SURESH BHAI VALJI BHAI KUKADIYA,GUJARAT vs. DCIT CENTRAL CIRCLE 3(1), MUMBAI

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ITA 9483/MUM/2025Status: DisposedITAT Mumbai07 July 2026AY 2010-201111 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal, while acknowledging the assessees' default, granted a final opportunity to present their case before the CIT(A) due to the nature of the legal grounds. This was subject to strict conditions, including payment of costs.

What were the facts?

The assessees' appeals were restored to the CIT(A) for de novo adjudication of additional legal grounds. However, the assessees failed to effectively comply with the CIT(A)'s notices and present their case, leading the CIT(A) to dismiss the grounds.

What were the issues?

Whether the assessment orders were void ab initio, bad in law due to lack of proper satisfaction notes, time-barred, or if the appointment of a Special Auditor was invalid.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153A,Section 153C,Section 142(2A),Section 153,Section 250,Section 254,Section 254(2B)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH MUMBAI

For Respondent: Shri B. Panda, Ld. DR
Hearing: 1.07.2026Pronounced: 07.07.2026

आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: These two appeals, preferred by two different assessees, are directed against separate orders dated 03.11.2025 passed by the learned Commissioner of Income-tax (Appeals)-51, Mumbai, under section 250 read with section 254 of the Income-tax Act, 1961, for the assessment year 2010-11. Though the appeals were heard on separate dates, they arise from the same search proceedings, involve identical additional legal grounds, emanate from substantially identical orders of the CIT(A), and were decided by the CIT(A) on common reasoning. Accordingly, for the sake of convenience and consistency, both appeals are being disposed of by this consolidated order. 2. The substantive grounds raised in the present appeals are identical and read as under: 1. The learned CIT(A) erred in not holding that the assessment order passed by the Assessing Officer u/s.143(3) r.w.s. 153C of the Act is void ab initio and bad in law. 2. The learned CIT(A) erred in not holding that Assessment Order passed by Assessing Officer u/s. 153C is bad in law for want of proper satisfaction notes recorded by the Assessing Officers.

3 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia 3. The learned CIT(A) erred in not holding that that the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s 153C of the Act is time barred and in violation of provisions of section 153 of the Act and hence, bad in law. 4. The learned CIT(A) erred in not holding that that the appointment made by the Assessing Officer of the Special Auditor is not in accordance with the provisions of section 142(2A) of the Act. 3. Briefly stated, a search action under section 132 of the Act was carried out in the case of the J.B. Diamonds Group on 29.10.2010. Consequent thereto, assessments in the cases of the present assessees were completed on 11.11.2013 under section 143(3) read with section 153A of the Act.

4.

In the first round of appellate proceedings, the original grounds raised by the assessees had already been adjudicated by the CIT(A). Thereafter, the assessees raised certain additional legal grounds for the first time before the Tribunal in ITA No. 4529/Mum/2016 in the case of Late Shri Bhagwanbhai Kalyanbhai Kukadiya and ITA No. 4523/Mum/2016 in the case of Shri Suresh Bhai Valji Bhai Kukadia.

5.

By order dated 16.05.2019, the Co-ordinate Bench admitted the additional grounds, considering that the questions raised therein went to the root of the validity of the assessments. Since those grounds had not been adjudicated by the first appellate authority, the Co-ordinate Bench restored the matters to the file of the CIT(A) for de novo adjudication after granting the assessees reasonable opportunity of being heard. The assessees were also

4 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia directed to file the additional grounds along with the relevant documents and evidence before the CIT(A).

6.

It is observed that during the set-aside proceedings, the CIT(A) issued various notices of hearing to the assessees between 30.01.2020 and 26.08.2025. The CIT(A) recorded that there was no response on several occasions and that, on the remaining occasions, adjournments were sought on grounds such as illness of the Chartered Accountant, the Chartered Accountant being occupied with tax audit work and the requirement of time for collection of papers. The CIT(A) further recorded that the assessees had not even filed the additional grounds which were required to be adjudicated pursuant to the directions of the Tribunal.

7.

In the absence of any effective compliance by the assessees, the CIT(A) adopted the additional grounds and submissions available in the case of Smt. Kalavati Surani. The CIT(A) treated the case of Shri Jivraj P. Surani as the lead case and applied the decision therein mutatis mutandis to the other group cases, including those of the present assessees. The relevant observations of the CIT(A) are reproduced below:

“Since the appellant has not responded to any of the notices issued by this office and has also not filed the additional grounds of appeal that are required to be adjudicated, the additional grounds taken in the case of Smt Kalavati Surani is being considered in this order. This also emanates from the order of the ITAT vide which these appeals have been set aside to the files of CIT(A).”(para 5)

5 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia 8. The CIT(A) held that Ground Nos.1 and 2 were not applicable because the assessments in the present cases had been framed under section 143(3) read with section 153A and not under section 153C of the Act. The CIT(A) thereafter adjudicated the grounds relating to limitation and the validity of the appointment of the Special Auditor under section 142(2A of the Act). The CIT(A) also followed the order of the Tribunal in the case of Shri Vallabhbhai Parsottambhai Surani for the assessment year 2007-08 and concluded as under:

“In view of the detailed discussion above and also following the order of ITAT in the case of Vallabhbhai Parsottambhai Surani for AY 2007-08 reproduced above, the additional grounds of appeal taken by the appellant is dismissed. Since the original grounds of appeal have already been adjudicated by the CIT(A), the same are not being considered again.”(para 10) 9. Before us, the learned Authorised Representative (AR) submitted that the assessees could not effectively avail the opportunities granted during the appellate proceedings before the CIT(A). It was submitted that the additional legal grounds could not, therefore, be properly presented and supported with the relevant records and submissions. The learned AR prayed that one final opportunity may be granted and the matters may once again be restored to the file of the CIT(A).

10.

The learned AR fairly acknowledged that eleven opportunities had been granted by the CIT(A) and that the assessees had failed to effectively comply with the notices. The assessees have, however, filed undertakings before the Tribunal

6 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia stating that they shall comply with the notices issued by the CIT(A), file the requisite written submissions and documents, and shall not seek unnecessary adjournments.

11.

The learned AR further submitted that the assessees were willing to bear costs as a condition for restoration of the appeals.

12.

The learned Departmental Representative did not raise any objection to the matters being restored to the file of the CIT(A), subject to appropriate conditions and costs.

13.

We have considered the rival submissions and perused the material available on record. At the outset, it is necessary to observe that the conduct of the assessees during the set-aside proceedings before the CIT(A) cannot be approved. The matters had earlier been restored by the Tribunal specifically to enable the assessees to present and substantiate the additional legal grounds. Despite this, eleven opportunities extending over a period of more than five years were not effectively availed. The assessees also failed to comply with the specific direction of the Tribunal requiring them to file the additional grounds and the relevant documents before the CIT(A).

14.

In these circumstances, it cannot strictly be said that the CIT(A) denied an opportunity of hearing to the assessees. On the contrary, the record demonstrates that sufficient and repeated opportunities were granted. The CIT(A) was, therefore, justified in

7 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia proceeding to dispose of the matters on the basis of the material then available.

15.

At the same time, it is equally evident that, owing to the absence of any substantive response from the assessees, the CIT(A) adopted the additional grounds and submissions filed in the case of another assessee, namely, Smt. Kalavati Surani. The CIT(A) also treated another group case as the lead case and applied the findings therein to the cases of the present assessees.

16.

The additional grounds relate to the validity of the assessment proceedings, computation of limitation and the legality of the direction for a Special Audit under section 142(2A) of the Act. These legal issues go to the root of the assessments. Though the underlying factual matrix may be common to the group, adjudication of these grounds may require examination of the proceedings and records pertaining to each assessee, including the relevant notices, objections, satisfaction recorded by the Assessing Officer, approval obtained from the competent authority, direction for Special Audit, period consumed by the Special Audit and the chronology relevant for computing limitation.

17.

The earlier order of the Co-ordinate BEnch contemplated adjudication of the additional grounds after granting the assessees a reasonable opportunity to place their respective cases before the CIT(A). That purpose has remained substantially

8 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia unfulfilled because of the assessees’ own default. However, considering the nature of the legal grounds, the undertakings now filed by the assessees and the absence of any objection from the Revenue, we are of the considered view that, in the larger interest of justice, one final opportunity may be granted to the assessees. Such indulgence, however, cannot be granted unconditionally.

18.

Section 254(2B) of the Act places the costs of an appeal within the discretion of the Tribunal. Considering the repeated defaults, the prolonged delay caused in the appellate proceedings and the additional administrative burden occasioned thereby, we deem it appropriate to impose costs of Rs.50,000/- on each assessee.

19.

Accordingly, the impugned orders dated 03.11.2025 are set aside, limited to the adjudication of the additional grounds which had earlier been restored by the Co-ordinate Bench , subject to the following conditions:

i. Each assessee shall deposit a sum of Rs.50,000/- with the Prime Minister’s National Relief Fund, within thirty days from the date of receipt of this order. ii. Each assessee shall furnish proof of such deposit before the CIT(A) within the aforesaid period.

9 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia iii. The CIT(A) shall take up the restored proceedings only upon production of proof of payment of the aforesaid costs by the concerned assessee. iv. In the event of failure by either assessee to deposit the costs within the stipulated period, the impugned order in the case of the defaulting assessee shall stand revived and the appeal of such assessee shall be treated as dismissed.

20.

Upon compliance with the above conditions, the CIT(A) shall grant one final effective opportunity of hearing to the concerned assessee and adjudicate the additional grounds de novo, on the basis of the records and material pertaining to that assessee, in accordance with law.

21.

The assessees shall file before the CIT(A), within the time allowed by him, the additional grounds, written submissions, relevant documentary evidence and a complete chronology of the proceedings. The assessees shall strictly abide by the undertakings furnished before the Tribunal and shall not seek any adjournment except for a genuine and unavoidable cause, duly supported by evidence.

22.

The CIT(A) shall be at liberty to call for the relevant assessment records or a report from the Assessing Officer and shall pass a reasoned and speaking order after considering the submissions and evidence filed by the assessees. In case of any further default by an assessee, the CIT(A) shall be at liberty to

10 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia decide the matter on the basis of the material available on record without granting any further indulgence.

23.

We clarify that the restoration is confined only to the additional grounds which formed the subject matter of the earlier remand by the Tribunal. The original grounds, which had already been adjudicated in the first round of proceedings, shall not be reopened or reconsidered.

24.

We have not expressed any opinion on the merits of the additional grounds. All contentions of both parties relating thereto are expressly left open for adjudication by the CIT(A).

25.

In the result, both appeals are conditionally allowed for statistical purposes, subject to payment of costs and compliance with the directions contained hereinabove.

Order pronounced in the open court on 07.07.2026.

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 07/07/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. संबंधधत आयकर आयुक्त / The CIT(A) 3. आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6.

11 ITA No. 1149/Mum/2026 ITA No. 9483/Mum/2025 Late Bhagwanbhai Kalyanbhai Kukadiya represent by Legal heir Khashiben B Kukadia & Suresh Bhai Valji Bhai Kukadia आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai

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