DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT, RAJKOT vs. CLASSIC NETWORK PVT. LTD., RAJKOT

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

Shri D. M. Rindani, Learned Counsel for the assessee, argued that during the re-assessment proceedings, the approval given by the Income Tax Authority, u/s 151 of the Act is unsigned, therefore, the reassessment order framed by the assessing officer, based on defective approval under section 151 of the Act, may be quashed. The ld. Counsel thus stated that re-assessment proceedings initiated by the assessing officer is bad in law, as it is based on the defective approval, given by the Income Tax Authority under section 151 of the Act. Therefore, re-assessment proceedings u/s 147/148 of the Act is vitiated on account of defective approval u/s 151 of the Act, hence, reassessment order framed by the assessing officer under section 147, read with section 143(3) of the Act, should be treated invalid, and therefore, the reassessment order framed by the assessing officer, may be be quashed and for that, learned Counsel for the assessee relied on the judgement of Hon’ble High Court of Allahabad in the case of Vikas Gupta (2022) 142 taxmann.com 253 (Allahabad HC). The learned Counsel also relied on the decision of the Coordinate Bench of ITAT Rajkot in the case of Aditya Plastic vide for Α.Υ. 2013-14 (Rajkot Tribunal).

On the other hand, the Ld. DR for the revenue submitted that when the approval document is generated through system ( computer system of the income tax department) then it should be treated valid document in the eye of law, even if, it is not signed by the appropriate income tax Authority.

We have heard the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, we reproduce the approval, for assessment year 2013–14, given by the Income Tax Authority, under section 151 of the Act, as follows:

During the recording of statements u/s 131(1A) from Shri Smitbhai Parshottambhai Kaneria, the Managing Director of M/s Classic Network Private Limited, the said impounded paper was provided to him and he has confronted the question about the impounded page and he was requested transaction written in the page by furnishing the ledger accounts of the said to explain the contractor of relevant period and also about cash payments made to the contractor.However, he has not given any explanation on the issue.

The return of income filed by M/s Classic Network Private Limited for A.Υ.2013- 14 was processed u/s 143(1) on 28-09-2014 at returned income of Rs. 10,55,46,860/- Thereafter, the case was selected for scrutiny and the assessment u/s 143(3) was completed on 25-03-2016 at Rs.10,55,74,940/-. Thus, the assessee has neither disclosed the above facts in his return of income nor before the A.O.during the assessment proceedings. As such, an income of Rs.25,00,000/- chargeable to tax has escaped assessment by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration and assessment as stipulated u/s 2(40) of the Act was made u/s u/s 143(3) of the Act. Therefore, provisions of clause (c) of explanation 2 to section 147 are applicable to facts of this case andl have reasons to believe that the amount of Rs.25,00,000/-being sum as unexplained cash transaction[also violation of section 40A(3) of the Act] is chargeable to tax has escaped within the meaning of Sec 147 of the Act and the assessment year under consideration is deemed to be a case where Income chargeable to tax has escaped assessment. Thus, Rs.25,00,000/-is required to be taxed in the case of M/s Classic Network Private Limited in the capacity of company in view of the above said facts.

In this case more than four years have elapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Income-tax Act.” 11. The approval, for assessment year 2014–15, given by the Income Tax Authority, under section 151 of the Act, as follows:

We have gone through the approval given by the income tax Authority under section 151 of the Act for assessment year 2013–14 and for assessment year 2014–15 and noticed that these two approvals have neither been signed digitally nor signed manually, by the income tax authority. Under the Income Tax Act, 1961, the Specified Authority defined in Page 12of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) Section 151 plays a critical oversight role in the process of assessing income that has escaped assessment. Their primary function is to provide mandatory prior approval before certain jurisdictional actions can be taken by an Assessing Officer. According to Section 151, the "Specified Authority" for the purposes of Sections 148 and 148A is the Additional Commissioner, the Additional Director, the Joint Commissioner, or the Joint Director etc. An Assessing Officer is prohibited from issuing a notice under Section 148 (which initiates the reassessment process) without prior approval from the specified authority if the information suggesting the escape of income was received through a scheme notified under Section 135A of the Act. Under the procedure for determining whether income has escaped assessment, the Assessing Officer must obtain the prior approval of the specified authority to pass an order under Section 148A(3) of the Act. This order determines whether or not a case is "fit" to issue a notice under Section 148 based on available material and the assessee’s reply to a show- cause notice. The role of the Specified Authority under Section 151 of the Act, is to act, as a statutory check, ensuring that reassessment proceedings and notices are only initiated after a high-ranking official has reviewed the information and granted formal sanction. Therefore, approval under section 151 of the Act, should be signed by the appropriate income tax Authority.

Therefore, we note that without a valid and properly signed approval under Section 151 of the Income Tax Act, 1961, reassessment proceedings under Sections 147/148 of the Act cannot be validly initiated. The requirement of approval under Section 151 is mandatory and jurisdictional; failure to comply with this condition precedent renders the entire reassessment invalid. The law is not a mere formality, it safeguards taxpayers against arbitrary reopening of assessments. Under Section 151 of the Act, before issuing a notice under Section 148 of the Act, (which Page 13of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) triggers reassessment under Section 147), the Assessing Officer must obtain prior approval from the specified higher authority (e.g., Commissioner, Principal Commissioner, Principal Chief Commissioner, etc., as applicable) and must record the reasons on which this approval is based. The statutory scheme makes this a condition precedent to the validity of any reassessment proceedings. Therefore, we find that Section 151 sanction is jurisdictional, without it, the assessing officer has no authority to issue a notice under Section 148 of the Act, and the proceedings would be void ab initio. A document that is not signed cannot automatically be treated as a valid document in Indian law. If the approval note under Section 151 of the Act is not signed, reassessment proceedings initiated thereafter are to be quashed.

In the assessee’s case under consideration, we find that approval u/s 151 of the Act, by the CIT is unsigned and hence not proper. That is the approval note dated 12-03-2020 granted by the CIT, Central - Ahmedabad at Rajkot is unsigned by the approving authority; it bears neither a physical nor a digital signature; one of which is a must to authenticate the communication of approval. In other words, due to absence of digital signature, there should have been a physical signature by the approving authority, which is ex-facie not there on a copy supplied by the Department to the assessee hence in absence of any signature, the approval becomes unauthenticated and consequently improper and non-est, non- existent and invalid in law, for that reliance is placed on the judgement of Hon’ble Allahabad High Court in the case of Vikas Gupta (2022) 142 taxmann.com 253 (Allahabad HC).

On identical facts, our view is fortified by the decision of the Co- ordinate Bench of ITAT- Rajkot in the case of Aditya Plastic, vide 14 of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case)

In the present set of facts there was no valid satisfaction recorded by the by the Prescribed Authority under section 151 of the Act, 1961 when the Assessing Officer issued notice to the assessees under section 148 of the Act, 1961. At the time when the notice under section 148 of the Act, 1961 was issued by the Assessing Officer to the petitioner there was no valid satisfaction recorded by the Prescribed Authority ie. the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Subsequent to issuance of the notice under section 148 of the Act, 1961 by the Assessing Officer, the satisfaction under section 151 was digitally signed by the Prescribed Authority. Therefore, the point of time when the Assessing Officer issued notices under section 148, he was having no jurisdiction to issue the impugned notices under section 148 of the Act, 1961. Consequently the impugned notices issued by the Assessing Officer under section 148 of the Act, 1961 were without jurisdiction. The questions no. (a) and (b) are answered accordingly. 8.2. Therefore, based on these facts and circumstances of the case, the assessment order framed by the AO needs to be quashed as there was no approval u/s.151 of the Act for initiating the re-assessment proceedings by the Ld.PCIT, therefore, on this count the assessment order framed by the AO should be quashed.”

We are not that the DSC Policy-2018, issued by the Directorate of Income-tax (Systems) read with its letter No. F/181 dated 16-02-2018 requires officers to issue letters, notices, orders even within the Department by using digital signature. Even this policy is not followed in impugned matter. Further, while granting approval u/s 151 of the Act, the Commissioner of Income-tax has mentioned that assessee has made cash payment which is covered u/s 40A(3) of the Act. Hence, the approval was granted for addition u/s 40A(3) and not granted for addition to be made u/s 69C of the Act, vide approval under section 151 of the Act, for assessment year 2013–14, reproduced above in this order.Therefore, we note that provisions of section 151 of the Act is not an empty formality, it is a jurisdictional requirement for the assessing officer to exercise power to Page 16of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) issue notice u/s 148 of the Act, and if such approval is not signed, then consequences assessment proceedings, are invalid. Therefore, respectfully following the binding precedent of the Co-ordinate Bench of ITAT- Rajkot in the case of Aditya Plastic(supra), we quash the reassessment proceedings for assessment year 2013–14 and assessment year 2014–15, being void ab-initio.

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, appeals of the assessee, in and in are allowed, whereas appeal of the revenue in is dismissed.

Now, we shall take assessee’s appeal in 2022, for assessment year 2015- 16 and assessee ‘s appeal in 2024 for assessment year 2016- 17 and corresponding cross appeals of revenue in 2022 and in , respectively. In order to adjudicate these appeals, we take lead case in 2024, for assessment year 2016- 17.

Learned Counsel for the assessee, respectfully submitted that the aforesaid ground of appeal is purely legal in nature and does not require any fresh facts to be investigated, as it arises from the facts which are on record and goes to the root of the matter, therefore, above legal ground of the assessee may be admitted in the interest of justice, and it should be adjudicated, first. On the other hand, learned DR for the revenue, opposed the prayer of the assessee to admit the above legal ground.

We have considered the request of the assessee for admission of additional ground, which is purely of legal nature. On the basis of material available on record it is certain that additional ground raised by the assessee challenging the very jurisdiction of the AO to pass reassessment order is no longer res-Integra and it is well settled that an assessee can raise a legal ground at any stage of proceedings as held by the Apex Court in the case of CIT v/s. Varas Internation reported in 284 ITR 80(SC) and National Thermal Power Co Ltd. v/s CIT reported in 229 ITR 383 (SC) and Special Bench decision in the case of DHL Operators reported in 108 TTJ 152(SB). Keeping in view the facts and circumstances of the present case, we are of the view that the issue raised Page 18of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) in 'additional ground' regarding challenging the reassessment proceedings under section 147/148 of the Act, goes to the root of the matter and hence needs to be admitted. Hence, we hereby allow the assessee to raise additional ground of appeal. Since this ground raises question about the assumption of jurisdiction and validity of reassessment order itself, therefore we thought it appropriate to take up and decide this additional ground first.

Brief facts qua the issue as per lead case in are as follows: Initial comments of the assessing officer in the assessment order reads as follows: “In this case, assessment order was passed on 28.03.2023 and assessment order was issued and served to assessee, vide Din & order No.ITBA/AST/S/147/2022- 23/1051608029(1), dated 28.03.2023. But due to some technical issue in ITBA system, incomplete assessment order was issued. Therefore, now the complete assessment order is being issued herewith”.

The assessee, a private limited company, is a civil contractor engaged in the business of development of infrastructure facility, that is, construction of roads, dams, water supply, water purification on behalf of Government. The assessee has filed its return of income for assessment year (A.Y.) 2016-17, on 21-10-2016, declaring income of Rs. Page 19of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) 11,84,14,510/-. Subsequently, on 26.09.2018, the business premise of the assessee, M/s Classic Network Pvt Ltd (CNPL), was covered under survey proceedings u/s 133A of the Act, as part of the Search and seizure action named "Operation Star Alliance" conducted by the investigation wing. Survey proceedings were carried out at the premises of associated entities. Various builders were covered under this operation. Inquiries revealed that cash was being parked in the real estate projects carried out by these builders. During the course of survey proceedings, at the premise of M/s Classic Network Pvt Ltd ( in brief “CNPL”), various incriminating documents in the form of loose papers and digital data in the form of computer backup were found and impounded. The impounded data revealed unaccounted transactions pertaining the year under consideration. In view of the impounded documents containing unaccounted transactions related to the assessee, the assessment for assessment year (A.Y.) 2016-17 has been reopened as per provisions of section 147 of the Act, after recording the reasons for re-opening and obtaining approval of the Pr. CIT(Central), Ahmedabad u/s 151 of the Act, dated 22/03/2021. The notice u/s 148 of the Act has been issued to the assessee, on 23/03/2021. On 24-03-2021, the assessee has filled a return of income in response to notice u/s 148, declaring therein total income of Rs. 11,84,14,510/-. Subsequently, notice u/s 143(2) was issued and served upon the assessee. Thereafter, notices u/s 142(1) calling for various details relevant to the assessment were issued and served upon the assessee. In response, Authorized Representative of the assessee, has submitted various details from time to time.

The assessing officer, vide notice u/s 142(1) cum show -cause notice dated 19/08/2021, of the assessing officer, at query no. 21, the assessee has been asked to submit page wise analysis with detailed explanation on the Page 20of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) incriminating documents impounded from the premise of the company during the survey. In response, vide assessee’s submission dated 26/08/2021 (received by AO on 13/09/2021), the assessee has furnished page wise explanations, before the assessing officer.

In response to the above show cause notice, the assessee has submitted the same details and documents again. However, the assessing officer Page 21 of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) rejected the same and made the following additions in the returned income of the assessee for the year under consideration : Sr. No. Amount in Rs. Relevant Provision of the Income-tax Act 1 29072908 Unexplained expenditure etc. u/s 69C 2 143999517 Unexplained / unaccounted income 3 900000 Profits chargeable to tax as per Section 41(1) Total 17,39,72,425 Relevant Provision of the Income-tax Act

Aggrieved by the order of the assessing officer, the assessee, carried the matter in appeal, before the Ld.CIT(A), who has partly deleted the addition, observing as follows:

Shri D. M. Rindani, Learned Counsel for the assessee, begins by pointing out that in respect of assessment year (AY) 2016-17, the assessing officer has issued two different DIN number. To issue two different DIN Number for the same assessment year, is not required as per the provisions of the Act. Therefore, based on this fact, the assessment order should be quashed, as the assessment order contains two different DIN number, which is against the provisions of the Income tax Act 1961.

The Ld. Counsel further argued that in the assessee’s case under consideration, the information was received by the assessing officer, from the third-party, therefore, the assessment should be framed u/s. 153C of the Act instead of u/s. 147/148 of the Act. In the assessee’s case under consideration, the assessment order was framed by the assessing officer under section 147/148 of the Act, therefore, reassessment proceedings may be quashed.

On the other hand, the Ld. DR for the revenue submitted that there is no harm, to the assessee, if the assessing officer issued two different DIN number for the same Assessment Year.

The Ld. DR further pointed out that the information was received by the assessing officer, from the third-party, therefore, assessing officer, may record the reasons for reopening the assessment, hence, assessing officer has rightly framed the assessment order u/s. 147/148 of the Act.

The Ld. DR also pointed out that the documents relating to reasons recorded are system generated document, therefore, the sufficiency of the reasons recorded should not be challenged. The Ld. DR also submitted that the assessing officer was right in making addition on different issue and reopening of the case u/s. 147 of the Act, as the reasons recorded by the assessing officer were sufficient reasons, based on the factual position.

We have heard the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, we reproduce, the reasons recorded by the assessing officer for the assessment year 2016–17 under section 147 of the Act:

Analysis of information collected/received: The survey loose papers and inventoried the same as Annexuer A1(120 pages), Annexure A2(122 pages) and Annexure A3(149 pages). Back up of digital data from 6 computers has also been obtained in Hard Disks and the same has been inventoried as Annexure A4. Analysis of the documents and digital data impounded by the survey party revealed that the assessee company was indulged in the practice of recording various expenses related to its business activities, making payment through banking channel and receiving the benefit by taking it back in cash. Instances of unaccounted cash expenses have also been noted.

Enquiries made by the AO as sequel to information collected/received: The loose papers and digital data have been thoroughly perused and it has been ascertained that following pages contained details of various unaccounted transactions pertaining to FY 2015-16 relevant for AY 2016-17. Page no. 10,11,12,13,52,56,57,59,69 and 78 of Annexure A2 Page no. 64 of Annexure A3 Page no. 31, 33 to 37 33 to 37 and 55 to 58 of the print outs taken from digital data backup.

Basis of forming reason to believe and details of escapement of income: In view of the above discussion, I have reason to believe that income to the tune of Rs. 18,95,69,678/- (at least) has escaped assessment in this case by reason of failure on part of the assessee to disclose fully and truly on material facts, for which the case of the assessee for A.Y. 2016-17 needs to be re-opened within the meaning of section 147 of the Income-tax Act. It is, therefore, requested that necessary approval may kindly be accorded for issuing notice u/s. 148 of the Income-tax Act in this case. Income chargeable to tax in relating to any assets (including financial interest in any entity) located outside India: Applicability of the provisions of section 147/ 151 to the facts of the case: In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case the only requirement to initiate proceeding u/s. 147 is reason to believe which has been recorded above. 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 u/s 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. This case is within four years from the end of the assessment year under consideration. Hence necessary sanction to issue the notice u/s 148 has been Page 26of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) obtained separately from Joint Commissioner of Income Tax as per the provisions of section 151 of the Act.

We have gone through the above reasons recorded by the assessing officer and noticed that these reasons were recorded based on the guess work and conjuncture, and assessing officer did not have definite information to say that particular income of the assessee has escaped from assessment. It seems to us that assessing officer recorded the reasons, based on general information and instances and examples. In the above reasons recorded, the assessing officer has stated as follows:

The findings of the assessing officer in the above reasons recorded by the assessing officer is reproduced below for our analysis : “3.Findings of the AO: The above stated facts are sufficient to draw an inference that the assessee- company has ventured into various out of books cash transactions which has escaped the assessment. Some in the form of out of books cash expenses and some in the form of recorded expenses but later recovered in cash”.

The basis of forming reasons to believe and details of escapement of income in the reasons recorded is reproduced below, for our analysis: “4. Basis of forming reason to believe and details of escapement of income: In view of the above discussion, I have reason to believe that income to the tune of Rs. 18,95,69,678/- (at least) has escaped assessment in this case by reason of failure on part of the assessee to disclose fully and truly on material facts, for which the case of the assessee for A.Y. 2016-17 needs to be re-opened within the meaning of section 147 of the Income-tax Act.”

Hence, from the above analysis, we find that there is no whisper in the reasons recorded, of any tangible material which came to the possession of Page 28of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) the assessing officer. It reflects an arbitrary exercise of the power conferred under section 147/148 of the Act.

Article 265 of the Constitution of India lays down that, “No tax shall be levied or collected except by authority of law”. The Hon’ble Supreme Court of India has held that the this provision under Article 265 of the Constitution of India is applicable not only for levy but also for the collection of taxes and the expression “assessment” within its compass covers both the aspects carried out by the executive functionary. Chottabhai Vs. Union of India 1962 SCR Supl.2 1006. Therefore, it is required that whole of the process of taxation must follow the procedures which are valid under the law and must adhere to law, that is, substantive one as well as procedural one too. Therefore, in other words it is provided in the Constitution of India that every step should be taken to ensure that levy and collection of the taxes is strictly in accordance with law – not only substantive one but the procedural law, as well.

We note that following conditions are laid down in section 147/148 to reopen the assessment. “If the A.O. has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.”  There must be material for the belief.  Circumstances must exist and cannot be deemed to exist for arriving at an opinion;  Reasons to believe must be honest and not based on suspicion, gossip, rumour or conjecture;  Reasons referred to must disclose the process of reasoning by which the AO holds “reasons to believe” and change of opinion does not confer jurisdiction to reassess;  There must be nexus between material and belief; and Page 29of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case)  Reasons recorded must show application of mind by the AO.

The purpose behind the relevant provisions imposing condition precedent for initiating reassessment proceedings is to ensure finality of proceedings. The Act also provides that such reason must be recorded in writing before issue of notice of reassessment so as to judge the existence of such belief before initiating reassessment proceedings by issue of notice u/s.148 of the Act. The above requirements are meant to ensure that powers to initiate reassessment proceedings are not exercised in an arbitrary manner. The Courts have analysed and explained in several cases as to what could be the valid reason to believe escapement of income, Page 30 of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) which would enable the Assessing Officer to successfully reopen the assessment. It has been held that the words ‘reason to believe’ are stronger than the words ‘reason to suspect’ or ‘reason to doubt’. It requires more than merely ‘satisfaction’ of the Assessing Officer. The belief entertained by the Assessing Officer must not be arbitrary or irrational. The expression ‘reason to believe’ does not mean purely subjective satisfaction of the Assessing Officer. The belief must be held in good faith. It cannot be merely pretence. Again, the belief must be of an honest and reasonable person based upon reasonable grounds. The Assessing Officer would be acting without jurisdiction, if the reasons for his belief are not material or relevant. There should be nexus between the information coming into possession of the AO and his belief on the basis of such information that income of the Assessee chargeable to tax has escaped assessment. We note that in the assessee’s case under consideration, the reasons recorded, by the assessing officer, as already noted above, are vague and unclear, hence, reassessment proceedings should be quashed.

In the assessment year 2016–17, we find that addition of Rs. 9,00,000/-, in the reasons recorded dated 22-06-2021, on Page 3, the A.O. has mentioned that Rs. 9,00,000/- was received back by the assessee, during the year under consideration and was not accounted for in regular books of account. However, the same is added as profit chargeable to tax u/s 41(1) of the Act, in the order u/s 147 dated 30-03-2023 by the assessing officer. Hence, when no addition was made on which belief was formed, the A.O. could not make additions on some other grounds, for that reliance can be placed on the judgement of jurisdictional High Court of Gujarat, in the case of Mohmed Juned Dadani (2013) 30 taxmann.com 1 (Gujarat HC). On identical facts, the Coordinate Bench of ITAT -Rajkot in the case of Page 31 of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) Nagichana Mahila Doodh Sahakari Mandali Ltd. in dated 02-06-2025 (Rajkot Tribunal), has held the same ratio.

In the assessment year 2015–16, regarding addition of Rs. 10,00,000/-, the A.O. in the reasons recorded on Page 3 has mentioned that the said amount is unaccounted income of the assessee- company whereas, the same is added as unexplained expenditure u/s 69C in the order u/s 147 dated 17-03-2022. Regarding addition of Rs. 5,22,54,327/- the assessing officer in the reasons recorded on page 5 has mentioned that the said amount was cash received against sale of bitumen to various party or cash received against bill issued. However, at the time of making addition the same is shown as profit chargeable to tax u/s 41(1) of the Act. Hence, when no addition was made on the ground on which belief was formed, the A.O. could not make additions on some other grounds, for that reliance can be placed on the judgement of jurisdictional High Court of Gujarat, in the case of Mohmed Juned Dadani (2013) 30 taxmann.com 1 (Gujarat HC). On identical facts, the Coordinate Bench of ITAT -Rajkot in the case of Nagichana Mahila Doodh Sahakari Mandali Ltd. in dated 02-06-2025 (Rajkot Tribunal), has held the same ratio.

In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings, for assessment year 2015–16 and for assessment year 2016-17. We, therefore, quash the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of the additions, and other technical arguments of ld. Counsel for Page 32 of to 298, 177 & 178/Rjt/2022 & 2024 Classic Network Pvt. Ltd. (Group Case) the assessee, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, the appeal of the assessee in for assessment 2015–16, and assessee’s appeal in for A.Y. 2016-17 are allowed, whereas corresponding cross appeals of revenue in for A.Y. 2015-16 and in A.Y. 2016-17, are dismissed.

Now, on merit, following are the remaining appeals of assessee and revenue. In these appeals the plea of the assessee is that estimated addition sustained by the learned CIT(A) is on higher side and therefore it should be reduced further, considering the average audited profit of the assessee, however, plea of the revenue is that addition made by the assessing officer may be sustained. The details of these appeals, assessment year-wise are as follows: for A.Y. 2017-18 Revenue’s appeal in for A.Y. 2017-18 2. Assessee’s appeal in for A.Y. 2018-19 Revenue’s appeal in for A.Y. 2018-19 3. Assessee’s appeal in for A.Y. 2019-20 Revenue’s appeal in ITA No.275/RJT/2022, for A.Y. 2019-20

In order to adjudicate these appeals on merit, we take lead case of assessee’s appeal in for assessment year 2017- 18. The grounds of appeal raised by the assessee in lead case in for assessment year 2017-18, are as follows:

The facts necessary for disposal of these appeals on merit are stated in brief.In this case, return of income showing total income of Rs. 8,69,68,360/- wase-filed on 17.02.2018. The case was selected for scrutiny through CASS for complete scrutiny. Notice u/s. 143(2) dated. 26.09.2018 was issued and served upon the assessee on 27.09.2018. The accounts of the assessee are audited and Audit Report dated 13.02.2018 in Form No. 3CB/3CD and copy of audited accounts were filed during the assessment proceedings. Subsequently, notices u/s.142(1) of the I.T. Act dated. 24.09.2019 and dtd. 15.10.2019 were issued, and served upon the assessee calling for various details relevant to the assessment in the case of the assessee- company. In response to said notice, Authorized Representative of the assessee filed its submission through e-filing portal and submitted the required details from time to time, to the assessing officer. The assessing officer, after considering the reply of the assessee, made the following additions:

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the learned CIT(A), who has rejected the books of accounts of the assessee and estimated the profit observing as follows: “On going through the records it is noticed that during the year consideration the assessee has shown the GP rate 7.72% and NP rate of 2.41% on the total turnover of Rs.3,35,39,72,992/-. Similarly, in the immediately preceding year the assessee has shown the GP rate of 7.94% and NP rate of 2.93% on the total turnover of Rs. 3,43,99,75,819/-. From the above it is apparent that there is fall in the GP rate and NP rate for the year under consideration as compared to the preceding year. In this regard during the course of appellate proceedings the assessee was asked to explain the aforesaid discrepancies and why the books of accounts may not be rejected u/s 145 of I.T. Act and appropriate GP/NP rate should not be estimated for the year under consideration? In response the assessee has submitted that during the year under consideration the assessee has procured the work orders below the SOR and because of the reduced rate of contract value the gross receipts and margin of profit has reduced to large extent. In support of the same the assessee has submitted the details showing that there was substantial fall in the GP rate and NP rate for the year under consideration. The relevant details are reproduced as under:-

Learned Counsel for the assessee submitted before Bench, year-wise written submissions, on merit, which are reproduced below:

However, learned DR for the revenue relied on the findings of the assessing officer in respect of the above assessment years, appeal- wise.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the learned CIT(A) and other materials brought on record. We have gone through the findings of the assessing officer, for assessment year 2017–18 and for assessment year 2018–19 and for assessment 2019–20. We have also gone through the entire findings of the learned CIT(A) for assessment year 2017–18 and for assessment year 2018–19 and for assessment 2019–20. We have heard in detail learned DR for the revenue and learned Counsel for the assessee, on merit, in respect of these assessment years. In sum and substance, the plea of ld. Counsel for the assessee is that estimated addition sustained by the learned CIT(A) is on higher side and therefore it should be reduced further, considering the average audited profit of the assessee, at the rate of 3.27%. The learned Counsel for the assessee also submitted a chart before the bench, showing average profit rate @ 3.27%, which we have gone through. However, plea of the ld DR for the revenue is that addition made by the assessing officer may be sustained.

In the result, following appeals of the assessee, and revenue, are dismissed:

In the result, appeal filed by the assessee in is allowed.

In the combined result, all appeals of the revenue, are dismissed, whereas appeals of the assessee in 176/Rjt/2024, 289/Rjt/2022, 177/Rjt/2024 and 178/Rjt/2024 are allowed and assessee’s appeal in 290/Rjt/2022, 291/Rjt/2022 are dismissed.