Reopening u/s 147 invalid without independent application of mind, based on borrowed satisfaction and factual errors in reversal trades allegation.

आदेश/ORDER

PER VIJAY PAL RAO, VICE PRESIDENT :

This appeal ITA No.1077/Hyd/2025 by the Revenue and Cross Objection No.26/Hyd./2025 by the Assessee are directed against the Order dated 15.04.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2013-2014.

ITA.No.1077/Hyd./2025 - A.Y. 2013-2014 [Revenue Appeal]:

2. The Revenue has raised the following grounds of the appeal:

1. “Whether on the facts and circumstances of the case and in law the order of the Learned CIT(A) erred in holding that the addition on account of cash commission expense of Rs.2,93,31,381/ was made solely on suspicion by ignoring the facts brought on record establishing manipulation of derivative transactions as part of colourable device to generate fictitious gain with the aim to evade taxes due.

2. Whether on the facts and circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition towards commission expenses by overlooking the fact that the entire transactions were stage managed with the object to facilitate the assessee to plough back its unaccounted income in the form of non-genuine profit?

3. Whether in the facts and circumstances of the case, the Learned CIT(A) was right in ignoring the fact that tax planning may be legitimate provided if it is within the framework of law, as colourable devices cannot be part of tax planning which cannot be encouraged ?

4. Whether on the facts and circumstances of the case, the Learned CIT(A) erred in deleting the disallowance of commission of Rs.2,93,31,831/- purportedly incurred by the assessee towards payment to brokers who allegedly entered into the derivatives transactions at the behest of the assessee overlooking the fact that the entire transactions were stage managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious gains of Rs.1,49,86,825/- thereby giving rise to the view of flaw in the decision-making process.

5. Any other ground that may be urged at the time of hearing.” Cross Objection No.26/Hyd./2025 – A.Y. 2013-2014 [Assessee]:

3. The assessee in the Cross Objection has raised the following grounds:

“1. (i) For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have held that the proceedings initiated u/s 147 was bad in law and therefore, the impugned assessment order is liable to be quashed.

(ii) For that on the facts and in the circumstances of the case, there was no income escaping assessment in as much as the impugned sum set out in the recorded reasons was already forming part of the taxable income and there was no valid basis to form reasonable belief that the assessee had incurred commission of Rs.2,93,31,831 and in that view of the matter, the condition precedent for reopening the assessment having not been met, the assumption of jurisdiction u/s 148 ought to be held as bad in law.

(iii) For that on the facts and in the circumstances of the case, there was no failure on the part of the assessee to fully and truly disclose the primary facts in the course of assessment and therefore, the AO having failed to fulfil the condition set out in the first proviso to Section 147 of the Act, the Ld. CIT(A) ought to have declared the reopening to be void ab initio.

(iv) For that on the facts and in the circumstances of the case, the reasons recorded for reopening the assessment was based on borrowed satisfaction and the AO did not objectively apply his own mind to the purported information received by him and therefore, the pr