ACIT, CIRCLE 3, LUCKNOW, LUCKNOW vs. ANSHUMAN SINGH, LUCKNOW

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ITA 342/LKW/2025Status: DisposedITAT Lucknow04 December 2025AY 2017-1820 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the impugned appellate order of the CIT(A) was factually wrong and based on a misconceived understanding of the facts. The CIT(A) had relied on paragraph 3 of the assessment order, stating that the AO mentioned the assessee produced books of account, cash book, ledger, bills, and vouchers which were verified. However, the Tribunal noted that paragraph 3 of the assessment order actually stated that no information was supplied by the assessee and the AO had no option but to finalize the assessment based on available material. Therefore, the basis on which the CIT(A) granted relief to the assessee was factually incorrect. Consequently, the Tribunal set aside the CIT(A)'s order and restored the assessment order dated 28/03/2022 passed by the AO. The issue regarding the quantum of addition became academic as the assessment order was restored. No issue was expressly left undecided.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2017-18. The Assessing Officer (AO) passed an assessment order dated 28/03/2022 under section 147 read with section 144/144B of the Income Tax Act, 1961, assessing the assessee's total income at Rs.1,39,54,930/- against an admitted income of Rs.7,91,740/-. This assessment involved an addition of Rs.1,31,63,190/- on account of cash deposits in the assessee's bank account. The original assessment for AY 2017-18 was completed under section 143(3) on 24/12/2019, accepting the returned income. Information was received that the assessee had deposited cash of Rs.1,31,63,190/- during the financial year 2016-17. A notice under section 148 was issued on 30/03/2021, to which there was no response. Subsequent notices under section 142(1) also received no response. The assessee eventually responded on 09/03/2022, stating that a return was filed in response to the section 148 notice and requested reasons for reopening. The AO supplied the reasons, and a notice under section 143(3) read with section 147 was issued on 14/03/2022. No information was provided by the assessee, and the assessment was finalized under section 144.

What were the issues?

1. Whether the reopening of assessment under Section 147 of the Income Tax Act, 1961, was valid, considering the assessee's contention that it was based on a change of opinion without new material, and the Revenue's argument that Explanation 2(c)(1) to Section 147 mandates reopening. Assessee's Contention: The reopening was based on a mere change of opinion, as the issue of cash deposits was already examined during the original assessment under Section 143(3) on 24/12/2019. No new material came to the AO's possession, and there was no failure on the assessee's part to make a true and full disclosure. Reliance was placed on CIT Vs. Foramer France and IPCA Laboratories Vs. CIT, and several Gujarat High Court decisions including Gujarat Power Corporation Vs. ACIT and CIT Vs. Kelvinator of India Ltd. Revenue's Contention: The CIT(A) erred in quashing the assessment order passed under Section 147 read with Section 144 without appreciating that the AO's reasons clearly mentioned the case was covered under the deeming provisions of Explanation 2(c)(1) to Section 147. The Revenue argued that the legal fiction created by Explanation 2 to Section 147 prevails over the substantive provisions and its proviso, mandating reopening if any clause of Explanation 2 is met.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 144B,Section 143(3),Section 148,Section 142(1),Section 69A,Section 271AAC,Section 272(A)(1)(d)

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Income Tax Appellate Tribunal, LUCKNOW BENCH A, LUCKNOW

Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA

2017-18 against impugned appellate order dated 25/02/2025 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1073694834(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal Revenue has raised the following grounds:

1. The Ld CIT(A). NFAC has erred in law and on facts of the case in quashing the assessment order 147 r.w.s. 144 without appreciating the fact that in the reasons recorded by the assessing officer regarding escapement of income, clearly mention that the assessee's case is covered under the deeming provisions of Explanation, 2(c)(1) to the section 147 of me IT Act 1961. The language of the Explanation 2 of section 147 clearly mentions that for the purpose of section 147, the situations mentioned in various clauses of the above referred Explanation shall also be deemed to be cases, in which income chargeable to tax has escaped assessment. Thus, by the sheer force of the legal fiction created in the above referred Explanation as a whole, by the legislature, gives the mandate to the assessing officer for reopening the assessee's case, which falls in any one of the clauses of the Explanation 2 to section 147 of the IT Act 1961. The learned CIT(Appeal) has not addressed this nuance of section 147 in which the legal fiction created in the Explanation 2 to section 147 of the IT Act, 1961 prevails over the substantive Provisions of the section along with its proviso.

(B) In this case assessment order dated 28/03/2022 was passed under section 147 read with section 144/144B of the I.T. Act whereby the assessee’s total income was assessed at Rs.1,39,54,930/- as against admitted income of Rss.7,91,740/-. In the aforesaid assessment order, an addition of Rs.1,31,63,190/- was made on account of cash deposit in the assessee’s bank account with Bank of Baroda account No. 51000000123. The assessment order is shown below for the ease of reference:

(C) The assessee’s appeal was allowed by the learned CIT(A) vide impugned appellate order dated 25/02/2025. The relevant part of the order of learned CIT(A) is reproduced as under:

The present appeal has been filed by Revenue against the aforesaid impugned appellate order dated 25/02/2025 of learned CIT(A).

(C.1) Learned Departmental Representative relied on the aforesaid assessment order dated 23/12/2021 whereas the learned A.R. for the assessee relied on the impugned appellate order of learned CIT(A).

(C.2) We have heard both sides. We have perused the materials on record. On perusal of the impugned order of learned CIT(A), relevant portion of which has been reproduced in foregoing paragraph (C) of this order, it is found that the learned CIT(A) relied heavily on para 3 of the assessment order. In para 5 of his impugned appellate order, the learned CIT(A) has observed that the assessee had produced books of account, cash book, ledger along with bills and vouchers and other relevant documentary evidence and the same were verified. This observation of the learned CIT(A), however, is contrary to records. We have shown the assessment order in paragraph (B) of this order. The paragraph 3 of the assessment order reads as: “3. However, till date, no information has been supplied in response to this office notices u/s.142(1) of the I.T. Act. Since the assessment proceedings are time barred by 31.3.22 and there is no information forthcoming from the assessee, I have no other option except to finalise the assessment basing on the material available on record.” Thus, it can be readily seen that the learned CIT(A) has wrongly observed that in assessment order at paragraph 3, the Assessing Officer has mentioned that the appellant produced books of account, cash book, ledger along with bills and vouchers and other relevant documentary evidence and that the Assessing Officer had verified the same. Fact is, that the Assessing Officer has observed in paragraph 3 of the assessment order that there was no information forthcoming from the assessee and he had no other option except to finalize the assessment based on the materials available on record. The basis on which the learned CIT(A) has granted relief to the assessee in the impugned appellate order is, therefore, factually wrong and based on misconceived understanding of the facts of the case.

(C.2.1) Therefore, and in view of the foregoing; the impugned appellate order of the learned CIT(A) is set aside and the aforesaid assessment order dated 28/03/2022 is restored.

(D) In the result, the appeal of Revenue is allowed.

(Order pronounced in the open court on 04/12/2025)

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