OZONE PB SPINTEX LTD.,AHMEDABAD vs. THE ITO, WARD-3(1)(1), AHMEDABAD

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ITA 534/AHD/2026Status: DisposedITAT Ahmedabad22 April 2026AY 2017-186 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) to provide the assessee with another opportunity of hearing. This was to allow the assessee to present its case on both jurisdiction and merits.

What were the facts?

The assessee's return of income for AY 2017-18 was processed, and a reassessment was initiated based on information regarding alleged beneficiary transactions. The Assessing Officer disallowed purchases from a supplier, treating them as bogus, and added the amount to the assessee's income.

What were the issues?

The key issues involved the validity of the reassessment proceedings, including the grounds for reopening, the application of amended provisions, and the validity of the addition made on account of alleged bogus purchases without proper verification or opportunity for cross-examination.

Which sections of the Income-tax Act were involved?

Section 147,Section 144(B),Section 148A,Section 148,Section 142(1),Section 149(1)(b),Section 151,Section 132(4A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH

Before: Shri T. R. Senthil Kumar & Shri. Narendra Prasad Sinha

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri T. R. Senthil Kumar, Judicial Member And Shri. Narendra Prasad Sinha, Accountant Member ITA No: 534/Ahd/2026 Assessment Year: 2017-18

Ozone PB Spintex Ltd, The ITO 1, Ozone Industrial Park, Ward-3(1)(1), B/h. Kerala GIDC, Bavla Vs Ahmedabad Bagodara Highway, Ahmedabad, Gujarat-382220 PAN: AABCO7826J (Appellant) (Respondent) Assessee Represented: Ms. Nupur Shah, A.R. Revenue Represented: Shri Rameshwar P. Meena, Sr. D.R. Date of hearing : 15-04-2026 Date of pronouncement : 22-04-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 30-12-2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment order passed under section 147 r.w.s. 144(B) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.

2.

Brief facts of the case are that the Assessee is a company engaged in the business of cotton yarn and ginning of cotton bales. For the

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Assessment Year 2017-18, the Assessee filed its return of income on 26.10.2017 declaring total income as Rs. Nill. The return was processed under section 143(1) on 28.02.2019 and a regular assessment under section 143(3) was completed on 20.12.2019. Information was received from the Insight portal and Investigation Unit, Ahmedabad that the Assessee is a beneficiary for an amount of Rs. 5,63,08,858/- from M/s. Dishman Carbogen Amics Ltd. (Dishman Pharmaceuticals and Chemicals Ltd. earlier) and hence, a show cause notice under section 148A(b) was issued to the Assessee. The Assessee has not replied; thereby notice under section 148 was issued to the Assessee on 30.07.2022. During the re-assessment proceedings, the Assessee submitted that it had purchased cotton yarn from M/s. United Polyfab Gujarat Limited and produced the purchase bills, sales bills, vouchers, etc. After considering the same, the Assessing Officer, due to non- verification of bogus purchases of Rs. 2,83,09,073/-, has disallowed from the yarn purchase of Rs. 15,01,42,938/- and added as the income of the Assessee and demanded tax thereon.

3.

Against the same, the Assessee filed appeal before CIT(A) and filed its written submissions; however, the Ld. CIT(A) dismissed the appeal on the ground that re-opening is valid in law as well as confirming the addition made by the Assessing Officer, without properly giving opportunity of hearing to the Assessee.

4.

Aggrieved against the appellate order, the Assessee is in appeal before us, raising the following Grounds of Appeal:

“1. The Ld. CIT (A) has grossly erred in law and on facts in dismissing the appeal filed by the appellant. He ought to have allowed the appeal fully in

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accordance with the grounds of appeal raised by the appellant before the Ld. CIT(A). Challenging the validity of Notice issued u/s. 148 of the Act and order passed u/s. 147 r.w.s. 144 read with section 144B of the I.T. Act dated 10.05.2023 1. The Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in reopening the case of the appellant by stating the procedural compliance as observed u/s. 148A(b)/148AD/148/142(1) with the assessee's replies remaining evasive and non-response to the show cause notice dated 26.04.2023 fully justifying the AO's action under section 147. 2 The Ld. AO erred in invoking the amended provisions of sections 147, 148 and 148A introduced by the Finance Act, 2021. The provisions of Explanation 2 to section 148 and substituted provisions apply only where search/survey/requisition is initiated on or after 01.04.2021. Since the L.d. A.O. has relied upon the search in the case of Dishman Group conducted on 19.12.2019, i.e., prior to 01.04.2021, the assumption of jurisdiction under amended provisions is without authority of law and void ab initio. 3. The Ld. AO erred in initiating proceedings under section 148A(b) alleging transactions of Rs. 5,63,08,858/- with Dishman Pharmaceuticals & Chemicals Ltd., which was factually incorrect. Subsequently, the AO shifted the allegation in notice under section 142(1) dated 01.02.2023 to alleged bogus transactions with United Polyfab Gujarat Ltd., which was not part of the original 148A proceedings. Such shifting and inconsistent reasons reflect non- application of mind and absence of valid "reason to believe," rendering the reopening invalid in law. 4. The Ld. CIT(A) has erred in not appreciating that the appellant's case was selected for scrutiny assessment, during which all requested documents and details were duly submitted. The Ld.AO satisfied with the submissions, the Ld.AO passed the assessment order u/s 143(3) dated 20.12.2019. Reopening the assessment to revisit these same facts merely amounts to a change of opinion, which is impermissible as held by the Hon'ble Supreme Court in CIT Delhi v. Kelvinator of India Ltd. [320 ITR 561 (SC)] and Income Tax Officer, Ward No. 162 v. M/s Tech Span India Pvt. Ltd. & Anr. 5. That Ld. A.O. has erred in law by not considering that as per section 149(1)(b), reopening beyond three years is permissible only where income chargeable to tax, represented in the form of an asset, amounts to Rs. 50 lakh or more. The addition made relates to alleged bogus purchases and does not represent income in the form of "asset" as defined under section 149

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(immovable property, shares, loans, deposits, etc.). Therefore, assumption of jurisdiction beyond three years is without authority of law. 6. The Ld. CIT(A) has erred in not appreciating that the AO has reopened the case of the appellant for AY 2017-18 beyond the 3-year period under section 151 of the Act, without obtaining the requisite sanction from the specified authority for issuing the impugned notice u/s 148. Further, the Ld. AO erroneously obtained approval from the Principal Commissioner of Income Tax-3 instead of the Principal Chief Commissioner of Income Tax, as mandated. II. Addition on account of disallowance of purchases made from Mis, United Polyfab Gujarat Ltd. by treating same as bogus transaction / unexplained credit accommodation entry of Rs. 2,83,09,073/- 1. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 2,83,09,073/-made by the Ld. AO on account of disallowance of purchases made from M/s. United Polyfab Gujarat Ltd. by treating same as bogus transaction / unexplained credit accommodation entry merely surmises and conjectures. 2. The Ld. AO erred in disallowing purchases of Rs. 2,83,09,073/- from M/s. United Polyfab Gujarat Ltd. as bogus, merely on the basis of information received and without any corroborative evidence. The Ld. AO failed to appreciate that the Appellant, engaged in the business of manufacturing and trading of cotton yarn, had furnished complete documentary evidences including ledger accounts, purchase invoices, delivery challans, vouchers and bank statements evidencing genuine purchases and payments through banking channels, which were not properly considered. 3. The Ld. AO has made the impugned addition without establishing any cash trail, cash deposits, incriminating material, statements implicating the Appellant, or any independent enquiry with M/s. United Polyfab Gujarat Ltd., thereby rendering the addition arbitrary and unsustainable in law 4. The Ld. AO erred in making the addition without conducting any independent enquiry by issuing summons or recording statements of M/s. United Polyfab Gujarat Ltd. or concerned persons, and without granting opportunity of cross-examination, thereby violating principles of natural justice as laid down in Andaman Timber Industries vs. CCE (SC), which has also been followed by the Hon'ble Gujarat High Court in CIT vs. Ramanbhal B. Patel.

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5.

The Ld. AO erred in law in blindly relying upon the dissemination note of Rajiv Shah and the search report of Dishman Group, despite observing that the alleged accommodation entries pertained to Dishman Group through shell entities. The AO failed to establish any direct nexus between the Appellant and the alleged tainted transactions. 6. The L.d. A.O has made the addition has been merely on suspicion and general allegations against certain accommodation entry providers, without proving with independent and clinching evidence that the purchases made by the Appellant were non-genuine, contrary to the ratio laid down by the Hon'ble Supreme Court in CIT vs. Daulatram Rawatmull and Dhakeswari Cotton Mills Ltd. vs. CIT. 7. The Ld.AO has erred not considering that the documents found from the search proceedings of third party cannot be treated as a material evidence in the case of the appellant in view of provisions of section 132(4A) of the I.T. Act.”

5.

Learned counsel appearing for the Assessee submitted that both on the reopening as well as on the merits of the case, the Assessee be given one opportunity of hearing by Ld. CIT(A) by setting aside the impugned order.

6.

Per contra, Ld. Senior D.R. appearing for the Revenue has no serious objection in setting aside the impugned order and remanding the matter back to the file of the CIT(A).

We have heard the rival submissions and perused the materials 7. available on record. As can be seen from the appellate order, the Ld. CIT(A) has not recorded the opportunities of hearing given to the Assessee, when he condoned the delay of four days in filing of appeal and decided the appeal based on the written submissions filed by the Assessee. Therefore, in the interest of principles of natural justice, we deem it fit to set aside the impugned order by remanding the matter back to the file of CIT(A) with a direction to the Ld. CIT(A) to give one

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more opportunity of hearing to the Assessee to explain its case both on jurisdiction and on merits of the case.

8.

Needless to say that the Assessee should make use of this final opportunity of hearing and produce all relevant materials before the Ld. CIT(A) to pass order on merits.

9.

In the result, the appeal filed by the Assessee is allowed for statistical purposes. Order pronounced in the open court on 22-04-2026

Sd/- Sd/- (NARENDRA PRASAD SINHA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : True Copy Dated 22/04/2026 (DS) आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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