AJAYBHAI DINESHBHAI BAGDAI,NEAR CENTRAL BANK OF INDIA vs. THE INCOME TAX OFFICER, WARD-1(2)(1), NEW AAYKAR BHAWAN

ITA 74/RJT/2026Status: DisposedITAT Rajkot19 October 2026AY 2013-144 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Ajaybhai Dineshbhai Bagdai, filed an appeal against the order of the Commissioner of Income-tax (Appeals) - NFAC, Delhi, for Assessment Year 2013-14. The impugned order upheld the reassessment initiated under Section 147 by the Assessing Officer (AO) on 24.09.2021, which was based on third-party information. The CIT(A) also confirmed an addition of Rs. 2,87,345/- under Section 68 of the Income Tax Act, 1961, relating to alleged cash transactions with M/s. National Shroff & Co. and Ellora & Co. The assessee contended that the reopening was invalid, principles of natural justice were violated, and the addition was made without credit in the books of account. The assessee also argued for restricting the addition to the profit element, citing departmental practice in earlier years (AYs 2011-12 and 2012-13) where only an 8% estimated addition was made.

What did the Tribunal hold?

The Tribunal noted that the Assessing Officer had accepted an estimated addition at the rate of 8% in the previous assessment years (AYs 2011-12 and 2012-13) and had allowed the assessee's appeals partly on this basis. Since the department itself had accepted this approach, the Tribunal directed the Assessing Officer to make a similar estimated addition at 8% in the present case for AY 2013-14. The addition of Rs. 2,87,345/- was thus restricted to 8% of this amount, resulting in an addition of Rs. 22,987/-. The Tribunal did not explicitly decide on the validity of the reopening, the disposal of objections, or the violation of natural justice, but implicitly accepted the assessee's plea for consistency by applying the 8% profit element. The principle cited is that of consistency in treating similar transactions across assessment years, especially when accepted by the department.

What were the issues?

1. Whether the reopening of assessment under Section 147 of the Income Tax Act, 1961, was valid, considering it was based solely on third-party information without independent application of mind by the Assessing Officer, and whether the CIT(A) erred in upholding it? 2. Whether the reassessment proceedings were vitiated due to the Assessing Officer not disposing of the assessee's objections against reopening by a separate speaking order? 3. Whether the CIT(A) erred in confirming the assessment despite gross violation of principles of natural justice, by relying on third-party statements and material without providing copies or affording cross-examination opportunities? 4. Whether the addition of Rs. 2,87,345/- under Section 68 of the Act was erroneous, as it was not in respect of sums credited in the assessee's books of account? 5. Whether, without prejudice, the addition should have been restricted to the profit element, considering the assessee is eligible under Section 44AD and departmental practice in earlier years? Assessee's Contentions: The reopening was bad in law as it lacked independent application of mind and was based on third-party information. Objections were not disposed of by a speaking order, violating principles of natural justice. Section 68 was wrongly invoked as there was no credit in the books. The addition should be restricted to the profit element (8%) based on consistency with AYs 2011-12 and 2012-13, where the department accepted only an estimated addition. Revenue's Contentions: The revenue's representative fairly agreed that an estimated addition at the rate of 8% may be made, aligning with the AO's view in previous years.

Which sections of the Income-tax Act were involved?

Section 68,Section 147,Section 250,Section 44AD,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Shri Samir Bhuptani, Ld. AR
For Respondent: Shri Ganesh Iyer, Ld. Sr. DR
Hearing: 15/10/2026

Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2013- 14, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, dated 02.12.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, on 24.09.2021. 2. The grounds of a

The order continues below.

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