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Facts
The assessee's case for A.Y. 2014-15 was reopened based on information from the Anti-Corruption Bureau (ACB) regarding disproportionate assets of his father and other family members, including the assessee. The AO made an addition of Rs. 80,97,000/- to the assessee's income, citing unexplained cash deposits and cash payments for property purchase. The CIT(A) dismissed the assessee's appeal, upholding the assessment and additions.
Held
The Tribunal held that the reopening of assessment under Section 147 was invalid as the Assessing Officer (AO) merely reproduced information from the ACB report without independent application of mind, failing to identify specific escaped income. The AO's belief was deemed 'borrowed satisfaction'. The Tribunal relied on a similar case (Mr. Arpanbhai Vikrambhai Desai) where reopening based on identical facts was quashed.
Key Issues
Validity of reopening of assessment under Section 147/148 of the Income Tax Act when based on borrowed satisfaction and lack of independent application of mind by the Assessing Officer.
Sections Cited
147, 144B, 148, 143(3), 133(6), 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI SDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
1. This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 08.07.2025 for the Assessment Year (A.Y.) 2014-15 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act (hereinafter “the Act”).
The brief facts of the case are that the assessee had filed his return of income for A.Y. 2014-15 on 31.10.2014 declaring total income of Rs.9,30,410/-. The case of the assessee was reopened on the basis of letter received from Anti-Corruption Bureau regarding registration of offence under Prevention of Corruption Act, against one Shri.
Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 2 Vikrambhai Lilabhai Desai, Deputy Mamlatdar, Kalol and six other family members. The assessee was one of the family members against whom the case was registered by ACB. As per the information received, the assessee had deposited cash of Rs. 30,97,000/- in his bank account. Further the assessee had also paid cash of Rs. 50,00,000/- to purchase right in land in block/survey No. 245A and 245B, Subsapur, Gandhinagar by way of agreement to purchase. In the course of assessment, the A.O. was not satisfied with the explanation of the assessee regarding the source of cash deposit in the bank account as well as the source of cash payments for purchase of immovable property. Therefore, the entire amount of Rs. 80,97,000/- was added to the income of the assessee. The assessment was completed u/s 147 r.w.s 144B of the Act on 27.03.2022 at total income or Rs. 90,27,410/-.
3. Aggrieved with the order of the A.O., the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
1. That on the facts and in the circumstances of the case and in law, the order of the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as the “Ld CIT(A)”) is erroneous, arbitrary, and bad in law to the extent it is prejudicial to the interest of the Appellant.
2. That the honourable CIT(A) had erred in law and on facts in dismissing the ground of appeal challenging the reopening the assessment under section 147/148 of the Income Tax Act without appreciating the Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 3 submission of the appellant and the same being against the law is require to be held so now. .
3. That on the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Apepals) erred in upholding the addition of Rs. 80,97,000/- made by the Assessing Officer on account of cash payments and cash deposited into the bank account as well as purchase of rights in property as unaccounted income of the appellant. The same being against the fact and law is require to be deleted now.
4. That the learned Commissioner of Income Tax (Appeals), NFAC erred in law and in the facts of the case in upholding the charging of interest u/s 234A, 234B, and 234C of the I.T Act.
5. The appellant craves a leave to add, amend, alter, edit, delete, and modify and change all any of the grounds of appeal at the time of or before the hearing of the appeal.
5. Shri. Divyakant Parikh, Ld. A.R of the assessee submitted that the case of the assessee was reopened on the basis of information received from ACB regarding disproportionate asset of Shri. Vikrambhai Lilabhai Desai. However, no details of any disproportionate asset was received and such details were not supplied to the assessee. He submitted that the disproportionate asset, if any, was acquired by Shri. Vikrambhai Lilabhai Desai and not by the assessee. Therefore, there was no merit in reopening the case of the assessee on the basis of the information of disproportionate asset acquired by Shri. Vikrambhai Lilabhai Desai. According to the ld. A.R, the investment in the immovable property was made out of income of Shri. Vikrambhai Lilabhai Desai and there was no information available with the A.O. for escapement of any income earned by the assessee. The ld. A.R further submitted that an identical action was taken in the case of Mr. Arpanbhai Vikrambhai Desai and the Co-ordinate Bench of the Tribunal had held in that case in Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 4 339, 758 and 759/Ahd/2024 dated 17.10.2025, that the reopening done in that case was invalid. He also relied upon the decision of the Co- ordinate Bench of this Tribunal in the case of Shri. Shivaji Rai Chauhan Vs. ITO, dated 05.02.2024 in this regard. On merits also he submitted that no addition was called for as the assessee had duly explained the source of the cash deposits in the bank account as well as the source of cash payments for purchase of immovable property.
Per contra, Shir. Rameshwar P Meena, Ld. Sr. D.R, supported the order of the lower authorities.
We have considered the rival submissions. It is found that the A.O. had recorded the reason for escapement of income in the case of the assessee on the basis of information received from ACB. The reason as recorded by the A.O is found to be as under:
Reasons for reopening of the assessment in the case of Krunal Virambhai Desai, for A.Y. 2014-15.
Assessee is an individual. The assessee has filed his return of income for A.Y. 2014-15 on 31.10.2014 declaring total income of Rs. 9,30,410/-.
2. As information received related to a criminal offence (Disproportionate Assets) case registered against Vikrambhai Lilabhai Desai and 6 others, was shared by the State Anti-corruption Bureau with the office of Pr CCIT, Gujarat vide letter dated 19. 02 2021.
On perusal of the letter shared by the state Anti-corruption Bureau (ACB), it is gathered that ACB has registered an offence vide GNR-ACB-PS-Cr No. 02/2021 under Section-12, 13(1)(b) and 13(2) of Prevention of Corruption Act-2018 on Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 19.01.2021 against Virambhai Lilabhai Desai, Deputy Mamlatdar, Class-III, E- Dhara Centre, Kalol and six other family members. The assessee Krunal Virambhai Desaiis one of the family member of Shri Virambhai Desai
A perusal and analysis of the information collected /material available shows that income has escaped assessment and there is no need for further enquiries u/s. 133(6) to establish the same.
On the perusal of the information available to this office, the following Sr. Name of PAN Entity A.Y DA Net Cash Cash Paid Total Cash Final No. the Amount Deposit for Transactions Reopening assessee property Amount purchase
Krunal AMBPD5662Q KVD 2014- 49,150,347 3,077,079 47,065,637 50,142,716 50,142,716 1. Virambhai 15 Desai transaction has been made by the Assessee.
6 On the basis of the facts of the case records available with this office and from the above information, it is prima facie concluded that the assessee had purchased immovable property and made cash transaction of Rs.5,01,42,716/-. it is found that the assessee has undisclosed income from the disproportionate assets. The assessee has filed return of income, however, the assessee has failed to explain the source of undisclosed income for the year that has escaped assessment. Though the assessee has made above transaction as mentioned above. As return of income has filed for the AY. 2014-15 for the year under consideration, disproportionate assets is his undisclosed income for the year that has escaped assessment. Accordingly, as no assessment was made in this case, the only requirement to initiate proceedings u/s 147 of the Act is to bring the undisclosed income of Rs 5,01,42,716/-.
7. No information of assets located outside India is available.
Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 6 8. In this case, a return of income was filed for the year under consideration and scrutiny assessment u/s. 143(3) of the Act was made on 26/12/2016 determining the total income amounting to Rs. 9,30,410/-.
On going through the contents of the reason recorded by the A.O. as above, it is found that the A.O had simply reproduced the information received from the ACB and no mind was applied to elicit as to how the income of the assessee had escaped assessment. Though the disproportionate asset amount mentioned in the reason is Rs.4,91,50,347/-, it has not been specified as to in what particular form / asset, this amount was invested. The details of disproportionate assets have not been brought on record in the reason. Further, the A.O has mentioned net cash deposit of Rs. 30,77,079/- and cash payments of Rs. 4,70,65,637/- for purchase of property, but there is no mention of the underlying asset. No particulars are specified in the reason, which is found to be based on borrowed satisfaction only. It appears, prima facie, that the proceeding was initiated by the ACB against Shri. Vikrambhai Lilabhai Desai, father of the assessee, who was Deputy Mamlatdar, Kalol and the investments in the name of family members, including the assessee, was made out of disproportionate income earned by him. Thus, as per allegation of ACB, all the disproportionate assets appearing in the name of the family members were acquired out of unaccounted/illegal earning of Shri. Vikrambhai Lilabhai Desai. This being the status, the proceeding for escapement of entire income invested in the disproportionate assets, including those invested in the name of family members, should have been initiated in the case of Shri. Vikrambhai Lilabhai Desai only.
It is found that an identical reopening was done in the case of Shri. Arpanbhai Vimalbhai Desai which was decided by the Co-ordinate Bench of this Tribunal vide order dated 17.10.2025. The finding given by the Tribunal in that case is found to be as under:
10. On going through the contents of the reason recorded by the AO as above, we are in agreement with the Ld Counsel for the assessee that the reasons are vague, do not bring out the income which has escaped assessment and the belief of escapement of income clearly is not of the AO but borrowed belief of the ACB report to which no mind at all has been applied by the AO.
11. As per the reasons recorded the undisclosed income of the assessee was his disproportionate assets (DA) as per information received from the ACB and related to purchase of immovable property/ transactions in cash amounting to Rs.3,02,86,472/-.
The information of Rs.3,02,86,472/- being disproportionate asset of the assessee shared by the ACB is listed in the Table, mentioning net cash deposit of Rs.2,00,700/-, cash paid for the property purchased Rs.1,97,72,487/- and the total DA amount Rs.3,02,86,472/- This is the entire information regarding the disproportionate assets of the assessee which the reason reveals and we have noted that the AO mentions that on perusal and analysis of the information collected materials available, there was no need for making any further enquiry u/s 133(6) of the Act. The AO notes that the assessee had failed to disclose source of the said income and the disproportionate asset therefore was his undisclosed income for the impugned year.
Clearly the reasons do not specify the income which has escaped assessment. It only vaguely refers to disproportionate assets and mentions property purchased/ transactions in cash without specifying/identifying the DA giving its breakup, or for that matter identifying the property purchased in cash/cash transactions undertaken by the assessee. There is no detail or break up of Rs.3.02 Crore of the alleged disproportionate assets of the assessee, as to which specific asset it relates to. No particulars are specified in the reason. In relation to the property purchased by the assessee in cash for Rs.1.95 Crores, there is no identification/description of the same. The information is not clear as to whether the DA amount of Rs.3.02 Crs includes the property purchased in cash of Rs. 1.95 Crs and if it does what other assets make up the DA of Rs.3.02 crs.
Undoubtedly the reasons do not point out the income which has escaped assessment. In fact, it is clearly evident from the reasons that the AO's belief of income escaping assessment of the assessee is merely a borrowed belief from the ACB report which mentioned DA of the assessee being to the tune of Rs.3.02 Crores. The AO has not cared to apply his mind at all to the information and find out what exactly what were these DA assets of the assessee. The AO does not appear to be aware of the nature of assets in relation to which the assessee has been found to be the owner of disproportionate assets. Even with respect to the immovable assets in which the assessee has allegedly invested in cash there is no detail/identification of the said immovable assets.
Ld. DR was unable to controvert the aforestated facts.
Therefore, we agree with the Ld Counsel for the assessee that the belief of the AO, of escapement of income of the assesse, was vague and not his own but borrowed belief.
With regards to the law on the issue, as pointed out by the Ld. Counsel for the assessee, there is no dispute that for a valid assumption of jurisdiction to frame assessment u/s 147 of the Act, the AO should have a reasonable belief of income of the assessee escaping assessment and the belief should be his own and not borrowed belief. As pointed out by the Ld. Counsel for the assessee the jurisdictional High Court, in the Dharamsinhbhai Narola (supra) has categorically stated that the law regarding reopening is well settled, with the basic requirement for valid assumption of jurisdiction being application of mind by the AO to information in his possession to conclude escapement of income of assessee, which belief is to be recorded in his reasons for reopening.
Applying the law to the facts as above, wherein the AO has failed both, to identify the income of the assessee which has escaped assessment and to apply his mind to the information in his possession while forming belief of escapement of income, we completely agree with the Ld Counsel for the assessee that the jurisdiction assumed by the AO to reopen the case of the assessee for A.Ys. 2014-15 and 2015-16 was invalid. The orders passed therefore in both the years are not sustainable in law as being passed without valid jurisdiction and are accordingly quashed.
The facts of the present case are exactly identical to the facts of Mr. Arpanbhai Vikrambhai Desai (supra) and the decision of the Tribunal Krunalkumar virambhai Desai Vs.ITO, AY- 2014-15 9 in that case is squarely applicable to the present case. Considering the facts of the case as discussed above as well as following the decision of the Co-ordinate Bench of this Tribunal in the case of Mr. Arpanbhai Vikrambhai Desai (supra), it is held that the jurisdiction assumed by the A.O. to reopen the case of the assessee was invalid. The A.O had reopened the case on the basis of borrowed belief of ACB without applying his mind to the information received. Further, no inquiry was carried out to find out the nature of disproportionate asset, which was attributed to the assessee by the ACB for the impugned year. There is nothing on record to suggest that A.O. had made any effort to cross check and verify the information contained in ACB report, in any manner. In view of these facts, we have no hesitation in holding that the re- opening done by the A.O. in the present case was not in accordance with law. Therefore, the order passed by the A.O. u/s 147 r.w.s. 144B of the Act is held as invalid and is accordingly quashed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 20/01/2026 at Ahmedabad.