INCOME TAX OFFICER WARD-1, GANDHINAGAR, GANDHINAGAR vs. KRUNALKUMAR VIRAMBHAI DESAI, GANDHINAGAR

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ITA 2189/AHD/2025Status: DisposedITAT Ahmedabad13 May 2026AY 2017-188 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reopening of the assessment was invalid as the AO had relied on a 'borrowed belief' from the ACB report without applying his own mind or conducting independent inquiry. The Tribunal quashed the AO's order.

What were the facts?

The Revenue appealed against the CIT(A)'s order which partly allowed the assessee's appeal. The case was reopened based on information from the Anti-Corruption Bureau (ACB) regarding disproportionate assets of a family member. The AO added cash deposits in the assessee's bank account as unexplained.

What were the issues?

Whether the reopening of assessment under Section 147 was valid when based on borrowed belief and without independent inquiry. Whether the AO applied his mind to the information received before initiating reassessment proceedings.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Divyakant Parikh, AR
For Respondent: Shri Rameshwar P Meena, Sr. DR
Hearing: 21.04.2026Pronounced: 13.05.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 11.08.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act (hereinafter “the Act”).

2.

There was delay of 19 days in filing of this appeal. The AO has filed a condonation application explaining the reason for delay. It is stated that due to heavy workload of time-barring cases the appeal couldn’t be filed in time. Considering the explanation of the AO, the delay is condoned.

ITA No. 2189/Ahd/2025 Krunalkumar virambhai Desai Vs.ITO, AY- 2017-18 2 3. The brief facts of the case are that the assessee had filed his return of income for A.Y. 2014-15 on 24.03.2018 declaring total income of Rs.17,16,150/-. The case of the assessee was reopened on the basis of letter received from Anti-Corruption Bureau regarding registration of offence under Prevention of Corruption Act, against one Shri Vikrambhai Lilabhai Desai, Deputy Mamlatdar, Kalol and six other family members. The assessee was one of the family members against whom the case was registered by ACB. As per the information received, the assessee had deposited cash of Rs.14,49,300/- in his bank account. In the course of assessment, the A.O. was not satisfied with the explanation of the assessee regarding the source of cash deposit in the bank account as well as the source of cash payments for purchase of immovable property. Therefore, the cash deposit of Rs.12,03,000/- made in the Axis bank account of the assessee was held as unexplained and added to the income of the assessee. The assessment was completed u/s 147 r.w.s 144B of the Act on 27.03.2022 at total income or Rs. 29,93,950/-.

4.

Aggrieved with the order of the A.O., the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was partly allowed.

5.

Now the Revenue is in appeal before us. The following grounds have been taken in this appeal:

a) The Ld. CIT (A) erred in law as well as on facts in treating the reopening proceedings u/s.147 as invalid solely on the facts that the reopening proceedings were initiated on the basis of the ACB report without making independent inquiry.

(b) The Ld. CIT (A) erred in law as well as on facts in appreciating the facts regarding the independent enquiry that it is the prerogative of the AO whether to make independent enquiry or not. Even in the section 147 of the Act prior to finance act, 2021, nothing was mentioned about facts that whether the AO has to do the independent enquiry or not before initiating the reopening proceedings. The only requirement for the reopening of the case under section 147 of the Act was whether the AO had reason to believe or not. At the stage of initiation of reassessmerit proceedings under section 147 of the Act prior to finance act, 2021 w.e.f. 01.04.2021, it was not required to be conclusively proven that income has actually escaped assessment. The only requirement is that whether there was any relevant material on which a reasonable person can form the requisite belief that taxable income has escaped assessment. Further, it is clearly mentioned in para-8 of reason recording (reason provided to the assessee on 10/05/2021) that in this case, the only requirement to initiate proceeding u/s 147 of the Act is reason to believe which has been recorded and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. Thus, the AO had the enough material available on the record for having the reason to believe that the income chargeable to tax has escaped assessment for the relevant year as per the section 147 of the Act prior to finance act, 2021 w.e.f. 01.04.2021.

(c) The Ld. CIT (A) erred in law as well as on facts in allowing the second additional evidences as submitted by the assessee without providing reasonable opportunity to the Assessing Officer as per the rule 468 of the Income Tax Act, 1961.

(d) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.

6.

Shri Rameshwar P Meena, the Ld. SR-DR, submitted that the case of the assessee was reopened on the basis of information received from ACB regarding disproportionate asset of Shri Vikrambhai Lilabhai Desai and six other persons. He submitted that the Ld. CIT(A) was not correct

ITA No. 2189/Ahd/2025 Krunalkumar virambhai Desai Vs.ITO, AY- 2017-18 4 in holding that the reopening was invalid only for the reason that the proceeding was initiated on the basis of ACB report without making any independent inquiry. He explained that as per the provisions of the Act, there was no requirement for making independent inquiry prior to the reopening proceeding. The AO was not required to conclusively prove that the income had actually escaped assessment. Therefore, the Ld. CIT(A) was not correct in holding that the reopening done in the present case was invalid. He further submitted that the Ld. CIT(A) had admitted additional evidences without allowing any opportunity to the assessee.

7.

Per contra, Shri D K Parikh, the Ld. AR of the assessee submitted that no details of any disproportionate asset acquired by the assessee was appearing in the information received from ACB on the basis of which the case was reopened. He submitted that the disproportionate asset, if any, was acquired by Shri Vikrambhai Lilabhai Desai and not by the assessee. Therefore, there was no merit in reopening the case of the assessee on the basis of information of disproportionate asset acquired by Shri Vikrambhai Lilabhai Desai. The ld. A.R further submitted that an identical action was taken in the case of Mr. Arpanbhai Vikrambhai Desai and the Co-ordinate Bench of the Tribunal had held in that case in ITA No. 338, 339, 758 and 759/Ahd/2024 dated 17.10.2025, that the reopening done in that case was invalid. He also relied upon the decision of the Co- ordinate Bench of this Tribunal in the case of Shri. Shivaji Rai Chauhan Vs. ITO, ITA No. 435/Ahd/2025 dated 05.02.2024 in this regard. Further, reliance was also placed on the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case for the A.Y. 2014-15 in ITA No. 1703/Ahd/2025.

ITA No. 2189/Ahd/2025 Krunalkumar virambhai Desai Vs.ITO, AY- 2017-18 5

8.

We have considered the rival submissions. On the basis of the information received from ACB, the case of the assessee was reopened for different years. The issue of reopening was also adjudicated in the assessee’s own case for A.Y. 2014-15 in ITA No. 1703/AHD/2025, dated 20.01.2026 wherein the facts of the case was discussed in detail. The finding given by the Tribunal in the said order is reproduced below:

8.

On going through the contents of the reason recorded by the A.O. as above, it is found that the A.O had simply reproduced the information received from the ACB and no mind was applied to elicit as to how the income of the assessee had escaped assessment. Though the disproportionate asset amount mentioned in the reason is Rs.4,91,50,347/-, it has not been specified as to in what particular form / asset, this amount was invested. The details of disproportionate assets have not been brought on record in the reason. Further, the A.O has mentioned net cash deposit of Rs. 30,77,079/- and cash payments of Rs. 4,70,65,637/- for purchase of property, but there is no mention of the underlying asset. No particulars are specified in the reason, which is found to be based on borrowed satisfaction only. It appears, prima facie, that the proceeding was initiated by the ACB against Shri. Vikrambhai Lilabhai Desai, father of the assessee, who was Deputy Mamlatdar, Kalol and the investments in the name of family members, including the assessee, was made out of disproportionate income earned by him. Thus, as per allegation of ACB, all the disproportionate assets appearing in the name of the family members were acquired out of unaccounted/illegal earning of Shri. Vikrambhai Lilabhai Desai. This being the status, the proceeding for escapement of entire income invested in the disproportionate assets, including those invested in the name of family members, should have been initiated in the case of Shri. Vikrambhai Lilabhai Desai only. 9. It is found that an identical reopening was done in the case of Shri. Arpanbhai Vimalbhai Desai which was decided by the Co-ordinate Bench of this Tribunal vide order dated 17.10.2025. The finding given by the Tribunal in that case is found to be as under: i). On going through the contents of the reason recorded by the AO as above, we are in agreement with the Ld Counsel for the assessee that the reasons are vague, do not bring out the income which has escaped assessment and the belief of escapement of income clearly is not of the AO but borrowed belief of the ACB report to which no mind at all has been applied by the AO. ii). As per the reasons recorded the undisclosed income of the assessee was his disproportionate assets (DA) as per information received from the ACB and related to purchase of immovable property/ transactions in cash amounting to Rs.3,02,86,472/-. iii). The information of Rs.3,02,86,472/- being disproportionate asset of the assessee shared by the ACB is listed in the Table, mentioning net cash deposit of Rs.2,00,700/-, cash paid for the property purchased Rs.1,97,72,487/- and the total DA amount Rs.3,02,86,472/- This is the entire information regarding the disproportionate assets of the assessee which the reason reveals and we have noted that the AO mentions that on perusal and analysis of the information collected materials available, there was no need for making any further enquiry u/s 133(6) of the Act. The AO notes that the assessee had failed to disclose source of the said income and the disproportionate asset therefore was his undisclosed income for the impugned year. iv). Clearly the reasons do not specify the income which has escaped assessment. It only vaguely refers to disproportionate assets and mentions property purchased/ transactions in cash without specifying/identifying the DA giving its breakup, or for that matter identifying the property purchased in cash/cash transactions undertaken by the assessee. There is no detail or break up of Rs.3.02 Crore of the alleged disproportionate assets of the assessee, as to which specific asset it relates to. No particulars are specified in the reason. In relation to the property purchased by the assessee in cash for Rs.1.95 Crores, there is no identification/description of the same. The information is not clear as to whether the DA amount of Rs.3.02 Crs includes the property purchased in cash of Rs. 1.95 Crs and if it does what other assets make up the DA of Rs.3.02 crs. v). Undoubtedly the reasons do not point out the income which has escaped assessment. In fact, it is clearly evident from the reasons that the AO's belief of income escaping assessment of the assessee is merely a borrowed belief from the ACB report which mentioned DA of the assessee being to the tune of Rs.3.02 Crores. The AO has not cared to apply his mind at all to the information and find out what exactly what were these DA assets of the assessee. The AO does not appear to be aware of the nature of assets in relation to which the assessee has been found to be the owner of disproportionate assets. Even with respect to the immovable assets in which the assessee has allegedly invested in cash there is no detail/identification of the said immovable assets. vi). Ld. DR was unable to controvert the aforestated facts. vii). Therefore, we agree with the Ld Counsel for the assessee that the belief of the AO, of escapement of income of the assesse, was vague and not his own but borrowed belief. viii). With regards to the law on the issue, as pointed out by the Ld. Counsel for the assessee, there is no dispute that for a valid assumption of jurisdiction to frame assessment u/s 147 of the Act, the AO should have a reasonable belief of income of the assessee escaping assessment and the belief should be his own

ITA No. 2189/Ahd/2025 Krunalkumar virambhai Desai Vs.ITO, AY- 2017-18 7

and not borrowed belief. As pointed out by the Ld. Counsel for the assessee the jurisdictional High Court, in the Dharamsinhbhai Narola (supra) has categorically stated that the law regarding reopening is well settled, with the basic requirement for valid assumption of jurisdiction being application of mind by the AO to information in his possession to conclude escapement of income of assessee, which belief is to be recorded in his reasons for reopening. ix). Applying the law to the facts as above, wherein the AO has failed both, to identify the income of the assessee which has escaped assessment and to apply his mind to the information in his possession while forming belief of escapement of income, we completely agree with the Ld Counsel for the assessee that the jurisdiction assumed by the AO to reopen the case of the assessee for A.Ys. 2014-15 and 2015-16 was invalid. The orders passed therefore in both the years are not sustainable in law as being passed without valid jurisdiction and are accordingly quashed. 10. The facts of the present case are exactly identical to the facts of Mr. Arpanbhai Vikrambhai Desai (supra) and the decision of the Tribunal ITA No. 1703/Ahd/2025 Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 9 in that case is squarely applicable to the present case. Considering the facts of the case as discussed above as well as following the decision of the Co-ordinate Bench of this Tribunal in the case of Mr. Arpanbhai Vikrambhai Desai (supra), it is held that the jurisdiction assumed by the A.O. to reopen the case of the assessee was invalid. The A.O had reopened the case on the basis of borrowed belief of ACB without applying his mind to the information received. Further, no inquiry was carried out to find out the nature of disproportionate asset, which was attributed to the assessee by the ACB for the impugned year. There is nothing on record to suggest that A.O. had made any effort to cross check and verify the information contained in ACB report, in any manner. In view of these facts, we have no hesitation in holding that the reopening done by the A.O. in the present case was not in accordance with law. Therefore, the order passed by the A.O. u/s 147 r.w.s. 144B of the Act is held as invalid and is accordingly quashed.

9.

The facts of the present case are identical to A.Y. 2014-15 and the decision of the Tribunal in that case is squarely applicable to this year as well. The AO had reopened the case on the basis of borrowed belief of ACB without applying his mind to the information received. No inquiry was carried out to find out the nature of disproportionate asset which was attributed to the assessee by the ACB.

10.

As regarding the contention of the Revenue that the Ld. CIT(A) had admitted additional evidences, it is found that the issue was not examined by him on merits. Therefore, there was no relevance to the additional evidences admitted by the Ld. CIT(A). The order of the Tribunal in the case of Shri Shivaji Rao Chauhan, on which reliance has been placed by Ld. CIT(A), cannot be held as an additional evidence. The assessee was within his rights to rely upon judicial decisions which cannot be held as additional evidence. Therefore, the ground taken by the Revenue is dismissed. The decision of Ld. CIT(A) to treat the proceeding u/s. 147 of the Act as invalid, is upheld.

11.

In the result, the appeal of Revenue is dismissed.

Order pronounced in the Court on 13/05/2026 at Ahmedabad.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 13th May, 2026 (True Copy) Neelesh, Sr. PS आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप/सहायक उप सहायक पंजीकार उप उप सहायक सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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