ALDIABLOS INFOTECH PRIVATE LIMITED,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1(1)(1), AHMEDABAD

PDF · subscribers
ITA 355/AHD/2024Status: DisposedITAT Ahmedabad08 April 2025AY 2015-1612 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the orders of the CIT(A) for AYs 2013-14 to 2016-17 were to be set aside and restored to the file of the CIT(A) for fresh adjudication of all grounds, including the legal challenge to the reopening. The reasoning was that the CIT(A) had summarily rejected the legal challenge without dealing with the assessee's objections in a reasoned manner, failing to meet the requirement of a speaking order. The Tribunal noted that vital legal issues were raised and supported by credible contentions, necessitating adjudication on merits. The ex-parte orders rendered the appellate process ineffective. For AY 2017-18, the assessment was set aside and restored to the file of the AO for a de novo assessment after affording a reasonable opportunity to the assessee to explain the nature and source of cash deposits. This was because the assessment was ex-parte, and substantial factual contentions disputing the addition were raised. The Tribunal clarified that the assessee must cooperate in future proceedings, failing which authorities could pass orders as per law. The ratio decidendi is that appellate authorities must pass speaking orders and adjudicate all vital legal and factual issues raised by the assessee, and reassessment proceedings must be based on independent application of mind and valid satisfaction.

What were the facts?

The assessee, Aldiablos Infotech Pvt. Ltd., filed five appeals before the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, for Assessment Years (AYs) 2013-14 to 2017-18. These appeals challenged orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, which arose from orders passed by the Assessing Officer (AO) under Section 143(3) read with Section 147 of the Income Tax Act, 1961. The assessments were reopened based on information from the Investigation Wing regarding substantial cash deposits in the assessee's bank accounts, which were not reconciled with returned income. For AY 2017-18, the assessment was completed under Section 144 due to the assessee's failure to file a return or comply with notices. The assessee contended that it was not afforded an effective opportunity before the CIT(A) and that the orders were passed without proper appreciation of facts and law. The appeals were filed with a delay of 40 days, which the Tribunal condoned.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the reassessment proceedings initiated under Section 147 of the Act for AYs 2013-14 to 2016-17 were valid, considering the assessee's contention that the reasons recorded were identical for multiple years, lacked independent application of mind by the AO, were based on borrowed satisfaction from the Investigation Wing without independent inquiry, and contained inconsistencies. 2. Whether the ex-parte orders passed by the CIT(A) for AYs 2013-14 to 2016-17 were justified, given the assessee's claim that its detailed written submissions and legal objections were not adjudicated. 3. Whether the ex-parte assessment order under Section 144 for AY 2017-18 was valid, considering the assessee's argument that it was not granted a proper opportunity and that the facts relied upon by the AO pertained to a different assessment year. Assessee's Contentions: The assessee argued that reassessment proceedings were initiated mechanically based on information from the Investigation Wing without independent application of mind or year-specific satisfaction. It contended that the action under Section 147 was based on borrowed satisfaction and that detailed objections filed before the CIT(A) were not adjudicated, leading to ex-parte and non-speaking orders. For AY 2017-18, it claimed lack of proper opportunity and that AO's facts were incorrect. Revenue's Contentions: The Departmental Representative fairly agreed that the matter could be restored to the CIT(A) for proper adjudication on merits.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 144,Section 69A,Section 68,Section 115BBE,Section 142(1),Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR

For Appellant: Shri P.F. Jain, AR
For Respondent: Shri Rignesh Das, Sr.DR
Hearing: 02/04/2025Pronounced: 08/04/2025

PER MAKARAND V. MAHADEOKAR, AM: These five appeals have been preferred by the assessee against the orders passed by the Ld.Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)"], for the Assessment Years (AYs) 2013-14 to 2017-18 arising from the orders passed by the Assessing Officer (hereinafter referred to as “AO") u/s 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act"). Since common issues are involved, all these appeals are disposed of by this consolidated order. Condonation of Delay

2.

These appeals have been filed with a delay of 40 days. The assessee has filed an affidavit affirmed by the Director of the company explaining the reasons for the delay. It was stated that the company had engaged a chartered accountant, Mr. Kamlesh Bhojani, to handle its appellate matters. The mobile number and email ID provided in Form No. 35 belonged to the said counsel, and therefore, the appellate orders passed by the Ld. CIT (A), NFAC, were delivered to the counsel and not directly to the assessee. The assessee contends that the said orders were not brought to its notice in time, resulting in an unintended delay in filing the appeals before the Tribunal. It was further submitted that the delay occurred despite due diligence on the part of the company, and there was no deliberate default or negligence.

3.

Considering the facts placed on record and the averments made in the affidavit, we are of the view that the delay of 40 days in filing the appeals is supported by reasonable cause. Accordingly, in the interest of justice, the delay is condoned, and the appeals are admitted for adjudication on merits. Facts of the case

4.

The assessee is a private limited company engaged in software-related services. In all years under consideration, the assessments were reopened under Section 147 based on information received from the Investigation Wing regarding substantial cash deposits made in the assessee's bank accounts which were not reconciled with the returned income. In case of AY 2013-14 to AY 2016-17, the AO reopened the assessments under Section 147 on the basis of information relating to cash deposits and passed orders under Section 143(3) r.w.s.147 making various additions. The assessee participated partially but failed to produce documentary evidence. The CIT(A) also passed ex-parte orders without adjudicating the issues on merits. The grievance of the assessee is that it was not afforded effective opportunity before the CIT(A) and the orders were passed without proper appreciation of facts and law. In case of A.Y. 2017-18, the assessment was completed under Section 144, as the assessee failed to file return or comply with notices under Section 142(1). Based on deposits of Rs.5.67 crore in HDFC Bank during the demonetisation period, the AO made addition under Section 69A, alternatively under Section 68, and taxed the same under Section 115BBE. The CIT(A) also passed an ex-parte order. The assessee contends that the proper opportunity was not given and seeks a chance to explain the nature and source of such credits.

5.

Aggrieved by the orders of CIT(A), the assessee has raised the following grounds of appeal:

1.

ITA No.353/Ahd/2024 for AY 2013-14 upholding the addition of Rs.2,80,08,032/-made by the A.O. to the return income of Rs.2,478/- without properly appreciating the facts and explanation of appellant. 2). He has previously erred in law and facts in upholding the ex-party order U/s 144 r.w.s.147 without considering and appreciating the fact that the assessment order passed by A.O. resorting to re-assessment proceedings was juri iction as per law. 3). He has erred in law and facts in not considering the detailed written submission dated 08/09/2022 in response to appeal hearing notice dated 24/08/2022 duly uploaded on 07/09/2022 vide Ack. No. 475518821070922 in seriously disputed legally even though appeal order has been passed on 27/04/2023. 4). He has also erred in law and facts in not considering and appreciating the legal decisions of various courts as detailed in submission dated 08/09/2022 in support of erroneous initiation of re-assessment proceedings. 5). He has erred in law and facts in confirming additions/disallowances made by the A.O. as detailed below which were seriously disputed. (a). Addition on account of cash deposit in bank as per para -5 of assessment order Rs.1,20,80,000/- (b). Disallowance of 30% expenses of Rs.1,45,87,050/-as per para 6 of assessment order (c). Addition of liabilities as per para-7 of assessment order Rs.13,40,978/- 6). He has erred in law and facts in confirming the order of A.O. without referring to the said submission and by wrongly applying the decision of the assessee. 7). He has erred in law and facts in upholding charging of interest U/s 234A of Rs.90,86,870/- and U/s 234B of Rs.90,86,870/- without appreciating the facts of the assessee. 8). on the facts the return Income of Rs.2,478/- ought to have been accepted. 9). the appellant craves leave to add, to alter and/or to modify any grounds of appeal."

2.

ITA No.354/Ahd/2024 for AY 2014-15 upholding the addition of Rs.2,80,08,032/-made by the A.O. to the return income of Rs.2,51,290/- without properly appreciating the facts and explanation of appellant. 2). He has previously erred in law and facts in upholding the ex-party order U/s 144 r.w.s.147 without considering and appreciating the fact that the assessment order passed by A.O. resorting to re-assessment, proceedings was juri iction as per law. 3). He has erred in law and facts in not considering the detailed written submission dated 08/09/2022 in response to appeal hearing notice dated 24/08/2022 duly uploaded on 07/09/2022 vide Ack. No. 475681311070922 in seriously disputed legally even though appeal order has been passed on 27/04/2023. 4). He has also erred in law and facts in not considering and appreciating the legal decisions of various courts as detailed in submission dated 08/09/2022 in support of erroneous initiation of re-assessment proceedings. 5). He has erred in law and facts in confirming additions/disallowances made by the A.O. as detailed below which were seriously disputed. (a). Addition on account of cash deposit in bank as per para -5 of assessment order Rs.1,20,80,000/- (b). Disallowance of 30% expenses of Rs.1,45,87,050/- as per para 6 of assessment order (c). Addition of liabilities as per para-7 of assessment order Rs.13,40,978/- 6). He has erred in law and facts in confirming the order of A.O. without referring to the said submission and by wrongly applying the decision of the assessee. 7). He has erred in law and facts in upholding charging of interest U/s 234A of Rs.91,06,945/- and U/s 234B of Rs.91,06,945/-without appreciating the facts of the assessee. 8). on the facts the return Income of Rs.2,51,290/- ought to have been accepted. 9). the appellant craves leave to add, to alter and/or to modify any grounds of appeal."

3.

ITA No.355/Ahd/2024 for AY 2015-16 upholding the addition of Rs.3,69,83,639/- made by the A.O. to the return income of Rs.5,90,250/- without properly appreciating the facts and explanation of appellant. 2). He has previously erred in law and facts in upholding the ex-parte order U/s 143(3) r.w.s.147 without considering and appreciating the fact that the assessment order passed by A.O. resorting to re-assessment proceedings was juri iction as per law. 3). He has erred in law and facts in not considering the detailed written submission dated 07/09/2022 in response to appeal hearing notice dated 24/08/2022 duly uploaded on 07/09/2022 vide Ack. No. 475935971070922 in seriously disputed legally even though appeal order has been passed on 27/04/2023. 4). He has also erred in law and facts in not considering and appreciating the legal decisions of various courts as detailed in submission dated 07/09/2022 in support of erroneous initiation of re-assessment proceedings. 5). He has erred in law and facts in confirming additions / disallowances made by the A.O. as detailed below which were seriously disputed. (a). Addition on account of cash deposit in bank as per para -5 of assessment order Rs.1,58,92,277/- (b). Disallowance of 30% expenses of Rs.2,05,90,256/- as per para 6 of assessment order (c). Addition of liabilities as per para-7 of assessment order Rs.4,00,133/- (d). Depreciation as per para-8 Rs.1,00,973. 6). He has erred in law and facts in confirming the order of A.O. without referring to the said submission and by wrongly applying the decision of the assessee. 7). He has erred in law and facts in upholding charging of interest U/s 234A of Rs.1,21,40,459/- and U/s 234B of Rs.1,21,40,459/- without appreciating the facts of the assessee. 8). on the facts the return Income of Rs.5,90,250/- ought to have been accepted. 9). the appellant craves leave to add, to alter and/or to modify any grounds of appeal."

4.

ITA No.356/Ahd/2024 for AY 2016-17 upholding the addition of Rs.3,33,43,656/- made by the A.O. to the return income of Rs.1,33,480/-without properly appreciating the facts and explanation of appellant. 2). He has previously erred in law and facts in upholding the ex-party order U/s 143(3) r.w.s.147 without considering and appreciating the fact that the assessment order passed by A.O. resorting to re-assessment proceedings was juri iction as per law. 3). He has erred in law and facts in not considering the detailed written submission dated 07/09/2022 in response to appeal hearing notice dated 24/08/2022 duly uploaded on 07/09/2022 vide Ack. No.475939241070922 in seriously disputed legally even though appeal order has been passed on 27/04/2023. 4). He has also erred in law and facts in not considering and appreciating the legal decisions of various courts as detailed in submission dated 07/09/2022 in support of erroneous initiation of re-assessment proceedings. 5). He has erred in law and facts in confirming additions/disallowances made by the A.O. as detailed below which were seriously disputed. (a). Addition on account of cash deposit in bank as per para 5 of assessment order Rs.89,92,000/- (b). Disallowance of 30% expenses of Rs.93,28,551/- as per para 6 of assessment order (c). Addition of liabilities as per para-7 of assessment order Rs.1,15,20,579/- (d). Addition of liabilities as per para-8 Rs.35,02,526.- 6). He has erred in law and facts in confirming the order of A.O. without referring to the said submission and by wrongly applying the decision of the assessee. 7). He has erred in law and facts in upholding charging of interest U/s 234A of Rs.7,74,798/- and U/s 234B of Rs.7,74,798/- without appreciating the facts of the assessee. 8). on the facts the return Income of Rs.1,33,480/- ought to have been accepted. 9). the appellant craves leave to add, to alter and / or to modify any grounds of appeal."

5.

ITA No.357/Ahd/2024 for AY 2017-18 upholding the addition of Rs.5,67,70,140- made by the A.O. considering the credit entries including cash in HDFC bank account No. 12292560001105 amounting to Rs.5,67,70,140/- as unexplained money U/s 69A of I.T. Act, 1961. 2). He has previously erred in law and facts in upholding the ex-party order U/s 144 r.w.s.147 without considering and appreciating the erroneous contention of the A.O who has alternatively treated the credits in the bank accounts of Rs.5,67,70,140/- as unexplained cash credit U/s 68 of I.T. Act. 3). He has erred in law and facts in upholding the addition made by the A.O. without appreciating the fact that bank deposits by itself cannot be treated as unexplained income either U/s 69A or U/s 68 of the Act. 4). He has also erred in law and facts in upholding the application of provision of Section 115BBE of the act to the facts of the assessee in as much as that the said provision is not applicable to the appellant. 5). He has erred in law and facts in upholding charging of interest U/s 234A of Rs.1,09,63,725/- and U/s 234B of Rs.1,40,33,568/- aggregating Rs.2,49,97,293/-without appreciating the facts of the assessee. 6). on the facts the assessee no additions ought to have been made. 7). the appellant craves leave to add, to alter and/or to modify any grounds of appeal." During the course of hearing, the Ld. Authorised Representative for the assessee submitted that the reassessment proceedings for all the captioned assessment years were initiated merely on the basis of information received from the Investigation Wing relating to cash deposits in bank accounts without independent application of mind by the AO. It was argued that in all cases, the AO has mechanically reproduced identical reasons for reopening, without recording separate satisfaction for each assessment year, thereby violating the settled principles laid down by various other judicial precedents. The AR further submitted that no independent inquiry or verification was undertaken by the AO prior to formation of belief, and the action under Section 147 was based on borrowed satisfaction. It was also highlighted that even in the reasons recorded for reopening, reference was made to unrelated assessment years, and there were apparent inconsistencies between the facts mentioned in the assessment orders and the actual financial records of the assessee. It was further submitted that detailed objections and legal submissions were filed before the Ld. CIT(A) in response to the notices issued, but the same were not adjudicated, and the appeals were dismissed ex-parte in a cryptic and non-speaking manner.

7.

The Departmental Representative fairly agreed that in the interest of justice, the matter may be restored to the file of the CIT(A) for a proper adjudication on merits.

8.

We have heard the rival contentions, perused the orders of the lower authorities, the affidavit for condonation of delay, the written submissions filed during the course of hearing, and the case records. The appeals before us relate to reassessment proceedings initiated under Section 147 of the Act for AYs 2013-14 to 2016-17, and an ex-parte best judgment assessment under Section 144 for AY 2017-18. Various additions have been made under Sections 69, 69A, and disallowance of expenses and liabilities, along with initiation of penalty proceedings.

8.

1 The assessee has challenged the validity of reassessment on multiple legal grounds that the reasons recorded are identical for multiple years without year-specific facts, no independent application of mind was undertaken by the Assessing Officer, the reopening is based merely on information received from the Investigation Wing relating to cash deposits in bank accounts without any inquiry or verification, in some years (AYs 2014- 15, 2015-16, and 2016-17), there is no separate set of reasons, and the AO has merely copied the reasons recorded for AY 2013-14 and reference has also been made in the reasons and assessment order to incorrect facts pertaining to different assessment years. The assessee has relied upon several judicial precedents to support the contention that reassessment based on borrowed satisfaction and mechanical recording of reasons is invalid.

8.

2 We find from the record that the Ld. CIT(A), in all the appeals for AYs 2013-14 to 2016-17, has summarily rejected the legal challenge without dealing with the assessee's objections in a reasoned manner. The finding of the CIT(A) does not meet the requirement of a speaking order. Further, it is apparent that the assessee had filed written submissions in response to the appeal notices and raised the legal issue in detail, which have not been adjudicated by the CIT(A). In such circumstances, where vital legal issues are raised and are supported by prima facie credible contentions, the appellate authority is expected to adjudicate the same on merits. The ex-parte orders passed without dealing with these issues rendered the appellate process ineffective. In view of the above, we consider it just and proper to set aside the orders of the Ld. CIT(A) for AYs 2013-14 to 2016-17 and restore the matters back to his file for fresh adjudication of all grounds, including the legal challenge to the reopening, after affording reasonable opportunity to the assessee.

8.

3 In AY 2017-18, the assessment has been framed ex-parte under Section 144 based on alleged unexplained cash deposits of Rs.89,92,000/- during the demonetisation period in HDFC Bank. The assessee did not file a return or respond to statutory notices. The addition has been made under Section 69A and taxed under Section 115BBE. The assessee submitted before us that proper opportunity was not granted and that the facts relied upon by the AO actually pertain to AY 2013-14, which were mechanically adopted in AY 2017- 18. 8.4 Given that the assessment is ex-parte and substantial factual contentions have been raised disputing the correctness of the addition, we deem it appropriate to restore the matter to the file of the AO for de novo assessment after affording reasonable opportunity to the assessee to explain the nature and source of cash deposits.

8.

5 In view of the foregoing discussion, without going into the merits, the orders of the Ld. CIT(A), for AYs 2013-14 to 2016-17 are set aside and the matters are restored to his file for fresh adjudication of all issues on merits, including the legal challenge to reopening. The assessment for AY 2017-18 is set aside and restored to the file of the AO for de novo assessment after granting adequate opportunity to the assessee.

8.

6 We make it clear that the assessee shall cooperate in the appellate and assessment proceedings, failing which the concerned authorities shall be at liberty to pass orders in accordance with law.

9.

In the result, all the appeals of the assessee are allowed for statistical purposes. Order pronounced in the Open Court on 8th April, 2025 at Ahmedabad. (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, दिनांक/Dated 08/04/2025 S. K. Sinha, Sr. PSआदेश की प्रतिलिपि अग्रेषित/

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →