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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./I.T.A. Nos. 338, 339, 758 & 759/Ahd/2024 (िनधा�रण वष� / Assessment Years : 2017-18, 2018-19, 2014-15 & 2015-16) बनाम/ Mr. Arpanbhai ITO Ward-1, Int. Tax, Virambhai Desai Vs. Plot No.267/2, Sector-7A, Ahmedabad Gandhinagar, Gujarat – & 382007 Principal Commissioner of Income Tax Ahmedabad-3, [Present Jurisdiction ITO, Ward-1, Gandhinagar] �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ATXPD2656H (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri D K Parikh, AR ��यथ� क� ओर से/Respondent by : Shri Sher Singh, CIT.DR Date of Hearing 26/08/2025 Date of Pronouncement 17/10/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM:
All the appeals relate to the same assessee. While the appeals in & 759/Ahd/2024 pertaining to A.Y. 2014- , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 2 – 15 & 2015-16, are against separate orders passed by the Principal Commissioner of Income Tax, PCIT, Ahmedabad-3, (hereinafter referred to as “PCIT”), both dated 21.03.2024, under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), the other two appeals, in & 339/Ahd/2024 pertaining to A.Ys. 2017-18 & 2018-19, are against the orders passed by the Assessing Officer(AO) in accordance with the directions of the Dispute Resolution Panel(DRP) u/s.147 r.w.s. 144C of the Act.
At the outset itself, it was common ground that the issue in all the appeals arose from a common backdrop of facts. It was pointed out that on the basis of information received from the Anti-Corruption Bureau (‘ACB’) relating to disproportionate assets (DA) of one Sh. Virambhai Lilabhai Desai, Deputy Mamlatdar, Class-III, E-Dhara Centre, Kalol, the case of the assessee, who was the son of Sh. Viram Bhai, was reopened u/s.147 of the Act for all the impugned years before us. The information related to DA of Sh. Virambhai, as a consequence of which offence u/s.12, 13(1)(b) and 13(2) of the Prevention of Corruption Act, 2018 had been registered on 19.01.2021 against Sh. Viram bhai and six other family members, which included the assessee before us. It was pointed out that in A.Ys. 2014-15 & 2015-16 orders passed u/s.147 of the Act making addition to the income of the assessee were subjected to revision by the Ld. PCIT u/s.263 of the Act finding errors therein causing prejudice to the interest of the Revenue. For the other two years i.e. A.Y 2017-18 , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 3 – & 2018-19, it was pointed out, the orders passed u/s 147 r.w.s 144C of the Act, basis the information shared by ACB, was in challenge before us.
3. It was contended that since in all the assessment years before us the orders were passed u/s 147 of the Act in the backdrop of common & identical facts, the legal arguments to be raised were also the same in all the cases and, therefore, all the four cases were requested to be taken up together for hearing. Ld. DR fairly agreed with the same.
Considering the same, all the four appeals were taken up together for hearing.
The primary contention of the Ld.Counsel for the assessee before us was that the assessment orders passed u/s.147 of the Act in all the years before us were invalid, passed without valid jurisdiction and therefore, for A.Ys. 2017-18 and 2018-19, the orders passed u/s 147 r.w.s 144C of the Act, which were in challenge before us, needed to be set aside and all the additions made by the AO needed to be deleted. In A.Y. 2014-15 and 2015- 16, it was contended that since the order passed u/s 147 of the Act which was sought to be revised by the Ld. PCIT was void therefore, the Ld.PCIT could not have exercised any revisionary jurisdiction u/s 263 of the Act on such invalid order which had no existence in the eyes of law. That therefore the orders passed , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 4 – u/s.263 of the Act for the said two years also needed to be set aside. Arguments were made before us to the above effect referring to the facts of the case and the law on the issue as interpreted by judicial authorities in various decisions.
The primary challenge, therefore, before us being in relation to valid assumption of jurisdiction by the AO to frame assessment u/s.147 of the Act, we shall first deal with the same in all the years before us.
The challenge to the valid assumption of jurisdiction has been raised on several grounds. Beginning with the jurisdiction being invalid on account of there being no reasonable belief of the AO of escapement of income of the assessee and the belief of escapement of income being not that of the AO but borrowed belief, it was pointed out that the law in this regard is settled. Courts, it was pointed out, have time and reiterated that for a valid assumption of jurisdiction to reopen the case of assesses u/s. 147 of the Act, the AO has to form a reasonable belief of escapement of income on the basis of information in his possession and the belief has to be his own and not borrowed. That he has to apply his mind to the information which comes to his knowledge, corroborating the same by making independent inquiries, for arriving at his belief of escapement of income. Reference was made to the decision of the Jurisdictional High court in the case of , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 5 – Kantibhai Dharamsinhbhai Narola vs ACIT SCA No. 19549 & others of 2018 dated 06-01-2021 para 32 as under;
“32. The law as regards the reopening of the assessment under Section 147 of the Act 1961 is well-settled. (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied-a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. (vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically.
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(viii) If the original assessment is processed under Section 143(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show C/SCA/19549/2018 JUDGMENT that there was any failure to disclose fully or truly all the material facts necessary for the assessment. (ix) In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two conditions are required to be satisfied; (i) The Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; (ii) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment.”
Thereafter, our attention was drawn to the facts of the case for A.Ys. 2014-15 and 2015-16 in & 759/Ahd/2024. Referring to the reasons recorded by the AO for reopening the case of the assessee for both the years it was contended that the reasons were vague, did not specify the income found to have escaped assessment and clearly was borrowed belief of the AO. Copy of the reasons were placed before us at paper book page nos. 6 to 10 for A.Ys. 2014-15 and page nos. 7 to 11 for A.Y. 2015-16.
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It was common ground that the reasons recorded in both the years was identically worded. Therefore, for the sake of convenience, we are reproducing the reasons recorded in A.Y. 2014-15 as under:
“Reasons for reopening of the assessment in the case of Arpan Virambhai Desai, for A.Υ. 2014-15 1. Assesse is an individual. The assessee has filed his return of income for AY 2014-15 on 31/10/2014 declaring total income of Rs. 3,40,000/- 2. As information received related to a criminal offence (Disproportionate Assets) case registered against Vikrambhai Lilabhai Desai and 6 others, was shared by the State Anti-corruption Bureau with the office of Pr.CCIT, Gujarat vide letter dated 19.02.2021 3. On perusal of the letter shared by the state Anti-corruption Bureau (ACB) it is gathered that ACB has registered an offence vide GNR- ACB-PS-Cr No. 02/2021 under Section-12, 13(1)(b) and 13(2) of Prevention of Corruption Act-2018 on 19.01.2021 against Virambhai Lilabhai Desai, Deputy Mamlatdar, Class-III, E-Dhara Centre, Kalol and six other family members. The assessee Arpan Virambhal Desai is one of the family members of Shin Virambhai Lillabhai Desai 4. A perusal and analysis of the information collected/maternal available shows that income has escaped assessment and there is no need for further enquiries u/s 133(6) to establish the same 5. On the perusal of the information available to this office, the following transaction has been made by the Arpan Virambhai Desai for A. Y.2014-15. Sr. Entity DA Amount Net Cash Cash paid Total Cash Final No. Deposit for Property Transactions Reopening Purchase Amount 1. AVD 3,02,86,472 2,00,700 1,97,72,487 1,95,71,787/- 3,02,86,472/- 6. On the basis of the facts of the case records available with this office and from the above Information, it is prima facie concluded that the assessee had purchased immovable property/made cash transaction of Rs. 3,02,86,472/-.It is found that the assessee has undisclosed income from the disproportionate assets. The assessee , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 8 – has filed return of income, however, the assessee has failed to explain the source of undisclosed income for the year that has escaped assessment. Though the assessee has made above transaction as mentioned above. As return of income has filed for the AY 2014-15 for the year under consideration, disproportionate assets is his undisclosed income for the year that has escaped assessment, Accordingly, as no assessment was made in this case, the only requirement to initiate proceedings u/s 147 of the Act is to bring the undisclosed income of Rs.3,02,88,472/-.
7. No information of assets located outside India is available.
8. In this case return of income was filed for the year under consideration accordingly in this case, no assessment was made and the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above (refer paragraphs 5 and 6). It is pertinent to mention here that in this case the assessee has chosen to file return of income, for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed in paragraph 6 above and the assessee was assessable under the Act In view of the above, the provisions of clause (a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 is to be obtain separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.
In view of the above, you may submit your response with supporting documents (if any) on the above mentioned issues to undersigned electronically in E-proceedings' facility through your account in e-Filling website(www.incometaxindiaefiling gov.in) at your convenience on or before 25/05/2021 4. In course of assessment proceedings, if required specific questionnaire(s) of requisition(s) for information/document may be issued subsequently.
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5. A brief note on E-Proceeding is enclosed for your kind reference. In case you require any assistance in filing your response, you may contract toll free Call Centre number 18001034215.”
On going through the contents of the reason recorded by the AO as above, we are in agreement with the Ld.Counsel for the assessee that the reasons are vague, do not bring out the income which has escaped assessment and the belief of escapement of income clearly is not of the AO but borrowed belief of the ACB report to which no mind at all has been applied by the AO.
11. As per the reasons recorded the undisclosed income of the assessee was his disproportionate assets (DA) as per information received from the ACB and related to purchase of immovable property/ transactions in cash amounting to Rs.3,02,86,472/-.
12. The information of Rs.3,02,86,472/- being disproportionate asset of the assessee shared by the ACB is listed in the Table, mentioning net cash deposit of Rs.2,00,700/-, cash paid for the property purchased Rs.1,97,72,487/- and the total DA amount Rs.3,02,86,472/-. This is the entire information regarding the disproportionate assets of the assessee which the reason reveals and we have noted that the AO mentions that on perusal and analysis of the information collected / materials available, there was no need for making any further enquiry u/s.133(6) of the Act. The AO notes that the assessee had failed to disclose source of the , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 10 – said income and the disproportionate asset therefore was his undisclosed income for the impugned year.
13. Clearly the reasons do not specify the income which has escaped assessment. It only vaguely refers to disproportionate assets and mentions property purchased/ transactions in cash without specifying/identifying the DA giving its breakup, or for that matter identifying the property purchased in cash /cash transactions undertaken by the assessee. There is no detail or break up of Rs.3.02 Crore of the alleged disproportionate assets of the assessee, as to which specific asset it relates to. No particulars are specified in the reason. In relation to the property purchased by the assessee in cash for Rs.1.95 Crores, there is no identification /description of the same. The information is not clear as to whether the DA amount of Rs.3.02 Crs includes the property purchased in cash of Rs.1.95 Crs and if it does what other assets make up the DA of Rs.3.02 crs.
Undoubtedly the reasons do not point out the income which has escaped assessment. In fact, it is clearly evident from the reasons that the AO’s belief of income escaping assessment of the assessee is merely a borrowed belief from the ACB report which mentioned DA of the assessee being to the tune of Rs.3.02 Crores. The AO has not cared to apply his mind at all to the information and find out what exactly what were these DA assets of the assessee. The AO does not appear to be aware of the nature of , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 11 – assets in relation to which the assessee has been found to be the owner of disproportionate assets. Even with respect to the immovable assets in which the assessee has allegedly invested in cash there is no detail/identification of the said immovable assets.
Ld.DR was unable to controvert the aforestated facts.
Therefore, we agree with the Ld.Counsel for the assessee that the belief of the AO, of escapement of income of the assesse, was vague and not his own but borrowed belief.
With regards to the law on the issue, as pointed out by the Ld.Counsel for the assessee, there is no dispute that for a valid assumption of jurisdiction to frame assessment u/s. 147 of the Act, the AO should have a reasonable belief of income of the assessee escaping assessment and the belief should be his own and not borrowed belief. As pointed out by the Ld.Counsel for the assessee the jurisdictional High Court, in the case of Dharamsinhbhai Narola (supra) has categorically stated that the law regarding reopening is well settled, with the basic requirement for valid assumption of jurisdiction being application of mind by the AO to information in his possession to conclude escapement of income of assessee, which belief is to be recorded in his reasons for reopening.
18. Applying the law to the facts as above, wherein the AO has failed both, to identify the income of the assessee which has , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 12 – escaped assessment and to apply his mind to the information in his possession while forming belief of escapement of income, we completely agree with the Ld.Counsel for the assessee that the jurisdiction assumed by the AO to reopen the case of the assessee for A.Ys. 2014-15 and 2015-16 was invalid. The orders passed therefore in both the years are not sustainable in law as being passed without valid jurisdiction and are accordingly quashed.
19. Before us, several other contentions were also raised challenging the assumption of jurisdiction by the AO u/s.147 of the Act, but, since we have held the jurisdiction assumed by the AO to be invalid for the above reason, we are not dealing with the other contentions of the Ld. Counsel for the assessee before us.
20. Having held the assessment order passed in A.Y. 2014-15 and 2015-16 u/s.147 of the Act to be invalid and not sustainable in law, we take up the next contention of the Ld. Counsel for the assessee that no power of revision could have been exercised by the Ld. PCIT on an invalid order. The rationale being that a revisional authority cannot cure fundamental jurisdictional defects through revision. We are aware of this proposition of law being reiterated in a series of decisions of the coordinate Benches of the ITAT as under: i. Mumbai ITAT – Westlife Development Ltd. vs. Pr. CIT – /Mum/2016, wherein it was held as under:
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“8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary proceedings' can be set up in the 'collateral proceedings' and if yes, then of what nature? 8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 14 – also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs. ……………… ……………… 10. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order: Having decided the aforesaid two issues, the next issue that is to be decided by us is about the validity of order passed u/s 263 by the Ld. CIT seeking to revise the assessment order which was nullity in the eyes of law. 10.1. We have discussed in detail in earlier part of our order that an invalid order cannot give birth to legally valid proceedings. It is further noticed by us that some of the judgments relied upon by the Ld. Counsel have already addressed this issue. This issue has also been decided by the co-ordinate bench (Delhi Bench of Tribunal) in the case of Krishna Kumar Saraf vs CIT (supra). The relevant part of the order is reproduced below: "17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee.
However, u/s 263 the Id. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the some was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Further, the decision of Hon'ble Madras High Court in the case of CIT Vs. Gitsons Engineering Co. 370 ITR 87 (Mad) clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the some was legal, which went to the root of the matter.
19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the same.
In view of above discussion, ground no.3 is allowed and revision order passed u/s 263 is quashed." 10.2. It is further noticed by us that similar view has been taken by Chandigarh Bench of the Tribunal in the case of Steel Strips Ltd (supra).
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11. Thus, after taking into account all the facts and circumstances of the case, we find that in this case, the original assessment order passed u/s 143(3) dt 24-10-2013 was null & void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s 263 by the Ld.CIT is also nullity in the eyes of law and therefore the same is hereby quashed.” ii. Pune ITAT – Pioneer Distilleries Limited vs. Pr. CIT, wherein it was held as under:
“When the assessment order is void and did not exist in law, the question which arises is whether the Commissioner can exercise his revisionary jurisdiction under section 263 of the Act against the same. The answer to the same is No. The Commissioner can exercise the jurisdiction under section 263 of the Act where the assessment order is live. In case the order is void, then the same cannot be held to be erroneous and prejudicial to the interest of revenue.” iii. Krishna Kumar Saraf vs. CIT in dated 24.09.2015, wherein it was held as under:
“18. However, u/s 263 the ld. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice u/s 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Further, the decision of Hon’ble Madras High Court in the case of CIT Vs. Gitsons Engineering Co. 370 ITR 87 (Mad) clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter.
While exercising powers u/s 263 ld. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If ld. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the statute.”
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Ld. DR was unable to point out any decision of higher judicial authorities holding to the contrary.
In view of the same therefore, since the assessment orders passed in A.Y 2014-15 & 2015-16 u/s 147 of the Act have been found invalidly passed, the said orders were not amenable to revision and the orders passed by the Ld.PCIT therefore u/s 263 of the Act for the said years are not sustainable in law.
The orders passed by the Ld.PCIT u/s 263 of the Act for A.Y 2014-15 & 2015-16 are accordingly set aside .
Now taking up the challenge to the validity of the assessment framed u/s.147 of the Act for A.Ys. 2017-18 and 2018-19. The facts admittedly are identical in both the years. We shall be adjudicating the issue dealing with facts relating to A.Y 2017-18.
The jurisdiction was assumed u/s.147 of the Act in accordance with the provisions of law prescribed u/s.148A of the Act, which came into effect by Finance Act 2021. The records of the case reveal that initially notice u/s.148 of the Act was issued to the assessee after recording reasons as per the old provisions of law vide notice dated 17.05.2021 and the reasons recorded for the same are as under:
“Reasons for reopening of the assessment in the case of Arpan Virambhai Desai, for A.Y. 2017-18.
, 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 17 – Assessee is an individual. The assessee has filed his return of income for A.Y. 2017-18 on 26/03/2018 declaring total income of Rs. 10,95,690/-. 1.
1. As information received related to a criminal offence (Disproportionate Assets) case registered against Vikrambhal Lilabhai Desal and 6 others, was shared by the State Anti- corruption Bureau with the office of Pr.CCIT, Gujarat vide letter dated 19.02.2021. 2. 1.On perusal of the letter shared by the state Anti-corruption Bureau (ACB), it is gathered that ACB has registered an offence vide GNR-ACB-PS-Cr No.02/2021 under Section-12, 13(1)(b) and 13(2) of Prevention of Corruption Act-2018 on 19.01.2021 against Virambhai Lilabhai Desal, Deputy Mamlatdar, Class-III, EDhara Centre, Kalol and six other family members The assessee Arpan Virambhal Desai is one of the family members of Shri Viramphal Lilabhai Desai 3. A perusal and analysis of the information collected /material available shows that income has escaped assessment and there is no need for further enquiries u/s. 133(6) to establish the same.
1. On the perusal of the information available to this office, the following transaction has been made by the Arpan Virambhai Desai for A.Y. 2017-18.
Sr. Entity DA Amount Net Cash Cash paid Total Cash Final No. Deposit for Property Transactions Reopening Purchase Amount 1. AVD 71,33,598/- 5,38,000/- - 5,38,000/- 5,38,000/-
On the basis of the facts of the case records available with this office and from the above information, it is prima facie concluded that the assessee had purchased immovable property/made cash transaction of Rs. 5,38,000/-. It is found that the assessee has undisclosed income from the disproportionate assets. The assessee has filed return of income, however, the assessee has failed to explain the source of undisclosed income for the year that has escaped assessment. Though the assessee has made above transaction as mentioned above. As return of income has filed for the A.Y. 2017-18 for the year under consideration, disproportionate assets is his undisclosed income for the year that has escaped assessment. Accordingly, as no assessment was made , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 18 – in this case, the only requirement to initiate proceedings u/s 147 of the Act is to bring the undisclosed income of Rs. 5,38,000/-. 2.
7. No information of assets located outside India is available. 3.
8. In this case return of income was filed for the year under consideration accordingly. In this case, no assessment was made and the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above (refer paragraphs 5 and 6). It is pertinent to mention here that in this case the assessee has chosen to file retum of income, for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed in paragraph 6 above and the assessee was assessable under the Act. In view of the above, the provisions of clause (a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 is to be obtain separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act."
Consequent to the order of the Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal, dated 04.05.2022 and in compliance to the directions of the Hon’ble Apex Court, proceedings under the new provisions of law as prescribed in Section 148A of the Act were initiated by issuing notice u/s.148A(b) of the Act to the assessee along with all information in the possession of the AO regarding escapement of income of the assessee. The information, which was supplied to the assessee in the present case as Annexure ‘A’ to the notice issued to the assessee u/s.148A(b) of the Act was placed before us at paper book pages nos. 326 to 334 as under:
, 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 19 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 20 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 21 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 22 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 23 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 24 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 25 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 26 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 27 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 28 –
As is evident from the above, the information related to that shared by the ACB with the Principal Chief Commissioner of Income Tax regarding the case registered against Virambhai Lilabhai Desai and six others of disproportionate assets. The assessee raised objections against the initiation of re-assessment proceedings all of which were dismissed by the AO in his order issued u/s.148A(d) of the Act stating as under:
“10. The objections & issues raised by assessee in its submission have been duly considered and the same are not found acceptable and are discussed as under:-
The issue raised by the assessee is considered carefully and not acceptable as the notice u/s. 148A(b) of the IT Act was issued on 26.05.2022 well within the time limit specified by the Hon'ble Supreme Court vide order dated 04.05.2022 and same is also accepted by the assessee. Further the assessee has objected that no information & material was attached with the notice. In this respect objection of the assessee is not acceptable as this office has supplied information to the assessee in the form of reason recorded even before the Hon'ble Supreme Court order dated 04.05.2022. Moreover, as per Hon'ble Supreme Court direction this office has issued u/s. 148A(b) of the IT Act on 26.05.2022 and served upon the assessee through registered e-mail of the assessee on ITBA Portal alongwith the information & material available with this office in the case of assessee for A.Y.2017-18. The same was provided to the assessee vide notice dated 26.05.2022.
The assessee has raised the objection & strongly object Calculation of D.A. (Disproportionate Assets) by the ACB against the assessee and 6 other family members for the period 01.04.2006 to 31.03.2020.
The objection raised by the assessee regarding the Calculation of D.A. (Disproportionate Assets) by the ACB is considered carefully and found not acceptable on the ground that the calculation of Disproportionate Assets by the ACB (Anti Corruption Bureau) against the assessee and other family , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 29 – members was done on the pattern followed by the CBI, which has been mentioned In the FIR. As per the Investigation report, DA(Disproportionate Assets) comes to Rs.5,38,000/- for the A.Y.2017-18. It is pertinent to mention here that while calculating the DA amounts, the claim of all legitimate income/expenditures/investments have been taken into consideration. The DA(Disproportionate Assets) amounts finally calculated therefore directly represent unaccounted income in the hands of assessee in the respective F.Ys.
Legal Contention: The Hon’ble Gujarat High Court in SCA No. 3250 of 2016 in the case of Peass Industrial Engineers (P) Ltd. vs. DCIT has held that when the Assessing Officer is armed with the tangible material in the form of specific information received by the Investigation Wing, Ahmedabad it is thoroughly justified in issuing a notice for reassessment. It is revealed from the said additional material available on hand and a reasonable belief is formed by the Assessing Officer that income of the assessee has escaped assessment and, therefore, once the reasonable belief is formulated on the basis of cogent tangible material, the AO is not expected to conclude at this stage the issue finally or to ascertain the fact by evidence or conclusion. Function of the Assessing Officer at this stage is to administer the statute. What is required at this stage is a reason to believe and not establish fact of escapement of income.
Assessee has further claimed that notice u/s 148A(b) of the Act is beyond Jurisdiction, Lack legality and has got time-barred is not acceptable on the ground that As per the directions of the Hon'ble Supreme Court in the Civil Appeal No.3005/2022 in the case of Union of India and others vs. Ashish Agrawal and others, above mentioned notice issued under section 148 of the Act would be treated as notice under section 148A(b) of the Act. The impugned notice u/s 148 had been issued as per the unamended section 148 of the I.T. Act and therefore, contained the words 'reason to believe'. The conditions mentioned by the assessee are as per the amendments brought in the section 148 vide the Finance Act, 2021.Such notice has been held valid by the Hon'ble Supreme Court in the case of Union of India vs Ashish Agarwal. The relevant extract of the Hon'ble Court's observations is produced below:
"There appears to be genuine nonapplication of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some lee , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 30 – way must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law.
As the matter has already been adjudged by the Hon’ble Supreme Court and the impugned notice u/s 148 has been held valid, hence the ground raised by the assessee regarding issue of notice u/s 148A(b) of the Act is not acceptable and hereby disposed of.
The submission filed by the assessee has been duly considered and the same is not found acceptable on the ground that assessee has merely submitted written submission without any supporting documentary evidences regarding the DA(Disproportionate Assets) of Rs.5,38,000/-. The assessee has not furnished single bill voucher or any other evidences regarding such transactions and no concrete evidence with explanation to justify its claim regarding the transactions of Rs.5,38,000/- during F.Y.2016-17 relevant to A.Y.2017-18. On verification of the ITR filed by the assessee, it is noticed that the assessee has not mentioned such transactions in the ITR filed for A.Y.2017-18. The assessee has not produced a single evidence to prove the genuineness and creditworthiness of transactions. Moreover, by providing the documents/information to the assessee upon which the department has relied, the onus was casted on the assessee to justify the source of DA(Disproportionate Assets) of Rs.5,38,000/- with the proper explanation and supporting documentary evidences. However, the assessee failed to do so. Having considered the submission of the assessee, it is found that the explanation/documentary evidences submitted by the assessee do not explain the fact that income arising from the impugned transaction/transaction itself, has been duly disclosed and relevant income arising there from has been offered for taxation for the relevant assessment year.
, 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 31 –
Therefore, in the light of the above reasons, information and material available on record, I am of the considered view that the assessee has failed to explain the above mentioned transactions and Income earned/derived there from, during the year under consideration and the same remained unexplained and unsubstantiated as per the relevant provisions of the Act. Hence, on the basis of material available on record which established that the income chargeable to tax in respect of above mentioned unexplained transactions of Rs.5,38,000/- being cash of transaction/purchase of immovable property has escaped assessment for A.Y.2017-18 and therefore, this is a fit case for issuance of notice u/s.148 of the Act for A.Y.2017-18.”
A perusal of the above documents on the basis of which jurisdiction was assumed in A.Ys. 2017-18 & 2018-19 to reopen the case of the assessee u/s.147 of the Act, reveals that the escapement of income of the assessee was noted to be in relation to disproportionate assets of the assessee of Rs.5,38,000/-.
We have gone through the entire information shared by the ACB on the basis of which this belief of escapement of income to the extent of Rs.5,38,000/- has been found by the AO, but, we do not find any specific information pertaining to the said amount for the impugned year in the case of the assessee. The assessment order reveals that the calculation of disproportionate asset had been done on the basis of pattern mandated by the Hon’ble Gujarat High Court vide Criminal Miscellaneous Application No.6215/2020 and the entire break up is reproduced at page nos. 8 to 10 of the order as under:
, 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 32 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 33 – , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 34 –
It is basis this break up that the AO has formed belief of escapement of income of the assessee pertaining to disproportionate assets to the extent of Rs.5.38 Lakhs. On a perusal of the above break up, we find that no assets as such has , 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 35 – been identified amounting to Rs.5.38 Lakhs in the information shared with the assessee. Further, the case of the Revenue is that disproportionate assets attributable to the assessee for the impugned year have been calculated on the basis of a pattern or formula prescribed by the Hon’ble Gujarat High Court, but what the pattern/ formula is, is not pointed out. There is absolutely no specification of the asset/s amounting to Rs.5.38 Lakhs, which was attributable as disproportionate in relation to income of the assessee for the impugned year. Clearly the reasons forming belief of escapement of income of the assessee as noted by the AO do not specify the income which has escaped income. Further, it is evident from the order passed by the AO u/s 148A(d) of the Act, basis which he has assumed jurisdiction to reopen the case of the assesee, that he has merely borrowed belief of the ACB without applying any mind of his own to the information passed by the ACB to him. The AO has not cared to find out what the nature of the Disproportionate asset(DA) was which was attributed to the assessee by the ACB for the impugned year.
The facts pertaining to assumption of jurisdiction by the AO in A.Y 2017-18 & 2018-19 are identical to that in A.Y 2014-15 and 2015-16 dealt with us above. And therefore following our reasoning for those years, we hold, the AO to have reopened the case of the assessee for A.Y 2017-18 & 2018-19 without valid jurisdiction. The assessment orders passed as a consequence u/s.147 of the Act are therefore set aside as invalid.
, 339, 758 & 759/Ahd/2024 [Mr. Arpanbhai Virambhai Desai] - 36 –
The assessee, therefore, succeeds on the legal ground raised in all the four appeals. The orders passed u/s.263 of the Act for A.Y. 2014-15 and 2015-16 and that passed u/s.147 of the Act for A.Y. 2016-17 and 2018-19 are quashed as invalid. Since, we have quashed the assessment orders and the orders passed u/s.263 of the Act in all the four years allowing the legal ground raised by the assessee, the grounds raised on the merits pertaining to the additions made or errors found by the Ld.PCIT merit no consideration, being a mere academic exercise.
In the result, all four appeals filed by the assessee are allowed in above terms.
This Order pronounced on 17/10/2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 17/10/2025 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,