ABHISHEK TAJRAJ DOSHI,MUMBAI vs. DY CIT CIRCLE 19(1), MUMBAI

This appeal by the assessee is directed against the order dated 20.09.2025 passed by the National Faceless Appeal Centre, Delhi [hereinafter referred to as the “Ld. CIT(A)”] under section 250 of the Income-tax Act, 1961 (“the Act”), arising from the assessment order dated 28.03.2022 passed under section 147 read with sections 144 and 144B of the Act for the assessment year 2015-16.

The assessee has raised the following grounds of appeal:

The brief facts are that the assessee, an individual, filed his return of income on 31.03.2016 declaring total income of Rs.34,15,480. The return was selected for complete scrutiny under CASS and the assessment was completed under section 143(3) of the Act on 27.12.2017 determining total income at Rs.5,29,54,790. In the said assessment, the Assessing Officer made an addition of Rs.4,85,67,955 under section 68 in respect of sale proceeds of shares of M/s Parag Shilpa Investments Ltd. and a further addition of Rs.9,71,359, being two per cent of the said amount, towards alleged commission.

Thereafter, on a perusal of the assessment record and the capital account, the Assessing Officer noticed that the assessee had credited gifts aggregating to Rs.6 crore, stated to have been received equally from his father, Shri Tejraj Doshi, and his mother, Smt. Sheela Doshi. According to the reasons recorded, the net transfers reflected in the bank accounts from the parents were Rs.2,14,42,060 and Rs.1,78,35,000 respectively, aggregating to Rs.3,92,77,060. The 3 balance of Rs.2,07,22,940 was considered unexplained. Notice under section 148 was consequently issued on 31.03.2021. The assessee filed a return in response on 07.05.2021 declaring the same income as in the original return.

In the reassessment proceedings, the Assessing Officer examined the bank accounts of the assessee and his parents. He observed that several amounts were first transferred from the assessee, his family members or related concerns to the parents and were thereafter transferred to the assessee; that the accounts of the parents were left with nominal balances; and that no gift deed or satisfactory evidence establishing the independent source and genuineness of the gifts was furnished. He accordingly treated the entire amount of Rs.6 crore as unexplained credit under section 68. While computing the reassessed income, however, the Assessing Officer commenced with the returned income of Rs.34,15,480 and, after making the addition of Rs.6 crore, determined the total income at Rs.6,34,15,480. He did not commence the computation from, or otherwise reconcile it with, the total income of Rs.5,29,54,790 already assessed under section 143(3) on 27.12.2017.

The Ld. CIT(A) upheld the validity of the reopening. He observed that the issue of gifts from the parents had not been examined in the original assessment and that the Assessing Officer had tangible reason to believe that income had escaped assessment. He further held that, once jurisdiction had been validly assumed, addition of the entire amount of Rs.6 crore could be made as it pertained to the same issue on which the assessment was reopened. On merits, the Ld. CIT(A) agreed with the Assessing Officer that the movement of funds showed routing of money through the parents' accounts and that the assessee had failed to establish the source, cash flow and genuineness of the gifts. The addition was accordingly confirmed.

Before us, the Ld. Authorised Representative submitted that the original assessment had admittedly been completed under section 143(3) on 27.12.2017 and the notice under section 148 was issued on 31.03.2021, beyond four years from the end of the relevant assessment year. It was contended that the first proviso to section 147, as then applicable, barred such reopening unless the escapement of income was occasioned by the assessee's failure to file a return or to disclose fully and truly all material facts necessary for the assessment. The Ld. AR submitted that this specific objection had been raised before the Ld. CIT(A), along with the grievance that a copy of the reasons recorded had not been furnished to the assessee, but the Ld. CIT(A) had not adjudicated these submissions. Reliance was placed on the decision of the Delhi Bench of the Tribunal in Humboldt Wedag India Pvt. Ltd. v. ACIT, ITA No.1299/Del/2022, order dated 26.05.2023.

On merits, the Ld. AR submitted that the gifts had been received from the assessee's parents through banking channels and that the identity of the donors, their relationship with the assessee and the source of the transfers were duly explained through the bank statements and other material placed before the lower authorities. It was therefore submitted that no addition under section 68 was called for.

The Ld. Departmental Representative relied upon the orders of the lower authorities. He submitted that the reasons recorded demonstrated escapement of income and that the gift issue had not been examined in the original scrutiny assessment. On merits, he supported the concurrent finding that the parents' bank accounts were 5 used as routing accounts and that the assessee had not established the creditworthiness of the donors and genuineness of the gifts.

We have heard the rival submissions and perused the material available on record. The assessee has raised a fundamental jurisdictional objection that the reassessment was initiated after expiry of four years from the end of the relevant assessment year, although an assessment under section 143(3) had already been completed, and that there was no failure on his part to disclose fully and truly all material facts necessary for the assessment. The assessee also specifically pleaded before the Ld. CIT(A) that a copy of the reasons recorded for reopening had not been furnished to him.

The impugned appellate order records the history of the original scrutiny assessment and the subsequent reopening. It also generally holds that there existed reasons to believe that income had escaped assessment. However, the Ld. CIT(A) has not returned any specific finding on the applicability of the first proviso to section 147, though the notice under section 148 was issued on 31.03.2021 after completion of the original assessment under section 143(3) on 27.12.2017. The order does not examine whether the reasons recorded alleged a failure on the part of the assessee to disclose fully and truly all material facts, whether such failure had any nexus with the alleged escapement, or the assessee's contention that the reasons recorded were not supplied to him. These are jurisdictional pleas which were required to be decided by a speaking order.

The first proviso to section 147, as applicable to the assessment year under consideration, imposed an additional jurisdictional condition where an assessment under section 143(3) had been completed and action was taken after four years from the end of the relevant 6 assessment year. The Delhi Bench of the Tribunal in Humboldt Wedag India Pvt. Ltd. v. ACIT (supra) has held that, in such a case, the recorded reasons must disclose that the income escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts necessary for the assessment. The assessee's reliance on this decision and the factual applicability of the proviso have not been examined by the Ld. CIT(A).

We also find a material inconsistency in the computation made in the reassessment order. In the original assessment completed under section 143(3), the Assessing Officer had made additions of Rs.4,85,67,955 under section 68 in respect of the alleged penny-stock transaction and Rs.9,71,359 towards alleged commission and assessed the total income at Rs.5,29,54,790. In the reassessment order, however, the computation begins afresh with the returned income of Rs.34,15,480 and, after adding Rs.6 crore, determines the total income at Rs.6,34,15,480. The reassessment order does not state the status or fate of the income already assessed under section 143(3), nor does it reconcile the earlier assessed income with the computation made on reassessment. The Ld. CIT(A) has also not examined this aspect.

In an appeal against a reassessment order, the first appellate authority is required to adjudicate the jurisdictional grounds as well as the grounds on computation and merits on the basis of the complete record and by recording clear findings. In the present case, adjudication of the jurisdictional ground necessarily requires the reasons recorded, proof of their communication to the assessee, the assessee's objections, if any, and the relevant original assessment record. These materials and the rival submissions have not been dealt with in the impugned order. We therefore consider it appropriate to restore the matter to the file of the Ld. CIT(A) for fresh adjudication rather than 7 record a conclusion at the first instance on an issue which the first appellate authority has not adjudicated.

Accordingly, the impugned order is set aside and the appeal is restored to the file of the Ld. CIT(A) for de novo adjudication. The Ld. CIT(A) shall call for the complete assessment and reassessment records, including the original reasons recorded for reopening and the material relied upon; ensure that an authenticated copy of the reasons recorded is supplied to the assessee if it has not already been supplied; and afford the assessee an effective opportunity to raise objections and place supporting material on record.

The Ld. CIT(A) shall first adjudicate the legal grounds relating to the validity of reopening, including whether the action taken after four years satisfies the first proviso to section 147 and whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The decision in Humboldt Wedag India Pvt. Ltd. v. ACIT (supra) and any other decisions relied upon by the parties shall be considered in accordance with law. If the reopening is held valid, the Ld. CIT(A) shall thereafter decide the remaining grounds on merits.

While deciding the appeal afresh, the Ld. CIT(A) shall also specifically examine and reconcile the computation of income. He shall ascertain the status of the original assessment under section 143(3), in which total income was assessed at Rs.5,29,54,790 after additions of Rs.4,85,67,955 and Rs.9,71,359, and determine the legal effect of the reassessment order commencing from the returned income of Rs.34,15,480 instead of the income already assessed. A clear finding shall be recorded so that there is no duplication, omission or inconsistency in the assessed income. 8

Needless to state, the Ld. CIT(A) shall grant reasonable opportunity of hearing to both sides and pass a reasoned and speaking order on each ground in accordance with law. The assessee is also directed to furnish the relevant submissions and evidence and cooperate in the appellate proceedings. We have not expressed any opinion on the validity of the reopening or on the merits of the addition under section 68, and all contentions of both parties are kept open.

In the result, the appeal filed by the assessee is allowed for statistical purposes.