MUKUND TULSIDAS JARIWALA,SURAT vs. DCIT CIRCLE 1(1)(1) , SURAT

ITA 755/SRT/2025Status: DisposedITAT Surat06 October 2026AY 2013-1411 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reopening of the assessment under section 147 was invalid. It was not disputed that the original assessment was completed under section 143(3) after scrutiny, and the reopening was based on particulars available in the Balance Sheet schedule, which was part of the original assessment record. Crucially, the Tribunal found that the very issue was examined during the original assessment, with the assessee providing a specific explanation on 12.10.2015 regarding the amounts to ITOCHU Corporation and D-3 Textiles Pvt. Ltd., supported by ledger accounts. The Ld. AO had completed the original assessment without making any adverse inference or disallowance. The observation of the Ld. CIT(A) that the issue "remained untouched" was contrary to the material on record. Therefore, the reopening was based on the same material available during the original assessment, amounting to a mere change of opinion, which cannot be sustained in law. Consequently, the notice under section 148 and the reassessment order were quashed. On merits, the Tribunal found that the premise of the Ld. AO that the assessee had advanced interest-free loans was not supported by the material. The amount to ITOCHU Corporation was an advance against raw material purchases, followed by actual purchases within a month. The amount to D-3 Textiles Pvt. Ltd. represented remuneration receivable, not a loan. Thus, even on merits, the disallowance was not sustainable. The grounds raised by the assessee were allowed.

What were the facts?

The assessee, Mukund Tulsidas Jariwala, an individual engaged in salary and art silk cloth manufacturing, filed his return for AY 2013-14 declaring Rs. 2,26,09,180. The original assessment under section 143(3) was completed on 30.12.2015 at Rs. 2,27,40,800. Subsequently, the Deputy Commissioner of Income-Tax (Ld. AO) reopened the assessment under section 147 by issuing a notice under section 148 on 27.03.2018. The reopening was based on the Ld. AO's observation that the assessee had debited interest expenses of Rs. 1,16,32,877 and had unsecured loans of Rs. 10,37,04,081, while giving interest-free loans of Rs. 1,41,62,786 (Rs. 1,20,67,736 to ITOCHU Corporation and Rs. 20,95,050 to D-3 Textiles Pvt. Ltd.). The Ld. AO disallowed Rs. 16,99,534, re-assessing the total income at Rs. 2,44,40,330. The Commissioner of Income-tax (Appeal) rejected the assessee's appeal. The assessee is now before the Tribunal.

What were the issues?

1. Whether the notice issued under section 148 of the Income-tax Act, 1961 (the Act) is bad in law and without jurisdiction, considering the original assessment was completed under section 143(3) after scrutiny? (Question of law) 2. Whether the disallowance of interest expense amounting to Rs. 16,99,534/- made by the Ld. AO and confirmed by the Ld. CIT(A) is sustainable on merits? (Question of mixed law and fact) Assessee's Contentions: - The reopening under section 147 is invalid because the Ld. AO had already examined the relevant aspects during the original scrutiny assessment. The details of the amounts in question were available in the Balance Sheet schedule, which was part of the departmental record. There was no new or tangible material for reopening. - The assessee had provided a specific explanation on 12.10.2015 regarding the amounts to ITOCHU Corporation (advance against raw material purchase) and D-3 Textiles Pvt. Ltd. (remuneration receivable), which was accepted by the Ld. AO during the original assessment. - The reopening amounts to a mere change of opinion based on the same material. - Even on merits, the disallowance is not sustainable as the amount to ITOCHU Corporation was a business advance followed by purchases, and the amount to D-3 Textiles Pvt. Ltd. represented remuneration receivable, not an interest-free loan. Revenue's Contentions: - The Ld. DR relied on the orders of the lower authorities. - The material on record showed that the assessee incurred substantial interest expenditure on loans taken, while giving interest-free loans. Therefore, the reopening and consequential disallowance were justified.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

For Appellant: Shri Tinish Mody, CA
For Respondent: Shri Ashish Kumar, Sr. DR
Hearing: 09.07.2026Pronounced: 06.10.2026

Per B.M. Biyani, A.M.: Feeling aggrieved by order of first appeal dated 18.06.2025 passed by the office of learned Commissioner of Income-tax (Appeal)-Addl./JCIT(A)-1 Nashik [“Ld. CIT(A)”], which in turn arises out of the assessment-order dated 28.11.2018 passed by learned Deputy Commissioner of Income-Tax, Circle- 1(1)(1), Surat [“Ld. AO”] u/s 143(3) r.w.s. 147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2013-14, the assessee has filed this appeal.

The background facts leading to present appeal are as under:

2.

Mukund Tulsidas Jariwala

(i) The assessee is an individual deriving income from salary and

The order continues below.

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