SHAILA SHARAD KHANDELWAL,AMRAVATI vs. ITO WARD-3, AMRAVATI

PER PAWAN SINGH, JUDICIAL MEMBER:

dated 31.07.2024for Assessment Year (AY) 2014-15. The assessee has raised

following grounds of appeal:

“1. That the assessment order passed by the learned Income Tax Officer, National Faceless Assessment Centre (NFAC), Delhi u/s. 147 r.w.s. 144B is bad in law and wrong on facts and the learned CIT(A), National Faceless Appeal Centre (NFAC) erred in confirming the same. On the facts and circumstances of the case, the action of the learned CIT(A) is unjustified.

for A.Y. 2014-15 on 27.02.2015 declaring income of Rs. 3,18,940/-. The case of

assessee was reopened on 30.03.2021. Notice under section 148 dated

30.03.2021 was issued to the assessee for filing return of income. The case of

assessee was reopened on the basis of information with assessing officer (AO)

that assessee is a proprietor of S.S. Traders engaged in the business of grain

adat at Warud, District Amravati and has transaction of worth Rs. 41.44 crore in

her bank account, which remains unexplained. The AO was of the view that even

if the commission income from gross receipts at general rate in the business adat

is taken at 1.75%, the income would be Rs. 72,53,525/-. Thus, there is

difference between real and the income shown by assessee in her return of

income. The AO formed her belief that income to the tune of Rs. 72,53,525/- has

escaped assessment within the meaning of section 147 of Income Tax Act. The

reasons recorded were approved by competent authority and accordingly notice under section 148 dated 30.03.2021 was issued. The AO further recorded that

assessee was asked to furnish various details as per show cause notice dated

15.12.2021 requiring to furnish details note of business activities, computation of

income, balance sheet, profit and loss account with all schedules and details,

complete details of bankaccount and source of cash deposit. The AO on page 3

of his order recorded that assessee made request to consider return of income

filed under section 139, as returned in response to notice under section 148. The

AO further recorded that assessee was non-responsive to various notice.

However, filed her submission dated 16.03.2022. The relevant part of reply is

recorded at page 5 & 6 of assessment order. The assessee in her submission

submitted that she is registered Aaditya with Agriculture Produce Marketing

Committee (APMC) that is as broker. She is commission agent of grains. All the

receipts received from Principal who purchased the grains are received through

bank. All details are disclosed while filing return of income. Her income is only of

adat which is disclosed in the return of income. There is no escapement of

income notice under section 148 is illegal and untenable. The assessee requested

for reasons recorded. On the show cause of AO that credits in the bank account

are not disclosed in the books of account. The assessee stated that beingAdatiya,

the purchases are made from farmers through APMC on behalf of the principal.

The assessee mainly procuring soyabean from the market. The payment is

received from banking channel against the goods supply to

principal/businessman, who purchased the agriculture produce. The assessee is kachhaAdatia, the sales and purchases are recorded in the memorandum

account. The payments to the farmers are debited to their bank account. The

assessee furnished registerof purchase and sales made during the course of Adat

business. The commission / Adat charges is charged from farmers as per

quantity and not as per value of goods procured. Generally, commission of Rs.

5.00/- is charged per quintal of goods, which comes to 0.15% approximately of

the purchase value. The assessee undertakes to produce supporting evidence as

such evidence was under collection, as the assessment was during Covid period.

The explanation of assessee was not accepted by AO. The AOnoted that while

filing return of income, the assessee has shown gross profit of Rs. 2,90,070/-

and income from other sources of Rs. 50,982/-. The submission of assessee was

accepted by AO to the extent that assessee is in the business of grain adat.

Further, the credit amount in the bank account of assessee of Rs. 41.44 crore are

part of books of assessee as has been accepted by assessee in her submission.

However, the AOnoted that assessee has shown gross profit of Rs. 2,90,071/-.

The assessee has shown other income and income of Rs. 50,982/-. The

AOestimated the income of assessee @ 5.00% of total credit of Rs. 41.44 crore

and thereby worked out addition of Rs. 2,07,24,358/- and added as income of

assessee.

before ld. CIT(A). Before ld. CIT(A), the assessee filed detail statement of fact as

well as written submission. The statement of facts of assessee are recorded in para 5.2 and submission of assessee in 5.3 of order of ld. CIT(A). In the

statement of fact, the assessee contended that she is individual earning from

income from grain adat (commission) and other sources. She is registered broker

with APMC having Mandi Licence, conducting her business in the name of S.S.

Traders. She filed her return of income declaring income at Rs.3,18,940/-. In

response to notice under section 148 dated 30.03.2021, the assessee attempted

to file return on ITBA portal, but due to technical glitches it could not be filed.

Thus, the assessee vide letter dated 21.01.2022 requested to consider original

return in response to notice under section 148. However, return was also

uploaded on 16.03.2022 showing same return. The assessee stated that reasons

recorded was not provided to the assessee to the assessee. The books of

account were maintained and were furnished with all financial statements. The

assessee is aAaditya and her income from commission is less than prescribed

limit under section 44AB. Thus, there was no requirement of audit. The copy of

Mandi Licence of APMC was furnished. The proforma of bills and documents

maintained under the prescribed form under APMC was also furnished. The

assessee further submitted that being anAdatia, she procured good grain mainly

soyabean for purchaser like Ruchi Soya Ltd., Adani Wilmar. The proforma of

APMC is known as “Hishob Chitthi”i.e. accounts statement. The payment is

received by cheque in the account of assessee and after withdrawal paid to the

farmers. The copy of purchase register, sale register, Hishob Chitthi were also

furnished. The transactions are made on behalf of the principal and sale and purchase does not belong to assessee and are not part of profit and loss account

of assessee. The only adat is considered as gross receipts in profit and loss

account of assessee. The assessee also furnished her bank account in IDBI and

ICICI Bank. She reiterated that adat charged @ Rs. 5.00/- per quintal as

mentioned in Hishob Patti. In none of the case, adat is charged on the

percentage basis as alleged by assessing officer. The adat income of assessee of

Rs. 7,78,578/- is disclosed in profit and loss account. The Investigation Unit,

DDIT-3, Nagpur also made enquiries about the business transaction of assessee.

The financial statement of assessee was furnished which were verified by

Investigation Officer thoroughly. No specific communication was made thereafter

by investigation unit. The assessee furnished sufficient explanation during

assessment. It was a covid period during assessment and assessee being a

diabetic and BP patient was advised for medical rest. The assessee in her

another submission also made similar submission. The assessee also relied on

certain case laws on the issue of reopening.

reopening under section 147 and issuance of notice under section 148. The ld.

CIT(A) while upholding the validity of reopening held that assessing officer was

having prima facie evidence in the form of information that income of assessee

has escaped assessment. To support his view, the ld. CIT(A) relied on the

decision of Supreme Court in Raymond Woolen Mills Ltd. vs ITO (1999) 263 ITR

34 (SC). The ld. CIT(A) also relied upon the decision of Hon’ble Apex Court in ITO vs Purushottam Das Bangur (1997) 90 Taxman 541 (SC) wherein it was held

that reopening based on information from investigation unit is valid. On the

ground against the non-supply of reasons recorded, the ld. CIT(A) held that

reasons recorded were communicated to the assessee vide letter dated

19.03.2022. On the estimation of income, estimated by AO @ 3.57% of total

turnover, the ld. CIT(A) rejected the submission of assessee. The ld. CIT(A) on

the basis of observation of AO that in A.Y. 2013-14, the assessee has declared

commission income of Rs. 3,90,164/- against the receipt of Rs. 1.09 crore which

is 3.57% and upheld the addition. On the commission income offered by the

assessee that she is getting commission @ Rs. 5.00/- per quintal, the ld. CIT(A)

held that assessee has failed to furnish necessary documentary evidence about

such commission. Further, aggrieved the assessee has filed present appeal before

Tribunal.

the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for

the Revenue and have gone through the orders of lower authorities carefully.

The ld. AR of the assessee submits that assessee is a proprietor of S.S. Traders,

a registered broker (Adatia) with APMC Roshankheda Village in TakukaWarud,

District Amravati. The assessee earned adat income @ Rs. 5.00 % per quintal on

agriculture product like soya. The assessee has earned total income of Rs.

7,78,578/- which is duly shown in the return of income. During assessment, the

assessee furnished sufficient evidence to substantiate the commission income in the form of Hishob Patti, Bills, Books of Accounts, Bank Statements, MandiAdat

Purchase Register, Mandi Adat Sale Register, Mandi License and Balance Sheet

and P & L A/c. The assessing officer disregarded all such documentary evidence

and estimated income of assessee @ 3.57% of total credit. The credit in the

bank account can never be considered for estimating income. The ld. AR of the

assessee that he has raised grounds against validity of assessment order as well

as against the additions on merits. Ground no. 1 to 2 relates to validity of

assessment order passed under section 147. The ld. AR of the assessee submits

that there is no proper approval of reasons recorded. The reasons were approved

in a mechanical manner. The ld. PCIT approved the reasons recorded in a

mechanical and routine manner by mentioning that “Yes, I am satisfied. It is a fit

case for re-opening”. The amount mentioned in the approval and the annexure

attached as Rs. 58,36,250/- is without any basis. Though, it was fatal; despite

accepting this fact the AO, treated it a typographical error. During assessment, in

the show cause notice, the AO issued show cause that there was a credit entry in

the bank account of assessee of Rs. 41.44 crore. However, there was no such

information in the approval and its annexure. In the annexure, the figure of

undisclosed income of Rs. 58,36,250/- is repeatedly mentioned as per

information available. The information was not provided to the assessee. The

reasons recorded was not provided though the ld. CIT(A) in his order mentioned

that it was provided on 19.03.2022. The assessment was completed on

28.03.2022. Though, the AO in para 7 of assessment order mentioned about the applicability of provisions of clause (a) Explanation 2 to section 147, such fact is

incorrect. In fact, return was filed on 27.02.2015 which is mentioned in the

annexure itself. To support his submission, the ld. AR of the assessee relied upon

the following decision:  Svitzer Hazira vs ACIT 441 ITR 19 (Bom)  United Electrical Company (P) Ltd. vs CIT &Ors. 258 ITR 317 (Del)  CIT vs S. Govanka Lime & Chemical Ltd. (2023) 150 taxmann.com 245 (SC)  Shree Balkishan Agarwal Glass Industries Ltd. vs DCIT (2020) 120 taxmann.com 473 (Delhi Trib.)  KartikSureshchandra Gandhi vs. ACIT (2023) 154 taxmann.com 193 (Bombay) 6. The ld. AR of the assessee further submits that AO acted on borrowed

satisfaction, borrowed from the information of DDIT Investigation Unit -3,

Nagpur and merely relied upon the such information without making any

independent enquiry. The information forwarded from DDIT Unit-3, Nagpur is

mechanically relied and acted upon for proposing reassessment in case of

assessee. The reassessment order passed without making enquiry is void and

liable to be quashed. To support such view, the ld. AR relied upon the following

decision:  PCIT vs Shodiman Investments Private Limited (2018) 93 taxmann.com 153/167 DTR 290 (Bom)(HC).  Akshar Builder & Developers vs ACIT (2019) 103 taxmann.com 162 (Bombay).  Devansh Exports vs ACIT ITA No. 2178/Kil/2017 dated 15.10.2018 (ITAT)(Kol).  PCIT vs RMG Polyvinyl (I) Ltd. (2017) 83 taxmann.com 348 (Delhi).  PCIT vs Meenakshi Overseas Private Ltd. (2017) 82 taxmann.com 300 (Delhi).

letter dated 19.03.2022 provided attachment to the letter for obtaining approval 9 under section 151. The reasons recorded with signature of AO were never

provided. Thus, the AO violated the principle of natural justice. To support his

submission, the ld. AR of the assessee relied upon the following decision:  PCIT vs Ramaiah (2019) 103 taxmann.com 202 (SC).  CIT(A) vs Videsh Sanchar Nigam Limited (2012) 21 taxmann.com 53/340 ITR 66 (Bombay HC).  Fomento Resorts & Hotels Ltd. in Tax Appeal No. 63 of 2007 (Bombay HC).  CIT vs Trend Electronic (2015) 61 taxmann.com 308/379 ITR 456 (Bom).  CIT vs IDBI Ltd. (2016) 76 taxmann.com 227 (Bom). 8. On merit, the ld. AR of the assessee submits that the AO proposed addition @

5.00% of credit entry in the show cause notice dated 19.03.2022. The rates

proposed by assessing officer were arbitrary and merely on presumption without

any comparable instances. Finally, the AO made addition @ 3.57% of entire

credit entry in her bank account. The assessee has furnished evidence in the

form of Hishob patti as prescribed by norms of APMC wherein the rate of adat is

duly mentioned at Rs. 5.00/- per quintal, copy of such invoices / hishobpatti are

filed at page no. 69 to 79. The assessee also furnished mandiadat purchase

register, sale register and no infirmity in such document was filed by assessing

officer. Ultimately, the AO estimated income on the basis of profit and loss

account of A.Y. 2013-14, without appreciating the fact that facts for the year

under consideration was different. In A.Y. 2013-14, the assessee has shown

income from adat and other commission income, while in the year under

consideration there is adat income only. Supporting evidence of mandi purchased

Hishob Patti and ledger account was furnished. The assessee also furnished commission income for A.Y. 2013-14. The AO adopted rate @ 3.57% without any

intimation or show cause notice and without any comparing facts of both the

years. The ld. AR of the assessee submits that he is liable to succeed on legal

issue as well as on merit.

authorities. In ground no. 1 to 3, the ld. Sr. DR for the Revenue submits that AO

was having sufficient information for making belief that income has escaped

assessment. The reasons recorded were provided to the assessee. During

assessment, the assessee provided full opportunity. On merit, the ld. Sr. DR for

the Revenue submits that during assessment as well as before ld. CIT(A), the

assessee has not furnished necessary documentary evidence to support her

claim. The AO estimated the commission income on the basis of assessment

order for A.Y. 2013-14. The ld. CIT(A) in para 7.5.5 of his order has given clear

cut finding that assessee failed to substantiate her contention that she was

getting commission @ Rs. 5.00/- per quintal only.

through the orders of lower authorities carefully. The basis of estimation of

income by AO and confirmed by the ld CIT(A) are recorded by us in para-2 & 4

of this order, which is not repeated here to avoid repetition. During the hearing

before us, the ld AR of the assessee vehemently urged before us that estimation

of income by AO was arbitrary and merely on presumption without any

comparable instances and that income was estimated on entire credit in bank @ 3.57% on the basis of profit and loss account of A.Y. 2013-14. The assessee has

furnished evidence in the form of Hishob patti as prescribed by norms of APMC

wherein the rate of adat is duly mentioned at Rs. 5.00/- per quintal, copy of such

invoices / hishob patti are filed at page no. 69 to 79. The assessee also furnished

mandi adat purchase register, sale register and no infirmity in such document

was filed by assessing officer.

regulation, “Hissab Patti” (Account Sale Note) is format of receipt of an

agriculture produce under the Maharashtra Agricultural Produce Marketing

(Development and Regulation) Act, 1963. It serves as the official record of the

transaction between the farmer (seller) and the trader (buyer), mediated by the

Adatiya. Such hissab patti contains; name, address, and License Number of the

Commission Agent (Adatiya), farmer details: name and village of the seller,

commodity details like type of produce (e.g., Soybean), variety, and number of

bags. Weight data; i.e. gross weight, tare weight (weight of empty bags),

and net weight. Rate; i.e. the final price per quintal discovered during the open

auction or electronic bidding. Total Value; i.e. gross sale proceeds (Weight ×

Rate). The regulation as per APMC ensures that no unauthorized deductions are

made from the farmer's share. Further, for most regulated commodities including

soybean, the commission agent (Adatiya) is legally supposed to collect their

commission from the purchaser, and not from the farmers. So, in our prima facia

view, the hissab Patti is not the conclusive document to prove the commission income of assessee. Moreover, the hissab Patti is not examined by the lower

authorities. Similarly, the business activities of Licensee of AMPC is regulated and

governed by monitored by Maharashtra Agricultural Produce Marketing

(Development and Regulation) Act, 1963. The lower authorities have not

considered such regulations. Therefore, in our view the matter require fresh

examination of facts for determination of commission income of assessee.

Hence, the matter is restored back to the file of jurisdictional AO to estimate the

commission income, having regard to Maharashtra Agricultural Produce

Marketing (Development and Regulation) Act, 1963 and pass order in accordance

with law, without being influence of our prima facia view. Needless to direct that

before passing the order afresh, the AO shall allow fair and reasonable

opportunity of hearing to the assessee. The assessee is also directed to furnish

required details to the AO. In the result, the ground No. 4 of the appeal is

allowed for statistical purpose.

with the finding of the ld. CIT(A) that that AO was having prima facie evidence

in the form of information that income of assessee has escaped assessment. We

find that Hon’ble Supreme Court in Raymond Woollen Mills Ltd. vs ITO (1999)

263 ITR 34 (SC) and in ITO vs Purushottam Das Banger (1997) 90 Taxman 541

(SC) wherein it was held that reopening based on information from investigation

unit is valid. It was held that only prima facie material if exists, is sufficient to

justify reopening. The correctness or sufficiency of that material is not to be examined at this stage. The AO must have reasonable ground to form his belief

that income had escaped assessment and not whether that belief was ultimately

correct. The reasons were recorded, supplied and sanctioned was obtained from

issuing notice under section 148. Thus, in view of the aforesaid legal discussions,

we do not find any reason to deviate from the finding of ld CIT(A). In the result,

the grounds No. 1 to 3 of the appeal is dismissed.

is consequential.

Order pronounced on 15/04/2026 as per Rule 34 of Income Tax (Appellate

Tribunal) Rules 1963.

Sd/- Sd/-

KHETTRA MOHAN ROY PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Nagpur: Dated: 15/04/2026 Biswajit

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file.

By order

Assistant Registrar ITAT, Nagpur