DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-3, JAIPUR vs. SAPNA KARNANI, TONK PHATAK

ITA 712/JPR/2025Status: DisposedITAT Jaipur14 October 2025AY 2017-1891 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal allowed the assessee's cross-objection and dismissed the Revenue's appeals. Regarding the Assessee's cross-objection (Issue 4), the Tribunal held that the CIT(A) had exceeded its jurisdiction by directing the AO to re-open the assessment under Section 147 after deleting the additions made under Section 153A. The Tribunal cited the principle of finality in legal proceedings and the apex court's view that stale issues should not be reactivated. The CIT(A)'s authority ended with deciding the sustainability of the addition under Section 153A, and by directing re-opening under Section 147, the CIT(A) acted ultra vires. Therefore, the cross-objection was allowed. Consequently, the Revenue's appeals were dismissed. The Tribunal did not explicitly rule on the merits of the additions under Sections 68 and 69C (Issues 1-3) as the appeals were dismissed based on the procedural issue raised in the cross-objection.

What were the facts?

The Revenue filed appeals (ITA Nos. 709 to 712/JP/2025) against the orders of the CIT(A) for assessment years 2013-14, 2014-15, 2016-17, and 2017-18. The Assessee filed cross-objections (CO Nos. 28 to 31/JP/2025). The lead case is ITA No. 709/JP/2025 for AY 2013-14 and CO No. 28/JP/2025. The Revenue is aggrieved by the deletion of additions made by the AO under Section 68 for unexplained cash credits (Rs. 78,50,000/-) and under Section 69C for unexplained expenditure (Rs. 1,96,250/-) and interest expenses (Rs. 3,79,776/-). The Assessee's cross-objection challenges the CIT(A)'s direction to the AO to proceed under Section 153C.

What were the issues?

1. Whether, on the facts and in the circumstances, the CIT(A) was justified in deleting the addition of Rs. 78,50,000/- made under Section 68 on account of unexplained cash credits, treating it as bogus unsecured loans from Kolkata-based companies. 2. Whether, on the facts and in the circumstances, the CIT(A) was justified in deleting the addition of Rs. 1,96,250/- made under Section 69C on account of unexplained commission expenses incurred for acquiring accommodation entries. 3. Whether, on the facts and in the circumstances, the CIT(A) was justified in deleting the addition of Rs. 3,79,776/- made under Section 69C on account of unexplained interest expenses incurred for obtaining accommodation entries. 4. Whether, in law, the CIT(A) erred in directing the AO to proceed under Section 153C, which the assessee argued was illegal and arbitrary. Assessee's Contention (for Issue 4): The CIT(A) erred in directing the AO to proceed under Section 153C, as this action was illegal, unjustified, arbitrary, and against the facts, and deserved to be quashed. The Assessee relied on the principle of finality in legal proceedings and the apex court's observation that stale issues should not be reactivated. The Assessee also cited the judgment in CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC) regarding the assessee's duty to disclose facts. Revenue's Contention (for Issues 1-3): The CIT(A) was not justified in deleting the additions made under Sections 68 and 69C, as the credits were bogus unsecured loans and accommodation entries obtained from shell companies controlled by Shri Mukesh Banka, which had no financial means.

Which sections of the Income-tax Act were involved?

Section 153A,Section 68,Section 69C,Section 147,Section 153C,Section 139(1),Section 127,Section 143(2),Section 142(1),Section 131,Section 132(4)

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Income Tax Appellate Tribunal, JAIPUR BENCHES, B JAIPUR

Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI,

For Appellant: Shri Deepak Sharma, CA
For Respondent: Ms. Alka Gautam, CIT, DR
Hearing: 11/09/2025Pronounced: 14/10/2025

PER: RATHOD KAM

The order continues below.

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