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Facts
The assessee, proprietor of M/s CM Mills, filed a return admitting income. The revenue had information that the assessee availed bogus unsecured loans. The Assessing Officer reopened the assessment on the basis of this information and made an addition under Section 68 for unexplained cash credit.
Held
The Tribunal held that the reassessment proceedings initiated beyond four years were invalid as there was no failure on the part of the assessee to disclose material facts. The addition made consequent to the invalid reopening was also set aside.
Key Issues
Whether reassessment proceedings initiated beyond four years without any failure on the part of the assessee to disclose material facts are valid?
Sections Cited
148, 143(3), 147, 68
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI JAGADISH
आदेश / O R D E R
PER MANU KUMAR GIRI, JM:
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (in short ‘the CIT(A), NFAC / Delhi dated 22.07.2025 for the Assessment Year (in short ‘AY’) 2013-14.
Brief facts of this case are as under the assessee, proprietor of M/s CM Mills, filed the return of income for the AY 2013-14 on 29.09.2013 admitting total income of Rs.2,18,950/-. The revenue is in possession of information that the assessee has availed bogus unsecured loans to the tune of -2 - ITA. No:2170/Chny/2025 Rs.25,000,00/- and accordingly it was seen in the return of income that the assessee had shown unsecured loan to the tune of Rs.2,15,01,903/- in which the loan of Rs.25,000,00/- received from Sri Mukesh Banka forms part of it. The tangible information and due verification of the return of income filed by the assessee for the AY 2013-14 led to the Assessing Officer to form opinion that the amount of Rs.25,000,00/- has escaped assessment. Therefore, on the basis of above information, case of the Assessee was reopened for assessment and notice under section 148 of the Act was issued on 27.03.2019 after recording reasons and obtaining the necessary approval of the competent authority. The assessee filed return of income declaring total income of Rs.2,18,950/- on 12.12.2019 in response to the notice under section 148 of the Act. The AO completed the assessment proceeding under section 143(3) read with section 147 of the Act by making addition of Rs.25,000,000/- as unexplained cash credit under section 68 of the Income Tax Act 1961. The ld. CIT(A) dismissed the appeal of the assessee on legal issue as well as on merits of addition.
The assessee has raised, inter alia, the following grounds: That the learned CIT(A) has erred in upholding the validity of reopening u/s 147 of the Act. That the CIT(A) failed to appreciate that the reassessment proceedings initiated beyond four years from the end of the relevant assessment year were invalid in law, there being no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. That the addition of Rs.25,00,000/- as unexplained cash credits u/s 68 is unjustified, arbitrary and contrary to the facts and law.
-3 - ITA. No:2170/Chny/2025
Before us, the ld. counsel for the assessee contended that there was no failure on his part to disclose fully and truly all material facts necessary for assessment. The loan was duly reflected in the books of accounts, confirmations were filed, and transactions were routed through banking channels. The reopening was initiated merely on borrowed satisfaction from another case (Banka Group), without any direct nexus to the assessee. The reasons recorded do not allege failure on the part of the assessee, which is a sine qua non for reopening beyond four years. Reliance was placed on several judicial precedents including CIT v. Kelvinator of India Ltd. [320 ITR 561 (SC)], Foramer France v. CIT [264 ITR 566 (SC)] and jurisdictional High Court decisions reported in 430 ITR 515 (Mad), 455 ITR 292 (Mad) and 476 ITR 193 Mad) holding that reassessment beyond four years is bad in law when there is no failure by the assessee to disclose material facts.
We have carefully considered the rival submissions and perused the records. It is undisputed that the original assessment was completed u/s 143(3) on 22.03.2016. The notice u/s 148 was issued on 27.03.2019, i.e., beyond four years. The recorded reasons do not mention any failure by the assessee to disclose fully and truly all material facts necessary for assessment. In such circumstances, the proviso to section 147 squarely applies. The Hon’ble Supreme Court in CIT v. Kelvinator of India Ltd. (supra) has held that reopening beyond four years is not permissible unless there is failure on the part of the assessee to disclose fully and truly all material facts. The so-called information derived from the search in Banka Group is subsequent information and cannot override the statutory condition precedent. The assessee had disclosed the loan in the balance sheet, and the Assessing Officer had the opportunity to examine the same in the original assessment. Therefore, it cannot be said that there was any failure on the part of the assessee. Accordingly, the reassessment proceedings initiated u/s 147 are held to be -4 - ITA. No:2170/Chny/2025 invalid and void ab initio. Since the reopening itself is held invalid, the consequential addition of Rs.25,00,000/- under section 68 cannot survive.
In view of the above discussion, the reassessment proceedings initiated u/s 147 are quashed. Accordingly, the appeal filed by the assessee is allowed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in open Court on the 10th day of November 2025, in Chennai.