MILANDO FASHIONS LIMITED ,LUDHIANA vs. CIR III(1),JCIT-III/LDH, LUDHIANA

ITA 632/CHANDI/2026Status: DisposedITAT Chandigarh07 October 2026AY 2012-1322 pages
AI SummaryAllowed

What were the facts?

The assessee, Milando Fashions Limited (formerly Kaursain Exports Ltd.), is challenging an order dated 23.01.2026 passed by the CIT(A), which upheld a reassessment framed by the AO under Section 143(3) r.w.s. 147 of the Income-tax Act, 1961, on 31.12.2019 for Assessment Year 2012-13. The original assessment was completed on 26.03.2015. The AO reopened the assessment on 30.03.2019, beyond four years from the end of the AY, based on information from ACIT, Circle-2 Ludhiana. This information indicated that during a search on Shri Tarlochan Singh @ Tochi, incriminating documents were seized, suggesting M/s Kaursain Exports Pvt Ltd. made cash payments exceeding ₹12 Crores for acquiring Telegraphic Transfers (TTs) in foreign currencies. The AO alleged that the assessee failed to disclose these facts fully and truly, leading to escapement of income. The assessee's bank statements for the period were reportedly destroyed in a fire. The AO formed reasons to believe income of ₹12 Crores escaped assessment due to unverified sources of payment.

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961, were invalid and quashed them. The primary reason for this decision was that the reopening was based on information received from another authority (Directorate of Enforcement via ACIT) without independent verification and due application of mind by the Assessing Officer. The Tribunal noted that the recorded reasons did not demonstrate any independent verification by the AO to establish that the alleged cash payments were made by the assessee or that the assessee had any business nexus with Shri Tarlochan Singh. The reliance on third-party material and statements, without independent corroboration or establishing a live nexus between such material and the assessee, was insufficient to satisfy the jurisdictional requirement of Section 147, especially when the original assessment was completed under Section 143(3). The Tribunal cited various High Court and Tribunal decisions to support the view that suspicion cannot replace the statutory requirement of 'reasons to believe' and that reopening beyond four years requires demonstrating the assessee's failure to disclose fully and truly all material facts. Since the jurisdictional requirements of the first proviso to Section 147 were not fulfilled, the reassessment proceedings were quashed. Consequently, the addition under Section 69C was also deleted, as it could not be sustained on merits. The appeal of the assessee was allowed.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961, are valid, considering the AO relied on borrowed satisfaction and third-party information without independent application of mind, and whether the reasons recorded were based on suspicion rather than belief, and if reasons were supplied properly and timely, and if the proceedings are barred by limitation under Section 149 of the Act. Assessee's Contentions: - The reassessment proceedings are bad in law and without jurisdiction as they are based on borrowed satisfaction and mere third-party information without independent application of mind by the AO. - The reasons to believe for reopening were based on suspicion, conjectures, and unverified third-party information without any tangible material linking the assessee. - Complete reasons were not supplied to the assessee in a timely and proper manner, vitiating the proceedings. - The reassessment proceedings are barred by limitation under Section 149 of the Act. - The addition under Section 69C is arbitrary and unjustified, based solely on third-party statements and loose papers without evidentiary value. - Reliance on third-party statements recorded behind the assessee's back without cross-examination violates natural justice. - Documentary evidence substantiating export transactions was ignored. - No expenditure was incurred or claimed; the amount represents duly recorded export receipts, making Section 69C inapplicable. - The addition results in double taxation. Revenue's Contentions: - The Ld. CIT-DR advanced arguments supporting the findings of the Ld. AO.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6),Section 149,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI RAJESH DAMODARLAL SHARMA, JM

Manoj Kumar Aggarwal (Accountant Member)

1.

Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 23.01.2026 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 147 of the Act on 31.12.2019. The grounds of appeal as raised by

The order continues below.

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