ACIT-19(3), MUMBAI, MUMBAI vs. S K REALTY, MUMBAI

The ground raised by the Revenue are as under: 1_ "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the notice issued under section 148 of the Income-tax Act, 1961 on 22.04.2021 for A.Y. 2013-14 was barred by limitation, without considering the statutory extensions granted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA Act") due to the COVID-19 pandemic?" 2 "Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) erred in interpreting the Supreme Court India Ashish judgment in Union of V. Agarwal (2022) as rendering the reassessment notice under section 148 invalid, when the Hon'ble Supreme Court had expressly preserved such notices as shOw-cause notices under section 1484(b) and mandated compliance with procedural safeguards?" 3 "Whether on the facts and in the circumstances of the case and in law, the Ld. CII(A) erred in ignoring the extended limitation " period provided under amended section 149(1)(b) of the Income-tax Act, 1961, which allows reassessment up to ten 3 years in cases where escaped income exceeds Rs. 50 Iakh, particularly when the unaccounted credits in the assessee's accounts exceeded this threshold?" ' 4. "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in not appreciating that the legal fiction created by the Supreme Court in Ashish Agarwal allows the Revenue adequate time to complete reassessment proceedings, and whether the CITIA)'s restrictive interpretation undermines the legislative intent behind the reassessment provisions?" 5. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) decision conflicts with settled judicial precedents emphasizing substantial compliance over strict adherence to limitation periods in reassessment proceedings?" ITA 9036/MUM/2025 ACIT vs:. SK Realty 6. The appellant craves leave to add, alter; amendor withdraw any of the above. 3_ As could be seen from the grounds raised, the grievance of the Department is with regard to decision taken by learned first appellate authority in declaring the reopening of assessment under section 147 of the Income Tax Act; 1961 (in short; " the Act' invalid. 4_ Briefly stated, the assessee is a partnership firm. For the assessment year under dispute, the assessee filed its return of income o 30*h July, 2013, declaring Nil income. Subsequently, assessment was reopened under section 147 of the Act; alleging that the assessee had availed accommodation entries by showing bogus purchases of Rs.78,41,654/- from Mls Jinendra Diamonds Pvt. Ltd. In course of reassessment proceeding; the Assessing Officer called upon the assessee to establish the genuineness of the purchases In response to the query raised by the Assessing Officer, the assessee submitted that it had not made any purchases but had taken loan ' from M/s Jinendra Diamond Pvt. Ltd , Financial Year 2012-13, and as on 31st March n 2013, outstanding loan amount was of Rs.2,76,785/-. The assessee further stated that it paid interest f Rs.1,70,827/- on the loan amount after deducting TDS of Rs. 17,082/- Further to establish the genuineness of loan transaction; the assessee furnished certain documentary evidences before the Assessing Officer: The Assessing Officer; however; did not find the documentary evidences furnished by the assessee reliable. In this context; the Assessing Officer further observed that notice issued under section 133(6) of the Act to Mls Jinendra Diamonds Private Ltd,, seeking ITA 9036/MUM/2025 ACIT vs:. SK Realty certain details relating to unsecured loan received no response. Thus, ultimately, the Assessing Officer concluded that unsecured loan availed of Rs.76,00,000/- from M/s Jinendra Diamonds iS non-genuine. Accordingly; he added the outstanding loan amount of Rs.78,41,654/-, including interest component, under section 68 of the Act 5_ Against the assessment order, so passed, the assessee preferred an appeal before learned first appellate authority; inter alia, challenging the validity of reopening of assessment under section 147 of the Act. While disposing of the appeal, learned first a appellate authority accepted assessee' s contention that reopening of assessment under section 147 of the Act was not within the prescribed time limit aS per the statute. Accordingly, he declared the reopening of' assessment invalid and quashed the assessment order: Since he decided the appeal on the legal issue, he did not adjudicate the grounds on merits of the addition made. 6_ Before uS, learned Departmental Representative (DR) submitted that the first a appellate authority has wholly misconceived and misinterpreted the ratio laid down . 1 by the Hon'ble Supreme Court in case of Union of India vs Ashish Agarwal [138 Taxmann 64] (SC) as also in case of Union of India and others VS. Rajeev Bansal [2024] 469 ITR 46 (SC) Thus, she submitted, order passed by learned first appellate authority deserves to be set aside. In response, learned counsel appearing for the assessee fairly submitted that the decision taken by the first appellate authority in declaring the reopening of assessment to be barred by limitation is erroneous, as the Assessing Officer has reopened the assessment within the prescribed time limit. ITA 9036/MUM/2025 ACIT vs:. SK Realty 7_ Keeping in view the submissions of the parties, we are of the opinion that the order of learned first appellate authority is unsustainable. However, considering the fact that while deciding the appeal; learned first appellate authority has not adjudicated the grounds o merit; we are inclined to restore the matter back to the Assessing Officer for adjudicating afresh: It iS made clear; the Assessing Officer should not expand the scope of adjudication and confine himselfto the issue relating to the addition contested by the assessee before the first appellate authorities.

Needless to mention; before deciding the issue, the Assessing Officer must provide due and reasonable opportunity of being heard to the assessee. 9_ In the result; appeal of the assessee is allowed for statistical purposes. ITA No9120/MUN2025 (Assessment Year 2014-15 10. C In this appeal, the Department has contested the deletion of addition of Rs.75,00,000/- made under section 68 of the Act as also the interest thereon amounting to Rs.2,76,785/-. 1 11. Facts relating to the issue in dispute in this appeal are more or less identical to Assessment Year 2013-14. As stated by uS in foregoing paragraphs, based on information available on record that unsecured loan taken ofRs.75,00,000/- from M/s Jinendra Diamonds Private Limited is in the nature of accommodation entry the Assessing Officer reopened assessment under section 147 of the Act Though, in ITA 9036/MUM/2025 ACIT vs:. SK Realty course of assessment proceedings; the assessee submitted before the Assessing Officer that firstly, loan of Rs.75,00,000/- was taken in earlier assessment year and secondly, the genuineness of loan cannot be doubted in view of the documentary evidences furnished, however; the Assessing Officer did not find the submissions of the assessee acceptable. Thus, ultimately, he added back the loan amount of Rs.75,00,000/- under section 68 of the Act Whereas, interest thereon amounting to Rs.1,53,755 was also added back: 12. Assessee contested the aforesaid additions before learned first appellate authority. Having factually verified the fact that the assessee has availed the loan of Rs.75,00,000/- in the preceding assessment year, learned first appellate authority held that addition of the said amount cannot be made under section 68 of the Act in the impugned assessment year. Proceeding further; he held that the documentary evidences furnished by the assessee demonstrate the identity and credit worthiness of the lender; as also the genuineness of the transaction: Accordingly; he deleted the additions made by the Assessing Officer: 2 13. We have considered rival submissions and perused the material on record. Material on record clearly demonstrate that the unsecured loan of Rs.75,00,000 /- was availed from Mls Jinendra Diamonds in Financial Year 2012-13, corresponding to Assessment Year 2013-14. In fact, the loan amount appears as an opening balance as on 01.04.2013 in the books of the assessee. That being the uncontroverted factual position on record, the loan amount of Rs.75,00,000/- cannot not be added under ITA 9036/MUM/2025 ACIT vs:. SK Realty section 68 of the Act in the impugned assessment year. Accordingly, we uphold the decision of learned first appellate authority in deleting the addition of Rs.75,00,000/.

Insofar as disallowance of interest payment of Rs.2,76,785/-, doubting the genuineness of the loan transaction amount was disallowed. Since the issue relating to the genuineness of the loan transaction has been restored back to the Assessing Officer while deciding the Department's appeal for Assessment Year 2013-14, the issue relating to interest liability on such loan is restored back to the Assessing Officer U for deciding afresh, depending upon the decision to be taken in respect of the addition made of loan amount under section 68 of the Act in Assessment Year 2013-14. 15. In the result; ITA No. 9036/Mum/2025 is allowed for statistical purposes, whereas ITA No. 9120/Mum/2025 is partly allowed for statistical purposes. 3 3 Order Pronounced In Open Court On 20/08 /2026. (MAKARAND VASANT MAHADEOKAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER PRESIDENT Dated 20/08/2026. 5 " AKS/ - ITA 9036/MUM/2025 ACIT vs:. SK Realty Copies to (2) The respondent; (1) The appellant: (3) CIT (5) Departmental (4) CIT(A) (6) Guard File "tanealn BY ORDER,