Calcutta High Court
Principal Commissioner Of Income Tax 2 vs M/S Alosha Marketing Private Limited on 16 June, 2025
Author: T.S Sivagnanam
Bench: T.S Sivagnanam
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IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION [INICOME TAX]
ORIGINAL SIDE
ITAT/296/2024
IA NO: GA/1/2024
PRINCIPAL COMMISSIONER OF INCOME TAX 2, KOLKATA
VS
M/S ALOSHA MARKETING PRIVATE LIMITED
BEFORE :
THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM
-A N D-
HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
DATE : 16th June, 2025.
Mr. Tilak Mitra, Adv.
Mr. Soumen Bhattacharjee, Adv.
Mr. Ankan Das, Adv.
Ms. Shradhya Ghosh, Adv. ...for appellant.
Mr. Pratyush Jhunjhunwalla, Adv.
Mr. N. K. Saini, Adv.
Mr. S. Datta, Adv. ...for respondent.
The Court : This appeal by the Income Tax department has been filed
under Section 260A of the Income Tax Act, 1961 (the Act) challenging the order
passed by the Income Tax Appellate Tribunal "SMC" Bench, Kolkata (the
Tribunal) in ITA/356/Kol/2024 for the assessment year 2011-12.
The revenue has raised the following substantial questions of law for
consideration :
"a. Whether the learned ITAT has committed substantial error in law in holding
that the reopening is bade in law and hence additions are not sustainable, when
the assessing officer has sufficient cause or justification so assume the
jurisdiction for re-opening ?
b. Whether the learned ITAT has committed substantial error in law to delete the
additions made under section 68 of the said Act to the tune of Rs.29,90,203/-,
despite the fact that the identity and creditworthiness of the creditors as well as
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genuineness of the transactions could not be established by the assessee relying
on the judgment in the matter of PCIT vs. Swati Bajaj 446 ITR 56 (Cal) ?
c. Whether the learned ITAT has committed substantial error in law in giving the
verdict in favour of the assessee where the issue of the accommodation entries is
the primary ingredient of this case and the same is covered by clause (h) of
Exceptions laid down under para 3.1 of the CBDT Circular No.5/2024 vide
F.No.279/Misc-142/2007-ITJ(Pt), dated 15th of March, 2024 ?"
We have heard Mr. Tilak Mitra, learned senior standing counsel assisted by Mr.
Soumen Bhattacharjee for the appellant/department and Mr. Pratyush
Jhunjhunwalla, learned counsel for the respondent/assessee.
The department is aggrieved by the impugned order passed by the Tribunal by
which the learned Tribunal allowed the assessee's appeal and set aside the order
passed by the Commissioner of Income Tax (Appeals) [CIT(A)] dated 29.1.2024. By the
said order, the CIT(A) dismissed the assessee's appeal and affirmed the addition made
by the assessing officer in the assessment order dated 20.12.2024 under section
143(3) read with section 147 of the Act. The issue which fell for consideration before
the Tribunal was whether the reopening of the assessment under section 147 was
legally sustainable. After elaborate hearing the learned advocates for the parties and
carefully perusing the materials placed on record we find that the reopening was done
by issuing notice under section 148 of the Act dated 28.3.2016. The reasons
mentioned for reopening as quoted hereunder:
"The Directorate of Income Tax (Inv), Koi had conducted extensive
investigation in the matter of tax evasion by some individuals/entities by
showing income from LTCG, which is actually bogus, perpetrated through
accommodation entry operators. In the entire scenario, it is found that the
promoters of the penny stocks, the share brokers and the entry operators are
involved in this business of bogus LTCG by rigging the prices.
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The assessee is found to have enjoyed bogus LTCG of Rs.547749/- in the
FY 2010-11 by transacting in the penny stock, 'JMD Telefilm'. In just reverse
procedure, the assessee is learnt to have booked STCL of Rs.3531930/- from the
same scrip in the same year.
In view of this, I have reason to believe that an income of Rs.4079679/-
chargeable to tax has escaped assessment within the meaning of sec 147."
As could be seen from the above, the first paragraph of the reasons is a general
statement wherein the Directorate of Income Tax (Investigation) upon conducting
extensive investigation in the matter of tax evasion found that some
individuals/entities were showing income from LTCG, which is actually bogus,
perpetrated through accommodation entry operators. Further the report states that it
is found that promoters of penny stocks, the share brokers and entry operators are
involved in this business of bogus LTCG by rigging the prices. Thus, it is evident that
in the report of the Directorate of Income Tax (Investigation) the name of the
respondent/assessee does not feature. Therefore, we are well justified in holding that
the report is a general statement.
In the second paragraph of the reasons for reopening it is mentioned that the
assessee found to have enjoyed bogus LTCG by transacting in penny stocks. The word
'bogus' which is found in paragraph 2 of the reasons for reopening should have been
used after independently considering the assessee's return of income and other
details. This is required to be done because before issuing notice under section 148 of
the Act, the assessing officer must have either reasons to believe by reason of omission
or failure on the part of the assessee to make a return under section 139 for any
assessment year to the Income Tax Officer or to disclose fully and truly all material
facts necessary for his assessment for that year, income chargeable to tax has escaped
assessment for any assessment order. This aspect of the matter is conspicuously
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absent in the reasons which were recorded for reopening the assessment. The second
error committed by the assessing officer is disposing the objection raised by the
assessee for the reopening of the assessment and by submitting a reply to the show
cause notice dated 28.3.2016.
It is being a mandate under law as held by the Hon'ble Supreme Court, in the
case of GKN Driveshaft (India) Ltd. vs. ITO & Ors. ;(2003) 259 ITR 19 (SC) goes to the
route of the matter rendering the reopening of the assessment as bad in law. At this
juncture it will be beneficial to note the decision of the Hon'ble Supreme Court in the
case of Income Tax Officer vs. Lakhmani Mewal Das wherein the Hon'ble Supreme
Court held that reasons for 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. It was further
pointed out that it is to be borne in mind that it is not any and every material,
howsoever vague and indefinite or distant, remote and farfetched which would warrant
the formation of belief relating to escapement of income of the assessee from
assessment.
The learned advocate appearing for the respondent/assessee also placed
reliance on the decision of this court in the case of Principal Commissioner of Income
Tax - 5, Kolkata vs. Shri Sanjay Mehta; 2024(3) TMI - 1014, Principal Commissioner
of Income Tax, Asansol vs. Eastern Coalfields Ltd; 2022(1) TMI 1468, and Principal
Commissioner of Income Tax-18, Kolkata vs. Prasant Desai; 2025(6) TMI 984.
The above decisions also would support the case of the assessee. That apart,
the tribunal has considered the factual position in paragraph 10 of the impugned
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order. After going through the computation of income as well as the objections raised
by the assessee against initiation of proceedings under section 147 of the Act and
observed that the assessee has not earned any long term capital gain during the year.
Further, there is no exemption claimed under section 10(38) of the Act at
Rs.5,47,749/- in the income tax return. Furthermore, the learned Tribunal perused
the profit and loss account, net income from sale of investment and found the same
only to be Rs.12,500/-. Further, with regard to short term capital loss which was
Rs.35,31,930/-, it was brought to the notice of the tribunal that during the year the
assessee purchased 30,000 shares of JMD Telefilm for consideration of
Rs.35,36,867/- and the same was sold at Rs.5,46,663/- incurring a loss of
Rs.29,90,203/-. Thus, on going through the profit and loss account the tribunal found
that assessee has not shown any long term/short term capital gain/loss and
purchases and sales of such shares are treated as stock in trade. Hence, the loss in
such scrips were claimed as business loss and not capital loss.
Thus, we find that apart from the jurisdictional error which was pointed out by
the learned Tribunal, the factual decision has also been discussed by the learned
Tribunal. Thus, we find no ground to interfere with the impugned order. Accordingly,
the appeal fails and the same is dismissed. The questions of law are answered against
the revenue.
Consequently, the application, GA/1/2024 stands disposed of.
.
(T.S. SIVAGNANAM)
CHIEF JUSTICE
(CHAITALI CHATTERJEE (DAS), J.)
Pkd./S.Das.
AR[CR]
