HUZEFA KURBANHUSAIN LAKDAWALA,GANDHIDHAM vs. THE ITO WARD-1, GANDHIDHAM, GANDHIDHAM-KUTCH

ITA 287/RJT/2026Status: DisposedITAT Rajkot23 October 2026AY 2012-139 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings were liable to be set aside/quashed. The Assessing Officer had issued the notice under section 147/148 of the Act based on incorrect facts. Crucially, the AO himself accepted that the assessee did not have a bank account in Kotak Mahindra Bank, yet this was stated as a reason for reopening. This indicated a complete non-application of mind by the AO. The Tribunal noted that the "Reasons to believe" did not contain any allegation of the assessee failing to disclose material facts leading to escapement of income and were based on borrowed satisfaction. The AO had taken irrelevant facts into consideration and proceeded on a factually incorrect basis. The Tribunal relied on the Gujarat High Court decision in Vijay Ramanlal Sanghvi and the decision in Inductotherm (India) (P) Ltd. v. M. Gopalan. As the reassessment itself was quashed, all other issues on merits of the additions were rendered academic and infructuous. The appeals were allowed.

What were the facts?

The assessee, Huzefa Kurbanhusain Lakdawala, filed appeals against orders for Assessment Years 2011-12 and 2012-13. These appeals challenged orders passed by the National Faceless Appeal Centre (NFAC), Delhi, which upheld assessment orders passed by the Assessing Officer (AO) under section 143(3) read with section 147 of the Income-tax Act, 1961. The reassessment proceedings were initiated based on information regarding cash deposits in bank accounts. The assessee had raised objections to the reopening, arguing that the reasons were based on incorrect facts, specifically that a Kotak Mahindra Bank account did not belong to him. The AO rejected these objections and proceeded with the assessment, making additions based on bank deposits.

What were the issues?

1. Whether the reassessment proceedings initiated by the Assessing Officer were vitiated due to illegality and being based on incorrect "Reasons to believe" as per Section 147 of the Income-tax Act, 1961, particularly when the bank account cited in the reasons did not belong to the assessee? - Assessee's contention: The reassessment was illegal as the "Reasons to believe" were factually incorrect, specifically regarding the ownership of the Kotak Mahindra Bank account. Reliance was placed on Ahmedabad ITAT decisions stating bank deposits alone are not a valid reason for reassessment. - Revenue's contention: The Revenue primarily reiterated the stand taken by the Assessing Officer. 2. Whether the lower authorities erred in confirming the addition at 8% of total deposits when the assessee's main business was timber trading and commission agency with a normal profit rate of 1-2%? - Assessee's contention: The addition at 8% was incorrect given the nature of the business and the source of deposits being from various customers for purchases and sales. - Revenue's contention: Not recorded. 3. Whether the notice under section 143(2) was validly issued without specifying whether it was a limited or full scrutiny case? - Assessee's contention: The notice under section 143(2) was mandatory required to specify the nature of scrutiny, and its omission rendered the proceedings bad in law.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 250,Section 44AD,Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

Hearing: 15/10/2026Pronounced: 23/10/2026

Per, Dr. Arjun Lal Saini, AM: Captioned two appeals filed by the assessee, pertaining to assessment year (AY) 2011-12 & 2012-13, are directed against the separate orders passed under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 12.12.2025 by the National Faceless Appeal Centre (NFAC), Delhi/ Commissioner of Income Tax (Appeals) [in short ‘Ld.CIT(A)’] which in turn arise out of separate

The order continues below.

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