income of Nil. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny under section 143(2) and notice under section 143(1) was issued. In response to the notice the assessee was represented by their authorised representative and appeared from time to time before the Assessing Officer along with books of account and other details as called for. The Assessing Officer completed the assessment under section 143(3) by order dated 28th December, 2012 accepting the submissions of the assessee. Subsequently, notice was issued for reopening the assessment.
As could be seen from the reasons for issuance of notice under section 148, the Assessing Officer relied upon a report termed as ‘suspicious transaction report’ in the case of M/s. S. R. Sales Corporation and based on that the Assessing Officer opined that he has reason to believe that income of the assessee chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. The assessee submitted a detailed reply to the notice proposing to reopen the assessment. However, the reply did not find favour with the Assessing Officer and the objections were rejected and assessment was reopened and completed by order dated 29th December, 2016 and added Rs.99,35,000/- to the assessed income of the assessee company.
The assessee preferred appeal before the Commissioner of Income Tax (Appeals), National Faceless Assessment Centre (NFAC), Delhi, which was dismissed by an order dated 29th December, 2016. Aggrieved by the same the assessee preferred appeal before the learned Tribunal which has been allowed by the impugned order. The first aspect to be considered is whether the reopening of the assessment for
