DINESHBHAI HARIBHAI SONI,RAJKOT vs. ITO WARD 1(1)(1), RAJKOT, RAJKOT

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ITA 726/RJT/2025Status: DisposedITAT Rajkot27 October 2026AY 2015-20168 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal admitted the additional legal ground challenging the reassessment proceedings, citing the Supreme Court's decision in National Thermal Power Company Ltd. vs. CIT. The Tribunal found that the reassessment proceedings were initiated beyond a period of three years from the end of the relevant assessment year. For such reopening, the Assessing Officer must possess material showing that income chargeable to tax had escaped assessment and such escaped income amounted to or was likely to amount to Rs. 50,00,000/- or more, as per section 149(1)(b) of the Act. The Tribunal noted that the Assessing Officer did not carry out the required analysis of the information before initiating reassessment proceedings, and the escaped income ultimately assessed was far below the statutory monetary threshold. Relying on the coordinate bench decision in Shri Ashokbhai Anbabhai Kachadiya and Prakash Babulal Bhandari v. ITO, the Tribunal held that the reassessment proceedings were barred by limitation and without jurisdiction. Consequently, the reassessment order passed by the Assessing Officer and the directions issued by the CIT(A) were quashed. As the reassessment itself was quashed, the issues on merits regarding the additions were rendered academic and infructuous.

What were the facts?

The assessee, Dineshbhai Haribhai Soni, filed an appeal against the order of the Ld. CIT(A) dated 22.08.2025, which upheld additions made in an assessment order passed under section 147 of the Income Tax Act, 1961, on 24.03.2023. The assessment year in question is 2015-16. The disputed additions are Rs. 4,55,448/- on account of cash book discrepancies and Rs. 13,04,927/- on account of opening capital. The Assessing Officer noted discrepancies between cash receipts and declared sales, and also issues with cash deposits from distant locations in Madhya Pradesh into the assessee's bank account in Gujarat. The assessee's submissions and revised cash books were examined, revealing fresh entries and inconsistencies. The addition for capital was made due to a failure to provide documentary evidence for capital introduced between 2003 and 2015.

What were the issues?

1. Whether the reassessment proceedings initiated under section 147/148 of the Income Tax Act, 1961, are without jurisdiction, bad in law, and void ab initio, as the mandatory conditions for assumption of jurisdiction were not fulfilled? Assessee's contention: The reassessment proceedings were initiated without a reasonable belief based on material that income escaping assessment exceeded the prescribed limit of Rs. 50 lakhs. The Assessing Officer framed reasons for reopening based on gross transaction figures without preliminary analysis. Revenue's contention: The legal ground challenging the reassessment proceedings was not raised before the Ld. CIT(A) and is being raised for the first time before the Tribunal, and therefore, should not be admitted for adjudication. 2. Whether the Ld. CIT(A) erred in sustaining the addition of Rs. 4,55,448/- on account of discrepancies in the cash book? 3. Whether the Ld. CIT(A) erred in sustaining the addition of Rs. 13,04,927/- on account of opening balance of capital?

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 149(1)(b),Section 250,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: DR. ARJUN LAL SAINI

For Appellant: Shri Gaurang Khakhkhar, Ld. AR
Hearing: 15/10/2026Pronounced: 27/10/2026

आदेश/ORDER

Per, Dr. Arjun Lal Saini, A.M

Captioned appeal filed by the assessee, pertaining to Assessment Year 2015-16, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Learned Commissioner of Income-tax (Appeals) (‘Ld.CIT(A)’), dated 22.08.2025, which in turn arises out of an assessment order passed u/s 147 of the Act, on 24.03.2023. 2. Solitary grievance of the assessee in this appeal is that ld.CIT(A) erred in sustaining the addition of Rs.4,55,448/- on account of discrepancies in the cash book, and ld.CIT(A) also erred in sustaining the addition on account of opening balance of capital of Rs 13,04,927/-.

3.

Brief facts of the issue in dispute are stated as under. From the cash account submitted by the assessee, it was noticed by the assessing officer that the assessee had total cash receipt of Rs.1,11,66,282/-during the year. However, in the Profit &Loss, the assessee has declared only Rs.39,25,450/- as his sales for the year. Also, the assessee had not shown any outstanding advances on the liability side of his Balance sheet as on 31-03-2015. The assessee in its reply vide Acknowledgement Number: 978189461090323 had stated that there were no advances received outstanding as on 31.03.2025. Further, when confronted with discrepancies in cash book, the assessee submitted a revised cash book. On perusal of the cash book, it was noticed that there were many contra entries in the cash book which showed that cash was deposited in the bank out of cash in hand and vice versa. As per this cash book, the source of cash in the cash book was, (i) Sales (ii) Advances and (iii) Contra entry.However, on studying bank statement of account 312110110002761 in conjunction with this Cash book it was noticed that cash was deposited in bank account from various places like BHOPAL, UJJAIN, CHHINDWARA CHANDERI and SEONI- all in the state of Madhya Pradesh. Assessee himself in based in RAJKOT, GUJARAT, the distance of these places in MP from the place of business of assessee in RAJKOT, GUJARAT is very long, which involves a significant travel time. There were certain entries in the cash book where there were large withdrawals from bank account and deposits (from a place in MP) into this bank account on same date. Banks do not allow large cash withdrawal facility from non-home branches, on savings accounts. Which means that the assessee has withdrawn this cash from RAJKOT branch only. Thus, it is not possible for the assessee to deposit cash at some distant branch on the same day. Some of such entries were confronted to the assessee.The assessee filed reply on 09-03- 2023, vide Acknowledgement Number: 978189461090323, where the assessee again filed a cash book in support of his claim that he had enough cash in hand to deposit the same in his bank account on various dates. The daily closing balance was not provided in the cash book submitted on 11-02-2023 vide Acknowledgement Number: 952977131100223. However, in cash book provided on 09-03-2023, the daily closing balance was also provided. Both these cash books were compared. It was found that in the cash book submitted on 09-03-2023, some entries were inserted afresh. Some discrepancies noticed by the assessing officer in the cash books submitted by the assessee are glaring and could not be ignored. Therefore, the assessing officer made addition of Rs.4,55,448/- in the hands of the assessee on account of discrepancies, in the cash book.

4.

About addition of Rs.13,04,927/-, the assessing officer noted that the assessee had failed to prove the capital introduced during the relevant year under consideration. In his submission, the assessee submitted before assessing officer, the working of capital as on 31.03.2015 and the same is reproduced as under for the sake of clarity:

However, the assessing officer rejected the above reply of the assessee and observed that the assessee has failed to produce any documentary evidence to substantiate the introduction of capital during the period from 2003 to 2015. Hence, the assessing officer made addition of Rs. 13,04,927/- in the hands of the assessee. 5. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld.CIT(A), but remained unsuccessful. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice. 6. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. 7. Learned Counsel for the assessee, stated that assessee had raised the additional legal grounds challenging the proceedings u/s 147/148 of the Act, which is reproduced below: “ That on the facts and in law, the reassessment proceedings, initiated under section 148 of the Income tax Act, 1961, are without jurisdiction, bad in law and void ab-initio, as the mandatory conditions for assumption of jurisdiction under section 147/148, were not fulfilled”

8.

Learned Counsel for the assessee submitted that since the assessee has raised the legal issue first time before the Tribunal and the all the facts related to this additional ground, on legal issue, are there before the assessing officer, therefore such additional ground, on legal issue, may admitted by this Tribunal.

9.

On the other hand, Ld.DR for the Revenue opposed the prayer of the assessee, and stated that such legal ground was not raised by the assessee, before the Ld.CIT(A), and it is raised first time before the Tribunal, therefore, additional ground, so raised by the assessee, should not be admitted for adjudication.

10.

I have heard both the parties. I note that it is purely a legal issue and all facts are already on record which goes to the root of the matter and no further inquiry is required for deciding the same as all facts are already on record. Therefore, in the light of ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT (1998) 229 ITR 382 (SC), I admit the additional/legal ground raised by the assessee, and proceed to adjudicate first.

11.

About additional/legal ground raised by the assessee, Ld.Counsel for the assessee, argued that reasons of reopening were framed by the assessing officer, on the basis of gross transaction- figures, without undertaking a preliminary analysis of the nature of the entries and without forming a reasonable belief based on material that income escaping assessment exceeds the prescribed limit of Rs. 50 lakhs, hence, reassessment proceedings should be quashed.

12.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.

13.

I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that the expression "likely to amount to fifty lakh rupees or more" does not permit initiation of reassessment proceedings merely on the basis of gross transaction figures, without undertaking a preliminary analysis of the nature of the entries and without forming a reasonable belief based on material that income escaping assessment exceeds the prescribed limit. Therefore, I note that issue is squirely covered in favour of the assessee by the judgement of the Co-ordinate Bench of ITAT Ahmedabad in the case of Shri Ashokbhai Anbabhai Kachadiya, vide I.T.A. No.1373/Ahd/2025, order dated 17.12.2025, wherein it was held as follows:

9.

We have carefully considered the rival submissions and perused the material available on record. It is an undisputed position that the reassessment proceedings in the present case were initiated beyond a period of three years from the end of the relevant assessment year and therefore the jurisdiction of the Assessing Officer to issue notice under section 148 of the Act could have been sustained only if the statutory pre-condition prescribed under section 149(1)(b) of the Act stood satisfied, namely that the Assessing Officer had in his possession material showing that income chargeable to tax had escaped assessment and such escaped income amounted to or was likely to amount to Rs. 50,00,000/- or more. In the instant case, the Assessing Officer estimated income at 8% of cash deposits of Rs. 1,74,81,925/-, thereby computing the escaped income at Rs. 13,98,554/-, which is clearly below the monetary threshold of Rs. 50,00,000/- prescribed in section 149(1)(b) of the Act for reopening assessments beyond three years. In our considered view, the expression “likely to amount to fifty lakh rupees or more” does not permit initiation of reassessment proceedings merely on the basis of gross transaction figures without undertaking a preliminary analysis of the nature of the entries and without forming a reasonable belief based on material that income escaping assessment exceeds the prescribed limit. 10. In the instant case, at the time of initiating proceedings u/s. 148A(d) of the Act, the assessee vide letter dated 28.06.2022 submitted that during the year under consideration, he was engaged in the business of earning commission on sale of onions under the name of “Akshit Trading”. Further, the assessee submitted that as per available bank statement, there were transactions amounting to Rs.1,74,81,925/- in his bank account. We note that in the assessment proceedings, the assessing officer has estimated the assessee’s undisclosed income at Rs.1,74,81,925/- and thereafter applied the rate of 8% u/s. 44AD of the Act on such undisclosed commission income and thereafter assessed the total income of the assessee at Rs.13,98,554/-. In the instant facts, once having accepted that the assessee’s undisclosed receipts of Rs.1,74,81,925/- on which the assessee has earned commission income, even if the assessing officer had estimated the net taxable income at 25% of these receipts, even then the escaped income was not likely to exceed the threshold limit of Rs.50 lakh prescribed u/s. 149(1)(b) of the Act for reopening assessment beyond three years. Therefore, in the instant case, we are of the considered view that the assessing officer at the time of initiation of proceedings u/s. 148A(d) of the Act could not have formed the reasonable belief that income escaping assessment was likely to exceed the prescribed threshold limit of Rs.50 lakh, for reopening the assessment beyond a period of three years. 11. This legal proposition has been squarely considered by the Coordinate Bench of the Ahmedabad ITAT in Prakash Babulal Bhandari v. ITO, I.T.A. No. 737/Ahd/2025 (A.Y. 2015-16), wherein it was held that reassessment proceedings initiated beyond three years from the end of the relevant assessment year are barred by limitation where, upon basic analysis of the information available, the alleged escaped income is below Rs. 50,00,000/- . The Tribunal in that case held that the Assessing Officer is required to apply his mind to the material before forming belief, and where such preliminary examination indicates that the escaped income is below the threshold, initiation of reassessment proceedings is without jurisdiction. 12. Applying the ratio laid down in the above judicial precedents to the facts of the present case, we find that the Assessing Officer did not carry out the required analysis of the information before initiating reassessment proceedings and the escaped income ultimately assessed is far below the statutory monetary threshold. Accordingly, we hold that the reassessment proceedings initiated in the present case are barred by limitation and without jurisdiction in terms of section 149(1)(b) of the Act. Consequently, the reassessment order passed by the Assessing Officer and the directions issued by the CIT(A) restoring the matter back to the Assessing Officer cannot be sustained. 13. In the result, the appeal of the assessee is allowed.”

14.

As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench, in the case of Shri Ashokbhai Anbabhai Kachadiya(supra),and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). I find no reason to interfere in the said order of the Coordinate Bench, therefore, respectfully following the binding judgment of the Coordinate Bench (supra), I quash the reassessment order framed by the assessing officer.

15.

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

16.

In the result, the appeal is allowed in the terms indicated above.

Order pronounced in the open court on 27/10/2026.

Sd/- (Dr. Arjun Lal Saini) लेखा सद�/Accountant Member राजकोट /Rajkot िदनांक/ Date: 27/10/2026 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order //True Cop// Assistant Registrar/Sr. PS/PS ITAT, Rajkot

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