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Facts
The assessee's assessment for Assessment Year 2017-18 was reopened under Section 147 based on information from the INSIGHT portal about alleged bogus accommodation entries of Rs. 1,37,00,000/-. An addition was made as unexplained credit under Section 68, which was upheld by the CIT(A). The assessee challenged the reassessment order citing improper sanction, time-barring, non-provision of material relied upon, and non-application of mind by the Assessing Officer.
Held
The tribunal quashed the reassessment proceedings and the consequential assessment order, concluding that the notice issued under Section 148 was time-barred and invalid, as it exceeded the surviving time limits prescribed by the Supreme Court's Rajeev Bansal judgment and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA). Furthermore, the required higher authority sanction under Section 151 was not obtained, and the Assessing Officer failed to provide the assessee with relevant material, violating natural justice principles. Other grounds regarding addition of unexplained credit and set-off of depreciation/MAT credit were not pressed by the assessee or became academic.
Key Issues
1. Whether the reassessment proceedings initiated under Section 147/148 were time-barred and issued with proper sanction from the competent authority as per the Income Tax Act, 1961 and Supreme Court judgments. 2. Whether the Assessing Officer's failure to provide the assessee with the material relied upon for reassessment violated principles of natural justice. 3. Whether the addition of unexplained credit under Section 68 was valid and if set-off of unabsorbed depreciation or MAT credit was permissible under Section 115BBE.
Sections Cited
147, 148, 148A, 148A(a), 148A(b), 148A(d), 149, 149(1), 149(1)(b), 151, 151(i), 151(ii), 151A, 68, 69, 69A, 69B, 69C, 69D, 115BBE, 115BBE(1), 115BBE(2), 115BBD, 143(1), 143(2), 144, 144B, 142(1), 153A, 153C, 132, 132(4), 139(1), 292B, 79A, 32(2), 3(1) (TOLA), 14
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 1320/PR/2024
vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
By way of present appeal, the above named assessee challenges the order of the National Faceless Appeal Centre, Delhi [ for short CIT(A) ] dated 24/10/2024 for the assessment year 2017-18. Ld. CIT(A) passed that order because the assessee has challenged the order of assessment dated 11.05.2023 passed under section 147 r.w.s 144 r.w.s 144B of the Income of Income Tax Department [ for short AO].
2. In this appeal, the assessee has raised the following grounds: - “1. That the whole proceedings u/s 147/148 are liable to be held as null and void as the same have been taken ignoring the provisions of section 153C of the Income Tax Act, 1961 which has over riding effect over provisions of section 147/148.
That the whole proceedings undertaken u/s 147/148 are vitiated on account of following reasons:- a. Notice has been issued without jurisdiction and proper sanction. Notice is not as per provisions of law as amended w.e.f. 01.04.2021. Further the new notice dated 28.07.20922 is also without proper sanction as per section 151 of the Income tax Act, 1961. b. The condition of Section 149 of escaped income being represented by 'asset' is not satisfied. c. reopening without providing the material which suggests escapement of income is against principles of Natural Justice. d. The Id. AO has issued notice u/s 148 without application of his independent mind and merely acted on the information received by him from another wing of the department. e. The Id. AO did not have complete information about alleged escapement of income by the assessee which did not satisfy the conditions stipulated u/s 147. f. The notice has not been issued in faceless manner as per provisions of section 151A of the Income Tax Act, 1961.
3. That assessment made without providing the assessee the material on which addition has been made is against principles of natural justice and denies the assessee fair opportunity to put up his case. Non provision of information makes the assessment illegal. Assessee has been denied reasonable opportunity to put up his case. Further the assessment has been framed passing a non speaking order without considering the replies of the assessee. The assessment framed deserves to be annulled and declared null and void.
4. That WITHOUT PREJUDICE to ground no. 1 to 3, the learned C.I.T. Appeals RSD Containers Pvt Ltd. vs ITO erred in confirming addition of Rs. 1,37,00,000/- as unexplained credit. The addition made is unjust and deserves to be deleted.
5. That WITHOUT PREJUDICE to Ground No. 1 to 4, it is only the Peak Credit which can be added as unexplained credit u/s 68. The addition made should be restricted to the Peak Credit balance.
6. That the learned CIT (Appeals) erred in not allowing set off of unabsorbed depreciation of Rs. 48,59,280/- as per return. The restriction on set off of loss u/s 115BBE does not apply to set off of unabsorbed depreciation.
7. That the learned C.I.T. (Appeals) erred in not allowing Credit of MAT of Rs. 22,10,576/- available for credit as per return. Tax Liability should have been recomputed on assessed income after giving credit of MAT Credit available.
8. The appellant craves to add, amend or delete the grounds of Appeal at the time of hearing of appeal.”
3. Succinctly, the fact as culled out from the records is that revenue has information available with during the Financial Year 2016-17 relevant to assessment year 2017-18 the assessee has made the following transactions :-
In this connection, it is stated that information is available with the department on INSIGHT Portal under High Risk CRIV/VRU information that the assessee firm has taken accommodation entery from through a paper company operated by shripal vohara in form of Loan for amounting to Rs. 13700000/- in F. Y. 2016-17. It proves that assessee company has infuse unaccounted cash in his books of account through the bogus accommodation entry for amounting to Rs. 1,37,00,000/- from shall company. In view of the above facts, it is concluded that there is escapement of income Rs. 1,37,00,000/- in the case of the assessee for the AY 2017-18. Ld. AO based on that set of information issued Notice u/s 148 of the Act on 28/07/2022. As per the direction of Hon'ble Supreme Court of India in the case of in the case of Union of India & ors vs Ashish Agarwal (Civil Appeal No. 3005/2022) read with instruction No. 01/2022 dated 11.05.2022 issued to the notice assessee has filed the return of Income on 10/08/2022 by declaring total income at Rs. NIL. Statutory notice as required u/s. 143(2)/142(1) of the Act was issued from time to time. Based on the information available with the revenue it was found that assessee has infused unaccounted cash in his books of account through the bogus accommodation entry for an amount of Rs. 1,37,00,000/- from shell company. In view of the above facts, it was concluded that there is escapement of income for Rs. 1,37,00,000/- in the case of the assessee for the AY 2017-18. On verification of all the documents available it is found that assessee has made transaction with Mis Rati Diamonds (P) Ltd. and M/s Kripanidhi Gems (P) Ltd., which were paper companies. Through questionnaire assessee was requested to explain the nature of transaction done with these companies during the year under consideration. Therefore, a show cause notice was issued and the assessee submitted its reply by stating to add Rs 75,00,000/- as the peak credit without any supporting documents. Therefore, the submission made by the assessee not considered by the ld. AO.
Record reveals that while post search verification of seized / impounded materials, various paper / shell companies controlled and categorically accepted by Shri Shripal Vora as paper / shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Therefore, the submission of the assessee was not considered as acceptable as the company from whom the assessee has claimed to have taken the unsecured loan is a only a paper company. The assessee has managed its untaxed income earn during the year, through this company.
Hence Rs 1,37,00,000/- credited in the books of account of the assessee is its money and is liable to be added to its total income as unexplained credit as per Section 68 of the Act.
4. Aggrieved from the order of ld. AO assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
“Decision 5. I have considered the grounds of appeal as well as the contentions of the appellant and also perused the material available on record. Ground of Appeal No. 8 is general in nature and as such do not call for any adjudication. The remaining grounds are adjudicated as under:-
In Ground of Appeal no. 1, the appellant contended that the reopening of assessment is bad in law. The appellant further contended that notice has been issued without jurisdiction and proper sanction and notice is not as per provisions of law as amended w.e.f. 01.04.2021 RSD Containers Pvt Ltd. vs ITO 6.1 I have carefully gone through the assessment order and the material available on record. I have considered the reasons recorded for reopening the assessment The AO has formed the opinion that the income otherwise taxable in the hands of the appellant, has escaped assessment based on the information uploaded on Insight Portal. Further, the AO has issued the notice u/s 148 of the Act after obtaining necessary approval as per Act. Thus, the AO applied independent mind before reopening of assessment u/s 147 of the 1961 Act. Therefore, I dismiss Ground No. 1 raised in this regard by the appellant.
7. Vide ground no. 2, the appellant contented that the issue of notice is illegal and unjust. The condition of section 149 of escaped income being represented by asset' is not satisfied.
7.1 During appellate proceedings, vide submission dated 13.02.2024, the appellant submitted that with regard to ground no. 2, it had already filed reply dated 13.06.2022 before the assessing officer during the assessment proceedings. The same may be treated as part of this submission I have carefully gone through the reply filed by the appellant before the assessing officer dated 13.06.2022
7.2 In Ground No. 2, the appellant raised the contention that the notice u/s 148 is not maintainable as per section 149, as the alleged escapement does not represent "in the form of asset. It is undisputed fact that the instant case was reopened as the assessing officer had a reason to believe that the income otherwise chargeable to tax has escaped assessment, because of alleged accommodation entries on account of unsecured loans
7.3. The appellant claimed that the alleged escapement of income for which notice u/s 148 is issued in the instant case is not represented by any assets in view of the provisions of section 149 effective for the relevant assessment year. Therefore, the issue to be decided is whether 'bogus loans and advances' as recorded by the assessing officer represent in the form of asset as prescribed by section 149(1)(b) of the Act. Section 149(1)(b) of the Act at the relevant period of time prescribes that the escaped income must be represented in the form of an asset. The term 'asset is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account.
7.4 The appellant contended that as per accounting concept, 'debit' denotes asset' and 'credit denotes 'liability', it had received "Loans' which is not an asset RSD Containers Pvt Ltd. vs ITO but liability of the company According to the appellant, since the same is a liability to the appellant, it cannot be included in the definition of asset. The appellant further contended that if any credits in a regular bank account, like sale proceeds/loan etc. is found to be unexplained, then it may be a case of discovery of an undiscounted 'income/cash credit but not as discovery of an undisclosed 'asset' by Revenue. I do not agree with this argument for the reason that the information available with the assessing officer indicated that the appellant received bogus loans and advances from Paper/Shell company managed by 'Mr. Shripal Vohra' and 'Bogus Loans and Advances is defined in the Income Tax Act as Type of "asset" as per section 149(1)(b).
7.5 Since, escapement is covered under the definition of "assets" prescribed under section 149(1)(b). I hold that the issue based on which the assessing officer formed opinion about the alleged escapement of income in the present case is covered by the definition of an "asset". Accordingly. I hold that there is no merit in the contention of the appellant that the alleged escapement does not represent "in the form of asset". In view of the above, I reject the ground No. 2 raised by the appellant.
8. Vide ground no. 3, the appellant contended that the addition made is against principles of natural justice and denies the assessee fair opportunity to put up its case.
8.1 The AO has given a finding that all the notices including the notice under section 148 of the Act, have been duly served on the address of the appellant and none of the notices have returned back. As noted from the assessment order, the AO has issued multiple notices and show cause notices which were duly served on the assessee. Following notices issued by the AO Notice u/s 148 dated 28.07.2022 Notice u/s 143(2) dated 23.12.2022 Notice u/s 142(1) dated 27.12.2022 Notice u/s. 142(1) dated 07.01.2023
Show Cause notice dated 02.05.2023 RSD Containers Pvt Ltd. vs ITO 8.2 In the instant case, the assessee not only responded to the notices u/s. 142(1) and Show Cause Notice dated 07.01.2023 and 02.05.2023, but also, participated in the proceedings till the matter reached the Commissioner (Appeals) The assessee uploaded its reply on 10.01.2023 and 08.05.2023 in ITBA portal during assessment proceedings. Having responded and participated in the proceedings, the appellant cannot be allowed to turn around and raise objection that the appellant was not given proper opportunity before passing the re-assessment order. In the circumstances, this ground is dismissed.
9. In Grounds of Appeal no. 4 and 6, the appellant contended that the AO had erred in law and in fact in making addition of Rs. 1,37,00,000 by treating as unexplained credit u/s. 68 r.w.s. 115BBE of the Income Tax Act, 1961
9.1 I have examined both the assessment order and the grounds of appeal presented by the appellant. As per the Assessment order, it is mentioned that the companies from whom, the appellant had received unsecured loans of Rs. 1,37,00,000/- were paper companies, the assessing officer had concluded that the appellant had managed its untaxed income earned during the year through these companies and accordingly, an amount of Rs. 1,3700,000/- credited in the books of account of the appellant was treated as unexplained credit u/s 68 rw.s. 115BBE of the Act and added to the total income of the appellant Moreover, with regard to taxability of only peak credit of Rs. 75,00,000/-, the assessing officer has given a finding that the claim of the appellant was without any supporting evidence and hence the AO had not accepted the contention of the appellant 9.2 The appellant has not produced any evidence and made no efforts at any stage to prove that the loan received was not an accommodation entry During the course of the re-assessment proceedings, it has been observed that the appellant entered into transactions with Paper/Shell companies and in spite of offering sufficient opportunities, the appellant neither furnished any details regarding the transactions nor explained the source of amount(s) involved in said transactions In view of this, the assessing officer observed that the onus is on the appellant to explain the nature and purpose of the amount of Rs 1.37,00,000/-transferred by the said accommodation entry provider. Therefore, I confirm the addition of Rs.1,37,00,000/- u/s 68 by AO for want of evidence.
10. Vide ground no. 5, the appellant is contending that the AO erred in not allowing set off of unabsorbed depreciation of Rs. 48,59,280/- carried forward from A.Y. 2014-15 and 2015-16 against income of Rs 1,37,00,000/- added u/s. 68.
10.1 In support of its ground of appeal, the appellant submitted before me vide submission dated 13.02.2024 that the unabsorbed depreciation is entitled to be set off against income of Rs. 1,37,00,000/- added u/s. 68 and only balance of Rs. 88,40,720/- liable to be taxed u/s 115BBE. The appellant further contented that Amendment to section 115BBE(2) made from Assessment Year 2017-18 restricts the set off of loss but there is no restriction on set off unabsorbed depreciation. Set off of Unabsorbed depreciation is on a different footing vis-a-vis Unabsorbed Loss.
10.2 Section 115BBE is inserted by Finance Act 2012 with effect from 1.4.2013. Through Finance Act 2016, an amendment to sub-section 2 of Section 115BBE was carried out. The section reads as follows
"After section 115BBD of the Income-tax Act, the following section shall be inserted with effect from the ist day of April 2013, namely:-
"115BBE. Tax on income referred to in section 68 or section 69 or section 69A or section 698 or section 69C or section 69D-(1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 698, section 69C or section 69D, the income-tax payable shall be the aggregate of-
(a) The amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 698, section 69C or section 69D, at the rate of thirty per cent, and (b) The amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause(a)
(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1)"
10.3 Circular No 11 of 2019 dated 19.6.2019 of CBDT guides the department as procedure followed in cases arising under Sections 14, 68 and 115 has dealt with the procedure pre and post 1.4.2017 on the entitlement of business loss set off by the assessee. The CBDT Circular reads thus:
"In this regard, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that in assessments prior to assessment year 2017-18 while some of the Assessing Officers have allowed set off of losses against the additions made by them under Section(s) 68/69/69A/698/69C/69D, in some cases, set off of losses against the additions made under Section 115BB(1) of the Act have not been allowed. As the amendment Inserting the words or set off of any loss is applicable with effect from 1 of RSD Containers Pvt Ltd. vs ITO April. 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18 The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18
3 The Board has examined the matter The Circular No 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE It also further mentions that the pre-amended provision of section 1158BE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016
Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, wef 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act bill the assessment year 2016-17..
10.4 It is undisputed that because of several court decision including Hon'ble Kerala High Court Kerala allows set off of business losses against unexplained income for the years prior to assessment year (AY) 2017-18 based on the Board's circular dated 19.06.2019 (Supra). Hence, in my opinion set off of loss includes business loss as well as unabsorved depreciation also. My view is got strengthen with this fact that New section 79A has been introduced by the Finance Act, 2022, w.e.f. 01.04.2022, wherein it is clearly mentioned that no set off of losses, against any such undisclosed income, whether brought forward or otherwise, or unabsorbed depreciation under sub section (2) of section 32, shall be allowed to the assessee under any provision of this Act in computing total income.. Therefore, since, the case at hand is of the assessment year, 2017-18 and during that year no set off of loss (including unabsorbed depreciation) was allowed against income u/s. 68, I dismiss this ground.
11. Vide ground no. 7, the appellant is contending that the assessing officer erred in not allowing credit of MAT of Rs. 22,10,576/- available for credit as per return.
11.1 Since, I have already decided issue of giving credit of any losses including unabsorbed depreciation, which includes MAT credit also against undisclosed income u/s. 68 of the Act in foregoing paragraph 10 of this order, the ground no. 7 raised by the appellant is dismissed.
5. Aggrieved with the finding recorded in the order of the ld. CIT(A), the assessee preferred the present appeal before this tribunal. To support the various grounds so raised by the ld. AR of the assessee, he has relied upon the written submissions which reads as follows :
The appellant company has been engaged in the business of manufacturing of corrugated boxes. It had filed its ITR for the relevant AY on 06/11/2017 vide e filing acknowledgement no. 292344431061117 declaring NIL income. Copy of ITRV and computation of Income are available at (APB 1-4). The ITR was processed u/s 143(1) of the Income Tax Act, 1961 on returned income. On 02.06.2021 the ld. AO issued notice u/s 148 of the Income Tax Act, 1961 with the approval of the JCIT of the range (APB 5). In response thereto the appellant filed its ITR by repeating the same ITR as had been filed u/s 139(1). Thereafter notice u/s 142(1) was issued on 12.11.2021 seeking some details and in response thereto the appellant provided the desired detailed and demanded for providing with the reasons for reopening , copy of approval given by higher authorities etc. Such response of the appellant is available at (APB 6). The ld. AO provided a copy of screen shot (APB 7) bearing the PAN and name of the appellant and PAN of primary source and details of information. The information showed that the appellant had received accommodation entry for Rs. 1.37 Crores which and hence was alleged to be unaccounted income of the appellant for the year under consideration. The appellant demanded for details of such transactions i.e. person who provided the stated sum of Rs. 1.37 Crores to the appellant, date of transactions, mode of transaction etc. but nothing was provided by the ld. AO even till date. On 04th May, 2022 the Hon`ble SC pronounced its decision in the case of UOI and Others v/s Ashish Agarwal and the CBDT also came out with instruction no. 01/2022 on 11.05.2022. In pursuance thereto the ld. AO issued a letter dated 01/06/2022 with the caption providing information and material relied upon for initiating reassessment proceedings u/s 148A of the Income Tax Act, 1961 (APB 8-9). In this letter an annexure A was provided containing the so called material wherein it was mentioned that as per Insight portal an information was flagged stating that the appellant had received accommodation entry from paper company operated by Shripal Vohara for Rs. 1.37 Crores. No any other sort of attachment was RSD Containers Pvt Ltd. vs ITO provided by the ld. AO. The ld. AO allowed 15 days time to file the response. The appellant filed response to this letter on 13.06.2022 (as narrated by ld. AO in order u/s 148A(d) and appearing at APB 11-13). Appellant raised various objections to this proceedings but the ld. AO passed order u/s 148A(d) of the Income Tax Act, 1961 by rejecting almost all objections raised by the assessee vide his order dated 28.07.2022 deeming the case to be fit for issuance of notice u/s 148 (APB 10-15) and a fresh notice u/s 148 was issued by him vide notice dated 28.07.2022 with the sanction from PCIT – 2, Jaipur (APB 16). During the assessment proceedings the appellant again and again demanded for the material available with the department on the basis of which the reassessment proceedings were initiated but nothing was provided except the screen shot. The ld. AO (Faceless Assessment Unit) considered such alleged accommodation entry for Rs. 1.37 Crore as unexplained cash credit u/s 68 and taxed the same in terms of section 115BBE of the Income Tax Act, 1961 1ST Appeal The assessment order so passed by assessment unit was appealed before the Ld. CIT (A), NFAC who also sustained the addition made by ld. AO. Submissions :- The appellant wishes to withdraw ground nos. 1, 5,6,7 and 8 as taken in Memo of appeal. Hence the same may kindly be permitted to the appellant. Ground No. 2 : That the whole proceedings undertaken u/s 147/148 are vitiated on account of following reasons:- a. Notice has been issued without jurisdiction and proper sanction. Notice is not as per provisions of law as amended w.e.f. 01.04.2021. Further the new notice dated 28.07.2022 is also without proper sanction as per section 151 of the Income tax Act, 1961. b. The condition of Section 149 of escaped income being represented by ‘asset’ is not satisfied. c. reopening without providing the material which suggests escapement of income is against principles of Natural Justice. d. The ld. AO has issued notice u/s 148 without application of his independent mind and merely acted on the information received by him from another wing of the department. e. The ld. AO did not have complete information about alleged escapement of income by the assessee which did not satisfy the conditions stipulated u/s 147. f. The notice has not been issued in faceless manner as per provisions of section 151A of the Income Tax Act, 1961. Regarding the whole proceedings the appellant has following objections :- Notice without proper sanction and not in accordance with law a. The first notice u/s 148 dated 02.06.2021 with an allegation of concealment of income of more than Rs. 50 Lacs was issued for which the time limit for issuance of the notice u/s 148 was not expiring during 20th March, 2020 to 31st March, 2021 and therefore there was no requirement of considering the said notice as covered in the judgement of the Hon`ble SC in the case of Ashish Agarwal, and benefit of TOLA is as such not available in the present case. This position was admitted by the ld. Additional Solicitor General of India during the hearing in the case of UOI v/s Rajeev Bansal and Others (Case Law PB 10-47) as mentioned in para 19 of the said order of the Hon`ble SC (Case law PB 17-18) . Hence the notice so issued has to be determined as has been issued under new regime only and as the notice was issued after three years the same was required to be issued with the prior approval of the PCCIT/PDGIT/CCIT/DGIT as per section 151(ii) as against which the same was issued with the sanction of JCIT (APB 5) and hence is invalid.
Any way the ld. AO however undertook the exercise as per directions of the Hon`ble SC in the case of Ashish Agarwal and he issued a letter dated 01.06.2022 to the appellant providing material to the assessee for taking a fresh decision on issuance of notice u/s 148. The same was replied by the appellant by raising many objections but the ld. AO decided the case to be fit for issuance of notice u/s 148 and issued a fresh notice on 28.07.2022 under section 148. The Hon`ble SC in the case of UOI and Others v/s Rajeev Bansal (2024 ITL 4249) held (Case Law PB 45-46) that TOLA over rides the provisions of Income Tax Act, 1961 and held all the notices issued during 01.04.2021 to 30.06.2021 as valid but the Hon`ble SC observed that by excluding the time as per proviso to section 149 the remaining proceedings were liable to be completed within the time frame i.e. upto 30th June, 2021. The relevant observations of the Hon`ble SC are in para 108 to 113 as per which following position emerges :-
Deemed date of issuance of notice u/s 148A(b)
Days left for issuance of fresh notice 28 days (Gap between 30.06.21 and date of issue of first notice)
Fresh letter issued for providing material to the assessee 01.06.2022 Time allowed for response to be filed by the Assessee 16.06.2022 Response file by assessee on 13.06.2022
Therefore the pending requirement of considering material available on record and reply of the assessee, forming opinion whether the case is fit for 148 and getting approval from higher authorities were to be completed within 28 days starting from 13.06.,2022/16.06.2022 and which expired on 11.07.2022/14.07.2022 as against which fresh notice u/s 148 was issued on 28.07.2022 (APB 16) and hence is time barred and no benefit of TOLA (even if applicable) is available in this case. So far as compliance to section 151 of the Income Tax Act, 1961 is concerned the Hon`ble SC in the case of Rajeev Bansal has stated about the authority who could sanction the notice u/s 148 in para nos. 73 to 81. In Para 81 (the concluding para) the Hon`ble SC has mentioned as under :- “81. This Court in Ashish Agarwal (supra) directed the assessing officers to “pass orders in terms of Section 148-A(d) in respect of each of the assessees concerned.” Further, it directed the assessing officers to issue a notice under Section 148 of the new regime “after following the procedure as required under Section 148-A.” Although this Court waived off the requirement of obtaining prior approval under Section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. These notices ought to have been issued following the time limits specified under Section 151 of the new regime read with TOLA, where applicable.” Therefore as per the Hon`ble Apex Court also the notices issued u/s 148 of the Income Tax Act, 1961 after 01.04.2021 were required to be issued with prior approval of the higher authority as per section 151 of the new regime. In the instant case since both the notices dated 02.06.2021 and 28.07.2022 were issued after three years from end of assessment year and hence required prior sanction of PCCIT/PDGIT/CCIT/DGIT as against which the sanction was taken from JCIT and PCIT respectively and hence there is clearly violation to this mandatory condition making both these notices (APB 5 and 16) as issued without proper sanction and hence are illegal. Reliance is also placed on the judgement of the Hon`ble Rajasthan High Court in the case of Dhadda Exports v/s ITO, Ward 1(1), Jaipur (377 ITR 347) wherein the Hon`ble Court was dealing with a situation wherein the sanction for issuance of notice u/s 148 was taken from JCIT in place of CIT/CCIT and on such irregularity the Hon`ble Court quashed the notice u/s 148 and the assessment order passed in consequence thereto and also further held that such defect is not curable u/s 292B of the Income Tax Act, 1961. It is therefore sincerely prayed that the instant notice(s) issued u/s 148 may kindly be declared as void ab initio and the assessment order passed in consequence thereto may also please be quashed. Copy of the cited judgement is enclosed at Case Law APB 48-52. The appellant would also like to place its reliance on the recent judgement of the Hon`ble Delhi High Court in the case of Kusum Healthcare P ltd. v/s DCIT (W.P. (C) No. 383/2023 vide order dated 05.03.2025) wherein the issue was also about sanctioning authority for issuing notice u/s 148. In this judgment the Hon`ble Court has stated as under :- “38. It would therefore be wholly incorrect to read the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act as intending to amend the distribution of power or the categorization envisaged and prescribed by section 151. The additional time that the said statute provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by section 151 of the Act. The issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant assessment year or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant assessment year or thereafter. The bifurcation of those powers would continue unaltered and unaffected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act.
What we seek to emphasize is that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act authorization merely enables the competent authority to take action within the extended time period and irrespective of the closure which would have ordinarily come about by virtue of the provisions contained in the Act. It does not alter or amend the structure for approval and sanction which stands erected by virtue of section 151. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act merely extended the period within which action could have been initiated and which would have otherwise and ordinarily been governed and regulated by sections 148 and 149 of the Act. If the contention of the respondents were to be accepted it would amount to us virtually ignoring the date when reassessment is RSD Containers Pvt Ltd. vs ITO proposed to be initiated and the same being indelibly tied to the end of the relevant assessment year. Once it is conceded that the notice came to be issued four or three years after the end of the relevant assessment year, the approval granted by the Joint Commissioner of Income-tax would not be compliant with the scheme of section 151. We thus find ourselves unable to sustain the grant of approval by the Joint Commissioner of Income-tax.” The Hon`ble Delhi High Court has also very categorically mentioned that approval for issuance of notice u/s 148 was required to be taken as per time gap between the Assessment Year and time when this notice was to be issued and TOLA did not amend the hierarchy set up under section 151. Therefore in this present appeal both the notices u/s 148 were not issued with proper approval and hence the whole proceedings including the assessment order are liable to be quashed being illegal. Escapement not represented in the form of asset b. Without prejudice to above submissions it is submitted that requirement as per provisions of section 149 of the Income Tax Act, 1961 prevailing at the time of issuance of notice u/s 148 on both the occasions was that for issuing notice after three years but before 10 years the income chargeable to tax was required to be represented in the form of asset and the word asset was defined to include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account etc. but in this case the allegation was for an accommodation entry for Rs., 1.37 Crores alleged to had been taken by the appellant and there was no allegation that income chargeable to tax was held in the form of asset as defined. Therefore on this score also the notice is bad. Non providing of relevant material for reassessment c. The appellant demanded for providing complete information to him regarding the parties from whom the alleged accommodation entry was obtained, date of transaction and mode of transaction etc. but nothing was provided by the ld. AO/ JAO in spite of so many reminders as detailed hereunder :- 1. Reply to 142(1) issued in pursuance of first notice u/s 148 APB 6 2. Submission dated 10.01.23 to Assessment Unit APB 17-26 3. Submission dated 08.05.23 to Assessment Unit APB 27-28 4. Submission dated 11.05.23 to Assessment Unit APB 29-30 5. Submission dated 13.02.24 to CIT (A) APB 31-33 6. Request again filed to JAO on 21.06.24 APB 34 7. Submission dated 15.07.24 to CIT (A) APB 35 8. Submission dated 03.09.24 to CIT (A) APB 36 RSD Containers Pvt Ltd. vs ITO It is apparent from all above evidences that even upto 03.09.2024 the appellant tried time and again for providing it with the relevant documents on the basis of which reassessment proceedings have been initiated against the assessee but no document was provided to the appellant till now. The Hon`ble Rajasthan in the case of Micro Marbles P Ltd. v/s ITO (457 ITR 569) held that non providing of relevant material to the assessee in connection with reasons for initiation of reassessment proceedings vitiates the whole proceedings. In this cited case also the Hon`ble Court quashed the notice u/s 148 and the assessment order passed in consequence thereto due to failure of the AO in providing relevant material to the assessee. Therefore on this score also the reassessment proceedings is liable to be quashed. Copy of said judgement is available in case law APB 53-60. Non application of mind by the AO d. From the whole proceedings undertaken in this case it transpires that the ld. AO was having only a piece of information flagged on insight portal and only on the basis of such information he framed reasons to believe the concealment and issued notice u/s 148 without application of mind. It has been held by various judicial authorities that no notice u/s 148 can be issued on borrowed satisfaction of another wing or another officer of the department and the AO has to apply his independent mind for reaching on the satisfaction about concealment. Reliance is placed on the judgment of the Hon`ble Delhi High Court in the case of PCIT-6 v/s Meenakshi Overseas P Ltd. (Del HC) (2017 ITL 1010) wherein the Hon`ble Court concurred with the view of the Hon`ble ITAT in quashing the 148 proceedings in view of the fact that the ld. AO while issuing notice merely reproduced the conclusion of other wing of the department and did not apply his independent mind for reaching on the satisfaction of concealment. Copy of cited judgement is being enclosed at Case Law APB 61-70 Incomplete information with ld. AO for reassessment e. It is also apparent that the ld. JAO as well as AO seems to be not having any document in his possession except the screen shot otherwise the same would have been provided to the assessee for which so many demands were raised and hence there was no reason for the ld. AO to form belief that any income has left to be assessed. Proceedings u/s 148A were not carried in faceless manner f. In this regard this is also to submit that the proceedings of issuing notice u/s 148, 148A(b) and 148A(d) have been carried by jurisdictional AO and not in a faceless manner as envisaged u/s 151A of the Income tax Act, 1961. Therefore the whole proceedings are liable to be quashed. Reliance is placed on Hexaware RSD Containers Pvt Ltd. vs ITO Technologies Ltd. v/s ACIT and others (464 ITR 430) (Mumbai HC) , Kairos Properties P Ltd. v/s ACIT and Others (241 DTR 97) (Mumbai HC) and Nava Diganta Builders and Others v/s UOI and Others (Calcutta HC) (WPA No. 16784 of 2024 vide order dated 21.08.2024). Therefore on this score all the proceedings are liable to be quashed. Ground No. 3 : That assessment made without providing the assessee the material on which addition has been made is against principles of natural justice and denies the assessee fair opportunity to put up his case. Non provision of information makes the assessment illegal. Assessee has been denied reasonable opportunity to put up his case. Further the assessment has been framed passing a non speaking order without considering the replies of the assessee. The assessment framed deserves to be annulled and declared null and void. Submissions on above ground stand covered in ground no. 2 (c). The assessment in this instant case is liable to be quashed on account of non providing of material to the assessee as held by the Hon`ble jurisdictional High Court of Rajasthan in the case of Micro Marble (supra). Ground No. 4 : That WITHOUT PREJUDICE to ground no. 1 to 3, the learned C.I.T. Appeals erred in confirming addition of Rs. 1,37,00,000/- as unexplained credit. The addition made is unjust and deserves to be deleted. The Ld. CIT (A) has sustained the action of the ld. AO in considering the alleged accommodation entry as unexplained cash credit by stating in paras 9.1 and 9.2 of his order as under :- a. As per assessment order the companies from whom appellant had raised loan during the year under consideration were paper companies and the ld. AO had concluded that the appellant managed the untaxed income earned during the year through these companies
b. The appellant has not produced any evidence to prove that loans so raised by the appellant were not accommodation entries. The appellant did not produce any details regarding these transactions nor explained the source of amount involved in these transactions. On these observations of the ld. CIT (A) the appellant would like to submit :- 1. The ld. CIT did not take into consideration that the parties from whom the appellant had raised loans were not disclosed by the ld. AO nor any information was provided by him to the assessee for above alleged accommodation entry.
RSD Containers Pvt Ltd. vs ITO The appellant on his own came forward vide his submissions dated 10.01.2023 (Back Page APB 19) wherein it was submitted that in absence of any details provided by ld. AO it was presumed that the ld. AO may be referring to loans taken from two companies namely Rati Diamonds P Ltd. and Kripanidhi Gems P Ltd. during the year under consideration as the appellant had raised loans from these two companies during the year and the appellant had submitted confirmations, bank statements and ITRs of these parties also, without there being any query from the side of ld. AO. As the ld. AO was not having information about parties from whom alleged accommodation entry was taken by the appellant and nothing was provided to the appellant also, there was hardly any reason for him to treat these loans as alleged accommodation entry. Further there is no comment made by ld. AO on the sanctity of the documents submitted by the appellant relating to above named two parties. In the observations of the ld. AO at page 2 (last para) he has stated that these two companies were paper companies. It is not known as to on what basis he has treated these two companies as paper companies. He has nowhere established that he was having information about alleged accommodation entries with respect to these two parties. The ld. JAO did not share any detail with the appellant about the parties from whom the assessee had received alleged accommodation entry and no statements of Shripal Vohara or any other concerned persons were provided to the appellant.
The appellant has enclosed confirmation of both these parties along with their bank statements and ITRs (APB 21-26), which were submitted to ld. AO also. The ld. AO is silent on these documents. With these documents the assessee has clearly established the ingredients of section 68 and no adverse view was to be taken. As the very basis of reopening of the case was alleged accommodation entry for Rs. 1.37 Croes for which the ld. AO was supposed to be having complete details about the parties who provided accommodation entries along with mode of remittance, dates of such remittance etc. and he was also required to provide all such details to the appellant which were never provided to the assessee and on the basis of details provided by the assessee on its own, the ld. AO tried to establish that these companies from whom loans were taken to be accommodation entries. He has not even tried to verify whether these loans taken from these two companies were of Rs. 1.37 Crores and how the alleged figure of Rs. 1.37 Crore has been arrived at and he has also not disallowed interest paid by the appellant to these companies and claimed as a business expenditure. This all shows that the ld. AO was having pre conceived notion for making addition in the income of the assessee. The way which he has followed RSD Containers Pvt Ltd. vs ITO and confirmed by ld. CIT (A) is not valid as per law and their action deserves to be quashed.
2. It is really strange to find the argument of the ld. CIT (A) that the appellant did not try to prove that these loans were not accommodation entries. The appellant on its own had submitted confirmations, Bank statements and ITRs of lenders which amply prove all the ingredients of section 68 and the assessee has proved genuineness of the transactions. It was the onus of the department to prove that these loans were not genuine and were accommodation entries. The appellant had submitted all documents in connection with these loan transactions. If the ld. AO or the ld. CIT (A) had any query about these documents they were supposed to raise such query but nothing was queried by them and in absence of any such query raised by ld. AO or CIT (A) the documents submitted by the appellant were required to be accepted. Therefore the action of the ld. AO and CIT (A) is patently wrong in considering the genuinely raised loans by the assessee as accommodation entry and taxing the same as unexplained cash credit u/s 68. The same deserves to be deleted.
In this connection it is also alternatively submitted that even if the appellant had taken accommodation entries from some parties controlled by one person who is Mr. Shripla Vohara in the instant case the assessment of undisclosed income was to be worked out as per peak theory. Without admitting about these loans as accommodation entries the appellant would like to further submit if the department considers a loan raised by the assessee as accommodation entry means that the assessee had paid equivalent amount in cash and similarly when the loan is repaid through cheque or any other banking mode equivalent amount would have been received in cash. In such situation only peak amount could have been added. Therefore if at all addition could have been made the same has to be for peak amount only. Your honour is sincerely requested to consider above submissions favorably and allow the appeal in toto.
5.1 The ld. AR of the assessee vide submission dated 15.07.2025 also placed on record the following submission for consideration; RSD Containers Pvt Ltd. vs ITO In support of the arguments raised by the appellant during hearing in the above case the appellant wishes to submit following documents :-
1.
1. Assessment Order passed in the case of Shri Rachit Jain (PAN: ADIPJ7265R) for the AY 2016-17 wherein also the case was reopened on the basis of information received from Investigation wing Gujarat about search undertaken in case of Shripal Vora group but later on since the information was found to be wrong and hence the Id. AO dropped the proceedings. Therefore in the instant case of the appellant also the authenticity of the information was not examined and there is every possibility that the information about the appellant on the basis of which case was reopened was also wrong. The appellant had raised this submission before the Id. CIT (A) in submissions dated 13.02.2024 (APB 31-33). The relevant para is appearing at back page of APB 31 wherein the appellant referred to this assessment of Shri Rachit Jain. The assessee had specifically asked to provide the details of accommodation entries (Name of the Entity and amount) which were never provided at any stage to the assessee. In view of this fact the assessment order of Rachit Jain is not a new piece of evidence and hence it is sincerely requested that the same may kindly be considered for deciding the case and oblige. This submission is relevant to ground no. 2(d) and 2(e) in the Appeal.
2. Very recently the appellant came across with a judgement of the Hon'ble Mumbai Bench of ITAT vide order dated 28.02.2025 passed in wherein proceedings u/s 147/148 were quashed by the Hon'ble Bench by relying on the judgment of the Hon'ble SC in the case of Rajeev Bansal (469 ITR 46). As the appellant also relied on this very judgment to argue that the second notice issued u/s 148 of the Income tax Act, 1961 dated 28.07.2022 was issued beyond the extended time permissible (28 days from 16.06.2022) i.e. beyond 14.07.2022. This was in addition to our objection that no time limit was expiring between 20.03.2020 to 31.03.2021 and TOLA is not at all applicable in our case. Copy of this cited judgement is also enclosed for your kind verification. Your honors are sincerely requested to admit both the above documents and consider the same for deciding the instant appeal of the appellant. On last date of hearing your honour had although considered the appeal as heard but allowed liberty to the Id. SR to file further submission within 7 days which time is yet to expire and hence the appellant also has thought it proper to substantiate the arguments raised during hearing of the matter.
6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:
SN DESCRIPTION PAGE NO.
1. ITR V and computation of Income of the Appellant 1-4 2. Notice dated 02.06.2021 issued u/s 148 5 3. Response filed by the appellant on notice u/s 142(1) during first round of 6 assessment in pursuance to notice dated 02.06.21 issued u/s 148 4. Copy of Reason for reassessment as provided by the ld. AO 7 5. Subsequent notice dated 01.06.2022 issued in pursuance to Order of 8-9 the Hon`ble SC in the case of Ashish Agarwal 6. Order u/s 148A(d) dated 28.07.2022 10-15 7. Notice u/s 148 dated 28.07.2022 16 8. Submission dated 10.01.2023 filed before assessment unit 17-20 9. Confirmation of Kripa Nidhi Gems P Ltd. and its bank statement, ITR 21-22 10. Confirmation of Rati Diamonds P Ltd. and its bank statement, ITR 23-26 11. Submission dated 08.05.2023 filed before assessment unit 27-28 12. Submission dated 11.05.2023 filed before assessment unit 29-30 13. Submissions dated 13.02.2024 filed before ld. CIT (A) 31-33 14. Letter to AO filed on 21.06.2024 seeking details about entries 34 15. Submissions dated 15.07.2024 filed before ld. CIT (A) 35 16. Submissions dated 03.09.2024 filed to ld. CIT (A) 36 17. Computation of Income of the appellant for AY 2016-17 37-38 S. No. Description Page no. 1 Audited Balance Sheet and P & L Account for 31.03.2024 1-10 2 Bank statement of the assessee for November, 2024 11-21 3 Screen shot of information with AO used for issue of notice u/s 148 22 4 Notice u/s 148 dated 02.06.2021 23 5 Notice u/s 148 dated 28.07.2022 24 S. No. Description Page No. 1 Assessment Order u/s 147 in the case of Rachit Jain A.Y 2016-17 1-3
2 Order of the Hon’ble ITAT Mumbai in the case of Ramchand Thakkurdads 4-7 Jhamtani
PAGE DESCRIPTION SN NO. 1. 1-9 Rajasthan High Court in Shyam Sunder Khandelwal and others v/s ACIT, C.C. 2 and Others (471 ITR 45) 2. 10-47 Supreme Court in the case of UOI and Others v/s Rajeev Bansal (2024 ITL 4249)
3. 48-52 Rajasthan High Court in Dhadda Exports v/s ITO, Ward 1(1), Jaipur (377 ITR 347) 4. Rajasthan High Court in Micro Marbles P. Ltd. v/s ITO (457 ITR 569) 53-60
61-70 Delhi High Court in PCIT — 6 v/s Meenakshi Overseas P Ltd. (2017 ITL 1010)
The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the return of income so filed by the assessee was proceeds as per provision of section 143(1) of the Act accepting income as returned by the assessee. The ld. AR of the assessee submitted that the ld. AO issued notice u/s. 148 of the Act on 02.06.2021 which was issued after taking sanction of JCIT, Range-7, Jaipur. The ld. AO based on the decision of the apex court suppose to provide the complete material instead he provided merely a screenshot. Thereby it is clear that the ld. AO did not have any material so as to form belief as to the escapement of any income. Thus, ld. AO proceeded without providing principles of natural justice. The assessee objected as no material relied upon material provided but the ld. AO did not deal with that aspect even though the same was taken up by the assessee. As the year under consideration was not expiring as on 31.03.2021 the extension of TOLA will not apply to the facts of the case relied upon page 9 and 10 of Rajeev Bansal case placed in case law paper book page18-19. And thereby the notice is required to be issued in new regime and thereby require the sanction of PCCIT and the same was not acquired in the year and therefore even on that count the assessment framed is bad in law and required to be quashed.
8. The ld DR is heard who relied on the findings of the lower authorities.
She vehemently argued that contention of the assessee that notice was not issued properly is incorrect and for that contention she relied upon the decision in the case of Deepak Agro Foods Vs. State of Rajasthan for issue of notice under sales tax laws and thereby submitted that the assessee merely finding technical default in the notice cannot say the proceeding were invalid. As the revenue was in possession of the information that the assessee has availed the accommodation entry from Shri Shripal Vora in assessee found to be beneficiary for accommodation entry. The ld. DR also filed the following written submission in this regard;
Preliminary Objection: Misplaced Reliance on Procedural Grounds The assessee has primarily challenged the reopening proceedings u/s 147/148 on procedural and jurisdictional grounds including sanction, limitation, non- availability of "asset" condition, and breach of natural justice. These contentions are misplaced, factually incorrect, and legally untenable for the following reasons:
2. Reopening is Valid and in Accordance with Law
2.1 Compliance with Supreme Court judgment in Union of India v. Ashish Agarwal
The original notice dated 02.06.2021, though issued under old Section 148, stood converted into a deemed notice under Section 148A(b) as per SC judgment in Ashish Agarwal (2022) 444 ITR 1 (SC). Following CBDT Instruction No. 1/2022 dated 11.05.2022, the AO duly issued:
Section 148A(b) notice (via letter dated 01.06.2022), Passed speaking order u/s 148A(d) on 28.07.2022, Issued fresh notice u/s 148 with proper sanction.
2.2 Section 149(1)(b)- Condition of Escapement Represented in Form of 'Asset' Satisfied
Section 149 Explanation defines "asser" to include "loans and advances."
The Insight Portal flagged the assessee for accommodation entries of ₹1.37 crore, categorized as bogus unsecured loans clearly falling within the meaning of "loans and advances" as asset.
Hence, both criteria of Section 149(1)(b) are satisfied:
3. Section 151 Compliance - Proper Sanction Obtained
The fresh notice issued on 28.07.2022 was issued within prescribed limitation and with approval of PCIT, as per amended Section 151.
The assessee's claim that sanction must be from "PCCIT/CCIT" is misconceived.
Ashish Agarwal and Rajeev Bansal (SC) clarified that the notice is deemed valid under the new law post-April 2021.
The administrative approval from PCIT satisfies the requirement under Section 151(ii) for cases beyond 3 years.
4. Natural Justice Fully Complied With - No Violation
Contrary to the assessee's repeated assertions, all statutory notices under Sections 148A, 148, 143(2), and 142(1) were duly issued and responded to.
The assessee has mischaracterized the absence of "incriminating documents":
The reassessment was triggered based on flagged high-risk information on the Insight Portal linked to Shripal Vohra's shell entities,
The assessee was provided screenshot and summary details of such flagged entries.
In such cases, the Insight Portal is now recognized as a reliable input mechanism. especially where:
The flagged entities (Rati Diamonds Pvt. Ltd. and Kripanidhi Gems Pvt. Ltd.) have been conclusively identified in other cases as paper companies linked to Mr. Shripal Vohra.
The assessee's blanket denial of any connection cannot be accepted merely because Vohra's statement was not enclosed. 5. On CIT(A) Findings and Section 68 Addition
The companies from which the assessee claimed to have received unsecured loans failed the test of creditworthiness and genuineness.
Assessee failed to discharge its initial burden under Section 68 despite repeated opportunities.
The documents furnished by the assessee (confirmations, ITRs, and bank statements) were not verified or cross-examined, and no evidence of creditworthiness or genuine business relationship was shown.
The CIT(A)'s finding that these are shell/paper companies based on wider departmental investigation is well-founded.
6. Peak Credit Theory Not Applicable in Accommodation Entry Cases
The "Peak Credit" principle applies to gemine, recurring, and cyclic banking transactions, not one-time accommodation entries.
In cases involving bogus loan entries from shell companies, courts have repeatedly held that entire amount can be added u/s 68, not merely the peak. Relied on:
PCIT v. NRA Iron & Steel Pvt. Ltd (2019) 103 taxmann.com 48 (SC)
Pr. CIT v. NDR Promoters Pvt. Ltd. (2022) 138 taxmann.com 499 (SC)
7. Misplaced Reliance on Abhisar Buildwell (SC) Inapplicable
The assessee's claim that reassessment under Section 147 is barred due to Abhisar Buildwell v. PCIT (SC) is wholly misplaced.
Abhisar Buildwell dealt with Section 153A/153C, ie., search assessments, and held that additions unrelated to incriminating material found in search are invalid.
The present case arises under Section 147, based on external flagged information (Insight Portal), not a search under Section 132.
Set-Off of Unabsorbed Depreciation & MAT Credit - Not Admissible under Section 115BBE
From AY 2017-18 onward, as per amended Section 115BBE(2), no deduction or set-off of any loss (including unabsorbed depreciation or MAT credit) is permissible against income deemed under Sections 68 to 69D.
The argument that unabsorbed depreciation is not a "loss" is already settled against assessee.
Relied on: Sudarshan Silks & Sarees v. CIT (2008) 300 ITR 205 (Kar) CIT v. Chimanlal S. Patel (2015) 371 ITR 357 (Guj) PRAYER
In view of the above submissions, the Hon'ble Tribunal is most humbly requested to:
Dismiss all grounds raised by the assessee as devoid of merit. Uphold the validity of reassessment proceedings under Section 147/148. Confirm the addition of ₹1,37,00,000/- under Section 68 r.w.s. 115BBE. Reject plea for peak credit, unabsorbed depreciation, and MAT credit set-off. The ld. DR vide submission dated 14.07.2025 further submitted as under : I. Limitation Period Under Section 149(1)(b) is Fully Alive
The assessee has contended that the reassessment proceedings are barred by limitation. However, this contention is devoid of merit in view of the amended RSD Containers Pvt Ltd. vs ITO provisions of Section 149 of the Income Tax Act, 1961. As per Section 149(1)(b), read with the explanation thereto, reassessment proceedings for Assessment Year (AY) 2017-18 can be initiated up to 31.03.2028 where the alleged escapement exceeds Rs. 50 lakhs and is represented in the form of an asset.
In the present case, escapement of income of Rs. 1.37 crore, represented through accommodation entries traceable to bank transactions and investment- related activities. Thus, the threshold and conditions under Section 149(1)(b) are clearly met.
Even assuming procedural defects, the statutory limitation period for fresh valid reassessment remains open, and therefore, the Department is not barred from taking lawful action.
II. Assessee's Concession on Merits - Peak Theory Admission
The assessee, in its own written submission before the Assessing Officer, has conceded that if any addition is to be made, it should be computed on the basis of the peak credit theory.
This is a categorical acknowledgment that: Certain transactions were not disclosed: Escapement of income did occur.
This admission establishes the Revenue's substantive case. The issue at best is one of quantum determination, not denial of escapement. Therefore, the very foundation of the reassessment under Section 147 stands vindicated.
III. Assessee Has Not Rebutted Deepak Agro Foods (SC)
During the hearing on 08.07.2025, the Department placed reliance on the judgment of the Hon'ble Supreme Court in Deepak Agro Foods v. State of Rajasthan [(2008) 7 SCC 748], wherein it was held that procedural irregularities that do not affect jurisdiction or cause prejudice to the taxpayer do not invalidate substantive legal proceedings.
The assessee has failed to file any counter or rebuttal to the applicability of this judgment. This omission is significant as the principle laid down in Deepak Agro is RSD Containers Pvt Ltd. vs ITO squarely applicable to the present case, where all jurisdictional requirements were fulfilled and the assessee was duly granted opportunity under Section 148A(b).
IV. Prayer
In view of the above, it is most respectfully prayed that:
1. The reassessment proceedings initiated under Section 148 read with 147 may kindly be upheld as valid and within limitation:
2. The assessee's admission regarding applicability of peak credit method may be treated as confirmation of income escapement on merits;
3. Alternatively, and without prejudice, in the event of an adverse procedural finding. the Revenue may be granted liberty to initiate fresh proceedings under Section 148 read with section 149(1) (b) within the surviving statutory limitation period up to 31.03.2028.
Relying on the above submission ld. DR supported the order of the lower authority.
We have heard the rival contentions and perused the material placed on record. At the outset of the hearing of the present appeal the ld. AR of the assessee admitted that he does not want to press the ground no. 1, 5, 6, 7 and 8 thereby the same are treated as dismissed.
Now the left our ground no. 2, 3 & 4 the assessee challenges the order of the assessment on technical ground wherein he challenge that the sanction was not proper, relevant material was not provided and the objection was not disposed off correctly and no information as to the ground for adjudication. In support of the contention ld. AR of the assessee relied upon the written submission, case laws and paper book filed. Even the ld. DR filed a detailed submission and relied upon the case in support of the contentions raised.
Heard the parties on the grounds raised in this appeal by the assessee. The bench noted that the case of the assessee is for A. Y. 2017- 18 and in this case notice u/s. 148 of the Act was issued on 02.06.2021 with the sanction of the JCIT, Range-7, Jaipur. That notice so issued u/s 148 (Old regime) on 02.06.2021, was treated as notice under section 148A(b) of the Act by the assessing officer on account of the landmark judgment in the case of Union of India Vs. Ashish Agarwal.
Record also reveals that thereafter an order u/s. 148A(d) was passed as consequence to the order of Ashish Agarwal case (Supra) on 28.07.2022. After that a notice dated 28.07.2022 was issued u/s. 148 of the Act [ new regime ] after obtaining the approval of PCIT-2, Jaipur. Thus, the notice under section 148 of the Act [ under new regime ] was issued after the expiry of 3 years from the end of the relevant assessment year. Thus, before we proceed further it would be appropriate to deal with the aforesaid (Supra) wherein the apex court has observed as under : b. Interplay of Ashish Agarwal with TOLA 108. The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices under section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.
If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom."] 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of RSD Containers Pvt Ltd. vs ITO two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.
The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime.
Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on 18 August 2022.
In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income- tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred.
Upon going through the above finding of the Supreme court it is very much clear that the assessing officer was required to complete these procedures withing the surviving time limit which can be calculated by computing the number of days between the date of issuance of the deemed limit provided by TOLA for issuing the reassessment notice u/s. 148, which fall for completion from 20.03.2020 to 31.03.2021. The time which has stopped from the date of issuance of notice u/s. 148 under old regime ( which is considered as deemed notice by apex court) would start running again when final reply to the notice deemed to have been issued u/s. 148A(b)of the Act is received by the AO. As it was clarified that the reassessment notice issued beyond the surviving time limit would be time barred.
The bench thus noted that in the case on hand notice u/s. 148 of the Act (old regime) was issued on 02.06.2021 and was deemed to be notice issued u/s. 148A(b) of the Act (new regime). Thus, the surviving time limit can be calculated by computing the number of days between the date of issuance of the deemed notice (i.e. 02.06.2021) and 30.06.2021, which come to 28 days. The clock started ticking only after Revenue received the response of the Assesses to the show causes notices on 13/06/2022. Once the clock started ticking, the Assessing officer was required to complete these procedures within the surviving time limit of 28 days which expired on 11/07/2022. Since notice under Section 148 of the Act was issued on 28/07/2022 which fell beyond the surviving time limit that expired on barred and therefore, bad in law. Therefore, notice, dated 28/07/2022, issued under Section 148 of the Act (new regime), the consequential reassessment proceedings and the Assessment Order, dated 11.05.2023, passed under Section 147 read with Section 144B of the Act are quashed.
10 Even if the argument of the revenue is accepted that the since the time limit for issuance of notice was not expired in this case being A. Y.
2017-18 the notice issued u/s. 148 dated 28.07.2022 [ as is issued after 3 years ] required sanction of the PCCIT but the same is issued with the sanction of PCIT-2,Jaipur and thus, notice issued u/s.148 after lapse of 3 years is bad in law, since the same has been issued without obtaining the approval from Specified authority viz. Pr. CCIT prescribed u/s.151(ii), thereby violating the law settled by Hon'ble Apex Court in the case of UOL vs. Rajeev Bansal (167 taxmann.com 70). Thus, the bench noted that on the identical facts the co ordinate bench of ITAT Mumbai in has decided the issue raised by the assessee as to acquiring the jurisdiction to issue notice u/s. 148 without proper approval and thereby having similar fact the assessment was quashed and in that the co-ordinate Mumbai bench has given the following finding; RSD Containers Pvt Ltd. vs ITO 8. We find that in a recent decision by the Hon'ble Supreme Court in the case of Union of India and other Vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC), dated 03.10.2024, Hon'ble Court after the fall out of its own decision in the case of Ashish Agarwal (supra) had dealt with the issue in respect of sanction of the specified authority and concluded that TOLA will extend the time limit for the grant of sanction by the authority specified u/s.151. According to the Hon'ble Court, the test to determine whether TOLA will apply to section 151 of the new regime is that if the time limit of three years from the end of the Assessment Year falls between 20.03.2020 and 31.03.2021 then, the specified authority u/s.151(i) has extended time till 30.06.2021 to grant the approval. According to the Hon'ble Court, Assessing Officers were required to issue the re-assessment notice u/s.148 of the new regime within the time limit surviving under the Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside. Hon'ble Court had elaborately dealt with this issue in Part E of its decision in para 73 to 78 which are extracted below: 73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assessees from harassment resulting from the mechanical reopening of assessments. 128 A table representing the prescription under the old and new regime is set out below:
The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:
RSD Containers Pvt Ltd. vs ITO (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under Section 148 within four years after obtaining the approval of the Joint Commissioner, and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakha: (0) reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director, and (h) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General 76. Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limita prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.
Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre- conditions due to the difficulties that arose during the COVID-19 pandemic Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will RSD Containers Pvt Ltd. vs ITO accordingly extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under. Section 151(1) has an extended time till 30 June 2021 to grant approval In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.
For example, the three years time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under Section 3(1) of TOLA Resultantly, the authority specified under Section 151(i) of the new regime cun grant sanction till 30 June 2021......
This quote in Ashish Agrawal (supra) directed the Assessing Officers to "pass orders in terms of Section 148-A(d) in respect of each of the assessee concerned. Further, it directed the Assessing Officers to issue a notice u/s. 148 of the new regime "after follouing the procedure as required u/s. 148-A Although this quote waived off the requirement of obtaining prior approval u/s.1484(a) and section 148A(b), it did not waive the requirement for section 148A) and section 148. Therefore, the Assessing Officer was required to obtain prior approval of the specified authenty according to section 151 of the new regime before passing an order us. 148Aldi or Issuing a notice u/s 148 These notices ought to have been issued following the time limits specified u/s.151 of the new regime r.w. TOLA, where applicable..... 114 ....... TOLA will extend the time limit for the grant of sanction by the authority specified u/s 151. The test to determine whether TOLA will apply to section 151 of the new regime is this: if the time limit of three years from the end of an Assessment Year falls between 20 March 2020 and 31 March 2021, then the specified authority u/s 151() has extended time till 30 June 2021 to grant approval;....” 8.1. From the above, we note that in para 73, in the table last two rows relate to provisions of Section 151(i) (ii) of the new regime prescribing the time limit as well as the specified authority. In para 75, it is very categorically mentioned by the Hon'ble Court that after 01.04.2021, in terms of Ashish Agrawal (supra) the prior approval must be obtained from the appropriate authorities specified u/s.151 of the new regime. This abundantly brings clarity on the aspect of obtaining approval for issue of notice u/s. 148 which are fall out of the decision in Ashish Agrawal (supra). In para 77, objective of section 3(1) of TOLA is mentioned which is to relax the time limit for compliance with actions that fall for completion from 20.03.2020 to 31.03.2021. Thus, the objective is specific for providing temporal RSD Containers Pvt Ltd. vs ITO flexibility. In para 78, the same has been explained by an example taking Assessment Year 2017-18 which also in specific terms mentions that the authority specified u/s.151 (i) of the new regime can grant sanction till 30.06.2021. Thus, while concluding in para 81 on the issue obtaining approval, Hon'ble Court has specifically stated that the Assessing Officer is required to obtain prior approval of the specified authority according to section 151 of the new regime before passing an order u/s.148A(d) or issuing a notice u/s.148. According to the Hon'ble Court, though it had waived off the requirement obtaining prior approval u/s.148A(a) and Section 148Ab, it did not waive the requirement for section 148A(d) and Section 148. 8.2. Taking into consideration the submissions made by the Id. Sr. DR and keeping the same in juxtaposition with the above observations and findings of the Hon'ble Court, we note that the issue we are presently addressing raised before us is not on the aspect of "when" for the procedural compliance for issuance of notice u/s.148 but on the aspect of "by whom" it ought to have been issued. Ld. Sr. DR has contended that there is hierarchical escalation vis-à-vis obtaining approval for issuing notice u/s.
148. In this respect, Hon'ble Court has very categorically held in para 75 that the prior approval must be obtained from the appropriate authorities specified u/s.151 of the new regime for the notices issued in terms of Ashish Agrawal (supra) after 01.04.2021. Reference by ld. Sr. DR to Section 149(1)(a) deals with time limit for issuing notice u/s.
Contention of the Id. Sr. DR that there is no hierarchical escalation for obtaining prior approval for issuing notice u/s.148 is not in coherence with the guidelines mandated by the Hon'ble Apex Court as enunciated above. Repeatedly, Hon'ble Court has stated including by way of illustration that TOLA extends time line from the old regime which survives making the notice validly issued subject to the approval requirements of Section 151 under the new regime. Accordingly, the prior approval requirement is mandated under the section 151 of new regime. 8.3. In the present case, the relevant Assessment Year is 2017-18 and the time limit of three years lapsed on 31.03.2021 which falls between 20.03.2020 and 31.03.2021 during which provisions of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) would apply. Accordingly, the amended provisions under the Act read with TOLA extended the time limit for granting of approval till 30.06.2021 by the specified authority. Thus, on the above stated facts and law, in the present case, three years had lapsed from the end of the Assessment Year when the order u/s.148A(d) and notice u/s.148 was issued on 30.07.2022. In the present case, since the notice u/s. 148 and order u/s. 148A(b) have been issued beyond the period of three years from the end of the relevant Assessment Year, case of the assessee falls within the provisions of section 151 (ii) of the amended law whereby the specified authority for grant of approval is specified as Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Contrary to this requirement, the approval obtained is by Principal Commissioner of Income Tax-17, Mumbai. Accordingly, since a proper sanction by the specified authority had not been RSD Containers Pvt Ltd. vs ITO obtained for issue of notice u/s. 148 under the applicable provisions of law, said notice is invalid and bad in law. 8.4. Keeping in juxtaposition the undisputed and the uncontroverted facts as stated above and the judicial precedent of the Hon'ble Supreme Court in the case of Ashish Agarwal and Rajiv Bansal (supra), we hold that sanction by specified authority has not been obtained by the ld. Assessing Officer in accordance with the provisions contained in section 151 of the Act under the new regime, since notice u/s.148 has been issued beyond three years from the end of the relevant Assessment Year. Accordingly, the said notice issued is invalid and thus quashed. Resultantly, the impugned re-opening proceedings so initiated and the impugned re-assessment order passed thereafter are also quashed. Since the facts of the present case of the assessee is similar to the case that has been decided by the co-ordinate bench of Mumbai wherein the bench has in detailed examined the issue and held that the since the approval was not properly obtained and that being the case of the present assessee. Thus, on being consistent with the above order which has been passed considering the decision of the apex court in the case of Ranjeev Bansal (Supra) and Ashish Agarwal (Supra) we quash the notice issued u/s. 148 as bad in law and thereby the consequential assessment as bad in law and thereby quash the same.
Record also reveals that ld. AO while providing the relied upon material provided only one screenshot which does not deal any material to be considered as reason to believe. The assessee asked for it but were not provided to the assessee. The ld. AR of the assessee on this aspect of the matter having similar information were there in the case of Mr. Rachit Jain dropped the proceeding on the reasons that there was no authenticity or information was wrong and thereby here also the ld. AR of the assessee submitted that in the absence of providing material and authenticity of the same no addition can be made and there was violation of principles of natural justice to deal with the material if any and even the ld. DR did not present before the ITAT any material whatsoever against the assessee. To drive home to the contention he relied upon the decision of our Jurisdictional high court in the case of Micro Marbles P Ltd. v/s ITO (457 ITR 569) held that non providing of relevant material to the assessee in connection with reasons for initiation of reassessment proceedings vitiates the whole proceedings. The relevant finding of our High Court reads as under :
In view of the above, the reasons to believe, as supplied to the petitioner, on the face of it are incomplete and do not afford the petitioner due and proper opportunity to file objections against such reassessment. The non-supply of the above material is within the teeth of the directions of the Division Bench of the Delhi and Bombay High Courts.
The submission of Shri Bissa that reasons to believe cannot be equated with the final conclusion and as long as the Assessing Officer has sufficient material to demonstrate that he had bonafidely formed the opinion that the income chargeable to tax has escaped assessment, the requirement of law stands satisfied is of no avail as there are no two opinions on the above aspect. Sufficiency of material is one thing and supply of the same is another, which is mandatory in nature. Therefore, the non-supply of the material referred to in the reasons to believe would be enough to render the proceedings bad, even though the material for forming the opinion may be sufficient.
RSD Containers Pvt Ltd. vs ITO 30. The argument of Shri Bissa is that information furnished by the Deputy Director of Income Tax, Investigation, by itself is sufficient for reopening the proceedings, more particularly when the said information was confirmed from other sources. Again the sufficiency of the information is not in question, nor its confirmation. What is questionable is the effect of its non-supply, to which there is no answer.
Thus, in the light of the decisions of the Delhi and the Bombay High Courts, as referred to above, the non-supply of the material, especially the documents of entry in the books of M/s Sanmatri Gems Pvt. Ltd. and the statement of Deepak Jain recorded under section 132 (4) of the Act, is sufficient to vitiate the proceedings.
It may be noted that the statement recorded under section 132 (4) of the Act can be used in evidence for making the assessment only if such statement is made in context with other evidence, or material discovered during search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger the assessment.
In view of the aforesaid facts and circumstances, we are of the opinion that shorn of all other technical aspects which may have been raised before us, the very fact that the material referred to in the "reasons to believe" was not supplied to the petitioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law.
Accordingly, the impugned notice dated 30-3-2021 and the order dated 18-8- 2021 dismissing the objections of the petitioner are hereby quashed and all consequential proceedings including the assessment order dated 29-3-2022 are declared to be illegal, null and void with liberty to the respondents to take up a fresh exercise for reassessment, if necessary, in accordance with law.
In view of the above, the writ petition is allowed. Pending application, if any, stands disposed of.
Respectfully following the above decision of our High Court even on this count also the assessment framed is quashed as the same was passed in violation of principle of natural justice and without providing the material relied upon.
Since we have considered the appeal of the assessee on three technical ground on the time barring and sanction the other issue on the case of Rachit Jain the proceeding were dropped on the same very information were not adjudicated as they become academic at this stage.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06/08/2025.
Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 06/08/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- RSD Containers Private Limited, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward 7(1), Jaipur vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 1320/JP/2024) vkns'kkuqlkj@ By order,
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