PAWAN KUMAR GARG,CHANDIGARH vs. INCOME TAX OFFICER, WARD 5(5), CHANDIGARH, CHANDIGARH

That the order of Ld. CIT(A) is against the law and facts of the case.

That the learned CIT(A), has grossly erred while upholding the reassessment order for A.Y. 2016-17 based on illegal Notice u/s 148, totally ignoring the fact that the Notice u/s 148 was issued on 04.04.2023 i.e. beyond after a period of 3 years and escaped income is less than 50 lakhs without appreciating the fact that the statutory Notice u/s 148 of the Act is barred by limitation and thus, illegal and non est and thus the whole of the reassessment proceedings becomes illegal and non est in the eyes of law.

That the Ld. CIT(A) has grossly erred in upholding the illegal and arbitrary assessment order, as the Notice dated 04.04.2023, issued u/s 148 of the Act is 2 illegal, non est as the notice u/s 148 was issued by the Juri ictional Assessing Officer (JAO) instead of the National Faceless Assessment Centre (NFAC), which is in violation of the provisions of Section 144B and Section 151A of the Act, Notification of Central Govt. bearing No. 18/2022/F. No. 370142/16/2022 TPL Part1 dated 29/03/2022 and as settled by the Honble Punjab and Haryana High Court in the case of Jatinder Singh Bhangu Vs. UOI, CWP No. 15745 of 2024 dated 19/07/2024 and in the case of Jasjit Singh Vs. UOI and Ors., CWP No. 21509 of 2023, dated 29.07.2024. 4. That the learned CIT(A), is not justified while upholding the reassessment proceeding werein the notice u/s 148 itself was issued on the factually incorrect and non-existent facts and figures.

That the Ld. CIT(A) is not justified while upholding the addition of entire cash deposit of Rs. 32,25,100/- without appreciating the fact that the assessee is a retail trader of sugar and out of the total receipts only the profit element of 8 percent embedded in it, can be taxed u/s 44AD and even without giving the benefit of cash withdrawals during the year as per the well settled law.

That the Ld. CIT(A) has erred in upholding the addition of Rs. 32,25,100/- without appreciating the fact that as per statutory provisions of law, assessee is not required to explain the cash deposits in the bank account which have a direct nexus with the sales of the assessee.

That the Ld. CIT(A) has erred in upholding the addition of Rs. 32,25,100/- without appreciating the fact that under the special provision, exemption from maintaining of books of account has been provided and presumptive tax at the rate of 8 per cent of the gross receipt itself is the basis for determining the taxable income.

That the CIT(A) has erred while upholding the addition of Rs. 32,25,100/- u/s 69A on account of alleged cash deposits, without appreciating the fact that assessee is an individual and return of income had been filed u/s 44AD and thus not required to maintain any books of accounts and the pass-book issued by the bank is not to be construed as books of accounts of the assessee.

That the Ld. CIT(A), has erred while upholding the illegal and arbitrary addition of Rs. 32,25,100/- simply concluding that the appellants claim that he was operating under section 44AD does not absolve him from explaining the source of substantial cash deposits flagged under the Risk Management Strategy of the CBDT without appreciating the fact that though the assessee was not required to keep any account book for retail trade u/s 44AD however the assessee duly submitted the evidences i.e. sale of sugar and submitted the sale invoices, sale ledger, cash book and bank statement duly showing the source of cash deposits.

That the appellant craves leave to add OR amend the grounds of appeal before the appeal is finally heard and disposed off.

Brief facts of the case are that the assessee had not originally filed the return of income for the year under consideration. The case of the assessee was reopened under section 147 of the Act on the basis of information available with the department regarding certain financial transactions undertaken during the 3 relevant previous year. As noted by the Assessing Officer in the assessment order, the following transactions formed the basis for alleged escapement of income:- (i) Cash deposits of Rs.32,25,100/- made in the savings bank account maintained with State Bank of Patiala during the financial year 2015-16; (ii) Sale consideration relating to immovable property reflected through TDS statements, namely payment credited by Shri Rakesh Singla amounting to Rs.47,10,000/-, by Smt. Usha Singla amounting to Rs.13,10,000/- and by Shri Kamal Kant Singla amounting to Rs.17,70,910/-; and (iii) Interest income of Rs.2,45,585/- reflected through information available from Punjab National Bank.

1 On the basis of the aforesaid information, notice u/s 148 dated 04.04.2023 came to be issued to the assessee alleging escapement of income aggregating to Rs.1,12,61,595/-. Thereafter, the assessee filed return of income declaring total income of Rs.5,36,020/- comprising business income and income from other sources.

2 During the reassessment proceedings, the assessee submitted that the cash deposits represented business receipts from trading of tax-free sugar and further submitted details regarding the sale transaction of immovable property along with relevant documents. The assessee specifically contended that after considering the cost of acquisition and other relevant factors, the property transaction had actually resulted into capital loss and therefore no taxable capital gain had arisen in his hands.

3 However, the Assessing Officer did not accept the explanation furnished by the assessee and proceeded to treat the cash deposits of Rs.32,25,100/- as unexplained money u/s 69A of the Act. The Assessing Officer also disallowed the business income declared by the assessee at Rs.2,58,010/- and ultimately completed the assessment at total income of Rs.35,13,110/-.

Aggrieved against the assessment order, the assessee preferred appeal before the Ld. CIT(A), however, without success. The assessee is now in further appeal before this Tribunal.

During the course of hearing before us, the Ld. Counsel for the assessee primarily challenged the very assumption of juri iction under section 147/148 of the Act. It was submitted that the reopening in the present case had admittedly been initiated beyond a period of three years from the end of the relevant assessment year and therefore the mandatory juri ictional condition requiring escapement of income exceeding Rs.50 lakhs was not satisfied.

1 The Ld. Counsel submitted that though the show-cause notice referred to aggregate financial transactions exceeding Rs.1 crore, however, the addition ultimately sustained by the Assessing Officer in the reassessment order was only Rs.32,25,100/- u/s 69A along with disallowance of business income of Rs.2,58,010/-. Thus, according to the assessee, the total addition made by the Assessing Officer was only around Rs.35 lakhs, which was admittedly below the statutory threshold of Rs.50 lakhs contemplated for issuance of notice beyond three years.

2 It was further submitted that the assessee had specifically demonstrated before the lower authorities that the immovable property transaction referred to in the reasons recorded had not resulted into any taxable gain and, on the contrary, the assessee had suffered loss on the said transaction. Therefore, according to the assessee, no income escaping assessment exceeding Rs.50 lakhs existed so as to confer valid juri iction upon the Assessing Officer for reopening beyond the prescribed limitation period.

On the other hand, the Ld. Sr. DR relied upon the orders of the authorities below and submitted that sufficient information regarding escapement of income was available with the department at the stage of issuance of notice u/s 148. 5

We have heard the rival submissions and perused the material available on record. Admittedly, the notice u/s 148 in the present case was issued on 04.04.2023 for assessment year 2016-17, i.e. beyond the period of three years from the end of the relevant assessment year. Therefore, the juri iction to reopen the assessment could have been assumed only if the conditions prescribed under law relating to escapement of income exceeding Rs.50 lakhs were duly satisfied.

1 We find considerable force in the submissions advanced on behalf of the assessee. Though the initial information available with the department referred to certain financial transactions aggregating to Rs.1,12,61,595/-, however, the reassessment ultimately culminated into addition of only Rs.32,25,100/- u/s 69A along with disallowance of business income of Rs.2,58,010/-. Thus, the total variation made by the Assessing Officer was only around Rs.35 lakhs, which is admittedly below the threshold limit of Rs.50 lakhs prescribed for assumption of juri iction beyond three years.

2 We further notice that the property transactions forming part of the reasons recorded were never ultimately assessed as escaped taxable income. The assessee had specifically explained that the said transaction had resulted into loss and no contrary material has been brought on record by the Revenue before us demonstrating escapement of income exceeding the statutory threshold.

3 In our considered opinion, once the alleged escapement of income capable of assessment itself remained below Rs.50 lakhs, the mandatory juri ictional requirement for issuance of notice beyond three years was not fulfilled. Consequently, the notice issued u/s 148 and the reassessment proceedings undertaken pursuant thereto cannot be sustained in the eyes of law.

4 Accordingly, we set aside the order of the Ld. CIT(A) and quash the reassessment proceedings initiated u/s 147/148 of the Act. Since the 6 reassessment itself has been held to be invalid, the additions made therein do not survive for adjudication.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 01/06/2026 मनोज कुमार अ"वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद"/ ACCOUNTANT MEMBER "ाियक सद" /JUDICIAL MEMBER AG आदेश की "ितिलिप अ"ेिषत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant

""थ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File