SONAJ AND COMPANY, SOLAPUR vs. DCIT CIRLCLE 2(2), SOLAPUR

आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE

BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITSSA No.30/PUN/2025 धििाारण वर्ा / Assessment Year : 2000-01 Sonaj And Company, DCIT, Circle – 2(2), Solapur P.O. No. 11, Indapur, Road, Akluj-413101 Vs. PAN : AASFS9837R अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Nikhil S Pathak Department by : Shri Amit Bobde Date of hearing : 24-02-2026 Date of 06-05-2026 Pronouncement : आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 30.07.2025 of the Ld. Commissioner of Income Tax (Appeals), Pune-11 (“CIT(A)”) pertaining to Assessment Year (“AY”) 1990-91.

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diaries and estimated household expenses; (ii) deposits not treated as genuine and interest paid thereon and (iii) excess stocks and GP on unaccounted sale. The Ld. CIT(A) partially allowed the appeal of the assessee vide his order dated 15.03.2004. On further appeal to the Tribunal, the assessee raised an additional ground of appeal challenging the validity of the block assessment order passed u/s 153BC of the Act dated 30.07.2001 on the ground that the notice u/s 143(2) pertaining to the block assessment proceedings was issued beyond 12 months from the end of the month in which the block return was filed. The Tribunal vide its order dated 28.09.2007 in ITA No. 932/PUN/2004 admitted the said additional ground raised by the assessee and remitted the matter back to the file of the Ld. CIT(A) to be decided as per law after due verification of the several dates as prescribed in the statute and thereafter arrive at the right conclusion, without himself dwelling into the merits of the case.

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assessment order on 11.03.2013 The assessee did not respond to the draft assessment order where certain additions were proposed on account of unexplained opening capital balances of partner, unexplained loan extended to Mr. and Mrs. Shah and disallowance of interest in absence of any explanation, the Assessing Officer made the additions. The Notice under Section 143(2) is required to be given only when return is furnished. Furnishing of the return is a sine qua non for issuance of notice under Section 143(2) of the Act. If no return is furnished by the assessee, there can be no reason for issuance of notice under Section 143(2) of the Act. Similar view has been taken by a Division Bench of this Court in the case of Azziz Qazi & Bros. v. ITO [1974] Tax LR 540 (J&K). 9. In view of the preceding analysis the substantial question of law framed by this Court vide order dated 07.02.2018 is answered in the negative and in favour of the revenue. Accordingly, the impugned order dated 11.08 2017 is quashed In the result, the appeal is allowed (emphasis supplied). 11. On similar issue, the Hon'ble Kerala High Court in the case of M/s. Nileshwar Rangekallu Chethu Thozhilali Vyavasaya Sahakarana Sangham vs CIT, Calicut, Ι.Τ.Α.Νο. 120/2019 & I.T.A. No.11/2022 has held that a return can be under Sections 139(1), 139(4), 142(1) or Section 148, and to be valid, had to be filed within the due date contemplated under those provisions, that the return filed after the dates prescribed under sections 139(1) and 139(4) or in the notices issued under Section 142(1) and Section 148 is non-est and not valid returns. The relevant para of the said decision is reproduced below: “11 On a consideration of the nval submissions and on a perusal of the statutory provisions, we find that a reading of Section 80A(5) and Section 80AC of the IT Act as they stood prior to 1.4.2018, when the latter provision was amended by Finance Act 2018, would reveal that the statutory scheme under the IT Act was to admit only such claims for deduction under Section 80P of the IT Act as were made by the assessee in a return of income filed by him. That return can be under Sections 139(1) 139(4), 142(1) or Section 148, and to be valid, had to be filed within the due date contemplated under those provisions. Under Section 80A(5), the claim for deduction under Section 80P could be made by an assessee in a return filed within the time prescribed for filing such returns under any of the above provisions. The amendment to Section 80AC with effect from 1.4.2018, however, mandated that for an assessee to get a deduction under Section 80P of the IT Act, he had to furnish a return of his income for such assessment year on or before the due date specified in Section 139(1) of the IT Act. In other words, after 1.4 2018, even if the assessee makes his claim for deduction under Section 80P in a return filed within time under Sections 139(4), 142(1) or Section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under Section 139(1). Thus, it is clear that the statutory scheme permits the allowance of a deduction under Section 80P of the IT Act only if it is made in a filed after the dates prescribed under Sections 139(1) and 139(4) or in the notices issued under Section 142(1) and Section 148, the returns were indeed non- est and could not have been acted upon by the Assessing Officer even though they were filed before the completion of the assessment. 12. There is yet another aspect of the matter. The requirement of making the claim for deduction in a return of income filed by the assessee can be seen as a statutory pre-condition for claiming the benefit of deduction under the IT Act it is trite that a provision for deduction or exemption under a taxing Statute has to be strictly

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construed against the assessee and in favour of the Revenue. Thus viewed, a failure on the part of an assessee to comply with the pre- condition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts. 13. It is in the backdrop of the aforesaid discussion that we must consider the findings of a Division Bench of this Court in The Chirakkal Service Co-operative Bank Ltd. [supra]. The findings therein, that appear to suggest that a claim for deduction under Section BOP can be entertained even if it is made in a return filed beyond the time permitted under the IT Act, ignores the perspective that sees the requirement of the claim for deduction being made in a valid return as a pre-condition for obtaining the benefit of the statutory deduction. The said findings also fly in the face of the express statutory provisions that requires the claim to be made in a return filed by the assessee, by which term is meant a valid return under the Act, and therefore have necessarily to be seen as per incuriam. We also find that the subsequent amendments to Section 80AC by the Finance Act 2018 fortifies the view that we have taken for, it makes the claim for deduction under Section 80P conditional on filing a return within the due date prescribed under Section 139(1) of the IT Act. In other words, the pre-condition for claiming the deduction under Section 80P of the IT Act has now been made more stringent by reducing the time available to an assessee for making the claim." 14. Before parting with these cases, we must also address the arguments of the learned counsel for the appellant/assessee relying on the provisions of Section 139(8)/(9) and Section 234A of the IT Act. A reading of the provisions of Section 139(8) and (9) of the IT Act clearly reveals that even under those provisions, the restrictions placed with regard to the accrual of interest on amounts assessed on an assessee is with regard to the date of filing of a return within the time prescribed under the IT Act. Under Section 234A of the IT Act, however, although the provision suggests that even a return filed beyond the time prescribed under any of the provisions of the IT Act can have the effect of limiting the accrual of interest on the amounts assessed against an assessee, we have to see the said provision as permitting a filing of a belated return for the limited purpose of conferring a specific benefit of limiting the accrual of interest, on an assessee, and for no other purpose We cannot accept the contention of the appellant/assessee that the said provisions which are intended for a specific purpose and are not general in nature, have to be seen as manifesting a statutory scheme that enables the Department to act upon a belated return for allowing the claim of an assessee for deduction under Section 80P of the IT Act. (emphasis supplied). 12. As stated above, in the present case, the assessee had not filed his return of income in response to notice u/s. 158BC dated 15.10.1999 within the date specified in the notice issued u/s. 158BCor within 45 days from the from the date of notice issued u/s 158BC. The assessee filed return only on 16.12.1999, which is therefore not a valid return. The appellant during the set aside proceedings also failed to prove that the return of income was filed within the time prescribed u/s. 158BC(a)(ii) of the Act In view of the above facts, discussion and relying upon the above referred decisions of Hon'ble High Court, I am of the considered view that the return filed after the dates prescribed in the notice issued u/s. 158BC or the date prescribed in sec. 158BC(a)(ii) is non-est and not a valid return and therefore there can be no reason for issuance of notice under Section 143(2) of the Act. Therefore, the legal ground of the appellant that the assessment order passed u/s. 158BC of the Act dated 30.07.2001 is not valid as the notice u/s. 143(2) of the Act was issued beyond a period of 12 months from the end of the month in which the return was filed is liable to be rejected and accordingly dismissed.

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“On facts and in law, 1] The learned CIT(A) erred in holding that since the assessee had not filed the return in response to the notice issued u/s 158BC within the time prescribed in the said notice, the return filed by the assessee was non-est and therefore, there was no requirement to issue notice u/s 143(2) of the Act and accordingly, the asst. order passed u/s 158BC was valid in law. 2] The learned CIT(A) failed to appreciate that even if the assessee had filed his return of income beyond the prescribed time specified in the notice issued u/s 158BC, the return of income filed by the assessee was valid return and there was no reason to treat it as a non-est return. 3] The learned CIT(A) failed to appreciate that the notice u/s 143(2) was issued by the learned A.O. on 27.04.2021 which was beyond the period 12 month from the end of the month in which the return was filed by the assessee and the said notice was invalid in law and consequently the asst. order passed u/s 158BC ought to have been declared null and void. 4] The learned CIT(A) erred in confirming the addition on account of excess stock of certain items to the extent of Rs.52.246/-. 4.1] The learned CIT(A) failed to appreciate – a] that the entire sale proceeds of the deficit stock were available to the appellant for investment in the excess stock of Rs.1,09,511/- and the household expenses, etc. and hence, no addition on account of the excess stock in certain items was sustainable. b] that the dept. had not found any evidence that the sale proceeds of the deficit stock were utilized for any other purpose than explaining the excess stock and the household expenses and hence, the contention of the appellant was justified that the excess stock was out of the sale proceeds of the deficit stock. 5] The learned CIT(A) erred in holding that the appellant had incurred estimated unaccounted household expenses on the partners to the tune of Rs.12,31,411/- for A.Y.s 1996-97 to 1998-99 on the basis of the notings in the diary while in reality the unaccounted household expenses ought to have been estimated at Rs 4,76,852/- as per the seized diaries. 5a] The learned CIT(A) failed to appreciate that the estimation was uncalled for in this asst. and the unaccounted household expenses ought to have been limited for the asst. years 1996-97 to 1998-99 to the extent of the amounts as noted in the seized diaries only. 6] The learned CIT(A) erred in holding that these unaccounted household expenses were not incurred out of the sale proceeds of the deficit stock found during search and which were unaccounted.

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6a] The learned CIT(A) erred in rejecting the contention of the appellant that the deficit stock found during the search was sold over a period of years and not in the year of search only and thus, the unaccounted sale proceeds of such deficit stock were utilized over the years for meeting the unaccounted household expenses as per the diaries seized. 6b] The learned CIT(A) failed to appreciate that- i] the unaccounted household expenses were met from the unaccounted sales of the deficit stock only as there was no other evidence found during the search to show that the appellant had some other source of income to meet such expenses. ii] had this entire deficit stock was sold in the year of search, the dept surely would have found the extra cash/assets to that extent during the search while no such assets were found and this itself indicated that the appellant had sold the deficit stock over a period of years and used the sale proceeds for meeting the unaccounted household expenses. iii] the dept. also had not adduced any evidence to prove that the appellant's contention in this regard was wrong. iv] the appellant had certain income by way of sale of milk and milk products which was available for the household expenses. 7] Accordingly, the learned CIT(A) erred in sustaining the addition on account of household expenses to the tune of Rs. 11,76,214/-. 8] The learned CIT(A) erred in confirming the addition of cash credits of Rs.1,45,958/- received from seven persons who had during the asst. proceedings had confirmed having advanced the above deposits to the appellant. 8a] The learned CIT(A) failed to appreciate that just because the above persons had denied at the time of search having given the deposits to the appellant, did not imply that the deposits were bogus particularly when later on, they had accepted that they had advanced the above funds to the appellant. 8b] The learned CIT(A) further failed to appreciate that the above addition did not constitute undisclosed income of the appellant and hence, it was beyond the scope of the provisions of Chapter XIVB of IT Act. 9] The appellant craves leave to add, alter, amend or delete any of the above ground of appeal.”

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5.1 Referring to Para 9 of the impugned order, the ld. AR submitted that the Ld. CIT(A) has held that the return filed after the specified time limit is not a valid return. The notice u/s 143(2) is required to be given only when a valid return is furnished by the assessee. If no valid return has been filed, there can be no reason for issuance of notice u/s 143(2) of the Act. Thus, placing reliance on the decision of Hon’ble High court of J&K in the case of PCIT Vs. Broadway Shoe Co. (2018) 99 taxmann.com 83 (J&K) and the decision of the Hon’ble Kerala High Court in the case of M/s. Neeleshwar Rangekallu Chethu Thozhilali Vyasvasya Sahakarana Sangham Vs CIT, Calicut in ITA No. 120/2019 and ITA No. 11/2022, the Ld. CIT (A) treated the block return filed by the assessee as non-est and hence rejected the claim of the assessee.

5.2 The Ld. AR submitted that simply because the block return was furnished beyond the time limit specified in the notice issued u/s 158BC of the Act, the same cannot be held to be non-est. As per the Ld. CIT(A), the assessee ought to have filed the block return by 29.11.1999. However it was filed belatedly on 16.12.1999. Referring to the relevant provisions of section 158BC of the Act, the Ld. AR submitted that there is no provision in the erstwhile section 158BC applicable to the case of the assessee that if the block return is filed beyond the time limit specified in the notice u/s 158BC, the same would be non-est.

5.3 The Ld. AR submitted that there was no provision to hold that if the block return is filed beyond the period prescribed in the notice, it would not be a valid return. In fact, the block assessment provisions were applicable only to searches conducted till 31.05.2003. Thereafter, the provisions of section 153A were applicable. He further submitted that the provisions of block assessment have been reintroduced subsequently with effect from 01.09.2004.

5.4 Referring to the amended provisions of section 158BC effective September, 2024 and onwards, the Ld. AR submitted that it has been clearly stated in the second proviso to that section (amended section 158 BC) that if the return which is required to be furnished u/s 158BC is furnished beyond the period allowed in the notice, in that event, such return would be treated as non-est. The Ld. AR, thus submitted that considering the amended provisions of section 158BC, it is to be

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appreciated that after 01.09.2024 in case the block return is not furnished within the prescribed time, the same would be treated as non-est. However, there is no such provision in section 158BC applicable to present case and hence the Ld. CIT(A) is not justified in holding that the belated return filed by the assessee is to treated as non-est.

5.5 Another plank of argument taken by the Ld. AR is that the relevant provision of section 158BFA(1) applicable to the present case and the amended provision of section of 158BFA(1) applicable from 01.09.2024 also support the assessee’s contention that belated return was a valid return and same cannot be treated as non-est.

5.6 Referring to the relevant provisions of section 158BFA(1), the Ld. AR submitted that as per the said section, if the assessee had furnished the block return after the expiry of the period specified in the notice, in that event, the interest was to be calculated from the day immediately following the expiry of the time specified in the notice and ending on the date of furnishing of the block return. Thus, it is clearly stated in section 158BFA(1) that if the belated block return has been furnished, the interest would be calculated till the date of furnishing of the block return which clearly implies that the belated block return was valid return and it cannot be treated as non-est.

5.7 Further, referring to the amendment of section 158BFA(1) applicable from 01.09.2024, the Ld. AR then submitted that under the said amended provision it is provided that if the block return is furnished after the time specified in the notice, the interest would be calculated till the date of completion of assessment. This is because after 01.09.2024 a belated return is to be treated as non-est and hence the interest would be charged till the completion of the assessment. On the other hand, in the erstwhile section 158BFA(1) applicable to present case, if the return is filed belatedly the interest was to be charged till the date of filling the return. This indicate that the belated return was a valid return and the same cannot be treated as non-est and hence in the instant case, as the notice u/s 143(2) is issued beyond 12 months from the end of the month in which the return was filed by the assessee, issue of such notice is invalid in law and accordingly the block assessment u/s 158BC is to be held as null and void.

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5.8 In support of his above contentions, the Ld. AR relied on the decision of the Hon’ble Supreme Court in the case of ACIT Vs Hotel Blue Moon (321 ITR 362).

5.9 The Ld. AR further submitted that reliance placed by the Ld. CIT(A) on the decision of the Hon’ble J&K High Court in the case PCIT Vs. Broadway Shoe Co. (99 taxmann.com 83) is misplaced as in that case the assessee had not furnished the return in the response to the notice issued u/s 148 and hence it was held therein that even if no notice u/s 143(2) was issued, the re-assessment u/s 147 was valid. However, in the present case, the assessee undisputedly filed a block return though belatedly and hence the decision in the case of Broadway Shoe Co. (supra) is not applicable to the facts of the present case. Accordingly, the block assessment may be held to be null and void and claim of the assessee be allowed.

6.1 So far as ground Nos. 5 and 6 along with its sub-grounds Nos. 5a, 6a and 6b and ground No. 7 relating to addition on account of unaccounted household expenses, the Ld. AR submitted that the Ld. AO has not considered the submission of the assessee in its entirety. The Ld. AO should have given set-off of the stock.

6.2 In ground No. 8 along with its sub-ground Nos. 8a and 8b, the assessee has challenged the addition of cash credits of Rs.1,45,958/- received from seven persons who had confirmed during the assessment proceedings that they had advanced the alleged cash credits to the assessee. The Ld. AR submitted that just because these 7 persons had denied at time of search having given the deposits to the assessee, it did not imply that the deposits were bogus particularly when subsequently these persons have accepted that they had advanced the alleged cash credits to the assessee. He further submitted that since the impugned addition did not constitute undisclosed income of the assessee, it was beyond the scope of the provisions of Chapter XIV-B of the Act.

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page 1-5 of paper book. Consequent thereto, the Ld. CIT(A) passed the impugned order on 30.07.2025. The Ld. CIT(A) dismissed the additional legal ground raised by the assessee for the reasons already reproduced in the preceding paragraphs. We find that the Ld. CIT(A) has dismissed the legal ground taken by the assessee on the ground that notice u/s 143(2) of the Act is required to be given only when a valid return of income has been filed by the assessee. If no valid return has been filed there can be no reason for issuance of notice u/s 143(2) of the Act. He concluded that the return filed after the time limit specified in the notice issued u/s 158BC of the Act is not a valid return and treated the belated block return filed by the assessee as non-est and hence rejected the claim of the assessee.

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(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return:] (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply: (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment: (d) the assets seized under section 132 or requisitioned under section 1324 shall be retained to the extent necessary and the provisions of section 132B shall apply subject to such modifications as may be necessary and the references to "regular assessment" or "reassessment" in section 132B shall be construed as references to "block assessment".

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such period, not exceeding a period of sixty days, as may be specified in the notice, a return in the form and verified in the manner, as may be prescribed. setting forth his total income, including the undisclosed income, for the block period: Provided that such return shall be considered as if it was a return furnished under the provisions of section 139 and notice under sub-section (2) of section 143 shall thereafter be issued: Provided further that any return of income, required to be furnished by an assessee under this section and furnished beyond the period allowed in the notice shall not be deemed to be a return under section 139. Provided also that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided also that a person who has furnished a return under this clause shall not be entitled to furnish a revised return; (b) the Assessing Officer shall proceed to determine the total income including the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144, section 145, section 1454 and section 145B shall, so far as may be, apply: (c) the Assessing Officer, on determination of the total income of the block period in accordance with this Chapter, shall pass an order of assessment or reassessment and determine the tax payable by him on the basis of such assessment or reassessment: Provided that nothing in the provisions of section 144C shall apply in respect of such order: Provided further that where the order of assessment or reassessment is made in pursuance of section 158BD, the block period for such assessment or reassessment shall be the same as that determined in respect of the person in whose case search was made under section 132, or whose books of account or other documents or any assets were requisitioned under section 1324, and proceedings under section 158BD were initiated due to such search or requisition, as the case may be, (d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B. (2) The provisions of sub-section (1) of section 143 shall not apply to the return furnished under this section. (3) The Assessing Officer, before issuance of notice under clause (a) of sub- section (1), shall take prior approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director, as the case may be."

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158BC were amended effective from 01.09.2024 it was stated therein that the block return if not furnished within the prescribed time allowed in the notice shall not be deemed to be a return u/s 139 of the Act and thus rendering the same as invalid and non-est. We have considered the relevant provisions of section 158BC both as applicable to the assessee and post its amendment effective from September 2024 and find some force in the arguments advanced by the Ld. AR that there was no such provision in section 158BC as applicable to the present case and hence the Ld. CIT(A) is not justified in holding that the belated return filed by the assessee is to be treated as non-est.

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assessee as the Hon’ble Court in that case clearly mentions that section 158BC itself prescribes the time limit of 45 days and envisages a scenario where a valid return of income has been filed.

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Order pronounced in the open court on 06th May, 2026.

Sd/- Sd/- (R.K. Panda) (Astha Chandra) JUDICIAL MEMBER VICE PRESIDENT पुणे / Pune; दिन ांक / Dated : 06th May, 2026. रदि Ravi Kumar Digitally signed by Ravi Kumar Date: 2026.05.07 14:31:35 +05'30' आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, 4. पुणे / DR, ITAT, “B” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER,

सहायक पंजीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune