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Facts
The assessee, Kundan Jewellers Pvt. Ltd., was subjected to reassessment proceedings based on information alleging undisclosed transactions amounting to Rs. 70.09 lacs with Ridhi International. The Assessing Officer (AO) made an addition of this amount, which was confirmed by the CIT(A). The assessee contended that the reassessment was based on mistaken identity, as the transactions pertained to another company with the same name registered in Maharashtra, not Punjab.
Held
The Tribunal held that the reassessment proceedings were invalid and void ab initio. The addition was made based on incorrect assumptions of fact and a lack of application of mind by the AO. The evidence, including MCA records and bank statements, confirmed that the alleged transactions did not relate to the assessee but to a different entity.
Key Issues
Whether the reassessment proceedings initiated under section 147/148 were valid when based on mistaken identity and incorrect facts, and whether the addition made under section 69A was justified.
Sections Cited
69A, 115BBE, 147, 144B, 148, 151, 153C, 143(3)
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. UDAYAN DASGUPTA & SH. KRINWANT SAHAY
This appeal is filed by the assessee against the order of the ld. CIT (A) NFAC, Delhi dated 20.02.2025 passed u/s 250 of the Income Tax Act, 1961(henceforth the Act) which has emanated from the order of the NFAC, Delhi dated 30.03.2022 passed u/s 147/144B of the Act.
Grounds of appeal taken by the assessee in Form No. 36 are as follows:
“1. That the Ld. CIT(A) NFAC has erred on facts and law, vide order u/s 250 of the Act dt. 20.02.2025, in confirming the addition of Rs. 70,09,601/- U/S 69A r.w.s. 115BBE of the Act, made by the AO vide assessment order u/s 147 r.w.s. 1448 of the Act dt. 30.03.2022, on account of alleged accommodation entry received by the assessee from M/s Ridhi International without considering the explanation and evidence filed by the assessee during the course of assessment as well as appellate proceedings.
That the Ld. CIT(A) NFAC has erred on facts and law in confirming the validity of the proceedings-initiated u/s 147/148 of the Act which has been challenged in the grounds of appeal on the following issues:
(1) The information on the basis of which proceedings u/s 147/148 of the Act have been initiated has neither been examined nor corroborated by the AO before recording the satisfaction for initiating the reassessment proceedings.
(ii) That the reasons have been recorded by the AO to initiate the proceedings u/s 147/148 of the Act on wrong facts which are contradictory to the addition made by the AO in the assessment order.
(iii) That there was mechanical approval of the Pr. CIT with regard to reopening of the case u/s 148 of the Act.
That the Ld. CIT(A) NFAC, vide order u/s 250 of the Act dt. 20.02.2025, has erred while arbitrarily rejecting the grounds of appeal of the assessee that while disposing the objections filed against the issue of notice u/s 148 of the Act neither all the objections has been delt with by the AO nor proper reasons have been given for conclusion.
That the Ld. CIT(A) NFAC, vide order u/s 250 of the Act dt. 20.02.2025, has erred while arbitrarily rejecting the grounds of appeal
of the assessee that the assessment order u/s 147 r.w.s. 144B of the Act dt. 30.03.2022 is liable to be quashed because the information received by the AO from ACIT Central Circle-1(2) Ahmedabad on the basis of which proceedings u/s 147/148 of the Act have been initiated and addition of 3.
Assessment Year: 2014-15
Rs. 70,09,601/- u/s 69A r.w.s. 115BBE has been made has not been provided to the assessee despite specific request during the course of assessment proceedings.
That the Ld. CIT(A) NFAC, vide order u/s 250 of the Act dt. 20.02.2025, has erred while arbitrarily rejecting the grounds of appeal of the assessee that the assessee did not receive any alleged accommodation entry of Rs.70,09,601/- from Ridhi International from the bank accounts of Saraswat Cooperative Bank and Canara Bank as the assessee does not have any account with these banks.
That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”
The assessee has filed additional grounds of appeal on 6th Jan., 2026 claiming 3. the same to be a legal ground and requested admission of the same placing reliance on the judgment of the Hon’ble Apex Court in the case of National Thermal Power Corporation Ltd. v. CIT 1998 229 ITR 383 (SC).
4. The additional grounds raised are as under:
“1. That the issuance of notice u/s 148 by the Assessing Officer is bad in law since if, at all, the proceedings were liable to be initiated, the same could have been initiated only by issuance of notice u/s 153C and, thus, assessment as framed by the Assessing Officer u/s 148/143(3) deserves to be quashed.
That the Ld. CIT(A) has ignored the binding judgment of the Hon'ble Apex Court in the case of Vikram Sujit Kumar Bhatia reported in 453 ITR page 417 and that binding judgment have been ignored in a summary manner.
That the re-opening of the assessment whether u/s 148 or 153C goes to the root of assumption of jurisdiction and since the very basis of the initiation of proceedings
Brief facts emerging from records are that the assessee company is engaged in the business of “Karigar” goldsmith, only earing income from labour charges under the name of style of “Kundan Jewellers Pvt. Ltd”, and has filed its regular return along with the copies of audited financials and balance sheet showing gross labour charges receipts at Rs.47,500/- and has returned an income of Rs.13,960/- after all expenses.
Subsequently, on the basis of information gathered from the insight portal, that the assessee is engaged in providing accommodation entries to various beneficiaries, specifically based on information received from ACIT, Circle-1(2), Ahemadabad, that the assessee has entered into transactions amounting to Rs. 70.09 lacs, with one Mr.
Shripal Vohra (bearing PAN AELPV5937J), the case of the assessee has been reopened (after necessary approval from higher authorities) vide notice u/s 148 dated 30.03.2021, in response to which return has been submitted by the assessee on 31.05.2021 declaring a total income of Rs. 14,760/-.
In course of reassessment proceedings, the assessee has raised objections regarding insufficiency of reasons recorded (which has been rejected ) and even though the assessee has fully cooperated by furnishing all documentary evidences including copies of audited accounts, cash book, ledger A/c of labour charges received, bank
Assessment Year: 2014-15 statements with HDFC Bank A/c No.xxxxxx 00863, along with computation of income and all other necessary particulars accompanied by written submissions explaining the facts of the case , the assessment has been ultimately completed, with an addition of Rs. 70.09 lacs u/s 69A of the Act, based on allegations, that the assessee has carried out undisclosed transaction, with one party namely Ridhi International, operated by Sh. Shripal Vohra from whom, the assessee has been alleged to have received an undisclosed amount of Rs. 70.09 lakhs in its bank accounts, held with “Saraswat Cooperative Bank” and with “Canara Bank” totaling the said amount.
Before the Ld. the ld. first appellate authority, the assessee has challenged the reopening u/s 147 being void ab-initio, the reassessment being initiated on the basis of information received in the portal , which has neither been examined or corroborated by the AO , before recording his satisfaction, which indicates non application of mind by the AO to the facts on record , the same just reasons to suspect and the assessee has also challenged the addition on merits by completely disowning the alleged transactions of Rs. 70.09 lacs, which is alleged to have been received from the said Mr.
Shripal Vohra.
However, the ld. first appellate authority has dismissed the appeal by observing as follows:
“5.1. I have carefully considered the relevant and material facts on record, in respect of this ground of appeal, as brought out in the assessment order. During the assessment proceedings, AO observed that the assessee had undisclosed income of Rs. 70,09,601/. The assessee failed to give a satisfactory reply and provide any required details. Hence, the A.O. completed the assessment and passed order u/s. 147/147B of the Income-tax Act dated 30.03.2022 Assessing total Income at Rs. 70,23,560/-.
5.2. It is further noted and as detailed in preceding para above that during the appellate proceedings, the appellant has not furnished any substantial evidence in support of its grounds of appeal. The appellant has challenged the addition in the different grounds of appeal. However, the appellant has not furnished any substantial written submission or documentary evidence in support of its grounds of appeal challenging the addition. The appellant has also not submitted any copy of its written submission or documentary evidence filed during the assessment proceedings. The onus lies on the appellant to support any claim by bringing in cogent documentary evidence. In absence of any substantial written submission or documentary evidence in support of its grounds of appeal, I have no basis to take a contrary view in the appellate proceedings as I have no reason to interfere with the assessment order. As such, I do not find any infirmity in the order of Assessing Officer. Therefore, Addition of Rs. 70,09,601/- (Assessing total Income at Rs. 70,23,560/-) is hereby sustained on merits.
In the result, the appeal is Dismissed.”
Now, the assessee is before the Tribunal on the grounds contained in the memorandum of appeal. In course of hearing, the ld. AR of the assessee argued on legal as well as on merits and submitted that the assessee company is only earing labour charges from doing the work of a skilled metal worker ( goldsmith ) who specializes in working with gold and other precious metals and has not engaged in any transaction of purchase or sale of goods and the gross receipts against such labour
Assessment Year: 2014-15 charges has been duly disclosed in the audited financials and return of income. He further submitted that in the instant case, proceedings initiated vide notice u/s 148 is void ab-initio because in the reasons recorded the AO, has stated that the assessee has purchased goods amounting to Rs. 70.09 lacs from one Mr. Vohra and it has also been alleged that the assessee has obtained various accommodation entries to the tune of Rs.
70.09 lacs against which payment has been received through bank channel, which itself proves that the reasons recorded are absolutely contradictory in nature.
The Ld. AR, further submitted that for all practical purposes, the alleged transaction on the basis of which proceedings has been initiated does not belong to the assessee at all, and has drawn our notice to the copy of the bank A/c of the assessee company (pb Page 27) with HDFC bank A/c No xxxxx00863, Muktsar , Punjab to explain that there is no such receipt by the assessee in its bank account . He further explained that the said reopening has happened because of an inadvertent error arising from a confusion regarding the actual identity of the assessee. He further clarified, that there are two different companies registered with Ministry of Corporate Affairs (MCA)
in the same name of (Kundan Jewellers Pvt. Ltd.), both having different identification numbers.
One of them having CIN No. U36910PB2004PTC026894, is the assessee in this case, Kundan Jewellers Pvt. Ltd. duly registered in the State of Punjab, evidenced by Assessment Year: 2014-15 Companies Master Data obtained from the MCA website, ( placed in pb page 31- 32 ) and the other company is also registered under the identical name of Kundan Jewellers Pvt Ltd , with registered office at Andheri West, Mumbai in the state of Maharashtra, CIN No. which of course is having a different U36900MH2000PTC125335, in support of which the assessee has enclosed the screenshots taken from MCA portal, reflecting both the companies with identical names with different CIN numbers (paper book page no. 31-34).
He further explained that the alleged accommodation entries with Ridhi International (Mr. Shripal Vohra) actually belongs to the other company with identical name which is registered in the state of Maharashtra, in support of which the assessee ( apart from company master data ), has also produced the copy of the bank statement of Canara Bank A/c No 2667256000051, obtained from the Mumbai company “
Kundan Jewellers Pvt. Ltd.,”, Mumbai (on request), to show that the said bank statement contains the entries of deposits amounting to Rs. 25 lacs on 5th March, 2014 and Rs. 10 lacs on 6th March, 2014, being funds transferred from Ridhi International in Canara Bank A/c branch Andheri, Maharashtra, (paper book page no. 36 & 37), the information which has formed the basis of initiation of this reassessment proceedings (albeit on the wrong assessee).
Assessment Year: 2014-15 14. Referring to the above documentary evidences brought on record, the ld. AR submitted that the addition has been made by the AO in the case of the assessee out of inadvertent error where the AO has mistakenly assumed that there was only one company in the name of Kundan Jewellers Pvt. Ltd, but in reality there are two different companies registered with Ministry of Corporate Affairs (MCA), one in the state of Punjab and other in the state of Maharashtra, and all the entries are found recorded in the bank account of the company registered in the state of Maharashtra. He further submitted that in the instant case, the assessee has fully provided all details and has explained his case and has discharged the initial burden of proof with lay upon the assessee, and now the onus has shifted on the revenue.
Before concluding, he submitted that in the instance case, since the addition has been made due to mistaken identity and wrong assumptions of facts and it is proved with documentary evidences, brough on record that the assessee is absolutely clear and transaction does not relate to the assessee, the addition erroneously made by the AO may please be deleted.
Before concluding, the ld AR , has also argued on the legal aspect of the matter stating that the transaction which has been alleged to have been entered into by the assessee company does not belong to him and as such, the reasons recorded are incorrect and has been recorded without any prima facie verification of facts and there
Before concluding he relied on various decisions in support of his legal arguments, some of which are reproduced below:
“ITO vs. Sukhvir Singh as reported in [2024]165 taxmann.com 197 (Amritsar).
It has been reported as under "Where Assessing Officer received AIR Information that assessee had deposited substantial amount of cash in bank account and issued reopening notice, since AlR information relied upon was incorrect and Assessing Officer failed to verify amount of cash deposited in bank from copies of bank statements duly furnished by assessee during course of assessment proceedings, there was non-application of mind by Assessing Officer and thus, impugned reopening notice was void ab initio.
BIC CELLO (INDIA) PVT. LTD. vs. ACIT as reported in (2025) 475 ITR 463 (Bom)
"Notice based on erroneous fact…… in our view if the reasons for reopening the assessment are based on incorrect facts or conclusions, certainly the notice issued for reopening cannot be sustained.
ITO vs. Baba Kartar Singh Dukki Educational Trust as reported in (2016) 158 ITD 965 (CHD).
"Where Assessing Officer processed under section 143(1) returns of income filed by assessee for assessment years 2001-02 to 2003-04 and subsequently, he reopened said assessments on sole basis that assessee had not filed returns for years preceding to assessment year 2004-05 and, therefore, its income having escaped assessment, reopening of assessment was on basis of suspicion and non-existent and incorrect facts and it was invalid" dated 28.02.2020-CHD Trib
"10.6 in the present case also the A.O. reopened the assessment on the basis of wrong facts, so respectfully following the ratio laid down in the aforesaid referred to cases, I am of the view that the reopening of the assessment in the present case was not valid, accordingly, the same is quashed.
Fortune Metaliks Limited vs. DCIT, dated 12.01.2021-CHD Trib
"7. We have heard both the parties. We find merit in the contention of the Id. counsel for the assessee that the reassessment proceedings undertaken by the AO in the present case were invalid since the reasons recording his satisfaction of escapement of Income were based on incorrect facts and there was no application of mind at all by the AO. The fallacies in the facts pointed out by the id. counsel for the assessee, regarding the quantum of bogus purchases noted by the AG In his reasons as the AD In the reasons that the bogus bills had been debited to the Profit & Loss Account wat incorrect which is evident from the fact that the Id. CIT(A) in his order passed on merits has found these bills to be relating to pure relating to purchase of fixed assets and has accordingly, made the disallowance of only depreciation relating to the same, which has not been challenged by the Revenue before us. It is clearly evident that on receiving information from the Commercial Tax Department, the Id. AO did not even care to verify the same from his records from where all these factual Inaccuracies would have been brought out. There was clearly total non-application of mind by the AG and the belief of escapement of income is definitely not his own but borrowed from that of the commercial tax officer who had forwarded the information.
The basic requirement of low for reopening an assessment is application of mind by the AD to the material or information in his possession to conclude and arrive at a satisfaction therefrom that Income has escaped assessment. Both application of mind and satisfaction / belief of the AO are lacking in the present case. The reassessment therefore we hold is invalid. The case lows relied upon by the Ld. Counsel for the assessee support the case of the assessee, the order passed by the AO is therefore, set aside."
Gaurav Joshi vs. ITO as reported ot (2019) 55 CCH 0083 (Jalandhar Camp)
"Held, AO while Issuing notice u/s 148 had mentioned that assessee hod deposited cash during FY 2009-10 in bank account which had escaped assessment-On contrary, in Assessment Year: 2014-15 assessment order, he mentioned that cash deposited in assessee's bank account was less than amount mentioned in reopening notice-Therefore, reasons recorded by AO were not emerging from record available with him-AO recorded reasons which were not found to exist on record, therefore, reassessment framed deserved to be quashed-Assessee's appeal allowed."
Kissan Fats Limited, Hazi Rattan Link Road, Bathinda. vs. The DCIT, Central Circle-1, Ludhiana in ITA No. 407/CHD/2023
Therefore, respectfully following the ratios of the above discussed decisions, we hold that the re-opening of the completed assessment in the present case was not valid. The plea of the Department, that the recording of wrong facts by the AD in the reasons was an inadvertent mistake, is of no avail and it does not validate the reasons recorded by the AO. It is trite that the reasons recorded are to be read as they are, and the reasons recorded in the present case, read as they are, are factually incorrect reasons which could not have led the AD to arrive at a valid satisfaction that income for the year under consideration had escaped assessment. Accordingly, the initiation of the re-assessment proceedings through the incorrect reasons recorded and the entire re-assessment proceedings, culminating in the order under appeal are quashed as void ab Initio."
Therefore, the reopening of the case made by the Ld. AD on the basis of incorrect facts and figures is vold-ab-initio and the reassessment proceeding deserves to be quashed.”
The ld. DR relied on the order of the ld. CIT(A) but after examining the records obtained from MCA portal (Ministry of Corporate affairs) with different company identification numbers registered in different States , further supported by the bank statement of Canara Bank, containing funds transfer from Ridhi International, which leaves no doubt that the transactions are related to the company registered at Maharashtra, and is not related to the assessee company , he did not dispute the Assessment Year: 2014-15 contention of the assessee and did not controvert the documentary evidences which has formed a part of the paper book.
We have heard the rival submissions and considered the materials on record and we find that the entire reassessment proceedings has been conducted by the AO on the basis of incorrect assumption of fact without making any enquiry and without any application of mind to the documentary evidences or information available in the portal which at best is a mere suspicion. This inadvertent mistake could have been easily deciphered at the initial stage had a proper enquiry been conducted with the bankers, before proceedings to record reasons, on the basis of information which are factually incorrect or which does not exist and issue notice u/s 148 on suspicion.
We also find from the copy of the approval granted u/s 151 of the Act, placed in paper book page no. 11 that the ld. PCIT, has simply observed as follows:
“Yes, I find this case fit for issue of notice u/s 148 of the Act, for reasons recorded by the Assessing Officer and the undisclosed/unexplained facts of purchase of goods of Rs.70,09,601/- and profit of Rs. 7,00,960/- did not declare in return of income.”
The approval itself has been granted on incorrect and contradictory recording , which speaks of goods purchase, when the allegation of the AO is receipt of funds in bank account.
Before we conclude we would like to rely on the decision of the Hon’ble Bombay High Court in the case of BIC CELLO (INDIA) PVT. LTD. vs. ACIT as reported in (2025) 475 ITR 463 (Bom) where the Hon’ble Court has opined that the Assessment Year: 2014-15 conditions precedents for reasons to believe that income chargeable to tax has escaped assessment is of correct facts by the Assessing Officer so as to have jurisdiction to issue the reassessment proceedings.
For an identical view, we also refer to the judgment of the ITAT, Chandigarh Bench in the case of Fortune Metaliks Ltd. v. DCIT in for AY 2011-12 dated 28.02.2020 where it has been held that the reassessment proceedings undertaken by the AO where invalid, since the reasons recording his satisfaction of escapement of income has been based on incorrect fact which suggest no application of mind at all by the AO.
As such, considering the entire facts of the case, we find that the addition made by the AO cannot be sustained on merits of the case for the simple reason that the transaction value alleged to have been received by the assessee does not belong to the assessee company at all and has never been received, but the same is the receipt of some other entity located in the State of Maharashtra to which the assessee is not at all connected .
We are of the considered view that legally also the reopening of this particular case on the basis of incorrect information flowing from the portal cannot be upheld and the same indicates lack of application of mind by the Assessing Officer, to the facts of Assessment Year: 2014-15 the case and we are also of the opinion that the approval granted by the higher authorities has been mechanically granted on recording of incorrect facts.
As such, the basic requirements of law for reopening of an assessment which is application of mind to the materials and information on record is absent in this case and as such, the reassessment is held to be invalid and void ab-initio.
As such, we allow the assessee’s appeal both on law as well as on facts and the additions of the AO stands deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 06.04.2026