SH. MANISH BHATIA,ALWAR vs. ACIT, CENTRAL CIRCLE, ALWAR, ALWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.1297/JPR/2025 (Assessment Year:2013-14)

Manish Bhatia Vs. ACIT Kalani & Co LLP, Central Circle Chartered Accountants, 5th Alwar Floor, Milestone Building, Gandhinagar Turn, Tonk Road, Jaipur �थायीलेखासं./जीआइआरसं./PAN/GIR No:AARPB6445P Appellant .. Respondent Appellant by : Sh. P.C. Parwal, FCA Respondent by : Ms. Aarti Rawat, Addl. CIT Date of Hearing 18.08.2026 Date of Pronouncement 06.11.2026 O R D E R Per Annapurna Gupta, AM:- The present appeal has been filed by the assessee against the order passed by the Office of the Commissioner of Income Tax Appeal, Jaipur 04 (hereinafter referred to as “Ld. CIT(A)”), dated 15.07.2025 under

P a g e | 2 ITA No.1297/JPR/2025 Manish Bhatia Section 250of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. The grounds raised by the assessee read as under:- 1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of notice issued u/s 148 and consequent order passed u/s 147 of IT Act, 1961. He has further erred in not appreciating that when the addition made by AO is less than Rs.50 lakhs, no reopening can be made u/s 149(1)(b) of the Act. 2. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.3,31,226/- on account of notional interest earned on amount advanced to M/s MNR Infratech Pvt. Ltd. on the basis of excel sheet found in search of Mama Group by not accepting the contention of assessee that the interest calculation was only a notional calculation to ascertain the per square feet cost of the project and no interest is actually paid by M/s MNR Infratech Pvt. Ltd. 3. The appellant craves to alter, amend and modify any ground of appeal. 4. Necessary cost be awarded to the assessee. 3. We shall be first taking up ground No.1 which is a legal ground challenging the validity of the assessment framed in the present case. 4. In the facts of the present case a search and seizure action u/s 132 of the Act was carried out on the members of the MAMA Group, Alwar, which included the assessee also. Accordingly as per the provisions of the Act, the case of the assessee was taken up for scrutiny assessment by issuing notice u/s 148 of the Act and assessment framed making addition to the income of the assessee of Rs.3,31,226/- on account of alleged interest earned on amounts advanced to an entity of the MAMA Group, Alwar. 5. The contention of the ld. Counsel for the assessee before us challenging the validity of the assessment framed was that

P a g e | 3 ITA No.1297/JPR/2025 Manish Bhatia thejurisdictional notice issued by the AO u/s 148 of the Act was beyond limitation prescribed in law. He contended that section 149 of the Act prescribed limitation for issuance of notice u/s 148 of the Act, and as per the said sectionthe notice u/s 148 of the Act in the present case ought to have been issued within three years from the end of the relevant assessment year since the income escaping assessment of the assessee did not exceed Rs.50 lakhs. That however the said notice was issued beyond three years period, the assessment year impugned being A.Y 2013-14, the three year period expiring on 31-03-2017 and the notice u/s 148 of the Act being issued on 30.03.2024. 6. Our attention as drawn to the provisions of Section 149 of the Act applicable for the impugned year as under:- …… 77[Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more. (2) No notice to show cause under section 148A shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

P a g e | 4 ITA No.1297/JPR/2025 Manish Bhatia (b) if three years, but not more than five years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts to or is likely to amount to fifty lakh rupees or more.] ……. 7. With regards to the income escaping assessment, he contended that the addition made in the hands of the assessee on account of alleged incriminating material found during search on the Mama Group amounted only to Rs.3,31,226/- which was below Rs.50 lakhs. 8. Ld. DR however, contended that the income escaping assessment in the case of the assessee could not have been gauged from the addition made to the income of the assessee in the assessment framed u/s 147 of the Act alone. That the same had to be gauged from the contents of the documents which were found during search on the Mama Group on the basis of which reopening was resorted to in the case of the assessee which showed income escaping assessment to the tune of Rs.62,47,395/- ,being the amount of cash invested in the development project undertaken by the MNR Group. That though no addition was made on account of cash so introduced, the AO being satisfied with the explanation of the assessee, however, the fact remains that it was on the basis of this document revealing cash to have been introduced by the assessee in the construction project undertaken in MNR Infratech Pvt. Ltd. to the tune of Rs.62 lakhs ,which was the basis for reopening the case of the assessee and the same being in excess of Rs.50 lakhs, the reopening beyond three years but within the period of 10 years from the end of the relevant assessment year

P a g e | 5 ITA No.1297/JPR/2025 Manish Bhatia was within the limitation prescribed u/s 149(1)(b) of the Act and was in accordance with law. He referred to the findings of the Ld. CIT(A) in this regard at page 19 of the order as under:- …. I have gone through the facts of the case and observations of the Id. AO in assessment order. As per facts of the case, the appellant has introduced an amount of Rs. 62,47,395/- in cash in the project. Therefore, the income which escaped assessment considered for reopening u/s 147 is Rs. 62,47,395/- i.e. more than Rs.50 lacs and the same clearly falls under clause 149(b) of the Income Tax Act. …… 9. To this ld. Counsel for the assessee countered by stating that Section 149 sub-clause (b) of the Act talks of where the AO being in possession of evidence showing that income chargeable to tax which has escaped assessment amounts toor is likely to amount to Rs.50 lakhs or more, to extend the period of limitation from three years to 10 years for issuance of notice u/s 148 of the Act. He emphasized that the word used in the sub clause (b)is income escaping assessment or likely to escape assessment exceeding Rs.50 lakhs. In the facts of the present case, he contended that the document found during search on the basis of which reopening was resorted to reflected cash introduced by the assessee in the construction project undertaken in MNR Infratech Pvt. Ltd. of the Mama Group. There is no dispute with regard to the said fact, he stated, but he contended that mere cash transactionnoted in the document could not led to the belief of escapement of income or income likely to have escaped assessment without any other material leading to such belief. He contended that there is no case of the Revenue that such document was confronted to the members of the Mama Group during search conducted

P a g e | 6 ITA No.1297/JPR/2025 Manish Bhatia and any statement recorded of the said persons stating to the effect that the amount recorded in the document represented undisclosed investments. He contended that query with regard to the said document was only raised during assessment proceedings initiated in the case of the assessee when the assessee was asked to explain the source of cash investment recorded in the document and after considering the reply of the assessee the AO was satisfied that the investment was made from disclosed sources. That therefore he made no addition on account of the said transaction noted in the document. This fact he pointed out is clearly recorded in the order of the AO, wherein at para 12 to 12.1.6 of the order, the issue regarding cash introduction is discussed, the reply of the assessee regarding the source of the cash is noted and the satisfaction of the AO, of the introduction of the cash noted in the document found during search being from disclosed sources, recorded. He contended therefore that on the basis of document found during search there could not have been any belief of escapement of income or likely escapement of income to the tune of cash entries recorded therein amounting to Rs.62 lakhs, and the likelihood of escapement of income therefore is only to the extent of Rs.3 lakhs odd, being the interest allegedly earned by the assessee on the cash advanced, which was added to the income of the assessee. 10. Ld. DR per contra relied on the findings of the Ld. CIT(A). 11. We have heard both the parties. The case of the assessee is that the notice issued in the present case u/s 148 of the Act is barred by limitation for the reason:-

P a g e | 7 ITA No.1297/JPR/2025 Manish Bhatia  That the income escaping assessment was less than Rs.50 lakhs.  The limitation for issuance of notice u/s 148 of the Act therefore, was governed by sub clause (a) of section 149(1) of the Act accordingly to which the notice ought to have been issued within 3 years from the end of the relevant assessment year.  The impugned assessment year being AY 2013-14, the three year period expiring on 31-03-2017 and the notice u/s148 of the Act being issued on 30.03.2024, the notice was clearly issued beyond the limitation prescribed by the law. 12. The case of the Revenue however is that the income escaping assessment was more than Rs.50 lakhs and the limitation prescribed as per sub clause (b) to section 149(1) of the Act was applicable, as per which the case of the assessee could be reopened upto 10 years from the end of the relevant assessment year ,which was complied with in the facts of the present case. 13. There is no dispute with regards to the law applicable relating to limitation for issuance of notice as per section 149 of the Act, that for all amounts of income escaping assessment reopening can be resorted to within a period of three years from the end of the relevant assessment year as per Section 149(1)(a) of the Act, which limitation is extended to 10 years only for incomes escaping assessment amounting to more than Rs.50 lakhs. 14. Having noted so, therefore the solitary dispute before us to be resolved is with regard to the quantum of income escapingassessment in

P a g e | 8 ITA No.1297/JPR/2025 Manish Bhatia the present case, with the assessee contending that the income escaping assessment was less than Rs.50 lakhs and the Department contending that the income escaping assessment was more than Rs.50 lakhs. 15. To adjudicate the same, certain facts need to be recorded regarding the document found during search on the MAMA group on the basis of which notice u/s 148 of the Act was issued to the assessee. This document was found during search conducted on the Mama Group Alwar and the connected entities on 27.07.2022. The orders of the authorities below reveal that the document was by way of digital data seized from the premises of Sh. Jitender Kumar Vijay (main accountant of the Mama Group) which was analyzed during post-search proceedings and it was found that it contained some entries relating to the Directors of MNR Infratech Pvt. Ltd. . On perusal of the entries, it was found that the assessee before us, Sh. Manish Bhatia, was actively participating in the construction work of flats under MNR Infratech Pvt. Ltd. and he had introduced substantial amount in the company in cash and received interest thereon. The extract of the digital data relating to the assessee was submitted by the AO in his factual report before us is under:-

P a g e | 9 ITA No.1297/JPR/2025 Manish Bhatia

P a g e | 10 ITA No.1297/JPR/2025 Manish Bhatia 20. What is to be seen, in the backdrop of the above facts is that, is whether the said document found during search could have led to the belief of escapement of income of Rs.65 lakhs as recorded therein so as to empower the AO to issue notice to the assessee for reopening the case of the assessee beyond three years. As pointed out by the ld. Counsel for the assessee the words used in Section 149 of the Act recording escapement of income is that whether documents or evidence found in the possession of the AO showed that income chargeable to tax which has escaped assessment amounts to or is likely to amount of Rs.50 lakhs. 21. We find that this is not the case. As rightly pointed out by the ld. Counsel for the assessee, the document containing record of cash advanced by the assessee and allegedly earned interest thereon, alone could not have laid to belief of income escaping assessment to the extent of amount recorded therein i.e. Rs.65 lakhs. The amounts recorded therein could represent both accounted and unaccounted income of the assessee. There being admittedly no other information in the possession of the Revenue/AO at the time of issuance of notice u/s 148 of the Act, regarding the character of the entries, whether disclosed or undisclosed, the AO could not have formed a belief of the amounts representing undisclosed income/ escaped income of the assessee. The information with the AO at the time of reopening the case of the assessee could at best have led to suspicion of entries

P a g e | 11 ITA No.1297/JPR/2025 Manish Bhatia recorded therein representing undisclosed income of the assessee. But by no stretch a belief of escapement of income could have been formed. More particularly when subsequent investigation and inquiry conducted during assessment revealed the amounts recorded therein to be investment of the assessee from disclosed sources. 22. We therefore completely agree with the ld. Counsel for the assessee that the document found during search, in the absence of any other evidence or inquiry conducted by the Department on the same , alone could not have led to the formation of belief of escapement of income to the extent of amounts recorded therein of 65 lacs odd. It is only the amount of Rs.3 lakhs , which was added to the income of the assessee in the assessment framed, which at best could be said to be the amount escaping assessment in the case of the assessee and the same being below Rs.50 lakhs, the reopening in the present case therefore was to be done within three years as prescribed u/s 149(1)(a) of the Act. The notice in the present case, u/s 148 of the Act having been issued beyond three years, we have no hesitation therefore in holding that the notice issued was barred by limitation. The jurisdiction assumed by the AO to reopen the case of the assessee was therefore invalid. Assessment order passed as a consequence is held to be without jurisdiction and is accordingly directed to be quashed. 23. Ground of Appeal No.1 of the assessee is allowed.

P a g e | 12 ITA No.1297/JPR/2025 Manish Bhatia 24. Since we have quashed the assessment order, ground of appeal No.2 raised by the assessee on merits, being mere academic in nature are not being dealt with by us. 25. In effect, appeal of the assessee is allowed in above terms. Order pronounced in the Open Court on 06.11.2026

Sd/- Sd/- (Kuldip Singh) (Annapurna Gupta) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 06.11.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

By Order, Asst. Registrar/Sr. PS ITAT, Jaipur Mittali Digitally signed by: Mittali DN: CN = Mittali email = mittaligupta34671@gmail.com C = IN O = Personal Date: 2026.11.06 13:22:48 +05'30'