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Facts
The assessee's case was reopened under Section 148 based on an intelligence report linking an investment of Rs. 25 lakhs by M/s Kailash Corporation in the assessee's name to the Dahyalal I. Thakkar Group's entry operations. The Assessing Officer added this amount as unexplained investment under Section 69, which was upheld by the CIT(A), as the assessee failed to provide satisfactory explanations or evidence.
Held
The Tribunal restored the matter of quantum additions to the Assessing Officer for de-novo consideration, granting the assessee another opportunity to produce supporting documents. The ground challenging the Section 148 notice was dismissed as not pressed. Consequently, the penalty appeal under Section 271(1)(c) was also restored to the Assessing Officer.
Key Issues
1. Validity of assessment reopening under Section 148. 2. Addition of unexplained investment of Rs. 25 lakhs under Section 69. 3. Imposition of penalty under Section 271(1)(c) for concealment of income.
Sections Cited
143(1), 148, 69, 271(1)(c)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These appeals have 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 orders dated 30.09.2024 passed for A.Y. 2010-11.
The assessee has raised the following grounds of appeal:
(A.Y. 2010-11) “1. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by not quashing notice issued under section 148 of the Act and all the subsequent proceeding and therefore the Order passed by Assessing Officer is required to be quashed.
2. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the addition of impugned unexplained investment of Rs. 25,00,000/- and therefore the learned AO should be directed to delete the said addition while computing the total income.
That your appellant craves a leave to add, alter or amend any grounds at the time of hearing”
&2024/Ahd/2024 Madanlal Girdharilal Bugaliya vs. ITO Asst.Year –2010-11 - 2– 3. The brief facts of the case are that the assessee filed the original return of income for Assessment Year 2010-11 on 10.09.2010 declaring a total income of Rs. 3,71,790/-, which was processed under section 143(1) of the Income-tax Act (Act). Subsequently, based on information received by the Assessing Officer, the case of the assessee was reopened under section 148 of the Act. The assessee submitted a revised return on 17.10.2017 declaring the same income and also requested a copy of the reasons for re-opening the case, which were provided to the assessee on 26.10.2017. The assessee filed submissions on 09.11.2017, 10.11.2017, and 08.12.2017. The Assessing Officer noted that there was an entry of Rs. 25 lakhs made by M/s Kailash Corporation in the name of the assessee through a demand draft drawn in favour of Fortune Equity Brokers (now Intime Equities Ltd.). The assessee was asked to explain the nature and source of this investment. The AR of the assessee appeared and explained that due to the assessee’s relocation to Ajmer and his ill health, no documents or details regarding the six-year-old transaction could be provided. However, the explanation was considered unsatisfactory by the Assessing Officer, and based on the investigation report linking the assessee to beneficiaries of entries from the Dahyalal I. Thakkar Group, which was engaged in cheque discounting and entry operations, the Assessing Officer held that a sum of Rs. 25,00,000/- was credited in the assessee’s name without any explanation of source or nature of the transaction. Despite being given an opportunity, the assessee failed to provide any supporting evidence. Therefore, the said amount was treated as unexplained investment under section 69 of the Act and added to the assessee’s income. Penalty proceedings under section 271(1)(c) were also initiated.
In appeal, Ld. Commissioner (Appeals), after examining the assessment order and assessee’s submissions, noted that the Assessing Officer had received &2024/Ahd/2024 Madanlal Girdharilal Bugaliya vs. ITO Asst.Year –2010-11 - 3– confirmed intelligence regarding entry-providing activities by the Dahyalal I. Thakkar Group. The AO had specifically asked the assessee to explain the transaction and provide evidence of any borrowings or source of funds used to make the investment. However, the assessee failed to provide such evidence, giving reason of prolonged illness and lapse of time. CIT(Appeals) observed that although the assessee denied receiving or investing the funds, the payment made by M/s Kailash Corporation was clearly credited in the books of the broker in the assessee’s name. Given the above fact, and the assessee’s failure to provide any explanation or evidence to trace the funds to genuine sources, CIT(Appeals) held that the onus to prove the genuineness and source of the investment remained undischarged. Accordingly, CIT(Appeals) upheld the addition of Rs. 25,00,000/- under section 69 of the Act, by holding that there was no merit in the grounds raised by the assessee.
The assessee is in appeal before us against the order passed by the Ld. CIT(A).
On hearing both the parties, we observe that in this case the assessee was a beneficiary of an insurance premium payment made through the companies / concerns of Shri Dahyalal I. Thakkar Group, a Group which was engaged in the business of cheque discounting and entry providing. Dahyalal I. Thakkar Group used to take cash from the beneficiaries and issue cheques / Demand Draft to Insurance Companies for purchase of insurance policy in the name of beneficiaries. In the instant case, one of the group concerns of Dahyalal I. Thakker (M/s. Kailash Corporation) issued a cheque for a sum of Rs. 25,00,000/- on 06.10.2009 in favour of M/s. Fortune Equity Brokers Ltd., for the purpose of purchase of an insurance policy in the name of the assessee. Both the Assessing Officer and the Ld. CIT(A) were of the view that the assesse has not denied that &2024/Ahd/2024 Madanlal Girdharilal Bugaliya vs. ITO Asst.Year –2010-11 - 4– insurance policy had been issued in the name of the assessee, for a sum of Rs. 25,00,000/- and accordingly, the assessee has failed to discharge the onus cast upon him to furnish the nature of source of such funds by providing details and documentary evidences. The main argument of the Counsel for the assessee was that the assessee has not received any payment to his credit nor has he made investment directly and hence the provisions of Section 69 of the Act are not triggered in the instant facts. The Counsel for the assessee submitted that assessee’s income cannot be assessed on the basis of ledger found at third party premises, in which a sum of Rs. 25,00,000/- was shown to have been credited in the name of the assessee. However, in the interest of justice, the Counsel for the assessee requested that another opportunity of hearing may be granted to the assessee to produce relevant information / supporting documents in support of it’s case.
Accordingly, looking into the instant facts, the matter is hereby restored to the file of Assessing Officer for de-novo consideration in the interest of justice.
We further, note that so far as Ground No. 1 (challenging through issuance of notice under Section 148 of the Act) is concerned, the Counsel for the assessee submitted that he shall not be pressing this ground of appeal, and accordingly, Ground No. 1 of the assessee’s appeal is dismissed as not pressed.
9. In the result, the assessee’s appeal is allowed for statistical purposes. relating to imposition of penalty in relation to the aforesaid transaction under Section 271(1)(c) of the Act for concealment of income.
&2024/Ahd/2024 Madanlal Girdharilal Bugaliya vs. ITO Asst.Year –2010-11 - 5–
The assessee has raised the following grounds of appeal:
(A.Y. 2010-11) “1. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the penalty levied for Rs.7,88,503/-, therefore the learned AO should be directed to delete the said penalty of Rs.7,88,503/-. 2. That your appellant craves a leave to add, alter or amend any grounds at the time of hearing.”
Since we have restored the matter relating to quantum additions to the file of Assessing Officer for de-novo consideration, accordingly, the present appeal is also hereby restored to the file of Assessing Officer.
In the result, assessee’s appeal is allowed for statistical purposes in ITA No. 2024/Ahd/2024.
In the combined result, both the appeals filed by the assessee are allowed for statistical purposes. This Order pronounced in Open Court on 29/07/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 29/07/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 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,