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Facts
The assessee filed an appeal against the CIT(A)'s order which dismissed the appeal entirely. The Assessing Officer initiated reassessment proceedings under Section 147/148 based on information suggesting the assessee received accommodation entries. The assessee failed to provide satisfactory explanations or evidence.
Held
The Tribunal restored the matter to the Assessing Officer for de-novo consideration, noting the assessee's consistent non-compliance. The Tribunal also imposed a cost of ₹10,000/- on the assessee for the litigation and wastage of judicial time.
Key Issues
Whether the reopening of assessment under Section 147/148 was validly done and if the assessee was provided adequate opportunity to present her case. Also, the validity of additions made on account of unexplained money and expenditure.
Sections Cited
147, 148, 142(1), 144B, 271(1)(c), 271F, 68, 69
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI BHAGIRATH MAL BIYANI
O R D E R PER SIDDHARTHA NAUTIYAL - JM:
The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 16.01.2025 passed for A.Y. 2013-14.
The Assessee has raised the following grounds of appeal:
“1. On the basis of facts and circumstances of the case and applicable law, the CIT(A) has erred in confirming the non-application of mind by LAO in initiating proceedings U/s 147 of the act. The notice u/s 148 is itself bad in law. The whole process of reopening i.e. reasons, approval and issuance of notice done was mechanical.
2. On the facts and circumstances of the case and applicable law, the CIT(A) has erred in confirming that LAO’s action of reopening the case u/s 148 and of further initiating assessment proceeding u/s 147 of the act which is bad in law.
Indira Bai Jindal vs. ITO A.Y. 2013-14 - 2 - 3. The Assessee was passed away during the assessment proceedings and response was made by legal representative even then the Assessment proceedings was continued in the name of deceased assessee and Order was also made in the name of deceased person which is bad in law.
The LAO and CIT(A) has not provided proper opportunity to represent the case.
5. The LAO has erred in treating the Income tax return as invalid however it was filed on28.01.2022 and received by CPCon 28.02.2022 and further CIT(A) has erred in confirming the same.
6. The CIT(A) has erred in confirming the addition made by LAO on account of unsecured Loan of Rs. 35,00,000/- taken from M/s Jay Jyoti India Pvt. Ltd. and on account of commission paid out of unexplained sources of Rs. 1,05,000/-.
7. The Assessee craves to add/amend/alter/substitute to any grounds of appeal
before or at the time of hearing of the case.”
3. The brief facts of the case are that the assessee, Smt. Indra Bai Jindal, filed her return of income for the relevant assessment year. Subsequently, based on information received from the Investigation Wing showing that the assessee was a beneficiary of accommodation entries, the Assessing Officer initiated reassessment proceedings by issuing notice under section 148 of the Income-tax Act, 1961 (“the Act”). The Assessing Officer was in possession of tangible material in the form of investigation reports which suggested that the assessee had entered into suspicious financial transactions involving accommodation entries. In response to the notice under section 148 of the Act, the assessee filed a return of income. However, the same was not e-verified and was, therefore, treated as non-est. During the course of reassessment proceedings, the Assessing Officer issued several notices under section 142(1) of the Act and also a show cause notice, granting multiple opportunities to the assessee to explain the nature and genuineness of the transactions. Despite these opportunities, the assessee failed to furnish satisfactory explanations or supporting Indira Bai Jindal vs. ITO A.Y. 2013-14 - 3 - documentary evidence. On the basis of material available on record and the investigation reports, the Assessing Officer held that the assessee had received an accommodation entry of ₹35,00,000/- from M/s Jay Jyoti India Pvt. Ltd., a concern controlled by Shri Sharad Kumar Darak, who had admitted to providing accommodation entries. The Assessing Officer held that the said amount was unexplained money of the assessee and added the same to her income. Further, considering the prevailing rate of commission in such accommodation entry transactions, the Assessing Officer estimated commission expenditure at 3% amounting to ₹1,05,000/- and treated the same as unexplained expenditure. Accordingly, the assessment was completed under section 147 read with section 144B of the Act, making additions of ₹35,00,000/- as unexplained money and ₹1,05,000/- as unexplained expenditure, and the Assessing Officer also initiated penalty proceedings under section 271(1)(c) and section 271F of the Act.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals) raising multiple grounds. Grounds of Appeal Nos. 1, 2, 3, 6 and 7 pertained to the validity of reopening of assessment under section 148, alleging that the reopening was mechanical, that objections filed against reopening were wrongly rejected, that the return filed in response to notice under section 148 was not considered, and that the reassessment should have been carried out under the amended law applicable from 01.04.2021. The Ld. CIT(A) noted that the assessee did not file any submissions during appellate proceedings in support of these grounds. On examination of records, the Ld. CIT(A) observed that the notice under section 148 was duly issued and served, that the reopening was based on tangible material received from the Investigation Wing, and Indira Bai Jindal vs. ITO A.Y. 2013-14 - 4 - that the Assessing Officer had formed a bona fide belief of escapement of income. Relying upon settled judicial principles laid down by the Hon’ble Supreme Court, the Ld. CIT(A) held that sufficiency or adequacy of reasons for reopening cannot be questioned at this stage and that the Assessing Officer was only required to form a prima facie belief. The CIT(Appeals) further held that the return filed by the assessee was invalid due to lack of e- verification and hence could not be acted upon. As regards applicability of the amended reassessment provisions, the Ld. CIT(A) held that since the notice under section 148 was issued prior to 01.04.2021, the law as applicable on the date of issuance of notice was correctly followed. Accordingly, Grounds of Appeal Nos. 1, 2, 3, 6 and 7 were dismissed.
4.1 Grounds of Appeal Nos. 4 and 5 related to alleged violation of principles of natural justice on the ground that adequate opportunity of being heard was not provided and that replies filed by the assessee were not considered. The Ld. CIT(A), after perusing the assessment records, noted that multiple notices under section 142(1) and a show cause notice were issued and duly served upon the assessee, granting sufficient opportunities to present her case. The CIT(Appeals) also observed that even during appellate proceedings, several opportunities were provided to the assessee, which she chose not to avail. In view of these facts, the plea of lack of opportunity was rejected and Grounds of Appeal Nos. 4 and 5 were dismissed.
4.2 Grounds of Appeal Nos. 8 and 9 challenged the additions of ₹35,00,000/- as unexplained money and ₹1,05,000/- as unexplained expenditure. The Ld. CIT(A) examined the findings of the Assessing Indira Bai Jindal vs. ITO A.Y. 2013-14 - 5 - Officer and the detailed investigation reports brought on record, which included search and seizure operations, statements of key persons admitting to providing accommodation entries, and findings that the entities involved were paper companies. The CIT(Appeals) observed that the assessee failed to file any evidence or explanation either during assessment or appellate proceedings to establish the genuineness of the transactions. The Ld. CIT(A) held that the burden of proving the genuineness of transactions lay on the assessee, which remained undischarged. Relying on various judicial precedents, the Ld. CIT(A) upheld the additions made by the Assessing Officer and dismissed Grounds of Appeal Nos. 8 and 9.
4.3 Grounds of Appeal Nos. 10 and 11 pertained to initiation of penalty proceedings under sections 271(1)(c) and 271F of the Act. The Ld. CIT(A) held that these grounds were premature in nature as no penalty had yet been levied and, therefore, did not call for adjudication at this stage. Accordingly, these grounds were dismissed.
In the result, the Ld. CIT(Appeals) dismissed the appeal filed by the assessee in entirety.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
In view of the totality of the facts and circumstances of the case and in the interests of justice, we are of the considered view that the matter may be restored to the file of the Assessing Officer for de-novo consideration. Though the Assessing Officer as well as the Ld. CIT(Appeals) have Indira Bai Jindal vs. ITO A.Y. 2013-14 - 6 - recorded detailed findings on the basis of material received from the Investigation Wing, it is an undisputed fact that the assessee has remained non-compliant at all stages of the proceedings and, therefore, the issues on merits could not be examined after considering the explanation and evidences, if any, from the assessee. It is a settled position of law that assessment proceedings are quasi-judicial in nature and the object of assessment is to determine the correct tax liability in accordance with law, and for this purpose reasonable opportunity should be afforded to the assessee. Reliance in this regard may be placed on the judgment of the Hon’ble Supreme Court in Tin Box Company v. CIT (2001) 249 ITR 216 (SC), wherein it was held that where the assessee did not get a proper opportunity before the Assessing Officer, the matter deserves to be set aside for fresh adjudication. Similar view has been taken by the Hon’ble Supreme Court in Kapurchand Shrimal v. CIT (1981) 131 ITR 451 (SC), holding that an appellate authority has the power and duty to set aside the assessment and remit the matter for fresh consideration to ensure that justice is done.
Accordingly, without expressing any opinion on the merits of the additions made under section 68/69 of the Act and the consequential additions towards alleged commission expenditure, we restore the entire matter to the file of the Assessing Officer for de-novo adjudication in accordance with law, after affording one final and effective opportunity of being heard to the assessee and after considering such explanations and evidences as may be produced. The Assessing Officer shall pass a speaking order in accordance with law after due verification.
Indira Bai Jindal vs. ITO A.Y. 2013-14 - 7 - 9. However, we also take serious note of the fact that the assessee has been consistently non-compliant before the Assessing Officer as well as before the Ld. CIT(Appeals), which has resulted in unnecessary litigation and wastage of judicial time. Therefore, while restoring the matter for fresh consideration, we deem it appropriate to impose a cost of ₹10,000/- on the assessee, which shall be deposited in the Prime Minister’s Relief Fund within 30 days from the date of receipt of this order and proof thereof shall be furnished before the Assessing Officer. The restoration of the matter shall be subject to compliance of this direction, failing which the Assessing Officer shall be at liberty to proceed in accordance with law on the basis of material available on record.
In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced on 17/12/2025