RAMNIKBHAI KHIMJIBHAI KATHIRIYA,JAMNAGAR vs. INCOME TAX OFFICER WARD- 1(3), JAMNAGAR, JAMNAGAR

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट। In The Income Tax Appellate Tribunal, “SMC” Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member आयकर अपील सं./ITA No.441 & 442/Rjt/2026 [ िनधा�रण वष� /Assessment Year: 2009-10 & 2010-11 ] Ramnikbhai Khimjibhai Kathiriya, Income Tax Officer Ward-1(3), Plot No.574, Crompton Brass 4th Floor, Manek Center, बनाम/ Industries, Phase-2, Patel Chowk Vs. Nehru Road, Jamnagar. Dared, Jamnagar, Gujarat-361005. �ायीलेखासं./जीआइआरसं./PAN/GIR No.: ADNPK3346F (Appellant) (Respondent) िनधा�रती की ओर से/Appellant by : Shri Shri Kalpesh Doshi, AR राज� की ओर से/Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR

सुनवाई की तारीख/Date of Hearing : 15/04/2026 घोषणा की तारीख/Date of Pronouncement : 10/07/2026 :: आदेश/ORDER :: Per, Dr. Arjun Lal Saini, AM: Captioned two appeals filed by the assessee, pertaining to assessment year (AY) 2009-10 and 2010-11, are directed against the order passed under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 19.01.2026 by the ld. CIT(A), which in turn arises out of an assessment order passed by the Assessing Officer (in short ‘AO’) u/s 143(3)r.w.s.147 of the Act, dated 15.12.2016.

“6.1 The first ground of appeal is against reopening of assessment u/s. 148 of the I.T Act, 1961. From the facts of the case and as per the assessment order, it is observed that appellant case was reopened based on the information received from the ADIT (Inv). Jamnagar. The relevant portion of the assessment order for reopening is reproduced as under:

"As per the interim report / information received from the ADI(Inv). Jamnagar vide No.ADIT(Inv)/Jam/CLD/2014-15/166, dated 24.03.2015, the inquiry of suspicious transactions is being carried out against late Shri Chhotalal Doshi (Prop. Of Abhi Enterprise) and it is noticed that he used to lend his bank accounts to other persons for a commission of Rs. 300/-per Rs.one lakh. It is also noticed that only current accounts of the concem and his personal accounts were used to receive unaccounted cash deposits of other parties from all over India and through cash withdrawal/cheque clearance, the cash was handed over to the concemed persons involved in under- invoicing and out of books sales. As per five diaries impounded of late Shn Chhotalal Doshi, the unaccounted credits of Rs. 13,13,000/- are written/mentioned against the name of the assessee during the previous year relevant to assessment year 2008-09. The unaccounted credits appearing in the name of the assessee is unexplained and required to be verified." 6.2 The appellant was served with notice u/s.148 dated 27.03.2015 and was also provided reasons for reopening the assessment. During the appeal proceedings, the appellant stated that the case has been reopened on the basis of suspicious report forwarded from the investigation wing and such report has been generated out of the enquiry made by the investigation wing in the case of Sri Chhotalal Doshi. 6.3 In order to examine the validity of reopening u/s. 148, the following conditions to be fulfilled for invoking the jurisdiction to reopen the assessment. a. The Ld. AO has to record the reason for taking action u/s 147. It is on the basis of such reasons recorded in the file that the validity of the order reopening an assessment has to be decided. Recorded reasons must have a live link with the formation of the belief b. The Ld. AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. c. The jurisdictional condition under section 147 is the formation of belief by the Ld AO that income chargeable to tax has escaped assessment for any assessment year. d. No action can be initiated under section 147 after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason for the failure on the part of the taxpayer to disclose fully and truly all material facts necessary for his assessment". 6.4 The appellant also submitted various case laws squarely covered by the following decision: 1. M/s. Banke Bihari Properties Pvt. Ltd., (ITA No.5128/Del/2015) 2 G & G Pharma India Ltd (94 CCH 0039) (Delhi HC) 3. Smt. Pramjit Kaur (75CCH 0759) (Punjab & Haryana HC) 4. Signature Hotels Pvt. Ltd (79 CCH 0558) (Delhi HC) 5. Kamadhenu Steels & Alloys Ltd., & Others (80 CCH 0027) (Delhi HC) 6. SFIL Stock Broking Ltd (78 CCH 0406) (Delhi HC) 7. ACIT vs. Dhariya Construction Co. (2010) (328 ITR 515) (SC) 8. CIT vs Ingo Arab Air Services (2016) (130 DTR 78/283 CTR 92) (Delhi) (HC) etc. 6.5 From the plethora of decisions cited by the appellant, it is seen that “AO has to apply his mind to information, if any, collected and must form a belief thereon. Apparently, after setting out four entries, stated to have been received by Page | 3 assessee on single date, the AO stated his conclusions. However, conclusion of AO was unhelpful in understanding if AO applied his mind to materials. Once data on which accommodation entries were provided was known, it would not have been difficult for AO, if he had in fact undertaken exercise, to make reference to manner in which those very entries were provided in accounts of assessee. Without forming prima facie opinion, on basis of relevant material, was not possible for AO to have simply concluded that assessee introduced its own unaccounted money in its bank by way of accommodation entries. Basic requirement that AO must apply his mind to materials in order to have reasons to believe that income of the assessee escaped assessment was found missing. CIT might have proceeded on basis that reopening of assessment was valid, however, that did not satisfy requirement of law that prior to reopening of assessment, AO applied his mind to materials, and concluded that he had reason to believe that income of assessee escaped assessment. Unless basic jurisdictional requirement was satisfied, post mortem exercise of analyzing materials produced subsequently to reopening would not rescue inherently defective reopening."

6.6Further the AO can assume jurisdiction under his provision only if he has sufficient material before him. He cannot form belief on the basis of his whims and fancies and the existence of material must be real. Further, there must be nexus between the material and escapement of income. 6.7On the basis of above, I am of the view that the AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. Further, the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s.148 of the Act, on the basis of information allegedly received by him from the ADIT(Inv), Jamnagar. Keeping in view of the facts and circumstances of the present case and the case laws applicable in the case of the assessee, I have considered view that the reopening in the case of the assessee for the assessment year in dispute is bad in law and deserves to be quashed.In result the appeal is allowed. 5. Therefore, Ld. Counsel submitted that Ld. CIT(A) allowed the appeal of the assessee, as the reasons recorded by the Assessing Officer were bad in law. The same reasons were recorded in A.Y. 2009-10 and 2010-11, hence reassessment proceedings may be quashed for assessment year 2009-10 and 2010-11.

“The assessee, an individual engaged in the business of manufacturing and trading of brass parts, filed its return of income for A.Y. 2010-11 on 03.08.2010 declaring total income at Rs.3,06,610/-. The case was reopened under Section 147 of the Act in relation to the inquiry of suspicions transactions carried out against Late Shri Chhotalal V. Doshi (Prop. of Abhi Enterprise) and it was found that he used to lend his bank account to other persons for commission of Rs. 300/- per Lakh. Further that only current accounts and personal accounts were used to receive unaccounted cash deposits of other parties from all over India through cash withdrawals/cheques clearance, the said cash was handed over to the concerned persons involved in under invoicing and out of the books sales. Five diaries were also impounded wherein unaccounted credits of Rs.34,15,391/- were written /mentioned against name of the assessee before us during the previous year relevant to assessment year 2010- 11. The said unaccounted credits were, according to the Revenue, was unexplained and required to be verified. The Revenue was of the belief that the income chargeable to tax has escaped assessment and the matter was reopened under Section 147 of the Act. It is also a fact that the said information provided by the ADIT was completely relied upon by the Ld. AO and made addition of Rs.34,15,391/-, which was, in turn, upheld by the Ld. CIT(A). Hence, the instant appeal before us. On the other hand, the case of the assessee is this that they have not carried out any transactions with said Late Shri Chottalal Doshi or his family neither there is any evidence available with the Revenue to establish the said fact as of the further case made out by the assessee. In fact, in order to save the skin of Late Shri Chottalal Doshi from taxation of his unaccounted money and/or unaccounted transactions, these allegations against the assessee was made. The assessee further requested to provide cross examination of Shri Dharmendra Doshi on the basis of whose statement, the case was reopened and addition was made, which was further denied. Under these circumstances, as no opportunities have been given to the assessee to cross examine the said party, the addition on account of unexplained cash credits in the books of third person has been claimed to be not sustainable in the eye of law as of the ultimate case made out by the assessee before us. In support of this, he has further relied upon the judgment passed in the matter of Shri Mukeshkumar Vrajlal vs. ITO in ITA Nos. 54 & 55/Rjt/2021.”

Order is pronounced in the open Court on 10/07/2026.

Sd/- [ Dr. Arjun Lal Saini ] लेखा सद�य/Accountant Member //True Copy// Rajkot Date: 10/07/2026 आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to :  अपीलाथ�/ The Appellant  ��थ�/ The Respondent  आयकर आयु�/ CIT  आयकर आयु�(अपील)/ The CIT(A)  िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, राजकोट/ DR, ITAT, RAJKOT गाड� फाईल/ Guard File  By Order

Sr. Private Secretary ITAT, Rajkot