SCARLET TRADELINK PRIVATE LIMITED,AHMEDABAD vs. THE ITO, WARD-4(1)(1), AHMEDABAD

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ITA 868/AHD/2025Status: DisposedITAT Ahmedabad06 May 2026AY 2015-168 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that reassessment notices issued after April 1, 2021, for AY 2015-16 are time-barred and invalid. Consequently, all subsequent proceedings, including the assessment order, are void ab initio.

What were the facts?

The assessee's assessment for AY 2015-16 was reopened based on information regarding alleged accommodation entries. A notice under section 148 was issued on June 7, 2021, for AY 2015-16, which is beyond the permissible time limit as per Supreme Court judgments.

What were the issues?

The primary issue was the validity of reassessment proceedings initiated beyond the prescribed limitation period for AY 2015-16. The Tribunal also considered the impact of Supreme Court judgments on the time limits for reassessment notices.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 147,Section 144B,Section 68,Section 149

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Sudhir Mehta, Advocate
For Respondent: Shri Alpesh Parmar, CIT DR
Hearing: 10.03.2026Pronounced: 06.05.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER I.T.A. No.868/Ahd/2025 (Assessment Year: 2015-16) Scarlet Tradelink Pvt. Ltd., Vs. Income Tax Officer, A-803, Shalin Opium, Nr. Shalin Ward-4(1)(1), Banglow, Prahladnagar, Ahmedabad Ahmedabad-380051 [PAN No.AAOCS4871Q] (Appellant) .. (Respondent) Appellant by : Shri Sudhir Mehta, Advocate Respondent by: Shri Alpesh Parmar, CIT DR Date of Hearing 10.03.2026 Date of Pronouncement 06.05.2026 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Center (in short “NFAC”), Delhi vide order dated 25.02.2025 passed for A.Y. 2015-16.

2.

The assessee has taken the following grounds of appeal:

“1. The Ld. CIT(A) has erred in law and facts while disallowing appellant ground that AO has not granted opportunity of being heard before passing assessment order u/s 147 read with section 144B of the act as the Ld. AO has given show cause notice on dated 20-05-2023 to reply. on dated 25-05-2023. The Ld. AO has given only 3 working days' time (because 20-05-2023 and 21-05-2023 was holiday on account of Saturday and Sunday) to reply SCN for such huge addition of Rs. 433,57,29,066/- The Ld. AO has completed the assessment on 29.05.2023 in very hurriedly manner and giving very short opportunity to appellant to reply SCN, due to which assessee unable to submit all details and evidence, even though the time limit to passed assessment was 31.03.2024 showing in IT portal and the authorities with bias mind passed assessment order. Hence, the Ld. A.O. has not given proper opportunity of being heard to the

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 2– appellant, which is against the principal of natural justice, and on the basis of facts and law the assessment order passed without providing proper opportunity to assessee is bad in law and required to be quashed. 2. The Ld. CIT(A) has erred in law and facts while confirming the order u/s 148A(d) passed by the Ld. AO and notices issued u/s 148 on the basis of unexplained cash credit in appellant bank accounts and appellant contention that the credit in his bank account is not an assets falling u/s 149(1)(b) of the IT Act and appellant in inquiry proceeding submitted evidence that the amount credited in bank account of appellant is received against sales of goods and not unexplained cash credit, even though the Ld. A.O. has passed Order u/s 148A(d) ignoring the law and facts submitted in inquiry proceeding and issued notice u/s 148 for income escaping assessment on purely guess work. The Ld. A.O. has failed to discharge his onus of proof to establish the proper reason for initiation of scrutiny u/s 147 in his order u/s 148A(d) and merely on assumption arrived on opinion by neglecting the facts and law of cases. Therefore, the Ld. A.O. has erred in law as well as facts while passing order u/s 148A(d) and initiating income escaping assessment by issuing notice u/s 148. The order passed u/s 148A(d) is bad in law as thus, order passed on that basis for income escaping assessment is also bad in law. 3. The Ld. CIT (A) has erred on law and fact while confirming the addition of Rs. 433,57,29,066/ on account of unexplained cash credit u/s 68 for amount received from Orange Tradex Pvt. Ltd, S & H Chemicals & Krrish Enterprise. The Ld. CIT(A) has also totally ignore the facts and submission by appellant in assessment proceeding as well as in appeal proceeding and has failed to discharge his burden of proof to establish the addition and passed non-speaking order by merely relying on the information received from DDIT(Inv) & order u/s 148A(d). Hence, on the basis of fact and law of case, the addition made of Rs. 433,57,29,066/-is bad in law and facts and required to be deleted. The entire addition made by the Ld. AO on the basis purely on surmises and conjunction. 4. The appellant reserves the right to delete, add, alter, and/or modify the grounds of appeal either before or during the course of hearing of the appeal.” 3. The brief facts of the case are that the assessee, a private limited company, filed its return of income for Assessment Year 2015–16 declaring income of ₹11,85,921/-. Subsequently, on the basis of information received from the Investigation Wing, the Assessing Officer initiated reassessment proceedings by issuing notice under section 148 dated 07.06.2021 alleging that the assessee was a beneficiary of accommodation entries from certain entities viz M/s Orange Tradex Pvt. Ltd., S&H Chemicals and Krrish Enterprise. Thereafter, pursuant to the judgment of the Hon’ble Supreme

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 3– Court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC)], the Assessing Officer issued notice under section 148A(b) of the Act and the objections filed by the assessee against the said notice were disposed of vide order under section 148A(d), which was followed by issuance of fresh notice under section 148 of the Act. The assessment was thus completed under section 147 read with section 144B of the Act on 29.05.2023 assessing total income at ₹433,59,12,085/- by making addition of ₹433,47,29,066/- under section 68 of the Act by treating the alleged sales made to the aforesaid three parties as non-genuine.

4.

During the assessment proceedings, the Assessing Officer relied upon investigation reports, statements recorded under section 131(1A) of the Act, and findings of alleged hawala operators to hold that the parties to whom sales were shown were merely accommodation entry providers and that no actual movement of goods had taken place. The Assessing Officer observed that the assessee failed to produce delivery challans, transportation documents, stock registers, confirmations or any cogent evidence to establish genuineness of the sales. It was further noted that the entities were non- existent or paper concerns, and discrepancies such as incorrect vehicle numbers and lack of infrastructure were pointed out. Accordingly, the entire sales were treated as bogus and added as unexplained cash credits.

5.

In appeal, the CIT(Appeals) upheld the validity of reopening under section 147/148 of the Act and rejected the contention of the assessee that the alleged escaped income was not represented in the form of “asset” under section 149(1)(b) of the Act. The CIT(Appeals) held that bank credits arising from alleged bogus sales constitute “assets” and therefore the notice beyond

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 4– three years was valid, placing reliance on Susai Amalnathan Antoni Vincent v. ITO [(2023) 457 ITR 96 (Mad)]. Further, it was held that due procedure under section 148A was duly followed in light of Union of India v. Ashish Agarwal (supra).

6.

On merits, the CIT(Appeals) confirmed the addition by holding that the assessee failed to discharge the burden of proving genuineness of sales and creditworthiness of parties. The CIT(Appeals) relied upon the findings of the Assessing Officer, investigation reports, and surrounding circumstances to hold that the transactions were sham and lacked commercial substance. The CIT(Appeals) placed reliance on Kachwala Gems v. JCIT [(2006) 288 ITR 10 (SC)] to hold that mere banking transactions do not establish genuineness, and on N.K. Proteins Ltd. v. DCIT [(2017) 250 Taxman 22 (SC)] affirming [(2016) 292 CTR 354 (Guj)] to justify addition of entire bogus transactions. The CIT(Appeals) further relied on Shoreline Hotels (P) Ltd. v. CIT (Madras High Court) to support the proposition that transactions with accommodation entry providers can be treated as non-genuine in entirety. Accordingly, the appeal of the assessee was dismissed.

7.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

8.

We have heard the rival submissions and perused the material available on record. The core issue for adjudication before us is the validity of reassessment proceedings initiated under section 148 of the Act for Assessment Year 2015–16 and consequential additions made thereunder.

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 5– 9. At the outset, we note that the original notice under section 148 of the Act in the present case has been issued on 07.06.2021, i.e., after 01.04.2021. This aspect assumes critical significance in view of the settled legal position laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [(2024) 167 taxmann.com 70 (SC) : (2024) 469 ITR 46 (SC)], wherein it has been categorically recorded that for Assessment Year 2015– 16, all reassessment notices issued on or after 01.04.2021 are liable to be dropped as they do not fall within the permissible time limits even after considering the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

10.

This principle has been further reiterated and applied by the Hon’ble Supreme Court in Deepak Steel and Power Ltd. v. CBDT [(2025) 174 taxmann.com 144 (SC)], wherein a notice issued after 01.04.2021 for AY 2015–16 was quashed as being time-barred. Similarly, the Hon’ble Supreme Court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC)] clarified that while earlier notices could be deemed as show cause notices under section 148A(b), such deeming fiction cannot extend the limitation period prescribed under section 149 of the Act.

11.

In Satva Merchandize Pvt. Ltd. v. ITO, ITA No. 1120/Ahd/2025, order dated 24.11.2025 (ITAT Ahmedabad), the facts were similar. In that case, the assessee had filed its return for AY 2015–16 and the Assessing Officer issued notice under section 148 on 20.04.2021. The reopening was based on information from the Investigation Wing alleging that the assessee had obtained accommodation entries from entities belonging to the Ardor Group. The assessee challenged the reopening, including by filing a writ

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 6– petition before the Hon’ble Gujarat High Court, wherein interim stay was granted. Subsequently, proceedings were continued under section 148A pursuant to Ashish Agarwal (supra), and an assessment under section 147 read with section 144B was completed making substantial additions on account of alleged bogus transactions. The Tribunal, after detailed consideration, held that since the original notice under section 148 was issued after 01.04.2021 for AY 2015–16, the same was inherently time-barred in view of Rajeev Bansal (supra). The Tribunal further held that once the initial notice itself is invalid, the entire chain of subsequent proceedings, including notice under section 148A(b), order under section 148A(d), and reassessment order, are rendered void ab initio. Importantly, the Tribunal emphasized that the deeming fiction created in Ashish Agarwal (supra) cannot cure a jurisdictional defect arising from limitation, and therefore, the reassessment proceedings were quashed in entirety without going into merits.

12.

Similarly, in Waves Tradeline Pvt. Ltd. v. ITO, ITA Nos. 1228, 1229 & 1230/Ahd/2025, order dated 24.12.2025 (ITAT Ahmedabad), the Coordinate Bench dealt with a group of appeals involving AYs 2015–16, 2016–17 and 2017–18. In so far as AY 2015–16 was concerned, the original notice under section 148 was issued on 07.06.2021. The Tribunal undertook an elaborate analysis of the interplay between TOLA, the decision in Ashish Agarwal (supra), and the subsequent judgment in Rajeev Bansal (supra). The Tribunal categorically held that for AY 2015–16, any notice issued after 01.04.2021 falls outside the permissible limitation period and is therefore void. Further, for subsequent years, the Tribunal also examined the concept of “surviving time limit” as explained by the Hon’ble Supreme Court

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 7– in Rajeev Bansal (supra) and held that even under the extended framework, reassessment notices must be issued within the remaining time available as on 30.06.2021. Where such notices were issued beyond the surviving period, the Tribunal held them to be time-barred and invalid. The Tribunal thus quashed the reassessment proceedings on the ground of limitation, holding that jurisdictional defects cannot be cured by procedural compliance.

13.

A conjoint reading of the aforesaid decisions makes it abundantly clear that the Coordinate Benches have consistently applied the binding law laid down by the Hon’ble Supreme Court and have held that reassessment notices for AY 2015-16 issued after 01.04.2021 are invalid per se. The factual matrix in both the above cases involved reopening based on alleged accommodation entries and investigation reports—facts which are materially similar to the present case—yet the Tribunal has consistently held that jurisdictional validity must be examined first, and if the notice itself is barred by limitation, the merits of additions become irrelevant.

14.

In the present case also, the notice under section 148 of the Act having been issued on 07.06.2021 for AY 2015–16 is clearly hit by the ratio of Rajeev Bansal (supra) and the Coordinate Bench decisions discussed above. Once the foundation of reassessment proceedings is invalid, all subsequent proceedings including notice under section 148A(b), order under section 148A(d), and assessment under section 147 cannot survive.

15.

Accordingly, the impugned assessment order passed under section 147 read with section 144B as well as the order of the CIT(Appeals) are hereby quashed. Since the appeal is allowed on the legal ground of jurisdiction, the

ITA No. 868/Ahd/2025 Scarlet Tradelink Pvt. Ltd. vs. ITO Asst. Year –2015-16 - 8–

other grounds raised on merits are rendered academic and do not require adjudication.

In the result, the appeal of the assessee is allowed. 16. This Order is pronounced in the Open Court on 06/05/2026

Sd/- Sd/- (NARENDRA P. SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 06/05/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

1.

Date of dictation 05.05.2026 (Dictated on dragon software) 2. Date on which the typed draft is placed before the Dictating Member 05.05.2026 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S .05.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 06.05.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S 06.05.2026 7. Date on which the file goes to the Bench Clerk 06.05.2026 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order……………………………………

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