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2026 Supreme(Online)(ITAT) 7441
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI “B” BENCH: NEW DELHI
BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER &
SHRI MANISH AGARWAL, ACCOUNTANT MEMBER
ITA No.1780/Del/2023
[Assessment Year : 2011-12]
Important Points
Subject
Tax Law - Direct Tax - Income Tax
Act Referred
Headnote
Facts of the case:
The assessee, a private limited company, challenged a reassessment order. The Assessing Officer had reopened the assessment under S. 148 based on information from the Investigation Wing, alleging that the assessee received accommodation entries of unsecured loans totaling INR 4.85 crores. However, in the assessment, the Assessing Officer arrived at different figures (INR 6.00 crores) and made additions under S. 68. The assessee challenged the reopening, asserting that the reasons recorded were based on 'borrowed satisfaction' and lacked independent verification.
Findings of Court:
The Court observed that the Assessing Officer failed to apply his mind independently and merely relied on external information without satisfying the requirement of forming a belief based on tangible material showing a live link to the escapement of income. The incorrect factual basis of the reasons recorded further proved a lack of due diligence.
Issues: Whether the reassessment proceedings initiated under S. 147/148 were validly sustainable given that the reasons recorded were based on 'borrowed satisfaction' and incorrect factual information.
Ratio Decidendi: The formation of the 'reason to believe' is a quasi-judicial function that requires the Assessing Officer to independently evaluate tangible material. Relying solely on external reports without verification, especially when the information provided is factually incorrect, fails the test of 'live link' and constitutes 'borrowed satisfaction', rendering the initiation of proceedings invalid.
Result: Appeal allowed; reassessment order set aside.
ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by assessee against the order dated 26.05.2023 of Ld. Commissioner of Income Tax (A), Lucknow-3 [“Ld. CIT(A)”] in Appeal No. CIT(A) Lucknow-3/10509/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 30.12.2018 passed u/s 147 r.w.s. 143(3) of the Act for Assessment Year 2011-12.
2. The assessee is a private limited company and e-filed its return of income declaring total income of INR 43,504/-. The case of the assessee was re-opened in terms of notice issued u/s 148 dated 30.03.2018. As per the reasons recorded, the AO on the basis of information supplied by the Investigation Wing Kolkata recorded the satisfaction that assessee has received unsecured loans from two companies namely M/s Gemini Vinimay Pvt. Ltd. and M/s Arham Vyapar Pvt. Ltd. which are paper companies and managed from a small office and therefore, the total unsecured loans taken from these two companies amounting to INR 4,85,00,000/- during the previous year was held as introduced by the assessee out of its undisclosed income and thus has escaped assessment. In response to notice u/s 148 of the Act, assessee filed return of income on 16.11.2018, declaring same income as was declared in the return of income filed u/s 139(1) of the Act. After considering the submission filed by the assessee, AO passed the reassessment order wherein it is alleged that the assessee has obtained accommodation entry of unsecured loan of INR 6.00 crores and by holding the same as unexplained cash credit, addition was made u/s 68 of the Act.
3. Against the said order, the assessee has filed an appeal before Ld. CIT(A) who dismissed the appeal of the assessee.
4. Aggrieved by the said order, assessee is in appeal before the Tribunal wherein various grounds of appeal were raised. During the course of hearing vide letter dated 20.06.2025, the assessee has raised one additional ground of appeal which reads as under:
“That the ld. AO has erred in law as well as on the facts in reopening the case under section 148 of the Income Tax Act based on borrowed satisfaction and wrong facts.”
5. Ld. AR submits that additional ground of appeal now taken is purely legal in nature and goes to the root of the matter and requires no investigation or verification thus, the same be admitted for adjudication. He placed reliance on the judgement of hon’ble Supreme Court in the case of NTPC Ltd. vs. CIT reported in (1998) 229 ITR 0383 (SC) and prayed for the admission of additional ground of appeal.
6. On the other hand, Ld. Sr. DR for the Revenue submits that additional ground of appeal require verification on the part of the AO therefore, the same should not be admitted at this stage.
7. After considering the submissions and perused the additional ground of appeal taken, we find that the assessee has challenged the reopening of assessment under section 148 of the Act as the reason recorded are based on borrowed satisfaction and no enquiry was made prior to reopening the case of the assessee. IN support the assessee filed the copy of the reason recorded before us thus no further fact is required to be verified from the AO. Therefore, by respectfully following the judgement of Hon’ble Supreme Court as relied upon by the assessee, additional ground of appeal taken by the assessee is admitted for adjudication.
8. First, we take additional Ground of appeal raised by the assessee.
9. Before us ld. AR for the assessee submits that the AO in the reason recorded the satisfaction that assessee received unsecured loans of Rupees 2.85 crores from M/s Gemini Vinimay Private Limited and of Rupees 2.00 crores from M/s Arham Vyapar Pvt. Ltd. whereas actually assessee received loan of Rupees 3.75 crores from M/s Gemini Vinimay Private Limited and of Rupees 2.25 crores from M/s Arham Vyapar Pvt. Ltd. This observations of the assessee are based on the information provided by the Investigation Wing, Kolkata which was avail
