M R PATEL AND SONS,BODAKDEV, AHMEDABAD vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), VEJALPUR, AHMEDABAD

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ITA 1792/AHD/2025Status: DisposedITAT Ahmedabad23 April 2026AY 2015-1611 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings were invalid due to incorrect jurisdictional facts and lack of independent application of mind by the AO. The addition was also found unsustainable on merits.

What were the facts?

The assessee claimed loading and supervision expenses paid to Dishman Carbogen Amics Ltd. The Assessing Officer reopened the assessment based on information that Dishman provided accommodation entries. The AO added the expenses as unexplained under Section 69C.

What were the issues?

Validity of reassessment proceedings initiated based on third-party information and the genuineness of the claimed expenses.

Which sections of the Income-tax Act were involved?

Section 69C,Section 147,Section 148,Section 133(6),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Tushar Hemani, Sr. Adv. & Shri
For Respondent: Shri Girish Parihar, Sr. DR
Hearing: 25.02.2026Pronounced: 23.04.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. Nos.1791&1792/Ahd/2025 (Assessment Years: 2013-14 & 2015-16) M R Patel And Sons, Vs. Deputy Commissioner of One 42, South Tower-1204, Income Tax, Ambli Bopal Road, Bodakdev, Circle-2(1)(1), Ahmedabad-380054 Ahmedabad [PAN No.AAFFM0677E] (Appellant) .. (Respondent) Appellant by : Shri Tushar Hemani, Sr. Adv. & Shri Kushal Fofaria, ARs Respondent by: Shri Girish Parihar, Sr. DR Date of Hearing 25.02.2026 Date of Pronouncement 23.04.2026 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: Both appeals have 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 Centre (in short “NFAC”), Delhi vide orders dated 21.08.2025 passed for A.Ys. 2013-14 and 2015-16. Since common facts and issues for consideration are involved for both the appeals before us, both the appeals are being disposed by way of a common order.

2.

The assessee has raised the following grounds of appeal:

“1) In facts & Circumstances of the case, Your Appellant, most respectfully submits that the Ld. CIT(A) has erred in law and on facts by confirming the addition of Rs.64,17,000/- in respect of expenditure incurred for loading & supervision expenses paid to Dishman Carbogen Amics Ltd. by treating the same as unexplained expenditure u/s 69C of the I.T. Act without considering documents submitted during the re-assessment proceeding which were also provided during the original assessment.

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 2– 2) The appellant craves to add, to alter, to substitute, to amend any ground/grounds of appeal at any time or at the time of hearing of the appeal if occasion arises.” 3. The brief facts of the case are that the assessee filed its return of income for A.Y. 2013–14 declaring total income of Rs.1,78,67,070/- and the original assessment was completed under section 143(3) of the Act assessing the total income at Rs.1,79,89,153/-. Subsequently, a search under section 132 of the Act was conducted in the case of Dishman group of Ahmedabad, wherein it was found that the said group was engaged in providing accommodation entries in the form of bogus loans, purchases, sales, expenses and other entries including loading and supervision charges. Based on the dissemination note received from the ADIT (Investigation), the Assessing Officer observed that the assessee had claimed loading and supervision charges of Rs.64,17,000/- paid to Dishman Carbogen Amcis Ltd. (formerly Dishman Pharmaceuticals and Chemicals Ltd.), which was a bogus claim. Accordingly, the assessment was reopened under section 147 of the Act and reassessment was completed by making an addition of Rs.64,17,000/- under section 69C of the Act treating the same as unexplained expenditure.

4.

During the reassessment proceedings, the Assessing Officer observed that the said entity, namely Dishman Carbogen Amcis Ltd., was engaged in providing accommodation entries and this fact was established through statements recorded during the course of search viz. the statement of its key personnel who admitted that the company was merely providing accommodation entries against cash. The assessee, on the other hand, furnished submissions along with supporting documents such as ledger accounts, bills, bank payment details and TDS details to establish the genuineness of the expenditure. However, the Assessing Officer rejected

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 3– the explanation of the assessee by holding that the evidences collected during the search constituted strong material indicating that the transactions were not genuine. The Assessing Officer further held that mere payment through banking channels is not sufficient to establish genuineness and that the issue has to be examined on the basis of surrounding circumstances and the test of preponderance of probabilities. Accordingly, the Assessing Officer held that the assessee had obtained accommodation entries in the guise of loading and supervision expenses to reduce its taxable income and the AO disallowed the same by making addition under section 69C of the Act.

5.

Aggrieved by the reassessment order, the assessee preferred an appeal before the CIT(Appeals) raising multiple grounds. The assessee primarily challenged the validity of reopening of assessment on the ground that the notice under section 148 of the Act was issued beyond four years from the end of the relevant assessment year and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The assessee contended that all details relating to loading supervision charges were already furnished during the original assessment proceedings and were duly examined by the Assessing Officer. The assessee further argued that the reopening was based merely on information received from the Investigation Wing without any independent application of mind by the Assessing Officer and therefore the same was void ab initio. The assessee also raised a ground claiming violation of principles of natural justice on account of denial of opportunity to cross-examine the persons whose statements were relied upon. On merits, the assessee contended that the expenditure was genuine, it was supported by documentary evidence including bills, ledger accounts, bank payments and TDS compliance, and that the Assessing

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 4– Officer had made the addition merely on presumptions without bringing any independent evidence on record.

6.

The CIT(Appeals), after considering the submissions and examining the record, adjudicated the grounds raised by the assessee in detail. With regard to grounds relating to validity of reopening under section 147 of the Act, the CIT(A) held that the Assessing Officer had received specific and credible information from the Investigation Wing based on search proceedings, which constituted fresh tangible material for forming a belief that income had escaped assessment. The CIT(A) observed that the Assessing Officer had applied his mind to such information and recorded proper reasons before issuing notice under section 148 of the Act after obtaining necessary approvals under section 151 of the Act. The CIT(A) further held that at the stage of reopening, the sufficiency of material is not to be examined and what is required is the existence of relevant material on the basis of which a reasonable belief could be formed. Accordingly, the CIT(A) held that the reassessment proceedings were validly initiated and grounds challenging jurisdiction were dismissed.

7.

On the issue of violation of principles of natural justice, the CIT(A) held that the assessee had been provided with all relevant material and sufficient opportunity to rebut the same. Relying on judicial precedent, CIT(Appeals) observed that cross-examination is not an absolute right and the requirement of law is satisfied if the material used against the assessee is made available and an opportunity to explain is granted. Accordingly, this ground was also dismissed.

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 5– 8. On merits of the addition under section 69C of the Act, the CIT(A) confirmed the addition by observing that the entity to whom the payments were made was found during search to be a paper company engaged solely in providing accommodation entries without having any real infrastructure or manpower to render services. The CIT(A) also noted a significant inconsistency in the assessee’s business model, observing that the assessee itself was engaged in providing loading services and was receiving substantial loading supervision income, and therefore there was no commercial rationale for incurring such expenditure by making payments to another entity. The CIT(A) further held that the documentary evidences such as bills and bank payments are not conclusive where the surrounding circumstances and statements recorded during search clearly establish that the transactions were accommodation entries. Accordingly, relying on the test of human probabilities and material gathered during search, the CIT(A) upheld the action of the Assessing Officer in treating the impugned expenditure as unexplained under section 69C of the Act and confirmed the addition of Rs.64,17,000/-. Thus, all the grounds raised by the assessee were dismissed and the reassessment order was upheld in entirety.

9.

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

10.

We have heard the rival submissions and perused the material available on record.

11.

The core issues arising for our consideration are the validity of reopening under section 147 of the Act and the addition of Rs.64,17,000/- made under section 69C of the Act.

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 6– 12. On the issue of reopening, we are of the considered view that the reassessment proceedings have been initiated beyond a period of four years from the end of the relevant assessment year, while the original assessment was completed under section 143(3) of the Act. In such a situation, as per the proviso to section 147 of the Act, the sine qua non for assuming jurisdiction is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the present case, it is an undisputed fact that the assessee had furnished complete details of loading and supervision charges during the original assessment proceedings and the same were duly examined by the Assessing Officer. No new failure on the part of the assessee has been brought on record in the reasons recorded. Therefore, the condition precedent for reopening beyond four years is not satisfied. In this regard, reliance placed by the assessee on the judgment of the Hon’ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) is well founded, wherein it has been held that reasons for reopening must be based on relevant and specific material and not vague or indefinite information.

13.

Further, on perusal of the reasons recorded, we find that the Assessing Officer himself was uncertain about the nature of transaction, at different places referring to the same as expenditure, loan and accommodation entry. Such inconsistency clearly demonstrates non- application of mind and renders the very foundation of reopening invalid. It is also evident that the reopening has been carried out merely on the basis of information received from the Investigation Wing without any independent inquiry or verification by the Assessing Officer. The Hon’ble jurisdictional High Court in Ashish Jashwantbhai Desai (HUF) vs. ITO [2025] 171 taxmann.com 220 (Guj.), Surani Steel Tubes Ltd. vs. ITO [2022] 136 taxmann.com 139 (Guj.) and Harikishan Sundarlal

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 7– Virmani vs. DCIT [2017] 394 ITR 146 (Guj.) has consistently held that reopening based on borrowed satisfaction without independent application of mind is not sustainable in law. Further, the Hon’ble Gujarat High Court in 03 Developers Pvt. Ltd. vs. ITO [2025] 174 taxmann.com 1028 (Guj.) has held that reassessment cannot be initiated for making fishing or roving inquiries. In the present case, the reasons recorded do not refer to any tangible material linking the assessee with any alleged bogus transaction except general information, which is not sufficient to form a valid belief of escapement of income.

14.

In view of the above facts and settled legal position, we are of the considered view that the reopening of assessment under section 147 of the Act is bad in law and deserves to be quashed. Consequently, the reassessment order passed under section 147 is liable to be set aside.

15.

Further, the assessee has placed on record complete documentary evidences including invoices, ledger accounts, bank statements and proof of deduction of tax at source to substantiate the genuineness of the expenditure. The assessee has also demonstrated the business necessity of incurring such expenditure in the course of executing loading contracts. On the contrary, the Assessing Officer has merely relied upon general statements recorded during search in the case of third party without conducting any independent inquiry or bringing any corroborative material on record to establish that the transactions of the assessee were bogus. No attempt has been made by the Assessing Officer to verify the transactions from the recipient party by issuing notices under sections 133(6) or 131 of the Act, nor has any cash trail been established.

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 8– 16. It is a settled proposition of law that addition cannot be made merely on the basis of information received from the Investigation Wing without any independent verification or corroborative evidence. The Hon’ble Courts have consistently held that suspicion, however strong, cannot take the place of evidence. In the present case, the Assessing Officer has failed to discharge the onus that shifted upon him after the assessee had furnished primary evidences in support of the claim.

17.

We also find that on identical facts in assessee’s own case for A.Y. 2014-15, the Coordinate Bench of the Tribunal in ITA No. 523/Ahd/2024 has accepted the genuineness of similar transactions with the same party, which further supports the case of the assessee.

18.

In view of the foregoing discussion, we hold that the reassessment proceedings are invalid in law and the addition made under section 69C is unsustainable on merits as well.

19.

Accordingly, the addition of Rs.64,17,000/- is hereby deleted and the appeal of the assessee is allowed.

Assessment Year 2015-16

20.

The issues involved in the present appeal for A.Y. 2015–16 are similar to those adjudicated by us in the assessee’s own case for A.Y. 2013-14.

21.

On the issue of validity of reopening, we find that the very foundation of reassessment is based on incorrect jurisdictional facts, inasmuch as the Assessing Officer proceeded on the premise that the assessee had received a fictitious loan from M/s Dishman Carbogen Amcis

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 9– Ltd., whereas the undisputed factual position on record is that the assessee had made payments towards loading and supervision charges to the said party. Thus, the very basis of formation of belief is factually erroneous and goes to the root of jurisdiction. It is a settled proposition of law that if the jurisdictional facts are incorrect, the assumption of jurisdiction under section 147 fails. In this regard, reliance placed by the assessee on Kolahai Infotech Pvt. Ltd. vs. ITO (2018) 409 ITR 595 (Delhi), Mumtaz Haji Mohmad Memon vs. ITO (2018) 408 ITR 268 (Guj.) and Manishkumar P. Kiri vs. ACIT (Special Civil Application No. 15475 of 2015, Gujarat High Court) is well founded. Further, on identical facts, the Hon’ble Gujarat High Court in Siddhi Corporation vs. DCIT [2025] 180 taxmann.com 552 (Guj.) has quashed the reopening holding that where the very premise of reopening is incorrect, the proceedings are unsustainable.

22.

It is further evident that the reopening has been made merely on the basis of general information received from the Investigation Wing without any independent application of mind or verification by the Assessing Officer. The reasons recorded do not refer to any tangible material linking the assessee with any alleged bogus transaction. Such reopening based on borrowed satisfaction has been consistently held to be invalid by the Hon’ble jurisdictional High Court in Ashish Jashwantbhai Desai (HUF) vs. ITO [2025] 171 taxmann.com 220 (Guj.), Surani Steel Tubes Ltd. vs. ITO [2022] 136 taxmann.com 139 (Guj.) and Harikishan Sundarlal Virmani vs. DCIT [2017] 394 ITR 146 (Guj.). Further, reopening for making fishing and roving inquiries has been held impermissible in 03 Developers Pvt. Ltd. vs. ITO [2025] 174 taxmann.com 1028 (Guj.).

23.

Even otherwise, on merits also, we find that the addition of Rs.38,61,500/- made under section 69C of the Act is unsustainable.

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 10– Firstly, the reopening was made on the issue of alleged fictitious loan, whereas no addition has been made on that count and instead addition has been made on account of loading and supervision charges. It is a settled position of law that where no addition is made on the issue for which the case was reopened, no other addition can be sustained. In this regard, reliance is placed on the judgments of the Hon’ble Gujarat High Court in CIT vs. Mohmed Juned Dadani [2014] 355 ITR 172 (Guj.), the Hon’ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bom.) and the Hon’ble Delhi High Court in Ranbaxy Laboratories Ltd. vs. CIT [2011] 336 ITR 136 (Del.).

24.

On facts, the assessee has furnished complete documentary evidences including invoices, ledger accounts, bank statements, details of wagons handled and proof of deduction of tax at source to establish the genuineness of the transactions. The assessee has also demonstrated that it has earned substantial loading and supervision income from Gujarat Electricity Board and others and the payments to Dishman were incurred in the ordinary course of business. The audited financial statements of the said party placed on record further demonstrate that it is a listed company having substantial turnover, assets and employee base, thereby rebutting the allegation that it is a mere paper entity.

25.

On the contrary, we observe that the Assessing Officer has not conducted any independent inquiry, has not issued notices under sections 133(6) or 131 of the Act, and has not brought on record any evidence to establish that the impugned transactions are bogus or that there is any cash trail. The addition has been made solely on the basis of general information and statements recorded in the case of third parties. It is well settled that suspicion, however strong, cannot take the place of evidence,

ITA Nos. 1791&1792/Ahd/2025 M R Patel And Sons vs. DCIT Asst.Years –2013-14 & 2015-16 - 11–

and addition cannot be made merely on the basis of uncorroborated information.

26.

In view of the foregoing discussion and respectfully following the decision of the Coordinate Bench in assessee’s own case for A.Y. 2014– 15 in ITA No. 523/Ahd/2024 as well as our findings for A.Y. 2013–14, we hold that both the reassessment proceedings as well as the addition made under section 69C of the Act are unsustainable in law.

27.

Accordingly, the addition of Rs.38,61,500/- is hereby deleted and the appeal of the assessee for A.Y. 2015–16 is allowed.

28.

In the combined result, both appeals filed by the assessee are allowed. This Order pronounced in Open Court on 23/04/2026

Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 23/04/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 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 01.04.2026 (Dictated over dragon software) 2. Date on which the typed draft is placed before the Dictating Member 02.04.2026 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 16.04.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 23.04.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S 23.04.2026 7. Date on which the file goes to the Bench Clerk 23.04.2026 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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