Calcutta High Court
Principal Commissioner Of Income Tax … vs Pearl Tracom Pvt Ltd on 1 July, 2025
Author: T.S Sivagnanam
Bench: T.S Sivagnanam
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OD - 13
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION [INCOME TAX]
ORIGINAL SIDE
PRESENT :
THE HON'BLE CHIEF JUSTICE T.S SIVAGNANAM
And
THE HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
ITAT/240/2024
IA NO: GA/2/2024
PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL 2 KOLKATA
VS
PEARL TRACOM PVT LTD
For Appellant : Mr. Prithu Dudhoria, Advocate
For Respondent : Mr. Pratyush Jhunjhunwalla, Advocate
Ms. Sretapa Sinha, Advocate
Ms. Sruti Dutta, Advocate
Ms. Sakshi Singhi, Advocate
Heard on : July 1, 2025
Judgment on : July 1, 2025
T.S. SIVAGNANAM, CJ : This appeal by the income tax department has
been filed under Section 260A of the Income Tax Act, 1961 (the Act)
challenging the order dated November 10, 2023 passed by the Income Tax
Appellate Tribunal “B” Bench, Kolkata (the Tribunal) in ITA/375/Kol/2023 for
the assessment year 2012-13.
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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
Income Tax Appellate Tribunal was not justified in law as well as in facts by
rejecting the appeal of the revenue without adjudicating the merits of the
appeal?
b. WHETHER on the facts and in the circumstances of the case and in law,
the order of Learned Income Tax Appellate Tribunal is perverse as it has failed
to adjudicate on the facts that the issue covered in order u/s. 263 was different
from the issues on the basis of which case was selected for re-assessment u/s.
147, since the order u/s. 263 was passed with a direction to verify only the
specific issue of verification of identity, creditworthiness of the shareholders and
also the genuineness of transactions relating to share capital and premium and
not all credits in bank account while the reassessment proceedings u/s.147
was initiated after due verification of information received regarding
accommodation entry of Rs.2,48,50,000/- which was credited to the bank
accounts of the assessee through layering by Sh. Sandeep Roy, Prop. Of Sarika
Trading Co.?
c. WHETHER on the facts and in the circumstances of the case the Learned
Income Tax Appellate Tribunal was not justified in law as well as in facts by
referring to the decision of Hon’ble SC in the case of SM Overseas (P) Ltd. v.
Commissioner of Income Tax reported in 450 ITR I(SC) [07-12-2022], since the
case law referred to by the Learned Income Tax Appellate Tribunal related to
initiation of reassessment proceedings u/s. 147 pending proceedings u/s. 154?”
We have heard Mr. Prithu Dudhoria, learned senior standing counsel for the
appellant/department and Mr. Pratyush Jhunjhunwalla, learned counsel for the
respondent/assessee.
The assessee preferred appeal before the learned Tribunal against the order
passed by the Commissioner of Income Tax (Appeals), Kolkata-21 [CIT(A)] dated
20.3.2023 by which the CIT(A) affirmed the assessment order dated 16.12.2019
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passed under section 147 read with section 143(3) of the Act. A small prelude is
required before we embark upon to exercise and examine the correctness of the
decision of the learned Tribunal, impugned in this appeal. The assessee filed its return
of income for the assessment year under consideration (AY 2012-13) on 6.2.2012
declaring a loss of Rs.74,252/-. The case was selected for scrutiny and an assessment
order was passed under section 143(3) of the Act on 20.3.2015 wherein the entire
share capital raised by the assessee was added and the total income was assessed at
Rs.79,14,03,750/-. To be noted that the assessing officer does not dispute the fact
that the assessee provided the relevant document and explained the transaction apart
from the identity and the creditworthiness of the share applicant and the genuineness
of the transaction. However, it appears that the additions were made on account of
non-compliance of the requirement under section 131 of the Act. While so, the
Commissioner initiated proceedings under section 263 of the Act by passing order
dated 17.10.2016 directing the assessing officer to conduct de novo assessment.
Pursuant to which, notice under section 142(1) was issued on 11.11.2016 and the
assessee responded to the notice, provided details and documents and the directors of
the assessee as well as the share subscribers statement in response to the summons
issued under section 131 of the Act. The assessing officer was satisfied with the
documents and details provided as well as the statements recorded from the directors
of the assessee and the share subscribers and he completed the assessment by an
order dated 30.12.2016 and assessed the total income at Rs.1,17,342/-. Once again,
the Commissioner initiated proceedings under section 263 of the Act being the second
round of revision proceeding and an order was passed on 12.3.2019 setting aside the
assessment order dated 30.12.2016. It is seen that the said order passed under
section 263 dated 12.3.2019 was an ex parte order. The assessee preferred an appeal
before the learned Tribunal in ITA/495/Kol/2022. During the pendency of the said
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appeal the assessing officer issued notices under section 148 of the Act based on
certain information alleged to have been received from DDIT (Investigation), Unit-4(2),
Kolkata through their letter dated 27.2.2019 that the assessee had taken
accommodation entry of Rs.2,48,50,000/- from Sandeep Roy, proprietor of M/s.
Sarika Trading Company. Notices were issued under section 142(1) of the Act and on
15.11.2019 show cause notices were issued by the assessing officer in course of
reassessment proceedings. The assessee filed its return on 1.12.2019 and also filed
the copies of the audited financials and the bank statement during the course of
reassessment proceedings and also requested for the reasons for reopening and
specifically denied that they have not entered into any transaction with Sandeep Roy
or his firm. This could be seen from the communications dated 3.11.2019, 3.12.2019
and 6.12.2019 though reasons were not furnished but taking a queue from what was
extracted in the show cause notice the assessee filed its objection on 9.12.2019 to the
show cause notice and the notice issued under section 142(1) of the Act and
specifically denied the alleged transaction with Sandeep Roy or his firm, M/s. Sarika
Trading Company and submitted that such allegation was not supported by any
document or evidence. While so, an assessment order was passed under section 263
read with section 144 of the Act on 6.12.2019 adding the entire share capital again
and the income was assessed at Rs.79,15,95,340/-. After about ten days by an order
dated 16.12.2019 reassessment order was passed under section 143(3) read with
section 147 of the Act reckoning the income to be Rs.79,15,95,340/- and making an
addition of Rs.2,48,50,000/- as is evident from the above proceedings. The objections
which were filed by the assessee on 9.12.2019 were not disposed of. The assessee
preferred an appeal before the CIT(A), who had called for a remand report and the
assessee also filed a rejoinder to the remand report by their rejoinder dated 28.2.2023.
The learned Tribunal allowed the assessee’s appeal in ITA/495/Kol/2022. By an order
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dated 6.3.2023 the appeal which was preferred by the assessee as against the
reassessment order was dismissed by CIT(A) by order dated 20.3.2023. This order was
put to challenge before the learned Tribunal in ITA/375/Kol/2023 which was allowed
by the learned Tribunal by an order dated 10.11.2023, which is impugned in this
appeal. As against the order passed by the learned Tribunal in ITA/495/Kol/2022
dated 6.3.2023, the revenue preferred appeal before this Court in ITAT/267/2023
which was dismissed by judgment dated 8.1.2024. The relevant part of the judgment
is quoted hereinbelow :
“The short question which falls for consideration in this appeal is whether
the Principal Commissioner of Income Tax was justified in invoking his jurisdiction
under Section 263 of the Act for the second time from the same issue. The learned
Tribunal after carefully going through the facts of the case found that in the second
round of assessment proceeding the assessing officer issued notice under Section
142(1) of the Act and called for complete details about share capital and share
premium received by the assessee company as well as complete details of the
investors. The details were filed to the satisfaction of the assessing officer. That
apart the Tribunal found that the directors of the investor companies personally
appeared before the Assessing officer in response to the summons issued under
Section 131 of the Act and the statement on oath was recorded and the books of
accounts were also verified. Thus the Tribunal was satisfied that complete enquiry
was conducted by the assessing officer when the matter went before him for the
second time pursuant to the order passed under Section 263 of the Act. The
Tribunal in our view rightly held that Principal Commissioner of Income Tax merely
gave directions but did not give any reasons for coming to a conclusion that the
assessment should be revised for the second time. Furthermore, the Tribunal has
noted that assessee no to only filed the complete details in the first round of
assessment and again in the second round of assessment and demonstrated
clearly by producing records that the transactions were genuine. Thus the Tribunal
was satisfied that the view taken by the assessing officer in the second round of
the proceedings was permissible under the law. The Tribunal has also noted
another decision of the Coordinate Bench where the facts appear to be more or less
6identical to the case on hand. Thus on reappreciation of the factual position the
Tribunal has found that it is not the case of non application of mind by assessing
officer nor the case of failure of reappreciation of facts.
Thus the Tribunal on facts rightly granted relief to the assessee. Thus We
find no questions of law much less substantial questions of law arising for
consideration in this appeal. ”
The above dates and events will clearly show that the assessee has been
exposed to multiple proceedings for the very same assessment. Be that as it may,
when we carefully go through the materials placed on record as well as the reasoning
given by the learned Tribunal we find that the decision taken by the learned Tribunal
was fully justified in the facts and circumstances of the case. We support this
conclusion with the following reasons.
As noted above, the order passed pursuant to the second revisional order under
section 263 has been quashed by the learned Tribunal which has been upheld by this
Court. The reasons to believe for reopening the assessment has been recorded by the
assessing officer and on going through it we find that the name of the assessee does
not feature in the body of the reasons but the assessee has been shown as a
beneficiary in the reasons for reopening in paragraph ‘details of enquiries made’. There
is no specific allegation as against the assessee and as to how layering of funds had
taken place. This aspect of the matter was considered by the learned Tribunal and
found that the assessing officer never disclosed the details of layers through which the
alleged money has been reached into bank account of the assessee nor any
information was shared in respect of any documentary evidence for the alleged
transaction of accommodation entry for which the assessee was stated to be a
beneficiary. This finding of the learned Tribunal is well justified. Apart from that we
also find that no specific reasons have been mentioned by the assessing officer as to
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the nature of the transaction of accommodation entry qua the assessee and this
aspect was examined by the learned Tribunal and it was observed that the assessing
officer does not disclosed as to whether it is an income or expenses or an allowance or
share capital or loan, etc. It is not in dispute that the assessee has produced the
books of accounts and the bank statement to demonstrate that there was no
transaction with the alleged accommodation entry provider, Mr. Sandeep Roy,
proprietor of M/s. Sarika Trading Co. The factual aspect of the matter as regards the
share capital and the share premium was examined by the assessing officer in detail
and the documents and details furnished by the assessee were accepted while passing
the assessment order dated 30.12.2016. The attempt to revise the said order by way of
a second revisional order under section 263 proved futile as the assessee was
successful before the Tribunal as well as before this Court. Thus, the learned Tribunal
on considering the factual position had rightly granted relief to the assessee. At this
juncture, it would be of relevance to take note of the decision of this Court in the case
of Principal Commissioner of Income Tax-18, Kolkata vs. Prasant Desai, 2025(6) TMI
984-Calcutta High Court, wherein also there was an allegation of layering. In fact the
case on hand is much stronger to that of the case of the assessee Prasant Desai in the
above decision. The court took note of the factual position and also the decision of the
Hon’ble Supreme Court in Income-tax Officer vs. Lakhmani Mewal Das, reported in
(1976) 103 ITR 437 (SC) wherein the Hon’ble Supreme Court held that the reasons for
the formation of the belief must have a rational connection with or relevant bearing on
the formation of the belief. Rational connection postulates that there must be a direct
nexus or live link between the material coming to the notice of the Income-tax Officer
and the formation of his belief that there has been escapement of the income of the
assessee from assessment in the particular year because of his failure to disclose fully
and truly all material facts.
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Thus, the Tribunal after examining the factual position had rightly granted
relief to the assessee by passing the impugned order.
For the above reasons, we find no question of law much less substantial
question of law arises for consideration in this appeal. Accordingly, the appeal fails
and is dismissed.
Consequently, the application, GA/2/2024 stands disposed of.
. (T.S SIVAGNANAM)
CHIEF JUSTICE
I agree.
(CHAITALI CHATTERJEE (DAS), J.)
S.Das/Pkd.
AR[CR]