SAHIL GEMS (INDIA) LIMITED,MUMBAI vs. THE DCIT, CENTRAL CIRCLE 2(3), MUMBAI., MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI PAWAN SINGH (JUDICIAL MEMBER)

ITA No. 2182/MUM/2026 Assessment Year: 2014-15

Sahil Gems (India) Limited, DCIT, Central Circle 2(3), Room Tara Niwas, M Block, 2nd No.803, 8th Floor, Prathistha Floor, JSS Road, Opera House, Vs. Bhawan, Old CGO Annexe, Mumbai – 400004. Maharshi Karve Road, Mumbai. PAN NO. AADCS 4493 H Appellant Respondent

Assessee by : Shri Rajesh C. Shah, CA (Virtually) Revenue by : Shri Rajgopal Parthasarathi – SR DR. Date of Hearing : 30/07/2026 Date of pronouncement : 14/08/2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 30/12/2025, passed by the learned Commissioner of Income-Tax (Appeals)-48, Mumbai (in short, the learned CIT(A)) for Assessment Year 2014–15, raising e following grounds:

“1. The Ld. AO has erred in the reopening of the case by issuing notice u/s 148 of the Act. The case of the assessee is not a fit case to be reopened under section 148 of the Income Tax Act. Hence, the order passed under section 143(3) r.w.s. 147 should be quashed, and also the Ld. CIT (Appeals) has erred in confirming the same.

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“8.3 A plain reading of reasons recorded f shows that the Assessing Officer referred to the information received from the Directorate of Investigation regarding the modus operandi unearthed in relation to bogus foreign outward remittances through fabricated Bills of Entry. The second part of a 2.1 of the reasons further record that, on the basis of enquiries conducted by the Investigation Wing and the charge-sheet filed by the Enforcement Directorate, the assessee had allegedly made remittances to two overseas entities, namely M/s Nippon Incorporation Ltd. and M/s Cornel Trading (HK) Ltd., which were stated to be shell entities engaged in facilitating accommodation entries. On the basis of the said information, the Assessing Officer recorded his satisfaction that income chargeable to tax had escaped assessment. 8.4 It is now well settled that, at the stage of issuance of notice under section 148, the Assessing Officer is only required to form a prima facie belief regarding escapement of income and not to conclusively establish such escapement. The adequacy or sufficiency of the material cannot be examined while testing the validity of the assumption of jurisdiction. The Hon'ble Supreme Court in Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (SC) has held that, at the stage of reopening, the Court is only concerned with whether there existed some relevant material on the basis of which a reasonable person could have formed the

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requisite belief. Similarly, in ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. (2007) 291 ITR 500 (SC), the Hon'ble Supreme Court has reiterated that the expression "reason to believe" postulates a bona fide belief founded on relevant material and not conclusive proof of escapement of income. 8.5 In the present case, the information emanated from the Directorate of Investigation and was based upon enquiries conducted by specialised investigating agencies. Such information cannot, by itself, be regarded as inherently unreliable. Merely because the Assessing Officer acted upon such information does not necessarily lead to the conclusion that the reopening was founded upon borrowed satisfaction. The reasons recorded disclose the material considered by the Assessing Officer as well as the nexus sought to be drawn between such material and the formation of the belief regarding escapement of income. We are, therefore, unable to accept the contention that the reassessment proceedings are liable to be quashed solely on the ground of borrowed satisfaction. 8.6 The next contention advanced by the learned counsel is that the reasons recorded refer to remittances aggregating to Rs.12.85 crore, whereas the reassessment ultimately resulted in an addition of Rs.14,15,37,622/-, thereby demonstrating complete non-application of mind. 8.7 We are unable to persuade ourselves to accept the aforesaid submission. The discrepancy in the figures recorded in the reasons may, at best, have a bearing upon the correctness or adequacy of the material available with the Assessing Officer. However, such discrepancy, by itself, does not invalidate the assumption of jurisdiction once there existed tangible material giving rise to a prima facie belief that income had escaped assessment. The correctness of the quantification and the ultimate sustainability of the addition fall within the domain of reassessment proceedings and are matters to be examined on merits. They do not, in the facts of the present case, render the very initiation of proceedings without jurisdiction. 8.8 The last limb of the challenge relates to the approval granted by the learned Principal Commissioner under section 151 of the Act. According to the learned counsel the PCIT has not applied mind or investigated the details. According to him the Ld. CIT(A) approved the initiation of reassessment proceeding, despite recording of incorrect facts by the Assessing Officer in the reasons recorded. The learned counsel has relied on various decisions cited above. But we find that in the instant case a copy of approval under section 151 of the Act granted by the PCIT is available on paperbook pages 15. While granting the approval, the learned PCIT recorded that he had gone through the reasons stated by the Assessing Officer and was satisfied that to be a fit case for issuance of the notice under section 148 of the Act. The learned DR submitted that it is the normal practice in the income tax department of sending the relevant assessment record or file to the PCIT for perusal. Before us the learned counsel has not brought on record any evidence that said procedure was not followed in the case of the assessee. In such circumstances, it was the mere presumption of

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the assessee without any evidence that learned PCIT had not gone through the entire record while approving the case for issuance of the notice under section 148 of the Act. 8.9 We are of the opinion that the approval placed in the paper book records that the learned Principal Commissioner had gone through the reasons recorded by the Assessing Officer and was satisfied that it was a fit case for issuance of notice under section 148 of the Act. Apart from contending that the approval is brief in its expression, no material has been brought before us to establish that the sanctioning authority had acted mechanically or without considering the proposal placed before him. It is also not the case of the assessee that the assessment records were not placed before the sanctioning authority while seeking approval. 8.10 In our considered opinion, section 151 requires the sanctioning authority to record its satisfaction regarding the fitness of the case for issuance of notice. It does not envisage that the Principal Commissioner should himself undertake an independent investigation or record elaborate reasons akin to an appellate order. As far as contention of granting approval on the basis of incorrect amount is concerned, we have already held that sufficiency or correctness of the material is to be seen at the stage of reassessment proceeding and not at the stage of recording reasons to believe. In the absence of any material demonstrating total non-application of mind, merely because the approval is concise cannot lead to the inference that it was mechanical. 8.11 The decisions relied upon by the learned counsel, including Pr. CIT v. Meenakshi Overseas (P.) Ltd. (2017) 395 ITR 677 (Del.), Pr. CIT v. G&G Pharma India Ltd. (2016) 384 ITR 147 (Del.), Sarthak Securities Co. (P.) Ltd. v. ITO (2010) 329 ITR 110 (Del.), and other authorities, were rendered in their own factual background where the Courts found complete absence of application of mind by the Assessing Officer or the sanctioning authority. In our considered opinion, those decisions do not advance the case of the assessee on the facts obtaining in the present appeal. 8.12 Accordingly, we uphold the finding of the learned CIT(A) sustaining the validity of the reassessment proceedings. The grounds challenging validity of the reassessment are dismissed.” 6. Further, the Coordinate Bench restored the matter on merits to the file of the Assessing Officer observing as under:-

“9.1 We have carefully considered the rival submissions and perused the orders of the authorities below as well as the material placed before us. The principal addition of Rs.14,15,37,622/- has been made by the Assessing Officer by treating the foreign remittances effected by the assessee as unexplained investment under section 69 of the Act and, in the alternative, as unexplained

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expenditure under section 69C of the Act. The Assessing Officer has primarily relied upon the information received from the Investigation Directorate, the findings of the Customs authorities and the Enforcement Directorate, and the alleged bogus nature of the Bills of Entry. The learned CIT(A) has affirmed the said addition substantially on the same reasoning. 9.2 The learned counsel for the assessee, on the other hand, has assailed the addition on several factual and legal grounds. According to him, complete documentary evidence in support of the purchases, imports, quantitative details and corresponding sales was produced before the Assessing Officer. It has further been contended that the books of account were never rejected and the sales corresponding to the alleged purchases have also been accepted. The learned counsel has also raised a grievance that neither the material relied upon by the Assessing Officer, including the charge-sheet allegedly filed by the Enforcement Directorate, nor any opportunity of cross-examination of the persons whose statements or reports formed the basis of the addition, was made available to the assessee. Without prejudice, it has further been argued that, even assuming the purchases were not fully established, the addition, if any, could only be restricted to the profit element embedded in such transactions. 9.3 From the impugned appellate order, we find that although the learned CIT(A) has dealt with the principal addition under section 69 of the Act, he has not adjudicated several specific grounds raised before him by the assessee. In particular, the grievance relating to the disallowance of foreign exchange difference amounting to Rs.51,96,282/- and the separate disallowance of administrative expenditure amounting to Rs.2,65,034/- has not been independently examined. Likewise, the factual submissions of the assessee regarding quantitative reconciliation of imports and sales, the contention that the books of account had not been rejected, the plea regarding non-supply of the material relied upon by the Assessing Officer and the consequential plea based on the gross profit rate have not been examined in the light of the documentary evidence placed on record. 9.4 In our considered opinion, the first appellate authority, being the final fact- finding authority under the Act, is under a statutory obligation to adjudicate every ground of appeal raised before it by assigning cogent and independent reasons. An order affirming the assessment without dealing with the material factual contentions urged by the appellant cannot be regarded as a complete adjudication of the controversy. Since the learned CIT(A) has not rendered findings on several factual issues which go to the root of the additions under challenge, any adjudication by us at this stage would necessarily require appreciation of evidence at the first instance, which is ordinarily the function of the first appellate authority. 9.5 Having regard to the totality of the facts and circumstances of the case, we are, therefore, of the considered opinion that the ends of justice would be adequately served by restoring the issues relating to the additions on merits to the file of the learned CIT(A) for fresh adjudication. The learned CIT(A) shall

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examine all the documentary evidence produced by the assessee, consider the rival submissions, deal with each of the grounds urged before him, including the challenge to the additions under sections 69 and 69C of the Act, the disallowance of foreign exchange difference, the estimated disallowance of expenditure, and the alternative plea regarding the quantum of addition, and thereafter pass a reasoned and speaking order in accordance with law after affording adequate opportunity of hearing to both the parties. 9.6 We clarify that we have not expressed any opinion on the merits of the additions, and all the contentions available to both the parties are left open to be urged before the learned CIT(A). 9.7 In the result, Ground No. 1 challenging the validity of the reassessment is dismissed. Ground Nos. 2 to 4 are restored to the file of the learned CIT(A) for fresh adjudication in the light of the observations made hereinabove. These grounds are, accordingly, treated as allowed for statistical purposes.” 7. As the facts and circumstances of the instant case are identical to the facts and circumstances in the case of Sahil Diamonds Private Limited (supra), respectfully following the findings of the Coordinate Bench, the grounds raised are decided mutasis mutandis i.e. the grounds challenging the validity of the reassessment are dismissed, whereas the grounds on merits are restored back to the file of the Assessing Officer to be decided afresh.

Order pronounced in the open Court on 14/08/2026.

Sd/- Sd/- (PAWAN SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 14/08/2026 M. Ranganath Vittal , Sr. P.S.

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Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai