DCIT, CENTRAL CIRCLE - 4(1), KOLKATA, INCOME TAX DEPARTMENT, KOLKATA vs. MAHABIR PRASAD DUDHANI, SILIGURI

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No. 1541/KOL/2024 Assessment Year : 2011-2012

DCIT, Central Circle-4(1), Vs. Mahabir Prasad Kolkata, Dudhani, Income Tax Department, Prop of M/s Jethmal Kolkata Surajmal Somani Mill Compound, S F Road, West Bengal - 734005 [PAN: ADFPD9799P] APPELLANT RESPONDENT

Assessee by : Miraj D Shah, AR Revenue by : Archana Gupta, Addl. CIT, Sr. DR

Date of hearing : 18.06.2026 Date of Pronouncement : 06.07.2026

O R D E R This is an appeal filed by the Revenue against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals) Kolkata-27, (hereinafter referred to as “the Ld. CIT(A)] dated 02.05.2024, DIN & order No. ITBA/APL/S/250/2024-25/1064600339(1) on the following grounds of appeal:

2 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani u/s 68 of the Income Tax Act, 1961 under ‘Unexplained Cash Credit’ of the assessee received in guise of bogus commodity trading profit. 2. That the Department craves leave to add, modify or alter any of the grounds(s) of appeal and /or adduce additional evidence at any time of hearing of the case. 2. Briefly stated the facts of the case are that the assessee filed return of income on 27.09.2011 declaring income of Rs. 2,41,250/- search and seizure operation was carried out in premises of the assessee on 09.04.2014. Accordingly, notice u/s 153 of the Act was issued and assessment was completed u/s 153A of the Act on 29.12.2016 accepting the return income of Rs. 2,41,250/-. Subsequently, as per the information received that the assessee has booked bogus accommodation entry of capital gain by sale of shares of Global Capital Market Ltd. As per information received from the PMO that the entities involved in that transaction are the syndicate members, the brokers, the entry operators. The transaction involves three layers. The beneficiary receives the number of shares at a nominal rate. This first layer of the transaction mostly is offline. Then the prices of the shares are rigged gradually through the brokers. After a period of over one year, the beneficiary provides required amount of cash which is routed through some of the paper companies of the entry operator and is finally parked in one company which will buy the share from the beneficiary. The paper company issues cheque to the beneficiary, this is the conventional method adopted by some bogus capital gains providers. Accordingly, notice u/s 148 of the Act was issued and served on the assessee vide

3 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani notice dated 23.03.2018 before reopening of the assessment for year under consideration the reason for reopening case was properly recorded and obtained necessary approval from the competent authority. In response to the notice u/s 148 of the Act the, the assessee filed letter on 30.03.2018 to treat the earlier return filed may be treated as return filed in response to the notice u/s 148 of the Act. In response, the notice u/s 148 of the Act and asked with reason of issuance of notice u/s 148 of the Act. The AO intimated to the assessee vide letter dated 17.05.2018 that the assessee is required to prepare a true and correct return of income and file its electronically. It was also intimated that if he failed to file his return of income the assessee will be treated as in default in filing of the return. Moreover, the assessee has not filed the return of income as prescribed under the provision of the Act. It is to be mentioned here that the as per the provision of section 139(1) of the Act and Rule 12 of Income Tax Rules, 1962 and he was replied to file his return electronically. Hence, these reasons filed earlier and merely in the letter cannot be treated as income filed in response to notice u/s 148 of the Act, the reasons were provided to the assessee. Subsequently, other statutory notices were issued to the assessee and the assessee furnished reply. After considering the entire submission of the assessee, relied on various case laws the same amount credited in the books of assessee of Rs. 17,52,499/- was treated as income u/s 68 of the Act.

4 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani 3. Aggrieved from the order of the Ld.CIT(A), the assessee filed appeal before the Ld.CIT(A). During the appellate proceedings, the assessee raised various issue which were disposed of by the Ld.CIT(A). The Ld. CIT(A) after discussing the issue in detail he allows the issue at para No. 6.2.4 of his order.

5 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani “Application under Rule 27 of the ITAT Rules 1. The Ld CIT Appeals in paragraph 5.2 on page 13/14 of his order has dismissed the grounds relating to issue of notice u/s 143(2) of the IT Act 1961. 2. The assessee seeks to move the following grounds under Rule 27 of the ITAT Rules: (a) That that CIT Appeals was not justified in holding that the notice u/s 143(2) of the Act was not required to be issued in this case. The assessment proceedings and assessment order deserves to be quashed in absence of notice u/s 143(2) of the Act. 3. The assessee relies on the decision of the Delhi High Court in the case of Sanjay Sawhney Versus Principal Commissioner Of Income Tax-116 taxmann.com 701 (Delhi), 316 CTR 392 wherein it was held as follows: 26. The upshot of the above discussion is that Rule 27 embodies a fundamental principal that a Respondent who may not have been aggrieved by the final order of the Lower Authority or the Court, and therefore, has not filed an appeal against the same, is entitled to defend such an order before the Appellate forum on all grounds, including the ground which has been held against him by the Lower Authority, though the final order is in its favour. In the instant case, the Assessee was not an aggrieved party, as he had succeeded before the CIT (A) in the ultimate analysis. Not having filed a cross objection, even when the appeal was preferred by the Revenue, it does not mean that an inference can be drawn that the Respondent- assessee had accepted the findings in part of the final order, that was decided against him. Therefore, when the Revenue filed an appeal before the ITAT, the Appellant herein (Respondent before the Tribunal) was entitled under law to defend the same and support the order in appeal on any of the grounds decided against it. The Respondent assessee had taken the ground of maintainability before Commissioner (Appeals) and, therefore, in the appeal filed by the Revenue, it could rely upon Rule 27 and advance his arguments, even though it had not filed cross objections against the findings which were against him. The ITAT, therefore, committed a mistake by not permitting the assessee to support the final order of CIT (A), by assailing the findings of the CIT(A) on the issues that had been decided against him. The Appellant assessee, as a Respondent before the ITAT was entitled to agitate the jurisdictional issue relating to the validity of the reassessment proceedings. We are, therefore, of the considered opinion that the impugned order passed by the ITAT suffers from perversity in so far as it refused to allow the Appellant assessee (Respondent before the Tribunal) to urge the grounds by way of an oral application under Rule 27. The question of law as framed is answered in favour of the Appellant - assessee and resultantly the impugned order is set aside. The matter is remanded back before the ITAT with a direction to hear the matter afresh by allowing the Appellant- assessee to raise the additional grounds,

6 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani under Rule 27 of the ITAT Rules, pertaining to issues relating to the assumption of jurisdiction and the validity of the reassessment proceedings under Section 153C of the Act.” 7. Considering the above application, the objection raised by the assessee is accepted even though the assessee is not in appeal and the issue raised in the above application in that no notice u/s 143(2) of the Act has been issued by the AO after filing return of income. However, in this case, whether the AO has issued defective notice to the assessee to be decided first, whether the assessee filed valid return of income or not the assessee filed return income u/s 139(1) of the Act on 27.09.2011 declaring income of Rs. 2,41,250/- in pursuant to search proceeding assessment u/s 153A of the Act was completed u/s 153A on 29.12.2016 and return income filed u/s 139(1) of Rs. 2,41,250/- was accepted. The return income assessed u/s 153A was accepted during the easement proceeding u/s 147/148 order dated 24.12.2018, the assessee filed a letter dated 30.03.2018 stating that the return filed u/s 139 of the Act shall be treated as the return in response to notice u/s 148 of the Act dated 23.03.2018within the period of 30 days. However, the AO intimated to the assessee on 17.05.2018 that the return should have been filed electronically and it was also intimated that the assessee fails to file his return of income electronically, the assessee should be treated that the assessee is in default. A Similar issue has been decided by the Co-ordinate Bench of the ITAT, Kolkata in ITA No. 1730/Kol/2025 for AY

7 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani 2013-14, order dated 11.12.2025. For the sake of convenience, I am reproducing the relevant part of the order:

“3. The assessee has raised an additional ground before us which is against the non-issuance of notice u/s 143(2) of the Act thereby rendering the assessment framed u/s 147 read with section 144/144B of the Act dated 31.03.2022, as invalid and nullity in the eyes of law. 3.1. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised an additional ground of appeal challenging the non-issuance of notice u/s 143(2) of the Act. In our opinion the issued raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts are required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities. The case of the assessee is squarely covered by the decisions of the Apex court in the case of i) Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 , ii) National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 and also by the decision of Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal). Therefore, we are inclined to admit the same for adjudication. 4. The facts in brief are that the assessee filed the original return of income on 29.09.2013, declaring total income of ₹20,56,820/-. The case of the assessee was selected through CASS for scrutiny and accordingly, the assessment was framed u/s 143(3) of the Act vide order dated 22.03.2016, assessing the total income at ₹95,95,420/-. Thereafter the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021 after obtaining the due approval from the competent authority. The assessee was required to file the return of income within 30 days from the date of the said notice. However, according to the ld. AO, the assessee has not filed any return of income in response to notice u/s 148 of the Act till the date of the assessment order. Thereafter, notice u/s 142(1) of the Act was issued on20.11.2021, by JAO requesting the assessee to file the return of income in response to notice 148 of the Act, however, the same was also not complied with. The ld. AO noted that in Para no.2 of the assessment order page no.2 that assessee has not filed any return of income in response to notice u/s 148 of the Act by the JAO on 20.11.2021. Finally, the assessment order u/s 147 read with section 144/144B of the Act dated 31.03.2022, was framed by making an addition of ₹1,24,00,000/- by way of cash credit. The said order of the ld. AO was affirmed by the ld. CIT (A).

8 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani 4.1. The ld. Counsel for the assessee vehemently submitted before us that the assessment framed by the ld. AO is nullity and bad in law as the mandatory notice u/s 143(2) of the Act was not issued during the assessment proceedings. Therefore, the ld. AO had no jurisdiction to frame the said assessment. The ld. AR also controverted the objections/observations of the ld. AO that the assessee has not filed any return of income in compliance to notice issued u/s 148 of the Act by submitting that the assessee has in fact filed a letter dated 24.01.2022, submitting before the ld. AO to treat the return filed originally u/s 139(1) of the Act on 29.09.2013, as return in response to notice u/s 148 of the Act. The ld. AR also referred to the acknowledgement of the return filed by the assessee originally, however, the ld. AR submitted the ld. AO overlooked the said fact and did not issue any notice u/s 143(2) of the Act. When the said fact was put to the ld. DR, he candidly admitted that no notice was issued by the ld. AO u/s 143(2) of the Act, after the ld. AO found that the assessee has not filed any return of income in response to notice us/ 148 of the Act. However, candidly, admitted that the assessee vide letter dated 24.01.2022, informed the ld. AO to treat the return filed originally on 29.09.2013, as return filed in response to notice u/s 148 of the Act. 4.2. After hearing the rival contentions and perusing the materials available on record, we find that the undisputedly, the notice u/s 143(2) of the Act was not issued by the ld. AO after assessee informed the ld. AO vide letter dated 24.01.2022, that return filed originally u/s 139(1) of the Act on 29.09.2013, may kindly be treated as return filed in response to notice u/s 148 of the Act and also attached an acknowledgement of the return filed originally. In our opinion, the said communication by the assessee to the ld. AO is a sufficient compliance to the notice u/s 148 of the Act and it is obligatory and mandatory on the part of the ld. AO to issue notice u/s 143(2) of the Act failing which the assessment framed by the ld. AO is invalid and nullity in the eyes of law. The case of the assessee find support from the decision of Hon'ble jurisdictional High Court in case of PCIT vs. Shri Jai Shiv Shankar Traders (P.) Ltd. [2015] 64 taxmann.com 220 (Delhi)/[2016] 383 ITR 448 (Delhi)/[2016] 282 CTR 435 (Delhi)[14-10-2015], wherein it is held that the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act, pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment. Therefore, we respectfully following the decision of the Hon'ble Delhi High court in case of PCIT Vs. Shri Jai Shiv Shankar Traders (P.) Ltd. (supra), quash the assessment framed by the ld. AO as invalid and nullity in the eyes of law. 5. In the result, the appeal of the assessee is allowed.” 8. The Ld. Counsel has also relied on ITA No. 3981/Del/2025 order dated 07.08.2025. Respectfully following the above judgments that the communication made by the assessee that the return filed u/s 139(1)

9 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani shall be treated as return in response to the notice u/s148 is sufficient to compliance to the notice u/s 148 of the Act and it is obligatory and mandatory on the part of the AO to issue notice u/s 143(2) of the Act on the valid return filed by the assessee. the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act on the valid return pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment Since, the assessee communicated to the AO within the period of specified date. Therefore, the letter submitted by the assessee is treated as valid return. Therefore, considering the application filed by the assess under Rule 27 of the ITAT Rules the appeal of the Revenue is dismissed

Order pronounced on 06.07.2026.

Sd/- (Laxmi Prasad Sahu) Accountant Member Dated: 06.07.2026 AK, Sr. P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)

10 ITA No. 1541/KOL/2024 Mahabir Prasad Dudhani //True copy// By order

Assistant Registrar, Kolkata Benches