ACIT 23.1, MUMBAI, MUMBAI vs. ARCADIA COMMODITIES AND TRADING, MUMBAI

PDF · subscribers
ITA 8127/MUM/2025Status: DisposedITAT Mumbai09 September 20267 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, finding that the AO's failure to properly dispose of the assessee's objections before passing the assessment order rendered the assessment erroneous and bad in law. The revenue's appeal was dismissed.

What were the facts?

The Assessing Officer (AO) reopened assessment for AY 2014-15 based on information from a search action. The assessee raised objections to the reopening, which were disposed of by the AO just one day before passing the final assessment order. The CIT(A) quashed the assessment order for this procedural lapse.

What were the issues?

Whether the reassessment proceedings were valid when the AO failed to dispose of the assessee's objections in a speaking manner before passing the assessment order. Whether the addition under Section 68 was justified based on third-party information without cross-examination.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 68,Section 271(1)(c),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by Revenue and Cross Objection therein by assessee is directed against the order of ld. CIT(A)/NFAC dated 16.09.2025 for Assessment Year (AY) 2014-15. The Revenue has raised following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CITA) erred in holding the reassessment u/s 147 r.w.s. 148 to be bad in law without appreciating that the original return for A.Y. 2014-15 had only been processed u/s 143(1) and no scrutiny assessment u/s 143(3) was ever framed, and that, in view of the ratio of ACIT. Rajesh Jhaveri Stock Brokers (P.) Ltd. (2007) 291 ITR 500 (8C) and DCIT u. Zuari Estate Development & Investment Co. Ltd. (2015) 373 ITR 661 (SC), there could be no question of "change of opinion" and the case squarely fell within the deeming fiction of Explanation 2(b) to the erstwhile section 147 as a case where income had escaped assessment."

2.

"Whether on the facts and in the circumstances of the case and in law, the Ld. CTT(A) erred in ignoring that the reasons recorded by the Assessing Officer were based on specific and credible information emanating from search and survey action in the case of Shri Dahyalal Ishwarlal Thakkar and M/s Jalaram Finvest Ltd., including statements u/s 132(4) admitting accommodation-entry activities and quantified remittances of Rs. 2,82,85,631/- to the assessee, which constituted "tangible material" and "information" justifying formation of a bona fide "reason to believe" of escapement of income within the meaning of Phool Chand Bajrang Lal v. 170 (1993) 203 ITR 456 (SC) and AGR Investment Ltd. v. Addl. CIT (2011) 333 ITR 146 (Del)."

3.

"Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) erred in proceeding on the premise that the Assessing Officer had acted on "borrowed satisfaction" and lacked "tangible material", instead of appreciating that the Assessing Officer had independently correlated the Investigation Wing material and search statements with the assessee's own bank transactions and non-disclosure of Rs. 2.82 crore in the return, and that at the stage of reopening the sufficiency or adequacy of such material could not be gone into in view of the settled law in Raymond Woollen Mills Ltd. vs. ITO (1999) 236 ITR 34 (SC).”

4.

“Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that information arising from search and other law enforcement action is now expressly recognised as "information suggesting escapement of income" under Explanation 1 and Explanation 2 to section 148 (inserted by the Finance Act, 2021) and CBDT Instruction F. No. 225/135/2021/ITA-II dated 10.12.2021, and that these provisions are declaratory and clarificatory of the pre-existing law on "information" as understood in Phool Chand Bajrang Lal (SC) and related decisions, thereby rendering the Assessing Officer's reliance on search-based material fully justified even for A.Y. 2014-15."

5.

"Whether, on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in annulling the reassessment solely on the ground that the objections to reopening were disposed of by a separate order dated 29.03.2022 and the reassessment order was passed on 30.03.2022, without appreciating that: (i) the Assessing Officer had, in fact, complied with GKN Driveshafts (India) Ltd. u. по (2003) 259 ITR 19 (SC) by passing a separate speaking order on objections; and (ii) any perceived irregularity in the timing of such disposal is at best a curable procedural defect which does not render the assessment non est, as held by the Madras High Court in Home Finders Housing Ltd. v. 170 (2018) 404 ITR 611 (Mad), SLP dismissed in Home Finders Housing Ltd. v. ITO (2018) 94 taxmann.com 84 (SC)."

6.

"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in quashing the reassessment order u/s 147 r.w.s. 1448, rather than, at the highest, setting aside the assessment with directions to the Assessing Officer to re-decide the objections in terms of GKN Driveshafts (India) Ltd. (SC) and thereafter frame a fresh assessment, particularly when no prejudice was demonstrated to have been caused to the assessee and the assessee had a full and effective opportunity before the appellate authority itself."

7.

Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not adjudicating on merits the substantive addition of Rs. 2,82,85,631/-made u/s 68 and the consequential initiation of penalty u/s 271(1)(c) and levy of interest u/ss. 234A/B/C, despite the Assessing Officer having brought on record detailed findings based on search material and the assessee's inability to satisfactorily explain the nature and genuineness of the remittances from M/s Jalaram Finvest Ltd., thereby failing to discharge its appellate duty to decide the real controversy between the parties."

8.

"The appellant craves leave to add, amend, alter or modify any of the above grounds of appeal or to raise any additional ground at the time of hearing, in the interests of justice.

2.

On receipt of memorandum of appeal, the assessee has filed its cross-objection raising following grounds: 1. “Ld. CIT(A) erred in not adjudicating the appeal on merits without appreciating that the additions/disallowances made by the Ld. A.O. in the assessment order are not justified and the same needs to be deleted.

The addition of Rs.2,82,85,631/- made under section 68 of the Act is unjustified

2.

The Ld. CIT(A) failed to appreciate that the Ld. A.O. has made the addition of Rs.2,82,85,631/- by treating the same as unexplained cash credit under section 68 of the Act without appreciating the facts and circumstances of the case. Thus, the addition of Rs.2,82,85,631/- under section 68 of the Act is unjustified. The same needs to be deleted.

3.

The Ld. CIT(A) failed to appreciate that the Assessee entered into the Memorandum of Understanding with M/s. Jalaram Finvest Limited through which M/s. Jalaram agreed to introduce the clients to the Appellant for which it charged commission/brokerage. As per the said MOU, if the client’s default in making payment to the Appellant, then M/s. Jalaram would be liable to reimburse that amount to the Assessee. The amount of Rs. 2,82,85,631/- is nothing but the part of the reimbursed amount paid by M/s. Jalaram Finvest Limited. Thus, the addition made under section 68 of the Act is not justified and the same may be deleted.

4.

The Ld. CIT(A) failed to appreciate that the Assessee has furnished all the necessary documents to substantiate the transaction with M/s. Jalaram Finvest Limited entered as per MOU. Thus, the addition of Rs. 2,82,85,631/- made under section 68 of the Act by treating the same as unexplained cash credit is not justified and the same needs to be deleted. 5. The CIT(A) failed to appreciate that the addition of Rs. 2,82,85,631/- is made by the AO under section 68 of the Act merely relying on some information received from the investigation wing and the statement of third party without providing the Assessee an opportunity of cross examination. Thus, the addition of Rs. 2,82,85,631/- made under section 68 of the Act is in breach of the principles of natural justice and the same needs to be deleted. 6. The Assessee denies the liability to pay the interest under section 234B, 234C and 234D of the Act.

7.

The Assessee craves leave to add, amend, alter delete any of the above grounds of appeal.”

3.

Rival submissions of both the parties have been heard and the record perused. At the outset of hearing, the learned Authorized Representative (ld. AR) of the assessee submits that the learned CIT(A) passed the assessment order without disposing of the objection raised by the assessee. The draft assessment order was passed on 25.03.2022. The assessee filed objections by way of reply/letter dated 29.03.2022. The AO passed the final assessment order on 30.03.2022. The learned CIT(A)

while allowing relief to the assessee held that the Assessing Officer was bound to follow the mandate of the decision of the Hon'ble Supreme Court in GKN Driveshaft’s (India) Limited vs. ITO, (2003) 259 ITR 19 (SC). The learned CIT(A) clearly held that the AO failed to dispose of objection by passing speaking order. The AO reject the objection just one day prior to the passing of order. Thus, the assessment order is erroneous and bad in law. 4. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue supported the order of the Assessing Officer. 5. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the case of assessee was reopened on the basis of information from DDIT (Inv.) Ahmadabad. As per information that a search action was carried out in the case of Dahyalal Ishwarlal Thakkar and Jalaram Finvest Ltd on 16.01.2014 and further follow up search was also conducted in March 2014. It was informed that as per the statement of Dahyalal Thakkar, he issued Demand Draft/Pay Order/transfers funds through RTGS to others against receipt of cash. The assessee was one of the beneficiaries and has entered into transaction amounting to Rs. 2.00 Crore. On the basis of such information the AO make belief that he has reason to believe that income to the extent escaped assessment. The AO issued notice under section 148 of the Act dated 18.03.2021. The reasons recorded were provided to the assessee vide notice dated 24.05.2021. The assessee had filed its objections on 04.03.2022. The AO had issued show cause notice dated 25.03.2022 to propose addition as per draft assessment order. In response to the same, assessee objected that the AO that he has passed the draft assessment order without disposing off the objections raised by the assessee and without providing the necessary documents relied upon by him for the purpose of reopening of the assessment. The AO passed order on the objection and communicated to the assessee vide issue letter dated on 29.03.2022, just one day prior to passing assessment order. We find that ld CIT(A) while quashing assessment order clearly held that held that the AO failed to dispose of objection by passing speaking order. The AO reject the objection just one day prior to the passing of order and held the assessment order is erroneous and bad in law. Before us, no contrary facts or law id brought to our notice to take contrary view. Hence, we do not find any merit in the grounds of appeal raised by the revenue. In the result, the grounds of appeal raised by the revenue are dismissed. 6. In the result, the appeal of the revenue is dismissed. 7. Considering the facts that we have affirmed the order of ld CIT(A) in quashing the assessment order, therefore, specific adjudication on the grounds raised by the assessee has become academic. Hence, the Cross Objection of the assessee rendered infructuous. Order was pronounced in open court on 09/09/2026. Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 09/09/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →