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Facts
The assessee's appeal against the order of the CIT(A) who had restored the case back to the AO for fresh adjudication. The assessee's grievance was that the CIT(A) should have adjudicated the issue of jurisdiction instead of remanding it to the AO.
Held
The Tribunal held that the AO's assumption of jurisdiction to reopen the case under Section 147 of the Income Tax Act was invalid, as the reasons recorded did not pertain to the impugned assessment year. Consequently, the assessment order was quashed.
Key Issues
Whether the assumption of jurisdiction by the AO under Section 147 for AY 2013-14 was valid when the reasons recorded pertained to AY 2012-13. Whether the CIT(A) erred in remanding the issue of jurisdiction to the AO instead of deciding it.
Sections Cited
147, 144, 250, 132, 131(1A), 151, 143(3), 143(1), 2(40), 251, 34(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SMT. ANNAPURNA GUPTA, AM vk;dj vihy la-@ITA No.1034/JPR/2025
fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke Kanhaiya Lal Hari Narayan Income Tax Officer, Vs. Kapil Mandi, Neem Ka Thana, Ward Neem Ka Thana Sikar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFK 4189 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Vedant Gupta, Advocate jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 23/12/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 31/12/2025 vkns'k@ ORDER PER: ANNAPURNA GUPTA, AM
The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as “Act”).
2. The grounds raised by the assessee read as under:-
On the facts and circumstances of the case and in law also Ld CIT(A) grossly erred in remanding back the matter for fresh assessment to Income Tax Officer despite of fact that no addition evidences OR information has been submitted by the assessee and assessment order has been passed u/s 147 of the Act not u/s 147 read with section 144 of the Act.
2. On the facts and circumstances of the case and in law also Ld CIT(A) grossly erred in remanding back the matter despite of fact that reasons has been recorded for A.Y.
2012-13 whereas reassessment proceedings has been initiated for A.Y. 2013-14 and same fact accepted by the CIT(A). 3. On the facts and circumstances of the case and in law, Ld. A.O. grossly erred in initiating reassessment proceedings u/s 147 of the Income Tax Act, 1961.
4.On the facts and circumstance of the case and in law, Ld. A.Ο. grossly erred in making addition of Rs 6,96,000/-, simply on assumptions, presumptions, surmises and conjectures. This action of Ld A.O. is wrong, unlawful and without any basis.
5. On the facts and circumstance of the case and in law, the Ld. A.O. grossly erred in not providing the opportunity of cross examination of the persons on whose statements reliance has been placed by Ld A.O. and also erred in not providing the copy of relevant evidences. Even the copy of the statements was not provided to the assessee. In none of the statements, there is allegation against the assessee of benefitting from any accommodation entry.
6. On the facts and circumstances of the case and in law, the Ld. AO grossly erred in initiating reassessment proceedings without having any reason of belief of escapement of income chargeable to tax. Kindly peruse the alleged reasons from WHARE it is clear that the alleged information is vague, general in nature, and no specific escapement of income has been proved.
7. On the facts and circumstances of the case and in law, the Ld. AO grossly erred in initiating reassessment proceedings on the borrowed satisfaction and without applying his independent mind.
8. Alternatively, additions of entire purchases amount is also illegal and bad in law.
9) That the appellant craves his indulgence to add, amend, alter or delete the grounds of appeal.
3. At the outset itself, learned counsel for the assessee pointed out that the ld. CIT(A) had restored the case back to the file of the AO for fresh adjudication. However, the assessee was aggrieved by the order of the ld. CIT(A) since the legal ground raised by the assessee before the ld. CIT(A) was not adjudicated despite facts being present on record before him. He contended that the ld. CIT(A) had directed the AO to reconsider the legal ground raised by the assessee before him challenging the assumption of jurisdiction by the AO to frame assessment u/s. 147 of the Act. Learned counsel for the assessee contended that the facts already being on record before him, the ld. CIT(A) ought to have adjudicated the issue himself. He contended that the fact clearly demonstrating the invalid assumption of jurisdiction by the AO to frame assessment u/s. 147 of the Act, the ld. CIT(A)’s order restoring this issue also to the file of AO was not in accordance with law.
4. Pointing out the contention raised before the ld. CIT(A) challenging the validity of jurisdiction assumed by the AO to frame assessment u/s. 147 of the Act, He contended that it was stated that while the reasons recorded mentioned escapement of income for Financial Year 2011-12 relevant to Assessment Year 2012-13, the jurisdiction to reopen the case of the assessee was assumed by the AO for Assessment Year 2013-14, the year impugned before us. He contended that the ld. CIT(A) had restored the issue back to the file of AO on this legal ground to verify the facts regarding actual Assessment Year from the reasons of reopening and proceedings of assessment year, while these facts were clearly there on record before him. He drew our findings to the order of the ld. CIT(A) in this regard at page 14 and 15 as under:-
OBSERVATIONAND DECISION: On perusal of the assessment order, it is found that a search was conducted in the premises of Sh. Hitesh Jain Prop. M/s Mittersain Rajesh Kumar, Karnal on 23/05/2017. During the search proceedings, some incriminating documents like loose paper, blank signed cheque books, laptop data were seized from the premises of Sh. Hitesh Jain. During the course of search, Mr. Hitesh Jain admitted in his statements that he was involved in providing accommodation entries by issuing bogus bills in lieu of certain commission and no actual sale/purchase takes place & after post search enquiry, it is found that no such entity exists at their ITR address. On perusal of bank statement of the appellant, it was found that huge transactions were made by the appellant during the year under consideration. Further, on perusal of the para 5 of body of assessment order & noting remarks for reasons of reopening, it is found that F.Y. 2011-12 has been mentioned by the AO, whereas assessment was made for the A.Y. 2013-14, which raised contradiction between the A.Y. 2012-13 & 2013-14. Further, on perusal of para G & H of submission of ground No. 1, 4 & 5 of written submission of the appellant on contrary to the assessment order, appellant has objected that reason recorded by the DDIT(Investigation wing), Karnal for the A.Y. 2012-13 are related for escaped income of Rs. 6,96,000/-, however, reassessment proceedings has been initiated for the A.Y. 2013-14, which is void & illegal. On perusal of the above agonistic facts regarding A.Y. 2012-13 & 2013- 14, it is important to verify the factual facts by the AO regarding actual assessment year from reasons of reopening & proceedings of assessment. In view of the aforesaid observations, facts and circumstances of the present case, it is revealed that facts mentioned by the appellant were not furnished during assessment proceeding before the AO on account of absolute non- compliance of the appellant. As the AO was not having benefit of the documents which have been filed during appellate proceedings, the AO is being directed to re-examine the claims of the appellant in the light of the submissions made at the time of appeal proceedings in regards to the grounds of appeal raised and re-verify the claims which weren't produced before the AO by the appellant and allow credits as applicable and permissible as per law. Since, the above facts and documents/evidences remained to be examined by the AO, the present appeal is being set aside to the file of the AO with the directions to consider the same during the set- aside proceedings. In view of the aforesaid observations, facts and circumstances of the present case, I have perused the relevant documents/records available with the undersigned, the present appeal needs to be set aside to the file of the AO for fresh adjudication. As the present appeal has been set-aside to the file of the AO, rest of the grounds of appeals adduced during the appeals proceedings requires no separate adjudications. Resultantly, the appeal of the appellant is hereby set aside for statistical purpose.
Thereafter, drawing our attention to the facts of the case he contended that the case of the assessee for the impugned year was reopened by the AO on the basis of information in his possession that the assessee had availed accommodation entry. He drew our attention to the reasons recorded by the AO recorded at page 8 and 9 of the assessment order as under:-
Kanhaiyalal Harinarayan Re-opening Reason for A.Y. 2013-14 is as under 1. The assessee has e-filled his return for the A.Y. 2012-13 vide acknowledgment no.783649591230913 on 23/09/2013 declaring total income of Rs. 55,230/-.
An information has been received from the DDIT(Inv.), Karnal vide his office letter no. 3050 dated 19/02/2020 in the case of M/s Kanhaiya lal Hari Narayan for the A.Y. 2012-13.
On perusal of the letter and its attachments enclosed it is found that as search U/s 132 of the IT Act 1961 was conducted at the premises of Sh. Hitesh Jain Prop. M/s Mittersain Rajesh Kumar, Karnal on 23/05/2017. During the search proceedings some incriminating documents like loose paper, blank signed cheque books, laptop data were seized from the premises of Sh. Hitesh Jain. During the course of search, Mr. Hitesh Jain admitted in his statements that he was involved in providing accommodation entries by issuing bogus bills in lieu of certain commission and no actual sale/purchase takes place.
On the basis of the information forwarded by the DDIT(Inv.), Karnal it is found that Mr. Hitesh Jain is doing activity of providing accommodation entries to the various beneficiaries with the help of approx 40 shell/paper concerns. When summon U/s 131(1A) of the IT Act were sent to these shell concerns, the same were returned back. The inspectors of this office were also deputed to verify the existences of these concerns. In its report the inspectors reported that none of these concerns were exists at their ITR address. It is further informed that thereafter bank statement along with the account opening form and KYC document of the said discussed 40 shell/paper concerns were called from the respective banks, by the office of the undersigned and the same have been furnished by the banks to the DDIT(Inv.) Karnal office. On perusal of these bank statements it is noted that huge entries were credited as well as debited in the bank account during the F.Y. 2011-12 thereafter letter have been issued to the banks with UTR no./ transaction ID/RTGS no. of the transactions credited as well as debited during the F.Y. 2011-12 to give IFSC code or name of the bank from whom transaction were credited/debited in the bank accounts. In response thereto, banks furnished information to this office with IFSC code or name of their banks where the accounts of these are being maintained of the parties. Thereafter further letter have been issued to respective banks to furnish the PANs of the same. In response thereto, banks furnished PAN no. of the various beneficiaries and out of the above beneficiaries/PAN No's provided by the bank the case of M/s Kanhaiya lal Hari Narayan, PAN:- AABFK4189M is reported to this office. M/s Kanhaiya lal Hari Narayan (the assessee) has transfer an amount of Rs. 6,86,280/-(3,30,720/-on12/05/2012 and Rs. 3,55,560/-on 15/06/2012) to the Dummy/paper concerns of Sh. Hitesh Jain i.e. M/s K.N. Agro Foods(Prop. Naresh Kumar Yadav) 2712, Gali Pattey Wali, Naya Bazar, Delhi 110006 A/c No. 911020050498467 Axis Bank, Karnal and received bogus bill without any sale or purchase of any commodity.
5. In view of the above it is established that the Dummy/ paper concerns of Sh. Hitesh Jain i.e. M/s K.N. Agro Foods Prop. Naresh Kumar Yadav is not engaged in the any business activity and is formed/established only for providing the accommodation entries to parties such as in the case of M/s Kanhaiya lal Hari Narayan, PAN:-AABFK4189M. Since the assessee has not engaged in the any genuine business activity/transaction with the M/s K.N. Agro Foods Prop. Naresh Kumar Yadav and only to get an bogus accommodation entry of Rs.6,86,280/-(3,30,720/- on12/05/2012 and Rs. 3,55,560/-on 15/06/2012), the amount was transferred through RTGS to the account of the M/s K.N.
Agro Foods Prop. Naresh Kumar Yadav. Therefore the amount of Rs. 6,86,280/- remained unexplained and escaped from the assessment.
In this case a return of income was filed for the year under consideration but no scrutiny assessment U/s 143(3) of the Act was made accordingly, in this case the only requirement to initiate proceedings u/s147 is reason to believe which has been recorded above (paragraph 05).
It is pertinent to mention here that in this case the assessee has filed return of income for the year consideration but no assessment as stipulated U/s 2(40) of the Income tax Act was made and the return of income was only processed U/s 143(1) of the Act. In view of the above, the provisions of clause (a) of Explanation 2 to 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 form the end of the assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income tax as per the provision of section 151 of the Act In view of the above circumstances and facts, I have reason to believe that income of Rs. 6,86,280/- has escaped assessment for the assessment year 2012-13 in terms of the provision of section 147 of the Income Tax Act, 1961.
6. Referring to the same he pointed out that the AO all along in his reasons recorded has referred to and taken cognizance of the return filed by the assessee for AY 2012-13, (Point No.1 of the reasons) and to information in his possession of the assessee having availed accommodation entry pertaining to Financial Year 2011-12 pertinent to AY 2012-13 (point No.4 of the reasons). He pointed out that the AO took cognizance of the return filed by the assessee in AY 2012-13 as noted on point No.1 of the reasons and thereafter, proceeded to elucidate the information in his possession to the effect that Mr. Hitesh Jain who was subjected to search action u/s. 132 of the Act on 23.05.2017 was found to have given huge entries of debit and credit to various parties relating to accommodation entries provided during the Financial Year 2011-12. He contended that as per the reasons the information in the possession of the AO pertained to AY 2012-13 and he had taken cognizance of this information for the purposes of return filed by the assessee for AY 2012-13, but however based on this information pertaining to a different assessment year and taking cognizance of the return filed by the assessee for a different financial year he had proceeded to reopen the case of the assessee for the impugned assessment year i.e. AY 2013-14. He contended that it was clear and evident that there was no information in the possession of the AO to believe escapement of income of the assessee for the impugned order so as to assume jurisdiction to reopen the case of the assessee for the impugned order i.e. AY 2013-14. He further contended that there was complete non-application of mind by the AO to the information in his possession and the jurisdiction assumed by the AO to reopen the case of the assessee was therefore not in accordance with law. The assessment order passed therefore was not sustainable in the eyes of law and he contended that ld. CIT(A) ought to have quashed the assessment proceedings based on the facts on record itself, that his order restoring the issue back to the file of the AO was not correct in law. He pleaded therefore that the assessment order be quashed on this ground alone.
7. Ld. DR however, supported the order of the ld. CIT(A) stating that the ld. CIT(A) had powers to remand as per Section 251 of the Act and had rightly therefore remanded the legal issue also to the file of the AO for adjudication afresh.
8. I have heard the rival contentions. The grievance of the assessee before me as noted above is that the ld. CIT(A) had incorrectly restored the legal issue raised by the assessee to the file of the AO when all facts were on record before him requiring no verification by the AO and could have been adjudicated by the ld. CIT(A) himself. Learned counsel for the assessee has pleaded that the reasons recorded revealed jurisdiction to have been assumed by the AO to reopen the case of the assessee to be based on information in his possession which did not pertain to the impugned year itself, that the AO had considered the return filed by the assessee for a different year in his reasons recorded ,for forming belief of escapement of income based on the information in his possession.
I find the factual contention of the learned counsel of the assessee as above to be correct. Learned counsel for the assessee has rightly pointed out that while reopening has been resorted to by the AO for AY 2013-14, in his reasons recorded he has perused and considered the return filed by the assessee for AY 2012-13 and as per the reasons the information in his possession also pertained to financial year 2011-12 relevant to assessment year 2012-13. These facts are clearly emanating from the reasons itself. I agree with the learned counsel for the assessee that based on the reasons recorded by the AO there could not have been any belief of escapement of income for AY 2013-14 since the information with the AO did not pertain to the said year. The jurisdiction assumed by the AO therefore to reopen the case of the assessee for framing assessment u/s 147 of the Act, I hold is invalid.
I agree with the learned counsel for the assessee that there was no reason with the ld. CIT(A) to have restored this matter to the AO to verify the facts, since the facts were clearly there on record and the plea raised by the assessee being a legal ground challenging the validity of jurisdiction assumed by the AO to frame assessment u/s. 147 of the Act, the ld. CIT(A) ought to have decided the issue at the appellate stage itself.
I agree with the learned counsel for the assessee that there was no occasion for the ld. CIT(A) to have restored the matter to the file of AO and on the contrary the assessment order passed ought to have been quashed by him.
In view of the above I allow the legal grounds raised by the assessee in ground No 1-3 & 6-7 holding the jurisdiction assumed by the AO to be not in accordance with law to frame assessment u/s. 147 of the Act. The order passed by the AO is quashed.
Since the order passed by the AO is held by me to be invalid, the addition made on merits has no legs to stand on and the order of the Ld.CIT(A) restoring the issue to the file of the AO for adjudication afresh on merits also does not survive.
The assessee therefore also succeeds on Grounds of appeal No 4, 5 & 8 raised.
The appeal of the assessee is allowed in above terms.
Order to be pronounced under Rule 34(4) of the Income Tax Appellate Tribunal) Rules,1963 by placing the details on the notice Board.