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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2013-14) Shri Ashokbhai Anbabhai Vs. Income Tax Officer, Kachadiya, Ward-1(9), Nr. Parekh College Vardhman Bhavnagar Soc., Mahuva Bhavnagar-364290 [PAN No.ATUPK1419N] (Appellant) .. (Respondent) Appellant by : Shri Mohit Balani, AR Respondent by: Shri Ravindra, Sr. DR 06.11.2025 Date of Hearing Date of Pronouncement 17.12.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 13.06.2025 passed for A.Y. 2013-14.
The assessee has raised the following grounds of appeal:
“1. Learned CIT(A) has erred in law and on facts of the case in upholding the reassessment proceedings initiated under Section 148, which was barred by limitation and invalid as per amended provisions, instruction no. 1/2022 and judicial pronouncement.
2. Learned CIT(A) has erred in law and on facts of the case in remanding the matter back to the AO. Under the facts and circumstances of the case, the ld. CIT(A) had no power to set aside the assessment, and it ought to have annulled the assessment.
Learned CIT(A) ought to have deleted the addition amounting to Rs. 13,98,554/- on account of 8% of cash deposits.
Shri Ashokbhai Anbabhai Kachadiya vs. ITO Asst.Year –2013-14 - 2– 4. Learned CIT(A) has erred in law and on facts of the case by not properly appreciating the evidence and submissions placed on record, and in passing an order contrary to the principles of natural justice.
The Learned CIT(A) has erred in law and on facts of the case in confirming the levy of interest under Section 234A, 234B and 234C without affording proper opportunity of being heard to the appellant.
The Learned CIT(A) has further erred in upholding the initiation of penalty proceedings under Section 271(1)(c) without proper notice or recording of satisfaction as mandated under the law.
7. The Appellant reserves the right to add, delete, amend or modify the grounds of appeal
.”
3. The brief facts of the case are that the assessee is an individual and is engaged in the business of commission agency in fruits and vegetables under the name “Akshit Trading”. The assessee had not filed a return of income for A.Y. 2013-14 on the ground that his income did not exceed the basic exemption limit. The Assessing Officer received information that cash deposits of Rs. 2,75,59,500/- were by the assessee made in various bank accounts during the relevant year and accordingly the Assessing Officer issued notice under section 148 of the Act on 30-07-2022. In response, the assessee submitted that the deposits actually amounted to Rs. 1,74,81,925/- and were the receipts received during the course of commission agency business, and that only commission income had accrued to the assessee. The assessee furnished cash book, bank statements and a summary of transactions in support. However, the Assessing Officer held that the assessee failed to produce reliable documentary evidence such as party-wise ledgers or APMC certificates. The Assessing Officer rejected the books of account under section 145(3) of the Act and treated the assessee as having been engaged in trading instead of commission agency, and applied section 44AD of the Act
4. Aggrieved, the assessee filed an appeal and raised several grounds before the CIT(A) to the effect that the reassessment under section 147 of the Act was illegal and time-barred, that section 44AD of the Act was incorrectly applied as it did not apply to commission income, that the Assessing Officer had rejected the books without issuing a show cause notice and without pointing out specific defects, that various evidences filed were not properly considered, and that interest and penalty proceedings were wrongly initiated. The assessee also argued that he was denied proper opportunity of hearing and that the assessment was completed in violation of natural justice.
5. After considering the assessment order, submissions of the assessee, and material on record, the CIT(A) held that although the assessee had deposited Rs. 1,74,81,925/- and had claimed that the deposits were out of commission receipts, the reconciliation had not been properly made before the Assessing Officer. The CIT(A) accepted the contention of the assessee that the Assessing Officer had not afforded proper opportunity and had passed the assessment order without issuing a show cause notice or granting adequate hearing, thereby violating the principles of natural justice. Accordingly, the CIT(A) set aside the assessment on this issue and restored the matter to the file of the Assessing Officer with directions to give proper opportunity to the assessee and decide the matter afresh as per law, and therefore allowed the appeal for statistical purposes.
Shri Ashokbhai Anbabhai Kachadiya vs. ITO Asst.Year –2013-14 - 4– 6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. The counsel for the assessee has raised a legal contention that the case is barred by the pecuniary limit of 50 lakhs in respect of re-assessments proceedings initiated beyond a period of 3 years from the end of relevant assessment year. In the instant case, the Assessing Officer finalized assessment order by estimating income at 8% of undisclosed income of Rs. 1,74,81,925/-, which is clearly below the specified limit of 50 lakhs with respect to re-assessments initiated beyond a period of 3 years from the end of relevant assessment year. The counsel for the assessee placed reliance on the case of Ahmedabad ITAT decision in the case of Prakash Babulal Bhandari v. ITO wherein Ahmedabad held that has ruled that a reassessment notice issued beyond the three-year limitation period is invalid if the income genuinely “likely to escape assessment,” after a preliminary analysis, is below the Rs. 50 lakh threshold stipulated under Section 149(1)(b) of the Income Tax Act, 1961.
In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record.
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 Shri Ashokbhai Anbabhai Kachadiya vs. ITO Asst.Year –2013-14 - 5– 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.
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 Shri Ashokbhai Anbabhai Kachadiya vs. ITO Asst.Year –2013-14 - 6– 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.
This legal proposition has been squarely considered by the Coordinate Bench of the Ahmedabad ITAT in Prakash Babulal Bhandari v. ITO, (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.
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.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 17/12/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 17/12/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,