ABC CONNECTS,ERODE vs. ITO, WARD-1(1), ERODE

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ITA 44/CHNY/2026Status: DisposedITAT Chennai19 June 2026AY 2014-158 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was bad in law as it was based on a change of opinion and the information was available during the original assessment. Furthermore, the notice for reopening was issued beyond the prescribed limitation period.

What were the facts?

The assessee filed its return of income, which was assessed. Later, the Revenue reopened the assessment based on information about setting off differences between sales and purchase vouchers. The assessee did not initially respond to the notice for reopening, but later filed a belated return. The Assessing Officer made an addition, which was confirmed by the CIT(A).

What were the issues?

Whether the reopening of assessment under Section 147 was valid when the information was already available and the notice was issued beyond the limitation period?

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 144B,Section 151(1),Section 149

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: HONOURABLE SHRI ABY T. VARKEY & SHRI GAGAN GOYAL

Hearing: 11.06.2026Pronounced: 19.06.2026

आयकर अपीलीय अधिकरण ‘सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय श्री एबी टी. वर्की, न्याययक सदस्य एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 44/Chny/2026 ननिाारण वर्ा /Assessment Years: 2014-15 ABC Connects, v. The Income Tax Officer, No.27/33, Thendral Nagar, Ward-1, Near Annai Sathya Nagar, Erode. Palayapala, Erode Collectorate S.O, Erode, Tamil Nadu-638 011. [PAN: AAOFA1397A] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. S. Sridhar, Advocate (Erode), Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr.Guru Prasad, Addl. CIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 11.06.2026 घोषणाकीतारीख /Date of Pronouncement : 19.06.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Commissioner of Income Tax (A) / NFAC, (hereinafter referred as the ‘Ld. CIT(A)’) dated 12.11.2025, for the Assessment Year (hereinafter referred as the ‘AY’) 2014-15.

GROUNDS OF APPEAL 1) The Impugned Order is unjust, unreasonable and bad in law. 2) The learned First Appellate Authority erred in not considering the scope and effect of the first proviso to sec. 147, as nothing discernible from the assessment order as to the proviso mentioned above. 3) The learned First Appellate Authority erred in not considering the reasons recorded and the corresponding satisfaction of the Revenue, which speak volumes about the fact that the above proviso was not followed at all.

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ITA No.44/Chny/2026 (2014-15) ABC Connects 4) The learned First Appellate Authority erred in not considering the ground raised with respect to the validity of the return of income filed in response to notice u/s.148 and further erred in endorsing the treatment given to the return of income by the Assessing Officer.

5) The learned First Appellate Authority erred in not considering the submissions in proper perspective.

And, for other grounds and reasons that may be adduced later, the Appellant humbly prays that the present appeal may be admitted, duly considered and justice be rendered.

2.

The brief facts of the care are that the assessee firm filed its return of income on 06.09.2014 declaring total income at Rs. 5, 47, 830/-. The case of the assessee was assessed u/s. 143(3) of the Act vide order dated 22.09.2016 and income was assessed at Rs. 5, 97,830/-. Thereafter, the Revenue came across an information that the assessee firm has set off the difference between the sales vouchers and purchase vouchers amounting to Rs. 14, 30, 284/-. In view of this, a notice u/s. 148 of the Act vide dated 29.03.2021 was issued. The assessee neither filed any return of income nor furnished any reply in response to notice u/s. 148 of the Act. Although in response to notice u/s. 148 of the Act the assessee filed an ITR on 30.12.2021 declaring income of Rs. 5, 47, 830/- belatedly. Ultimately, the assessment u/s. 147 r.w.s. 144B of the Act was completed after making an addition of Rs. 14, 30, 584/-.

3.

The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A) who in turn dismissed the appeal of the assessee and confirmed the order of the AO. The assessee being further aggrieved preferred the present appeal before us. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee along-with arguments adduced before us. We further, gone through the approval note u/s. 151(1) of the Act along with annexure wherein the reasons for reopening were mentioned and the same is reproduced below as under:- Page 2 of 8

ITA No.44/Chny/2026 (2014-15) ABC Connects

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ITA No.44/Chny/2026 (2014-15) ABC Connects

Consideration, assessment has been made allowing incorrect setting off of losses, the claim of which made by the assessee and the only requirement to initiate proceedings u/s. 147 to believe which has been recorded above vide para v and vi. Considering the facts of the case, provisions of section 147(c) are applicable to the case of the assessee and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.

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ITA No.44/Chny/2026 (2014-15) ABC Connects 4. For better appreciation of the facts mentioned (Supra) and analysis of the reasons recorded as reproduced (supra) we deem it fit to discuss the provisions of section 147 of the Act as under:-

“Section - 148, Income-tax Act, 1961 - FA, 2026 Issue of notice where income has escaped assessment. 148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall, subject to the provisions of section 148A, issue a notice to the assessee, along with a copy of the order passed under sub-section (3) of section 148A, requiring him to furnish, within such period as may be specified in the notice, not being less than thirty days from the date of such notice but not exceeding three months from the end of the month in which such notice is issued, a return of his income or income of any other person in respect of whom he is assessable under this Act during the previous year corresponding to the relevant assessment year: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year: Provided further that where the Assessing Officer has received information under the scheme notified under section 135A, no notice under this section shall be issued without prior approval of the specified authority. (2) The return of income required under sub-section (1) shall be furnished in such form and verified in such manner and setting forth such other particulars, as may be prescribed, and the provisions of this Act shall, apply accordingly as if such return were a return required to be furnished under section 139: Provided that any return of income required under sub-section (1), furnished after the expiry of the period specified in the notice under the said sub-section, shall not be deemed to be a return under section 139. (3) For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; or (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court; or (vi) Any information in the case of the assessee emanating from survey conducted under section 133A, other than under sub-section (2A) of the said section, on or after the 1st day of September, 2024.”

5.

There is nothing on record to indicate as to where from the Assessing Officer received such information that the assessee has concealed anything from the AO while filed the return u/s. 139 of the Act. Furthermore, it is clear from the records that there has been no such default at the end of the asse3ssee while participated in the

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ITA No.44/Chny/2026 (2014-15) ABC Connects regular assessment proceedings u/s. 143(2) of the Act and, therefore, the learned AR was fully justified in arguing that the reopening of assessment was bad in law. When the assessee is not at any default, the question of reopening would not arise. We further relied upon the latest decision of the Hon’ble Apex Court in the case of [2026] 186 taxmann.com 443 (SC) PCIT – 13 v. Pradip Kumar Jajodia, wherein the Hon’ble Court held as under:

“The assessee preferred an appeal before the Tribunal challenging the order passed by the National Faceless Appeal Centre (NFAC) under Section 250 of the Income Tax Act, 1961. The question which fell for consideration before the Tribunal was whether the reopening of the assessment under Section 147 read with Section 148 was valid in law. The Tribunal has examined the factual aspects in a very detailed manner and found that the action of the AO was not valid for the purpose of reopening of the assessment since the reason stated for reopening was that the assessee had traded in shares of Appu Marketing & Manufacturing Ltd. /Ejecta Marketing Ltd., which information the Tribunal found was very much available on record when the assessment was completed under Section 143(3). The Court is of the view that the Tribunal was fully justified that there was no reason to believe that the income chargeable to tax has escaped assessment and that the assessee failed to fully and truly disclose all information for completing the assessment. Thus, the conclusion of the Tribunal that the reasons assigned by the AO in reopening the assessment are not reason to believe but reason to suspect is well founded. The Court finds that there is no question of law much less substantial question of law arising for consideration in this appeal. [Para 5]”

6.

Moreover, This submission is agreeable, the view is that reopening the assessment on some basis, shall in the above facts, amount to reviewing the assessment already made, as the relevant material was available with the assessing officer during that assessment. It is necessary to draw a distinction between a case where the assessee failed to provide some material/information during the assessment, which was flagged later on by some internal system of the department, as against a case where all information was provided by the assessee, but was not considered or commented upon by the assessing officer in the assessment order, resulting in a subsequent action. The latter cannot be subject matter of reassessment, as it shall have the effect of reconsidering the same material to arrive at a different conclusion, which cannot be permitted. The attempt of the revenue to

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ITA No.44/Chny/2026 (2014-15) ABC Connects now hold that the amounts are chargeable to tax certainly amounts to a change of opinion, which cannot be sustained.

7.

As seen above, the first proviso to section 147 of the Act mandates that when assessment under section 143(3) of the Act has been made for the relevant assessment year, reassessment on the ground that income has escaped assessment is only possible up to four years from the end of the assessment year unless any income chargeable to tax has escaped for such assessment year by reason of the failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for his assessment. Confidently it can be said, in the present case, the assessee had made a return of its income on 06.09.2014 for the relevant assessment year and had provided all necessary material for its assessment. As such, the extended period of six years for reopening the assessment would not be available to the revenue under section 147 of the Act as it existed prior to 1-4-2021. The period of limitation is thus, four years from the end of assessment year 2014-15. It is a matter of record that the notice under section 148 of the Act has been issued on 29.03.2021, which is beyond the said period of four years. Therefore, in view of the first proviso to section 149 of the Act, no notice could have been issued under section 148 of the Act, as no such notice could have been issued under the provisions that were in force prior to 1-4-2021. It is held that the notice dated 29.03.2021 and the subsequent proceedings are barred by limitation.

8.

In view of our observation vide para 7 & 8 above, it is opined that the impugned notice and order, both dated 31-3-2023 need to be set aside. The assessment proceedings initiated pursuant to the same also need to be quashed. In the result, grounds taken by the assessee are allowed.

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ITA No.44/Chny/2026 (2014-15) ABC Connects 9. In the result, the appeal of the assessee is allowed with above observations and directions.

Order pronounced on the 19th day of June, 2026, in Chennai.

Sd/- Sd/- (एबी टी. वर्की) (गगन गोयल) (ABY T. VARKEY) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 19th June, 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF K Digitally signed by K BABU BABU Date: 2026.06.30 09:00:48 +05'30'

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