HARPALSINH BHAVUBHA CHUDASAMA,AHMEDABAD vs. THE ITO, WARD-3(2)(2), AHMEDABAD

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ITA 1201/AHD/2025Status: DisposedITAT Ahmedabad16 April 2026AY 2014-1510 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reopening of the assessment was invalid as the AO's reasons were based on suspicion rather than a belief of escapement of income, and there was no nexus between the information and the belief. The assessment order passed under Section 147 was quashed.

What were the facts?

The assessee's appeal was filed with a delay of 56 days due to communication issues with the CIT(A). The Assessing Officer (AO) reopened the assessment under Section 147 based on cash deposits and property purchases, considering them unexplained income.

What were the issues?

Whether the reopening of assessment under Section 147 was valid when based on suspicion and lacking a nexus between information and belief? Whether the assessment order passed under Section 147 is invalid due to lack of valid jurisdiction?

Which sections of the Income-tax Act were involved?

Section 147,Section 250,Section 56(2)(vii)(b),Section 68,Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Jaimin Shah, A.R, Shri Girish Parihar, Sr.DR
For Respondent: Shri Girish Parihar, Sr.DR
Hearing: 26/03/2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD

BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 1201/Ahd/2025 (िनधा�रण वष� / Assessment Year : 2014-15) Harpalsinh Bhavubha बनाम/ Income Tax Officer Chudasama Ward -3(2)(2), Vs. At Panchi Darbar Gadh Ahmedabad Dholera, Dhandhuka, Ahmedabad, Gujarat - 382455 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AUJPC7542C (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Jaimin Shah, A.R. ��यथ� क� ओर से/Respondent by : Shri Girish Parihar, Sr.DR Date of Hearing 26/03/2026 16/04/2026 Date of Pronouncement (आदेश)/ORDER PER ANNAPURNA GUPTA, AM:

The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”) dated 28.01.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter

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referred to as the “Act”) and relates to Assessment Year (A.Y.) 2014-15.

2.

The appeal is delayed for filing by 56 days. The assessee has filed an application before us supported by duly sworn affidavit of the assessee explaining the cause of delay as all communications by the CIT(A) being served on an incorrect /inactive email-id of the assessee despite the appeal form mentioning the correct and active email-id of the assessee. He contended that all notices and order of the Ld.CIT(A) were served on Nishantshah1994@gmail.com which was inactive while the assessee had given the correct email id being nishantshah711@gmail.com.He pleaded therefore that the delay in filing of the appeal be condoned.

3.

The Ld. DR objected to the condonation of delay.

4.

Considering the explanation of the assessee for delay of 56 days in filing of the appeal duly supported by an affidavit, we are of the view that the assessee has adduced sufficient cause for the delay in filing of the present appeal, and in the interest of justice, therefore, we condone the delay of 56 days in the filing of the present appeal.

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5.

In the facts of the present case, the order u/s.147 of the Act was passed making addition of Rs.31,03,000/- to the income of the assessee on account of cash deposited in bank account source on which remained unexplained; Rs.16,37,500/- u/s.56(2)(vii)(b) of the Act and Rs.87,525/- on account of unexplained source of income. Thus, total addition of Rs.48,28,025/- was made to the income of the assessee in an ex parte assessment order in the absence of any reply filed by the assessee.

6.

The assessee preferred appeal against the same before the Ld. CIT(A), wherein the assessee did not respond to any notice of hearing and, accordingly, the Ld. CIT(A) reiterated the additions made by the AO.

7.

Against the order of the Ld. CIT(A), the assessee has come up in appeal before us.

8.

His contention before us was that the assessment order passed in the present case was invalid. The reason being that the jurisdiction assumed by the AO to reopen the case of the assesse was based on reasons of escapement of income which were vague and showed clearly no nexus between the information in possession of the AO and his formation of belief of escapement of income. The reopening, he contended, was done merely for the purposes of making enquiry and only on suspicion, but, not on the

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basis any belief of escapement of income, which was the requirement of law for assuming jurisdiction by AO to reopen cases u/s 147 of the Act.

9.

We have gone through the reasons recorded by the AO, for reopening of the case of the assessee, which is reproduced at para 1 of assessment order as under:

“1. In this case, notice u/s 148 of the Act was issued through ITBA on 22.03.2019 and a copy of the same was also served through speed post. The reason recorded for re-opening assessment in this case is reproduced as under- 1. The assessee is an individual and has filed return of income for AY 2014-15 on 31.03.2016 declaring Total Income of Rs 95, 790/- The assessee has filed ITR 2 and has shown income under the head "Income from other sources only. The assessee has also shown net agricultural income of Rs. 1,98,700/- in the return. Further, no scrutiny assessment u/s 143(3) of the Act was made in this case. 2. During the remand proceedings of AY 2015-16 in the case of assessee, it was noticed that the assessee had made cash deposits of More than 10 lakhs and purchased and sold properties during AY 2015-16 The assessment was finalized after making additions u/s 68, 50C and 56(2) of the act in ΑΥ 2015-16. To verify whether any such transactions were made by assessee in earlier years, ITS data of FY 2013-14 relevant to AY 2014-15 was verified and it was found that assessee had made cash deposits of more than 10 lakhs and had purchased immovable property valued at Rs. 5 lakh or more during the year. 3. The assessee had produced sale deed of property purchased on 17.06.2013 during the remand proceedings of AY 2015-16. On verification of sale deed, it was noticed that assessee had purchased immovable property with 1 other person for sale consideration of Rs. 16,00,000/- in which share of assessee was 50%. So the

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amount of Rs. 8 lakh (50% of sale consideration of Rs. 16 lakh) and Rs. 79,400/- (50% of Rs. 1,58,800/-) as stamp duty and Rs. 8,125/- (50% of Rs. 16,250/-) as Registration fee was paid by assessee. The assessee had made cash deposits of Rs. 31,03,000/- in Punjab National Bank, Dholera Branch as seen from AIR information available in ITS data. In this way, the assessee has made investment of Rs. 8,87,525/- in property and has deposited Rs. 31,03,000/- in PNB, Dholera branch but Further, on verification of return of income for AY 2012- 13. It is learnt that the assessee has shown income of Rs. 2,94,490/- only including agricultural income. So the source of such huge transactions remains unexplained and is required to be treated as income of the assessee during the FY. 2013-14. 4. The assessee has not disclosed the amount of Rs. 39,90,525/- in the return of income filed for AY 2014-15 relevant to FY. 2013-14. Thus, the assessee has failed to disclose fully and truly all material facts. Therefore, I have reason to believe that income amounting to Rs. 39,90,525/-, which is chargeable to tax, has escaped assessment for the A. Y. 2014-15. 5. In this case, a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s 147 of the IT Act is the reason to believe which has been recorded above in paragraph 4. 6. If is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 of the I.T. Act, 1961 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 7. This case is within 4 years from the end of the assessment year under consideration Hence, necessary sanction to issue the notice u/s 148 is requested from the Joint Commissioner of Income Tax as per the provisions of section 151 of the Act.”

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10.

On going through the above, we find merit in the contention of the Ld. Counsel for the assessee that the reopening was resorted to merely on suspicion of escapement of income and not on the formation of any belief of escapement of income and also there was no nexus between the information in the possession of the AO and the formation of belief of escapement of income. This is evident from para 2 of the reasons which reveal that since the AO found that in the in the assessment finalized in the case of the assessee for the succeeding assessment year i.e. 2015-16, additions u/s.68, 50C and 56(2) of the Act were made and in the impugned year also he found the assessee to have made cash deposits and purchased immovable property valued at Rs.5 Lakhs or more, he believed that since identical transactions were conducted by the assessee in the impugned year also income in relation to the same had escaped assessment. Therefore, the information in the possession of the AO was the addition made to the income of the assessee in A.Y. 2015-16 and on the basis of this information he formed belief of escapement of income that on similar transactions conducted by the assessee in the impugned year also income must have escaped assessment. The inference drawn and conclusion arrived after detailed inquiry conducted on transactions carried out in A.Y 15-16 were believed by the AO to apply to the impugned year also merely on account of similarity of nature of transaction. There was no other reason or material to doubt the similar transactions in the impugned year. There can be

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a case of suspicion only of the similar transactions also being liable to tax as in A.Y 15-16, but surely not a belief of the transactions being liable to tax.

11.

Para 3 merely reveals the facts of the case that deposits made in the bank account of the assessee and the investment made in the immovable property besides noting the fact that both these investments were not commensurate with the income returned by the assessee, which was found to be not sufficient for the purposes of making said investments. The AO also noted the assessee to have not disclosed the said transaction in his return of income. The mere fact that the assessee has disclosed income which is not sufficient for corroborating the source of investments made by him during the year or deposits made by him in cash in bank during the year cannot lead to the belief of escapement of income. It can at most lead to only a suspicion of the investment made having been sourced from undisclosed sources of income. There is always a possibility of the investments being sourced from family, friends or others or from any non-taxable sources and without making further enquiry on the issue the AO surely could not have formed a belief of escapement of income. Therefore, we find that the reasons do not reveal any belief of the AO of income escaping assessment. It is merely a suspicion and, therefore, we agree with the Ld. Counsel for the assessee that in the absence of mandatory requirement of there being belief of escapement of income of the

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AO for assumption of valid jurisdiction to reopen the case of the assessee, the reopening done in the present case and the assessment order passed as a consequence u/s.147 of the Act is invalid being without jurisdiction.

12.

The AO has noted in his reasons that in the facts of the present case, the return of income was processed u/s.143(1) of the Act and, therefore, as per the provisions Clause (b) of Explanation 2 to Section 147 of the Act, this deemed to be a case where income chargeable to tax as escaped assessment. We are not in agreement with the same. The provisions of Explanation 2 to Section 147 of the Act is reproduced hereunder:

“Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a ratett; or

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(iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India.”

A perusal of the same would reveal that as per Explanation 2(b), where no assessment has been made of the income returned and the AO notes the assessee to have understated his income or claimed excessive loss, deduction, allowance or relief, then, it shall be a case where income has escaped assessment. In the facts of the present case the AO has only suspected the assessee to have understated his income. It cannot, therefore, be said that the AO has noted the assessee to have understated his income so as to invoke Explanation 2(b) to Section 147 of the Act.

13.

In the light of the above, we hold that the assessment framed in the present case u/s.147 of the Act is without valid jurisdiction, since, it is based on reasons which do not fulfill the mandatory requirement of there being a belief of the AO of income of the assessee escaping assessment. The reasons, we hold, merely

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reveal the suspicion of the AO of income escaping assessment and not believed and we find the reasons of escapement of income to be based on information which have no nexus with the fulfillment of belief of escapement of income, if any. The assessment order passed as a consequence u/s.147 of the Act is quashed.

14.

In the result, appeal filed by the assessee is allowed.

This Order pronounced on 16/04/2026

Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 16/04/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��यथ� / The Respondent. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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