AJIT SHRIRANG PATIL,PUNE vs. ITO WARD 9(3) , AKURDI PUNE

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ITA 1877/PUN/2024Status: DisposedITAT Pune13 July 2026AY 2019-207 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the notice under Section 148 of the Act was bad in law as it was issued based on unverified information from the 'Insight Portal' without proper application of mind by the AO and Pr. CIT. The reassessment proceedings were therefore vitiated.

What were the facts?

The assessee did not file an income tax return for AY 2019-20. The AO issued a notice under Section 148A(b) alleging cash deposits of Rs. 1,52,16,000/- in Bank of Baroda, which the assessee denied, providing bank statements showing much lower deposits and salary slips.

What were the issues?

Whether the notice for reassessment under Section 148 was validly issued based on unverified information and without proper application of mind by the authorities.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 147,Section 139,Section 151,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI Dr. DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Sanket Joshi
For Respondent: Shri Arvind Renge, Addl. CIT

आदेश /ORDER

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2019-20 on 11.07.2024.

2.

Findings and Analysis: In this case, the assessee had not filed return of income for AY 2019- 20. The Assessing Officer (AO) issued notice u/s 148A(b) of the Act dated 25.01.2023. The assessee filed reply on 07.02.2023. It was alleged in the notice u/s 148A(b) of the Act that the assessee had deposited cash of Rs.1,52,16,000/- in Bank of Baroda. It is important to mention here that no bank account number or the city is mentioned in the notice u/s 148A(b) of the Act. The assessee filed reply along with copy of bank statements, Form 26AS and salary slip to prove that the assessee is a salaried employee. The assessee also submitted that he had never deposited an amount of Rs.1,52,16,000/- in Bank of Baroda. The

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assessee submitted that during the year, deposits in saving bank account were only Rs.30,43,200/-. The assessee filed copy of the bank statements to prove the same.

2.1 However, the AO passed an order u/s 148A(d) of the Act dated 23.03.2023 which has been ironically approved by the Pr. CIT-3, Pune. The relevant paragraphs of the order u/s 148A(d) are reproduced here as under : “Order under clause (d) of section 148A of the Income-tax Act, 1961 01. Brief Details of the assessee: The assessee is a/an Individual. On verification, it is noticed that the assessee has not filed his / her / its return of income for the A.Y. 2019-20 as per the provisions of section 139 of the Income Tax Act, 1961. As the assessee has not filed any return of income, the business activities/sources of income of the assessee cannot be ascertained. In this case the information has been disseminated on Insight Portal under the case type RMS - Non-Filing of Return - PAN Cases. 02. Brief details of information collected / received by the AO. In the instant case, the information has been disseminated on Insight Portal under the case type RMS - Non-Filing of Return - PAN Cases, in accordance with the risk management strategy formulated by the CBDT, New Delhi. The information in this case which leads to an assessment of income escaped, is tabulated as below:- S.No. Information Type Source Amount (In Rs.)

1 Cash deposits Bank Of Baroda 1,52,16,000/- 2 Salary to employee Kelvion India Private Limited 6,40,868/- 3 Salary to employee Kelvion India Private Limited 6,40,868/-

Total 1,64,97,736/- Escapement

3.

Enquiries made by the AO as sequel to information collected /received: After due analysis of the relevant information and verification from the different portals, it was observed that the income corresponding to the above tabulated financial transaction have escaped assessment as the assessee has not filed return of income for the year under consideration, and neither has any assessment been done earlier for these financial transactions. 3.1. Thereafter, following due procedure as provided under Section of the Act, a show-cause notice u/s 148A(b) was issued on 25.01.2023. The assessee was given an opportunity of being heard by issuing/serving upon him/her/it a notice to show-cause as to why a notice under section 148 of the Act shall not be issued in his/her/its case, on the basis of information available on record which suggests that income chargeable to tax has escaped assessment, in the case for the relevant assessment year. Sufficient

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time as per the provisions of section 148A(b) of the Act has been provided to the assessee and date of compliance was fixed on or before 07.02.2023. 04. Response of the assessee. The show cause notice issued and served upon the assessee on 07.02.2023, by email / registered post, under the provisions of section 148A(b) of the I. T. Act, 1961. The assessee has filed the response dated 07.02.2023 to the show cause notice issued. The reply of the assessee has been considered as per the provisions of section 148A(c) of the Act. The assessee has submitted the following details/documents which are as under:- 1) Reply of the assessee; 2) Copy of Emails; 3) Bank statements 4) Form 26AS; 5) Play slips In reply, the assessee has stated the following: First of all i would like to make it clear that the cash Deposit by me in my saving account is rs.30,43,200 only An not rs 1,52,16,000/- which can be easily checked Through my bank statement attached. 06. Therefore, based on the above observations, which originate from the material/information available on record with undersigned, income to the tune of Rs. 1,58,56,868/-, has escaped assessment for the year under consideration within the meaning of explanation 1 to sec 148 of the Act and it is a FIT CASE for initiating the proceedings u/s 147 of the Income Tax Act, 1961 to assess the income escaped as above and assess any other income which may come to the notice during the assessment proceedings u/s 147 of the Income Tax Act, 1961. 07. In this case, as per the requirements of section 148 of Income Tax Act, 1961, procedures/steps under section 148A of the Act have been duly followed. As, three years or less than three years have elapsed from the end of the relevant assessment year, necessary approval of the Pr. CIT-3, Pune to pass the order u/s 148A(d) of the Act has been obtained as per the provisions of the section 151 of the Act. In view of the above, provisions of section 147 are applicable to the facts of the case of the assessee for the assessment year under consideration as the income chargeable to tax amounting to Rs. 1,58,56,868/- has escaped assessment. Hence, it is a fit case for issuing notice u/s 148 of the Act.”

2.2 Thus, the AO held that it was a fit case to issue notice u/s 148 of the Act. We have already mentioned that this order u/s 148A(d) of the Act has been approved by the Pr. CIT-3, Pune as mentioned in the order. It is a fact that the assessee filed copy of bank statements during proceedings to prove that the assessee had never deposited Rs.1,52,16,000/-. In spite of that the AO held that the assessee has failed to prove source of cash

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deposits. The assessee also filed pay slips issued by his employee to prove that he received salary Rs.6,40,868/- only but, the AO has alleged salary received of Rs.6,40,868/- + Rs.6,40,868/-. The AO has not bothered to verify the information received on the so called INSIGHT Portal of the Income Tax Department. The AO mechanically accepted the information which merely says that cash deposits in Bank of Baroda. This information does not have any head and tail at all. There must be thousands branches of the Bank of Baroda in India. The information does not mention anything which branch the assessee has account and the account number. The AO also do not want to verify these facts to blatantly hold that it is a fit case for issuing notice u/s 148 of the Act alleging escapement of income. The Pr. CIT do not want to apply his mind on the submission of the assessee wherein the assessee filed copy of bank statement to prove that the assessee had never deposited such a huge amount. The assessee had filed salary slip to prove that he is a salaried employee of Kelvion India Private Limited. The assessee had also filed copy of 26AS.

2.3 It is important to mention here that CBDT Circular No. F.No.299/10/2022-Dir(Inv.III)/647, dated 22.08.2022 has specifically stated in the Circular that the information available on INSIGHT Portal must be verified independently by the AO and supervisory authorities were given the responsibilities. The relevant paragraph of the said Circular are as under :

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2.4 Thus, CBDT Circular had accepted in the Circular that data uploaded by the various institutions may have factual errors and therefore CBDT specifically directed the AO and the supervisory authorities to verify the data before initiating any proceedings. However, in disrespect of the Circular the AO and Pr. CIT-3, Pune issued notice u/s 148 of the Act alleging the escapement of income.

2.5 In this case, the notice u/s 148 of the Act has been issued based on incorrect fact as narrated in earlier paragraphs without verifying the bank statements and salary slips. Rather, the AO was not having copy of bank statement at all before issuing notice u/s 148A(b) of the Act as the AO during assessment proceedings issued notice u/s 133(6) of the Act to Bank of Baroda on 08.09.2023.

2.6 In these facts and circumstances of the case, it is held that notice issued u/s 148 of the Act which is based on incorrect facts has been issued without application of mind by the AO and without application of mind by the Approving Authority, is bad in law. Subsequently, reassessment proceedings are also bad in law.

3.

We derive support from the decision of the Hon’ble Bombay High Court and the Hon’ble Delhi High Court. The Hon’ble Bombay High Court in the case of Principal CIT-5 vs. Shodiman Investments (P.) Ltd. [2020] 422 ITR 337 (Bombay) has held as under : Quote, “12. The re-opening of an Assessment is an exercise of extra- ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before re-opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v. CIT [1967] 63ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v. Lakhmani Merwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer.

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13.

In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 15. Therefore, in the above facts, the view taken by the impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law. 16. Therefore, the question as framed does not give rise to any substantial question of law. Thus, not entertained. 17. Accordingly, Appeal dismissed. ” Unquote.

4.

The Hon’ble Delhi High Court in the case of Well Trans Logistics India (P.) Ltd. v. Addl. Commissioner of Income-tax, W.P. (C) NO. 13273 OF 2018, order dated September 2, 2024,[2025] 474 ITR131 (Delhi), has held as under : Quote,” 24. We may note that the Assessing Officer after reproducing the information received from DDIT,(Investigation) Unit, drew the conclusion of escapement of income. In the case of Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316/291 ITR 500 (SC), the Supreme Court had explained that expression "reason to believe" would mean justification to know or suppose that income had escaped assessment. While, it is correct that it is not necessary for the Assessing Officer to finally ascertain whether income had escaped assessment, nonetheless, the Assessing Officer must have sufficient cause to believe that it has. 25. In the present case, as may be seen, there is no "close nexus" or "live link" between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the Revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such

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material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. 26. Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. There is not even a line of reason which may justify the formation of the belief. Consequently, we are satisfied that reopening of assessment for the assessment year in question by the Assessing Officer does not satisfy the requirement of law in terms of Section 147 & 148 of the Act.” unquote.

5.

Accordingly, for all the reasons discussed above, legal ground raised by the assessee is allowed.

6.

Since, we have held that notice u/s 148 of the Act is bad in law, we do not intend to adjudicate on merits of the addition. Accordingly, appeal of the assessee is partly allowed.

7.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open Court on 13th July, 2026

Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER

पुणे/Pune; दिन ांक/Dated : 13-07-2026 Ravi Kumar Ravi Kumar Digitally signed by Ravi Kumar Date: 2026.07.13 13:29:23 +05'30' आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. The concerned Pr. CIT, Pune 4. DR, ITAT, ‘SMC’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण, पुणे/ITAT, Pune

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