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Facts
The assessee, Vimal Alloys Private Limited, engaged in manufacturing and trading iron and steel products, had its AY 2016-17 return originally processed under section 143(1). Reassessment was initiated under section 148 based on an Excel sheet found during a search on a third party (M/s Futuristic Metal Trading Pvt. Ltd.), alleging unaccounted cash transactions, leading to an addition of Rs. 55,02,640/- under section 69A. The Ld. CIT(A) confirmed this addition.
Held
The Tribunal held that the reassessment proceedings were invalid as they were initiated beyond four years without establishing failure to disclose material facts by the assessee, were based on borrowed satisfaction, and suffered from invalid jurisdiction (notice issued by JAO instead of NFAC). Furthermore, principles of natural justice were violated by denying cross-examination, and the electronic evidence was inadmissible without a Section 65B certificate. Consequently, the reassessment proceedings were quashed, rendering the addition on merits non-survivable.
Key Issues
1. Validity of reassessment proceedings initiated beyond four years and based on borrowed satisfaction. 2. Jurisdictional validity of notice under Section 148 and violation of natural justice. 3. Admissibility of electronic evidence without Section 65B certificate. 4. Sustainability of addition under Section 69A based on uncorroborated third-party excel sheet when assessee's books were accepted.
Sections Cited
69A, 147, 148, 143(1), 143(3), 151A, 119, 142, 143(2), 65B, 36(1)(viia), 69C, 145
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M: This appeal filed by the assessee is directed against the order dated 22/05/2025 passed by the Ld. CIT(A), NFAC, Delhi pertaining to Assessment Year 2016-17, whereby the addition of Rs.55,02,640/- made by the Assessing Officer under section 69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was confirmed. 2. In the present appeal, Assessee has raised the following grounds:
1. 1. 1. 1. That the Ld. CIT (A)-NFAC, Delhi has erred in confirming the action of the Ld. AO in passing the order u/s 147/143(3) as notice issued u/s 148 of the Act is bad in law as it has been issued by Jurisdictional AO (JAO) instead of the AO-NFAC in the light of the of latest judgment of HIGH COURT OF PUNJAB & HARYANA in case of Jasjit Singh v.Union of India dated JULY 29, 2024.
2. That, without prejudice to the above and even otherwise, the Ld. CIT (A)-NFAC, Delhi has erred in confirming the action of the Ld. AO in passing the order u/s 147/143(3) without appreciating that the reasons are based on borrowed satisfaction and there is no independent application of mind by the Ld. AO and nor any enquiry have been made before issue of notice u/s 148.
3. That the information relied upon by the Ld. AO in the shape of so called EXCEL SHEET as well as approval sought for relevant authority for 2 reopening of the case had not been shared by the Ld. AO with the assessee which vitiates the assessment proceedings in the light of judgment of M/s Sabh Infrastructure Ltd. v. ACIT [(2017) 398 ITR 198 (Del)]. Further, the appeal u/s 151 as may have been granted by PCIT appears to be mechanical.
4. That the assessment order has been passed by the Ld. AO on the basis of third party information recovered from the premises of some third party in the shape of some EXCEL SHEETS during the course of survey at their premises and such third party information cannot be used as an evidence without any corroborating evidence to prove the allegation of the cash transaction by the assessee with M/s Futuristic Metal Trading Pvt. Ltd. in view of judgment of Hon'ble Chandigarh bench in the case of DCIT vs. Shri Amarjit Singh in No. 774/CHD/2023 (06.03.2025).
5. That no copy of the statement as may have been recorded of M/s. Futuristic Metal Trading Pvt. Ltd. had been provided to us and nor any opportunity to cross examine the statements of any third party relied upon by the Ld. AO has been provided to the assessee which violates the principles of natural justice and makes the assessment proceedings bad in law.
6. Notwithstanding the above ground of appeal the addition of Rs. 55, 27,640 as confirmed by the Ld. CIT (A) irrespective of the fact that it has been made by invoking incorrect provisions of section 69A of the Act as the assessee is not found to be owner of any móney, bullion, jewellery or other valuable article and provisions of section 69A of the Act are not applicable in case of alleged cash purchases being made by the assessee.
7. That the AO/Ld. CIT (A) has failed to appreciate that the assessee is maintaining complete day to day stock records in respect of material purchased from M/s. Futuristic Metal Trading Pvt. Ltd. and other parties and as such, the payments in respect of purchases from M/s. Futuristic Metal Trading Pvt. Ltd. have been made through banking channel and as such, there could be no occasion to receive the alleged cash receipts as being alleged by the AO/ CIT (А).
8. That the Ld. CIT(A) has erred in confirming the addition without appreciating the submissions filed by assessee and rejecting the explanation provided by assessee, which is illegal and against the principal of natural justice in the light of judgment of Sahara India (Firm) v. CIT [(2008) 300 ITR 403 (SC)].
9. That appellant crave leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
3. Briefly, the facts of the case are that the assessee is a private limited company engaged in the business of manufacturing and trading of iron and steel products. The return of income for the year under consideration was originally processed under section 143(1) of the Act. Subsequently, the assessment was reopened by issuance of notice under section 148 of the Act. The reopening was based on information received from the Investigation Wing in consequence to a search conducted on World Window Group, including Futuristic Metal Trading Pvt. Ltd., a concern alleged to be engaged 3 in providing accommodation entries and unaccounted cash transactions in scrap trade. 3.1 During the course of search proceedings at the premises of the said third party, an excel sheet titled “Cash & CH Report 14.11.17” was allegedly found. According to the Assessing Officer, the said excel sheet contained certain entries reflecting cash payments and unaccounted transactions purportedly relatable to the assessee. Relying solely on the said excel sheet, the Assessing Officer concluded that the assessee had made cash payments outside the books of account towards purchase of scrap material and accordingly made an addition of Rs.55,02,640/- under section 69A of the Act.
4. Against the order of the AO the assessee went in appeal before the Ld.CIT(A).
5. The Ld. CIT(A) upheld the addition by observing that the excel sheet constituted incriminating material found during search, that the assessee failed to rebut the same, and that the reopening was validly initiated on the basis of tangible material. 5.1 The Ld. CIT(A), while dismissing the appeal of the assessee, held that the excel sheet constituted incriminating material found during search proceedings. According to the Ld. CIT(A), the assessee failed to rebut the findings of the Assessing Officer with cogent evidence. 5.2 The Ld. CIT(A) further held that the reopening was valid as it was based on tangible material received from the Investigation Wing and that the Assessing Officer had valid jurisdiction over the assessee.
Aggrieved by the said order, the assessee is in appeal before the Tribunal.
During the course of hearing, the Ld. AR for the assessee made detailed and elaborate submissions and assailed the orders of the lower authorities on both legal and factual grounds. 7.1 It was submitted that the entire edifice of the addition rests solely on an excel sheet found from the premises of a third party, which neither belongs to 4 the assessee nor was found from its possession or control. It was argued that no effort was made by the Assessing Officer to establish that the entries contained in the excel sheet actually pertain to the assessee. 7.2 The Ld. AR further submitted that the excel sheet is nothing but an uncorroborated digital document, the author of which is unknown. No statement of the third party owning or maintaining the said excel sheet has been recorded to link the assessee with the alleged transactions. In the absence of such corroboration, the addition is legally unsustainable. 7.3 It was further contended that the Assessing Officer failed to provide the complete excel sheet and other underlying material relied upon for reopening and assessment. No opportunity of cross-examination of the third party was afforded to the assessee. Thus, the assessment suffers from gross violation of the principles of natural justice. 7.4 The Ld. AR also submitted that the reopening of assessment was based on borrowed satisfaction, as the Assessing Officer merely acted on the information received from the Investigation Wing without any independent application of mind. The reasons recorded do not demonstrate any live nexus between the alleged material and escapement of income in the hands of the assessee. 7.5 A specific legal objection was also raised regarding jurisdiction. It was contended that the reassessment proceedings were initiated and completed by the Jurisdictional Assessing Officer (JAO), whereas under the Faceless Assessment Scheme, such powers vested only with the Faceless Assessing Officer (FAO). In this regard, reliance was placed on the decision of this Bench in Vikas Jain v. ACIT, ITA No. 838/Chd/2024. 7.6 The Ld. AR further relied upon the decision of the Chandigarh Bench in Akbar Ali v. ACIT, to submit that uncorroborated third- party excel sheets cannot form the sole basis of addition. 7.7 Ld. AR also submitted the written submission during the course of hearing content of which read as under:
5 1. The assessee concern is a private limited company engaged in a business of manufacturing of steel ingots, steel casting and metal rolling and the assessee is in same business since 1980 and regularly filing its return of income for past many years as per audited books of accounts of the assessee.
In the year under consideration i.e. AY 2016-17 the assessee has filed its original return of income declaring an income of Rs. 16,90,550/- against the total turnover of Rs. 67,57,30,991/- as per page 19 of PB and the books of account of the assessee are duly audited and assessee maintains regular stock register which is declared in the tax audit report at point no 35(b) at page 15 and 53 to 59 of PB and the complete financial statements of the assessee are placed at pages 1 to 59 of the PB.
Further, the case of the assessee originallyselected for complete scrutiny u/s 143(3) of the Income Tax, Act, 1961 (‘the Act’) and assessment order dated 30.10.2018 passed with an addition of Rs. 2,72,365/- as per copy placed at pages 60-61 of PB, which were later on deleted by the CIT(A) vide appeal order dated 09.05.2019.
Later on the case of the assessee was selected for reopening on the basis of information of CIRU/VRU that ‘Search and survey actions under the Income Tax Act, 1961 was conducted on 05.06.2018 inthe case of World Window Group (WWG) and related entities under section 132 and 133A of the Income Tax Act, 1961. During the search proceedings as one of the group concern of the WWG namely M/s. Futuristic Metal Trading Pvt ltd.(FMTPL), was surveyed by the department wherein an excel sheet namely ‘Cash & CH report 14.11.17.xlsx’ was found from the premises of the FMTPL, and the said excel sheet received was examined and it was alleged by the department that the beneficiaries and amounts mentioned in the column ‘Cash’ were not recorded by the assessee in its books of accounts and the assessee was one of the beneficiary as per the said excel sheet who have made cash transaction of Rs. 5502640/- with FMTPL and the show cause notice u/s 148A(b) issued to assessee dated 22.03.2023 as per copy placed at page 62-64 of the PB.
The assessee filed an reply before the Ld. AO challenging the reopening in the case of the assessee on the followings issues as under: a) On the issue of reopening based on borrowed satisfaction. b) On the issue of reopening based on third party evidence. c) On the issue of no satisfaction of searched party AO recorded before initiation of notice u/s 148A(b). d) One the issue of challenging excel sheet as dumb document. Further, it is also submitted that the assessee has filed various list of documentary evidences relating to purchases made by the assessee from doubtful party namely FMTPL and also assessee has filed its VAT returns in relation to prove the genuineness of the purchases and sales made by the assessee. No disposal to the objections in order passed u/s148A(d) 6. It is submitted that, thedetailed objections to the reopeningwere challenged by the assessee vide its reply dated 28.03.2023 consisting of 5 pages as per pages 65 to 69 were not considered by the AO and no specific disposal to the various objections as raised by the assessee have been disposed off by way of speaking order which is completely bad in law on the basis of judgement of Bombay HighcourtM/s. Browntape Technologies Pvt Ltd vs. ACIT in Writ petition No. 627 of 2022 wherein assessee order passed u/s 148A(d) was set sided by the Hon’ble court for not disposing off the objection raised by the assessee. Copy of said judgement is placed at pages 94-97 of the JS.Further reliance is being placed on 6 judgement of Amarpadma Credits (P.) Ltd. vs. Income-tax Officer [2025] 179 taxmann.com 144 (Gujrat) as per copy placed at pages 212 to 214 of JS-II wherein it is held as under: INCOME TAX : Where Assessing Officer issued reopening notice under section 148A(b) on ground that a search conducted upon a party revealed that said party provided accommodation entries in form of loan to assessee, since Assessing Officer failed to consider detailed reply filed by assessee to show cause notice issued under section 148A(b) along with relevant documents, impugned reopening notice issued to assessee would result in breach of principles of natural justice and same was to be quashed and set aside Thus, since AO has not disposed off the detailed objection by way of speaking order the assessment deserve to be quashed.
7. Addition ground of appeal
filed vide letter dated 27.12.2025- Not pressed
8. Further additional ground of appeal filed on 28.12.2025 challenging the of validity of notice issued u/s 143(2) as per separate set consisting of 50 pages:- a) It is submitted that, the assessee has taken an additional ground of appeal challenging the notice of 143(2) for the year under consideration case of the assessee was selected for CASS and notice u/s 143(2) was issued on assessee on 02.06.2023copy of said notice is placed at pages 2 to 4 of separate set without following the instructions of CBDT vide instruction circular F NO. 225/157/2017/ITA-II dated 23.06.2017 copy of which is at pages 5 to 9 of the separate set, and as per the said instruction, the A.O. while issuing the notice u/s 143(2), the AO needs to specify the category of the scrutiny selected under CASS (Computer Aided Scrutiny Selection) as to whether, it is a limited scrutiny, manual scrutiny or Complete Scrutiny Assessment. In the case of the assessee the instruction of CBDT referred above have not been followed, for which, we have taken an additional ground of appeal vide letter dated 31.10.2025 challenging the notice issued u/s 143(2), which is not as per the CBDT instructions and reliance is being placed on judgement of Hon’ble ITAT Kolkata Bench ‘A’ in the case of Srimanta Kumar Shit vs. A.C.I.T. vide order dated 19.11.2024 relevant copy placed pages 45 to 55 of separate set and another latest judgement of Kolkata Bench in the case of M/s. Hind Ceramics Pvt. Ltd vs. DCIT vide order dated 06.05.2025 copy of which is placed at pages 38 to 44 of separate set, wherein the appeal of the assessee have been allowed on this technical ground only and the Assessment Order as passed by the AO has been quashed. The facts in the above said case are similar to the facts in the case of the assessee, therefore, the judgments above need to be followed in the case of the assessee. b) The issue in the case of Srimanta Kumar has been analysed at page 48 onwards to 53 and findings has been given at pages 54 to 55 separate set. Another judgement is at page 38 of the separate set and findings is at page 42 is being relied upon. This, it is prayed before your goodself that the further additional technical ground taken above may please be considered and assessment may please be quashed.
9. Notwithstanding the above facts, the reopening is otherwise bad in law on account of followings: Non-Disclosure of any failure on the part of assessee 7 a) Firstly it submitted that the reopening in the case of the assessee is wrong in the facts since the Ld. AO has failed to disclose the facts of original assessment proceedings while recording the reasons that the assessment have been already completed u/s 143(3) dated 30.10.2018, copy of said order is as at pages 60 to 61 of PB.Further, it is submitted thatin the reasons as recorded u/s 148A(d) which is beyond four years, there is no mention about original assessment proceedings and about any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, which is mandatory. b) It is submitted that the assessment is sought to be reopened after four years and it is a mandatory condition and this being a sine–qua for formation of belief that the income of the assessee has escaped assessment because of the failure on the part of the assessee to disclose all the facts. Thus, in the cases where the assessment is sought to be reopened after four years and, therefore, the Assessing Officer was obliged to examine the information received in the context of the facts on record. If such an exercise were to be done, it is likely that the Assessing Officer would have come to the conclusion that whether there was a failure to disclose truly and fully all material facts necessary for assessment. The relevant text of the section if being produced hereunder: - “Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.” c) It is submitted that, in the case of the assessee there is no such information relating to failure and nothing has been mentioned about the original assessment proceedings have been discussed by the AO in the reasons to believe. Reliance is being placed upon the following case laws in which various courts have held that where the reasons recorded fail to whisper that there was any failure on the part of the assessee to disclose fully and truly all material facts, in such a case, reopening beyond 4 years is bad in law: - [2023] 151 taxmann.com 411 (SC) SUPREME COURT OF INDIA Assistant Commissioner of Income-tax v. Virbac Animal Health India (P.) Ltd.* …….High Court held that there was no failure on part of assessee to truly and fully disclose all material facts necessary for purpose of assessment which were carefully scrutinized by Assessing Officer during original assessment and thus, said reopening notice issued after four years on account of change of opinion was to be set aside - Whether special leave petition filed against order of High Court was to be dismissed - Held, yes [Para 3] [In favour of assessee] [2023] 155 taxmann.com 290 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax v. Canara Bank* Section 36(1)(viia), read with section 148, of the Income-tax Act, 1961 - Bad debts, in case of banks (Reassessment) - Assessment years 2006-07 and 2007-08 - High Court by impugned order held that where notice under section 148 is to be issued after expiry of four years or before expiry of six years, assessee should have failed to disclose material facts, hence, where Assessing Officer had not even stated or alleged that there was failure on part of assessee to disclose fully and truly all material facts in respect of claim of deduction under section 36(1)(viia), Tribunal rightly held that reopening assessment initiated beyond four years was bad in law - Whether SLP filed by revenue against said impugned order was to be dismissed - Held, yes [Para 4] [In favour of assessee] [2015] 59 taxmann.com 391 (Punjab & Haryana) HIGH COURT OF PUNJAB & HARYANA State Bank of Patiala v. Commissioner of Income-tax* Section 32, read with section 148, of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of (Rate of depreciation/ATMs) - Assessment years 2005-06 to 2007-08 - Assessee bank installed ATMs, and claimed depreciation at rate of 60 per cent by treating it as computer - Assessing Officer sought to reopen case on ground that depreciation allowable on plant and machinery was to be allowed - Reasons for opening assessment which had already been concluded did not show that there was any failure on part of assessee to disclose fully and truly all material facts and thus, it was merely a change of opinion - Whether reassessment was justified - Held, no [Para 11] [In favour of assessee] [2024] 159 taxmann.com 51 (Bombay)[29-01-2024] Section 37(1), read with sections 36(1)(iii), 36(1)(va), 43A and 147/148, of the Income-tax Act, 1961 - Business expenditure - Allowability of (Reassessment) - Assessment year 2015-16 - Assessee filed its return of income - Same was selected for scrutiny and assessment order was passed - After four years, Assessing Officer issued a reopeing notice on ground that assessee had claimed certain expenditures such as delayed remittance of employees contribution to employees provident fund on one occasion, consultancy for project,