JAYCEE JEWELLERS PVT LTD,MUMBAI vs. DCIT WARD-4 (2) (2), MUMBAI

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ITA 4119/MUM/2026Status: DisposedITAT Mumbai14 October 2026AY 2010-20118 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings were bad in law. The Assessing Officer's reasons for reopening the assessment were based on a factually incorrect premise that the assessee had not filed its return of income for assessment year 2010-11. The paper book clearly showed that the return was filed on 29.09.2010. Therefore, the assessment was reopened on a wrong assumption of fact. The Tribunal relied on the decisions of the Gujarat High Court in Saga Enterprises v. ACIT (2002) 257 ITR 335 and the Delhi High Court in Dr. Ajit Gupta v. ACIT, 383 ITR 361, which held that reopening based on factually erroneous premises is unsustainable. Consequently, the assessment framed under Section 143(3) read with Section 147 was also held to be bad in law. Ground No. 2 of the appeal was allowed. The issue regarding the disallowance of alleged hawala purchases was not explicitly decided as the appeal was allowed on the ground of invalid reassessment proceedings.

What were the facts?

The assessee, Jaycee Jewellers Pvt Ltd, filed an appeal against the order of the Additional/Joint Commissioner of Income Tax (Appeals)-1, Chennai, for the assessment year 2010-11. The appeal was filed against the dismissal of the assessee's appeal by the CIT(A) without providing sufficient opportunity, violating principles of natural justice. The assessee contended that it had filed adjournment letters, but the CIT(A) ignored them and dismissed the appeal for non-submission of details. The assessee also challenged the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, arguing that the Assessing Officer lacked valid reasons to believe income had escaped assessment and relied solely on information from the Sales Tax Department. The assessee further contested the disallowance of alleged hawala purchases of Rs. 3,11,116/-.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, are bad in law due to the Assessing Officer lacking valid reasons to believe that income had escaped assessment and relying on borrowed satisfaction from the Sales Tax Department, and whether the assessment framed under Section 143(3) read with Section 147 is consequently bad in law? (Question of law and mixed fact and law, concerning Section 147 and Section 143(3) of the Income Tax Act, 1961). Assessee's arguments: The Assessing Officer initiated reassessment without valid reasons to believe income escaped assessment, merely on information from the Sales Tax Department. This constitutes borrowed satisfaction and a change of opinion, which is impermissible. Reliance was placed on CIT v. Kelvinator, 320 ITR 561 (SC). Revenue's arguments: Not recorded in the judgment. 2. Whether the disallowance of alleged hawala purchases of Rs. 3,11,116/- under Section 69C of the Income Tax Act, 1961, is bad in law, considering the documentary evidence submitted by the assessee and that defaults by suppliers under MVAT Act do not automatically render purchases non-genuine? (Question of fact and law, concerning Section 69C of the Income Tax Act, 1961). Assessee's arguments: The Assessing Officer ignored documentary evidence like invoices, bank statements, stock register, and banker's certificate for payments. Defaults by suppliers under MVAT Act are not sufficient to deem purchases non-genuine. Revenue's arguments: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: CHALLA NAGENDRA PRASAD & SHRI MAKARAND VASANT MAHADEOKAR

For Respondent: Shri Bal Krishna Yadav, Sr.DR
Pronounced: 14/10/2026

PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: This appeal is filed by the assessee against the order of the learned Additional/Joint Commissioner of Income Tax (Appeals)-1, Chennai [“Ld. CIT(A)”], dated 21.01.2026 for the assessment year 2010-11.

2.

The assessee has raised the following ground of appeal.

“The learned Commissioner of Income Tax has erred in law and facts in dismissing the appeal without giving sufficient opportunity, thereby violating the principles of natural justice. Your Appellant respectfully submits that it has filed adjournment letter on portal dt.11.12.2025 however ignoring the same Lr. CIT Appeals dismissed the appeal for non-submission of the details. Your Appellant further respectfully submits that it is not correct on part of the Lr. CIT to state that Appellant has responded only twice against six notices between 03.07.2018 to 11.12.2025. Representative of the Appellant physically attended before Comm. of Appeals-9, Mumbai in July and November, 2018 and filed necessary submissions along with judicial paper book as well factual paper book. When fresh notice was received in December, 2019 from CIT Appeals-9, representative of the Appellant attended the hearing and discussed the facts of the case with Hon. CIT Appeals-9. In February, 2021 Appellant filed adjournment letter as submission could not be made due to pandemic COVID-19 and subsequent lock down. Similarly, adjournment letter was submitted for hearing on 11.12.2025. Hence it is respectfully submitted that in early hearing in 2018 Appellant filed not only written submissions along with factual and judicial paper books and attended the physical hearing, subsequent all the notices which were received from NFAC was attended by filling of necessary response on portal. Your Appellant therefore respectfully submits that the impugned order is therefore liable to be set aside and the appeal deserves to be restored for decision on merits. 2. Reassessment proceedings are bad in law The learned CIT appeals has grossly erred in law in confirming initiation of Reassessment proceedings by Lr. Assessing Officer and subsequently passing the order u/s 143 (3) r.w.s 147 of the I.T. Act, 1961. Your Appellant respectfully submits that learned Assessing officer initiated reassessment proceedings u/s 147 without having any 2 reasons to believe that income has escaped assessment and merely on the basis of information received from sales tax department, Maharashtra. It is further respectfully submitted that information collected by DCIT- Investigation is without any specific proof that it relates to Appellant Company in particular hence it cannot be used against Appellant Company. A general confession by a person that all the transactions are bogus or that he is indulged in bogus/accommodation transactions cannot be a reason for reopening of the Assessment of the Assessee when the Assessee has not been named specifically in the confession. It is further respectfully submitted that words in section 147 are "reason to believe" and not "reason to suspect". In the result, your Appellant urges that none of the criteria embedded section 147 r.w.s 148 of the I.T. Act, 1961 to reassess the Assessee are attracted in your Appellant case and hence learned Assessing officer has traveled beyond his jurisdiction in arrogating himself with authority contemplated u/s 147 and thus his back assessment action is bad in law and illegal and consequently ab intio void and nullity in eyes of law deserves to be quashed. 3. Disallowance of Alleged Hawala purchases of Rs.3,11,116/= Ld. CIT Appeals erred in law and on facts in confirming additions made by Lr. Assessing officer for alleged hawala purchases of Rs.3,11,116/- u/s 69 C of the I.T. Act, 1961. Your Appellant respectfully submits that Lr. Assessing Officer has completely ignored documentary evidences submitted in support of subject transactions such as invoices, bank statements, stock register, corresponding sales, realization of the said sales, banker certificate for payments made to the parties through a/c payee cheque, etc. It is further respectfully submitted that defaults on the part of the suppliers under the provision of MVAT Act could not be sufficient to hold your Appellant's purchases as non-genuine. Under the circumstances additions made by Lr. Assessing officer if Rs.3,11,116/- and confirmed by CIT appeals is bad in law and deserves to be deleted.”

3.

The Ld. Counsel for the assessee referring to page 5 of the paper book which contains the reasons for reopening the assessment, submitted that the Assessing Officer, in the reasons, stated that the assessee had not filed its return of income for the assessment year 2010-11. However, the assessee filed its return of income on 29.09.2010 declaring an income of Rs.81,62,370/-, and a copy of the acknowledgement of filing the return of income for the assessment year 2010-11 is placed at page 1 of the paper book. Therefore, the Ld. Counsel for the assessee submitted that the very basis for forming a belief that income had escaped assessment is factually incorrect and, therefore, there is complete non-application of mind by the Assessing Officer in forming the reason to belief that income had escaped assessment.

4.

The Ld. Counsel further submitted that in the reasons recorded the Assessing Officer has merely relied upon information from the Sales Tax Department, Investigation Wing to form a belief that the assessee had made purchases from two parties who were hawala dealers and formed an opinion that income had escaped assessment. Such formation of belief by the Assessing Officer is merely based on information from the Sales Tax Department and constitutes borrowed satisfaction, without making any further inquiries by the Assessing Officer to form a belief that income had escaped assessment. The Ld. Counsel for the assessee, therefore, submitted that the assessment was reopened merely on a change of opinion, which is not permissible in law. Reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT v. Kelvinator, 320 ITR 561 (SC).

5.

Heard rival contentions, perused the orders of the authorities below. On perusal of the reasons for reopening of assessment, which is placed at page 5 of the paper book, we noticed that the Assessing Officer, in the reasons recorded, stated that the assessee had not filed its return of income for the assessment year 2010-11 and formed a belief that income had escaped assessment, merely on the basis of information received from the Sales Tax Authorities without making any further inquiries.

6.

We observed that the Assessing Officer reopened the assessment, firstly, on the wrong assumption of fact that the assessee did not file its return of income for the assessment year 2010-11 and resulted in escapement of income. However, the copy of the acknowledgement of filing the return of income for the assessment year 2010-11 which is placed at page 1 of the paper book establishes the fact that the assessee had, in fact, filed its return of income on 29.09.2010, declaring an income of Rs.81,62,370/-. Thus, the assessment was reopened entirely on a wrong assumption of fact.

7.

We observed that the Hon’ble Gujarat High Court, in the case of Saga Enterprises v. ACIT, (2002) 257 ITR 335 (Guj.), considered a situation where an assessment was reopened by the Assessing Officer on the ground that no return had been filed and, therefore, income had escaped assessment. However, the assessee had filed a return of income for the relevant assessment year. On these facts, the Hon’ble High Court held as under:

“Held, that it was apparent that the fact of non-filing of the return for the assessment year 1991-92 had weighed with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income. However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which fact would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover the Income-tax Officer had stated that the payment which was stated to be undisclosed income relevant for the assessment year 1991-92 could have been made during the financial year 1990-91 relevant to the assessment year 1991-92 and hence, "to cover up that probability, protective addition was made in the assessment year 1992-93". The first appellate authority decided the appeal for the assessment year 1992-93 on January, 1996, and the reasons had been recorded thereafter on August 18, 1997. The notice of reassessment was not valid and was liable to be quashed.” 8. Similarly, the Hon’ble Delhi High Court, in the case of Dr. Ajit Gupta v. ACIT, 383 ITR 361, held as under:

“Since the action of the Revenue was based on a factually erroneous premise, the court is of the view that the reopening of the assessments for the said assessment years is not sustainable in law. The court is also satisfied that the requirement of the law, as explained by the court in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), and reiterated in the later decisions, has not been fulfilled in the present case.” 9. The ratio of these decisions applies to the facts of the assessee’s case. Thus, respectfully following the said decisions, we hold that the reopening of the assessment is bad in law and, consequently, the assessment framed u/s. 143(3) r.w.s. 147 of the Act is also bad in law. Ground No. 2 of the grounds of appeal is allowed.

10.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 14/10/2026

Sd/- Sd/- MAKARAND VASANT MAHADEOKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai Dated: 14/10/2026 Prabhat Copy to: JAYCEE JEWELLERS PVT LTD, 56, PAREKH GHAR, 1ST BHOIWADA, 1 BHULESHWAR, MUMBAI-400002, MAHARASHTRA

DCIT WARD-4 (2) (2), 2 AAYKAR BHAVAN, NEW MARINE LINES,, MUMBAI-400020, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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