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Facts
The assessee's appeals are against orders of the CIT(A) confirming additions made by the AO. The AO reopened the assessment based on information from an investigation wing regarding accommodation entries and bogus purchases. The assessee had purchased from two parties, which the AO deemed bogus.
Held
The Tribunal held that the reopening of the assessment was bad in law as it was done after the expiry of four years from the end of the relevant assessment year without satisfying the conditions of the first proviso to Section 147 of the Income Tax Act. The assessee had disclosed material facts, and the AO should have sought further information during the original assessment.
Key Issues
Whether the reopening of the assessment beyond four years is valid when the assessee has disclosed material facts and the AO had prior information? Whether the purchases made by the assessee were indeed bogus?
Sections Cited
147, 143(3), 148, 250, 139(1), 153C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Shri Makarand V. Mahadeokar
आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The captioned appeals have been preferred by the assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals)-3, Ahmedabad and O/o The CIT (Appeal) ADDL/JCIT (A)-3, Mumbai [hereinafter referred to as ‘CIT(A)’] dated 13/08/2019 & 07/02/2024 respectively passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Years (AYs) 2011-2012 & 2013-14. First, we take up the assessee’s appeal in for AY 2011-12.
& 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14 2. The assessee, in this appeal has taken following grounds of appeal:
“1. The Ld.CIT(A) erred in law and on facts in upholding validity of notice issued u/s.148 of the IT Act, 1961 without appreciating the facts and law of the case properly.
The Ld.CIT(A) erred in law and on facts in confirming the addition of Rs.13,88,500/- made by assessing officer by treating the purchases made by the assessee as bogus, without appreciating the facts and law of the case properly.
3. The appellant craves liberty to add, amend or alter any or all of the grounds of appeal before or at the time of hearing of an appeal.”
A perusal of the above grounds of appeal would reveal that the assessee apart from contesting the validity of addition made by the lower authorities on merits has also raised the legal issue of validity of the reopening of the assessment.
The Ld.Counsel for the assessee submitted that, in this case, the assessment was re-opened by the AO on the basis of the information received from Investigation Wing, Mumbai, wherein, it was mentioned that a search action was carried out in the case of one Shri Rajendra Jain and during the course of search action, it was found that said Shri Rajendra Jain was indulged in giving accommodation entry to various clients which included bogus purchases, etc. It was also found from the documents/information collected during search action that the assessee was also beneficiary of some transactions, detail of which is given as under:
& 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
S.No. Name of the Name of the Amount (Rs.) Party proprietor/Director/partner 1. M/s.AVI Shri Rajendra Jain 12702600 Exports, Mumbai 2. M/s.Sun Diam, Shri Rajendra Jain 15067500 Surat Total 27770100 4.1. From the said information, the Assessing Officer (AO) noted that the assessee had obtained bogus purchase-bills to avoid his correct tax liability and, therefore, he formed the belief that the income of the assessee for the assessment year under consideration had escaped assessment. He further noted that though, the earlier assessment in this case was made u/s.143(3) of the Act and four years had passed from the end of the relevant assessment year, however, in this case, the assessee had not disclosed fully and truly all material facts necessary for the assessment of his income. He accordingly, reopened the assessment and in the assessment proceedings, the AO treated the aforesaid purchases from two parties as bogus and estimated the escapement of income to the extent of 12.50% of the said alleged bogus purchases and made impugned addition of Rs.34,17,260/-.
The Ld.CIT(A) though, confirmed the addition, however, restricted the same to 5% to the aforesaid bogus purchases. However, the assessee still aggrieved, has come in further appeal before us.
& 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
We have heard the rival contentions of the parties and perused the material available on record.
At the outset, the Ld.Counsel for the assessee has invited our attention to paragraph No.2 of the assessment order to show that the AO had received the alleged information vide letter of the DGIT (Investigation) dated 14/03/2014, however, the original assessment u/s.143(3) of the Act in the case of the assessee was finalized on 21/03/2014. He, in this respect, has submitted that when the alleged letter was issued, the assessment proceedings of the assessee were already in progress and, therefore, the AO should have considered and utilized the said information during the original assessment proceedings itself, and that the subsequent re-opening of the assessment on the basis of alleged information which was available to the AO during the original assessment proceedings, was bad in law. At this stage, a specific query was raised by the Bench as to whether the said information/letter dated 14/03/2014 was received by the AO prior to the finalization of the original assessment in the case of the assessee or thereafter? However, even in the assessment records available with the Department, the said information is not available. Therefore, at this stage, it is difficult to point as to whether the AO had received information during the pendency of the original assessment proceedings or thereafter. Therefore, any adjudication regarding the & 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
5 validity of reopening of assessment on this issue, at his stage, is not possible for want of exact and proper factual information. However, the fact on the record is that the alleged letter was sent by the office of the DGIT (Inv.), Mumbai on 14/03/2014 or a few days thereafter which might have been received the AO of the assessee in the month/months of March – April-2014. However, the AO of the assessee kept mum on the said information for four years. After passing of four years, the assessment was re-opened in the case of the assessee on 28/03/2018. Therefore, the aforesaid re-opening of the assessment is hit by the first proviso to section 147 of the Act, as applicable for the assessment year under consideration. As per the said proviso, if the original assessment has been completed u/s.143(3) of the Act, the assessment cannot be re- opened u/s.147 of the Act after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment.
Now, the question before us is as to whether the assessee, in this case, has failed to fully and truly disclose all material facts necessary for the assessment. The AO has enumerated the following facts, which according to him, the assessee was supposed to disclose, but had not disclosed during the original assessment proceedings:
& 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
6 (a) His true nature of business with the M/s.Avi Exports and M/s.Sun Diam. (b) Copy of any delivery Challan/receipts/proof of transportation. (c) Name of the purchasers against the supplies made by M/s.Avi Exports and M/s.Sun Diam. (d) Confirmation of the purchasers of such stock and evidences to establish the genuineness of transaction.
It is pertinent to mention here that the AO, himself, has noted in the impugned assessment order that the assessee had filed the copy of Annual Financial Report and Audited P&L account and balance-sheet along with return of income, wherein various information/material were disclosed. At this stage, we had specifically put a query to the Ld.DR as to whether as per the legal requirement, the assessee was supposed to file along with return of income any other information/documents apart from that have been filed by the assessee along with return of income. He however, could not point out any such specific requirement, but, insisted that the aforesaid information as narrated in above points (a) to (d), was necessary for the just and correct assessment of income of the assessee. However, the Ld.Counsel for the assessee has submitted that the assessee had duly disclosed all the material information and particulars of income, which as per law, the assessee was required to disclose. The assessee as per the requirement of law, was not supposed to disclose in particular about any specific & 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
7 fact about the nature of his business transactions relating to different purchases made by the assessee from various concerns including that from the two parties as mentioned by the AO in point (a) above. He inviting our attention to the assessment order has submitted that during the assessment year, the assessee had made purchases from 11 different parties which were duly disclosed in the audited accounts of the assessee. The assessee having disclosed all the material facts necessary for the assessment, if the AO wanted to enquire further particulars regarding to any of the purchases, he would have called for such particular information from the assessee. However, the plea that the assessee was supposed to disclose further or more particulars about all the purchases without any query being raised by the AO in relation to any of the purchases, in our view, is not tenable. The Ld.Counsel for the assessee has submitted that the assessee has carried out numerous transactions during the year, which fact has also been noted by the AO in the assessment order, and, hence, it was not possible otherwise to furnish any further details of each of the transaction carried out by the assessee during the year unless such or any information was called for by the AO in relation to any or all the purchase transactions. The Ld.Counsel for the assessee has further invited our attention to the copy of the original assessment order passed u/s.143(3) of the Act, a perusal of which reveals that the AO has already examined the issue of low Gross Profit (GP) rate and made an addition of Rs.1,00,000/- into the income of the assessee and thus, the issue of alleged bogus purchases, was under the circumstances, was examined by the AO. Further, the & 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
8 said addition made on account of low GP rate was confirmed by the Ld.CIT(A), however the same stood deleted by the ITAT in further appeal. Therefore, the aforesaid issue of low GP having been examined during the original assessment proceedings, it cannot be said that the assessee had not furnished the requisite particulars which he was supposed to furnish for the purpose of assessment of true and correct income of the assessee.
We find force in the contention of the Ld.Counsel. Now coming to the four points (a) to (d) as reproduced above by the AO to suggest that the assessee was supposed to disclose these particulars during the original assessment proceedings, we note that the assessee had already furnished all the particulars of his purchases and sales before the AO which were duly included in the audited accounts of the assessee. As noted above, the assessee had made numerous transactions and purchases during the year. If the AO doubted any of the particular transaction, he should have called for further details relating to such transaction from the assessee. However, there was no requirement as per law for the assessee to furnish any further information as to the nature of transaction regarding each of the purchase transactions as alleged. The assessee had duly disclosed that the nature of transaction was purchases of the gold ornaments/bullion from the said parties. The copies of delivery challan/receipt/proof of transportation, the names of parties, to whom the further sales were made from all the & 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
9 parties were furnished. The confirmations of purchasers, etc. were not required to furnished at the first instance along with a return filed u/s.139(1) of the Act. No doubt, during the assessment proceedings, the AO could have called for further information regarding any or each of the transaction. However, the AO proceeded to estimate the net profit by enhancing the same by Rs.1,00,000/-. The AO sat silently on the information received from Investigation Wing for four years and did not make any effort to verify the aforesaid information and re-open the assessment. After the lapse of four years, the case of the assessee is hit by proviso to section 147 of the Act, and the assessment cannot be reopened unless the conditions stipulated in the first proviso to section 147 of the Act are satisfied. However, such conditions have not been satisfied in this case. In view of this, re-opening of the assessment, in this case, is bad in law and subsequent assessment framed u/s.143(3)/147 of the Act is also bad in law and the same is hereby quashed.
Before parting, it is pertinent to mention here that the assessee has raised another legal ground that, in this case, re-opening has been made on the basis of various material/information collected during the course of search action in the case of Shri Rajendra Jain and under the circumstances, the only recourse available with the Department was to proceed against the assessee u/s.153C of the Act and that the re-opening of the assessment u/s.148 was not justified on this score also. However, we have already held that the re-opening of the assessment in this case & 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
10 is bad in law being hit by first proviso to section 147 of the Act. Hence, at this stage, no adjudication is made on this legal ground of appeal and the same is kept open and the assessee may raise this ground at proper stage, if need be.
In the result, assessee’s appeal in for AY 2011-12 is allowed.
The assessee in this appeal has taken the additional legal ground that the assessment order is bad in law being hit by first proviso to section 147 of the Act. Since the additional ground taken by the assessee is legal and hit at the very jurisdiction of the AO to re-open the assessment and further no new facts have to be brought on record to examine this issue being relating to the dates, events, etc.as the same are very much available on record, therefore, this legal ground is admitted for adjudication.
13.1. The issue, facts, dates and events being same as narrated above while adjudicating assessee’s appeal in for AY 2011-12, , as admitted by the Ld.DR also, hence, in view of our findings given above, the re-opening of the assessment after the lapse four years from the end of the relevant assessment year, in this case is also bad in law. The consequential assessment framed u/s.143(3)/147 of the Act in this case is also accordingly quashed.
& 580/Ahd/2024 Mitesh Ashokkumar Patel vs. ITO Asst.Years : 2011-12 & 2013-14
In the result, both the appeals of the assessee stand allowed.
Order pronounced in the Open Court on 26/08/2025.