INCOME TAX OFFICER, WARD 7.2.1, AHMEDABAD vs. RAGHAVBHAI GORDHANBHAI NAROLA, AHMEDABAD

The appellant craves leave to add to, alter, amend and or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”

At the outset, the Ld.Counsel for the assessee has invited our attention to the copy of the reasons recorded by the AO for re-opening of the assessment, the contents of which, for the sake of ready reference, are reproduced as under:-

In this case, a STR in the case of V. Nitin was received by the investigation wing, Surat Thereafter, the STR report was prepared by the o/o, the DDIT(Inv), Unit-2, Surat and disseminated the information in the case of its beneficiaries in category of High Risk Transaction CRIU/VRU Information through Insight Portal of the department to the Jurisdictional Assessing Officer.

On perusal and analysis of information received, it is noticed that a current account was opened on 09.04.2012 in the name of V Nitin operated for a partnership firm Kiran Gems Pvt. Ltd. Within a span of 30 months, the turnover of this current account was Rs.22874 lacs. This account exhibited a transaction pattern of huge credit transactions from the other accounts of Kiran Gems Pvt. Ltd and V. Nitin, Thereafter, that amount was immediately transferred to the various entities and the to 1268/Ahd/2025 (By Revenue) & CO Nos.55 to 57/Ahd/2025 (By Assessee) ITO vs. Raghavbhai Gordhanbhai Narola Asst.Years : 2013-14, 2015-16 & 2016-17 4 funds transferred were immediately withdrawn in cash keeping the minimum balance in account.

On further verification of the information received, it is found that the above named assessee is also a beneficiary of these suspicious transactions and the assessee has entered into financial transactions exceeding the taxable limits. The assessee has undertaken unexplained credits in his bank accounts of Rs.1,73,94,080/- however despite making these financial transactions the assessee has not truly and correctly disclosed the quantum of transactions done during the year under consideration.

Thus, on perusal of the details available on record, it is noticed that during the previous year relevant to the assessment year under consideration, the assessee has undertaken financial transactions much beyond the taxable limit. However, as per the income profile of the assessee, verified from the (TR of concerned A.Y., the huge credits in the bank account of the assessee is not conclusively proved. Hence, it is concluded that the assessee has not offered the amount of Rs 1,73,94,080/- for taxation

In view, of the above facts narrated in above paras, I have reason to believe that income upto the extent of Rs. 1,73,94,080/- which is chargeable to tax, has escaped assessment for the A.Y. 2013-14. within the meaning of the provisions of clause (b) of Explanation 2 to Section 147 are applicable to facts of this case of the I.T. Act.

It is pertinent to mention here that in this case, the assessee has filed return of income for the year under consideration but no assessment as stipulated under section 2(40) of the Income Tax Act, 1961 was made and the return of income was only processed under section 143(1) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 of the Income Tax Act, 1961 are applicable to the facts of this case and the assessment year under consideration is deemed to be case whore income chargeable to tax has escaped assessment

In this case, more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice under section 148 of the Income Tax Act, 1961 has been obtained separately from the Principal Commissioner of Income Tax-3, Ahmedabad as per the provisions of section 151 of the Income Tax Act, 1961. 3. In this regard, it is further brought to your notice that if you have any objection, the same may be filed within 7 days from the receipt of this letter. In the case, anything is not heard from you, it would be presumed that you have no objection for proceedings initiated u/s. 147 of the Act as per the above and the matter will be finalized on merits as per the provisions laid down under the Act.”

The assessee filed objections against the said reasons recorded for re- opening of the assessment, copy of which has been placed at page Nos.3 to 5 of the paper-book. The relevant para of which is reproduced, as under:-

The AO, however, rejected the submissions filed by the assessee in a summarily manner observing that the transactions relating to receipt of amount of Rs. 1,73,94,080/- were suspicious in nature and that these transactions were needed to be verified. He accordingly re-opened the assessment of the assessee u/s.147 r.w.s.144B of the Act. He, thereafter, completed the assessment u/s.143(3) r.w.s.147 of the Act and made the impugned additions.

Before the Ld. CIT(A), the assessee challenged the additions on merits as well as the reopening of the assessment u/s 147 of the Act. The Ld. CIT(A) though decided the legal objection relating to the validity of the reopening of the assessment against the assessee, however, on merits accepted the contentions of the assessee and held that the assessee had explained the aforesaid transactions which were noted by the AO as suspicious. He, therefore, deleted the additions so made by the AO.

At the outset, the Ld, Counsel for the assessee has brought our attention to the decision of the Coordinate Bench of this Tribunal in the case of “Jigneshkumar Jivrajbhai Patel” passed in & Others, wherein, the Tribunal vide common order dated 20/05/2025 in exactly identical facts and circumstances has decided both the issues, i.e. on merits as well as regarding the legal issue relating to the validity of the to 1268/Ahd/2025 (By Revenue) & CO Nos.55 to 57/Ahd/2025 (By Assessee) ITO vs. Raghavbhai Gordhanbhai Narola Asst.Years : 2013-14, 2015-16 & 2016-17 7 reopening of the assessment in favour of the assessee. The relevant part of the order of the Tribunal is reproduced as under:

In this case, a STR in the case of V. Nitin was received by the investigation wing, Surat Thereafter, the STR report was prepared by the o/o, the DDIT(Inv), Unit-2, Surat and disseminated the information in the case of its beneficiaries in category of High Risk Transaction CRIU/VRU Information through Insight Portal of the department to the Jurisdictional Assessing Officer.

On perusal and analysis of information received, it is noticed that a current account was opened on 09.04.2012 in the name of V Nitin operated for a partnership firm Kiran Gems Pvt. Ltd. Within a span of 30 months, the turnover of this current account was Rs.22874 lacs. This account exhibited a transaction pattern of huge credit transactions from the other accounts of Kiran Gems Pvt. Ltd and V. Nitin, Thereafter, that amount was immediately transferred to the various entities and the funds transferred were immediately withdrawn in cash keeping the minimum balance in account.

On further verification of the information received, it is found that the above named assessee is also a beneficiary of these suspicious transactions and the assessee has entered into financial transactions exceeding the taxable limits. The assessee has undertaken unexplained credits in his bank accounts of Rs.1,61,75,577/-however despite making these financial transactions the assessee has not truly and correctly disclosed the quantum of transactions done during the year under consideration.

Thus, on perusal of the details available on record, it is noticed that during the previous year relevant to the assessment year under consideration, the assessee has undertaken financial transactions much beyond the taxable limit. However, as per the income profile of the assessee, verified from the (TR of to 1268/Ahd/2025 (By Revenue) & CO Nos.55 to 57/Ahd/2025 (By Assessee) ITO vs. Raghavbhai Gordhanbhai Narola Asst.Years : 2013-14, 2015-16 & 2016-17 8 concerned A.Y., the huge credits in the bank account of the assessee is not conclusively proved. Hence, it is concluded that the assessee has not offered the amount of Rs 1,81,75,577/- for taxation

In view, of the above facts narrated in above paras, I have reason to believe that income upto the extent of Rs.1,61,75,577/- which is chargeable to tax, has escaped assessment for the A.Y. 2013-14. within the meaning of the provisions of clause (b) of Explanation 2 to Section 147 are applicable to facts of this case of the I.T. Act.

It is pertinent to mention here that in this case, the assessee has filed return of income for the year under consideration but no assessment as stipulated under section 2(40) of the Income Tax Act, 1961 was made and the return of income was only processed under section 143(1) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 of the Income Tax Act, 1961 are applicable to the facts of this case and the assessment year under consideration is deemed to be case whore income chargeable to tax has escaped assessment

In this case, more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice under section 148 of the Income Tax Act, 1961 has been obtained separately from the Principal Commissioner of Income Tax-3, Ahmedabad as per the provisions of section 151 of the Income Tax Act, 1961. 3. In this regard, it is further brought to your notice that if you have any objection, the same may be filed within 7 days from the receipt of this letter. In the case, anything is not heard from you, it would be presumed that you have no objection for proceedings initiated u/s. 147 of the Act as per the above and the matter will be finalized on merits as per the provisions laid down under the Act.”

The assessee filed objections against the said reasons recorded for re-opening of the assessment, copy of which has been placed at page Nos.3 to 5 of the paper-book. The relevant para of which is reproduced, as under:-

The AO, however, rejected the submissions filed by the assessee in a summarily manner observing that the transactions relating to receipt of amount of Rs.1,61,75,577/- were suspicious in nature and that these transactions were needed to be verified. He accordingly re-opened the assessment of the assessee u/s.147 r.w.s.144B of the Act. He, thereafter, completed the assessment u/s.143(3) r.w.s.147 to 1268/Ahd/2025 (By Revenue) & CO Nos.55 to 57/Ahd/2025 (By Assessee) ITO vs. Raghavbhai Gordhanbhai Narola Asst.Years : 2013-14, 2015-16 & 2016-17 10 of the Act and made the impugned additions, which have been further confirmed by the Ld.CIT(A).

We have heard the rival contentions and perused the material available on record. A perusal of the reasons recorded for reopening of the assessment would reveal that the only information passed on by the Investigation Wing to the AO was that the assessee had entered into financial transactions exceeding the taxable limits and that the assessee had undertaken unexplained credits in his bank account of Rs.1,61,75,577/-, which were received from Kiran Gems Pvt.Ltd. The AO formed his reasons to believe that the income of the assessee has escaped assessment only on the basis of above information, without verifying as to whether the assessee has disclosed the said receipts in his return of income/audited accounts attached with the return of income. It is pertinent to mention here that the AO has himself recorded in para-7 of his order that the assessee had filed return of income for the year under consideration, which was processed u/s.143(1) of the Act, which means that all the record relating to the return filed by the assessee for the year under consideration was available with the Department/AO.

The assessee in his objections has categorically stated before the AO that the alleged receipt of Rs.1,61,75,577/- was duly disclosed by the assessee in his audited books of accounts and that, in fact, the said receipts were on account of job-work charges of cutting and polishing of diamonds received from Kiram Gems Pvt.Ltd., Surat That, the said amount was duly appearing in IT return, as well as Form No.26-AS of the said year, as Kiran Gems Pvt.Ltd. had deducted the tax at source on the said job-work charges received by the assessee from them. That, the said receipt was duly disclosed in audited profit & loss account and balance-sheet attached with the tax audit report and that the said receipt had also been duly reflected in the return of income filed for the year under consideration. It has been further mentioned that the re-opening of the assessment has been proposed without verifying the records available with the Department. It has also been explained that the amounts credited in the bank account were withdrawn immediately on account of payment of wages and salaries to workers, which normally were to be paid on 7th of each month out of the payment received by 3rd to 4th day of beginning of the month. The AO, however, without considering the aforesaid objections filed by the assessee and without co- relating the information received from the Investigation Wing with the available assessment records, proceeded to re-open the assessment in a casual manner without application of mind. The only information received by the AO from the Investigation Wing was that the assessee had carried out High Value transactions and that there was a receipt of Rs.1,61,75,577/- in the bank account of the assessee. The said information received by the AO may have been relevant to make further enquiries to verify if the assessee had taken into account such receipts in his income tax return. However, the said information, in itself, was not enough to form the belief that the to 1268/Ahd/2025 (By Revenue) & CO Nos.55 to 57/Ahd/2025 (By Assessee) ITO vs. Raghavbhai Gordhanbhai Narola Asst.Years : 2013-14, 2015-16 & 2016-17 11 income of the assessee has escaped assessment. The AO was supposed to co-relate the said vague information received from the Investigation Wing with the assessment records of the assessee and thereafter he could have formed the belief that the income of the assessee has escaped assessment.

In view of the above discussion, the re-opening of the assessment in this case on the basis of mere suspicion and vague information received from the Investigation Wing without co-relating the same with the assessment records available with the department, is not sustainable. Therefore, the consequential assessment order passed u/s.147 of the Act is also not sustainable. The assessment passed by the AO u/s.147 of the Act is, thus, bad in law and the same is accordingly quashed. Since we have decided the legal issue relating to validity of the re-opening of the assessment in favour of assessee, therefore we, at this, do not deem it necessary to discuss the factual merits as the same has been rendered academic in nature.”

The facts and issues involved in the captioned appeals of the Revenue as well as the Cross Objections of the assessee are exactly identical as in the case of Jigneshkumar Jivrajbhai Patel (supra), therefore, both the issues, i.e. on merits as well as the legal jurisdictional issue are covered by the above decision of the Tribunal in favour of the assessee. The Ld. DR could not bring before us any distinguishing fact or law. Therefore, following the aforesaid decision of the Coordinate Bench of this Tribunal for the sake of consistency, all the captioned three appeals of the Revenue are hereby dismissed, whereas, all the Cross Objections filed by the assessee are hereby allowed.