AI Drafter 
TaxTMI 
TaxTMI 
2026 (1) TMI 303
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....issing the appeal of the assessee, vide order u/s 250 of the Act dt. 17.10.2024, because the proceedings-initiated u/s 147/148 of the Act are void ab initio as the notice u/s 148 of the Act has not been served in accordance with the provisions of Section 282 of the Act. 3. That the Ld. CIT(A) NFAC has erred on facts and law in dismissing the appeal of the assessee, vide order u/s 250 of the Act dt. 17.10.2024, because the proceedings-initiated u/s 147/148 of the Act are void ab initio as the proceedings have been initiated on account of change of opinion& further no tangible material came in possession of the AO subsequent to the passing of the original order u/s 143(3) of the Act. 4. That the Ld. CIT(A) NFAC has erred on facts and law in dismissing the appeal of the assessee, vide order u/s 250 of the Act dt. 17.10.2024, because the proceedings-initiated u/s 147/148 are void ab-initio as there was mechanical approval of the Pr. CIT with regard to reopening of the case u/s 148and, as such, proceedings u/s 148 are liable to be quashed in view of the judgement of the Hon'ble Apex Court in the case of CIT vs Goyanka Lime and Chemical Ltd. as reported in [2015] 23....
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....r addition of Rs. 16.76 lakhs u/s 68 on a/c of difference in ledger balance with one Ramesh Kumar & Co). 4. The matter carried in first appeal has been dismissed by the ld. CIT(A) by upholding both the additions on merits by observing as follows: "In view of the above facts, it is pertinent to note that the assessee has made cash payments on various dates in excess of Rs. 20,000/- per day to a person as per details given in above table for expenditure claimed under the head Machinery rent of Rs. 5,31,280/-, purchase of material/payments on account of carriage of Rs. 16,43,302/- and Rs. 4,88,991/- on account of purchase of material 6.05% which is not allowable as per the provisions of 40A(3) of the Act. As per provisions of Section 40A(3) where the assessee expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. In this regard, the appellant has stated that these payments were not made to a single person and payment to single person per day was less than R....
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....In view of the facts as discussed above and as the explanation offered by the appellant is not satisfactory about the nature and source of the amount so credited, the amount of Rs. 16,76,426/- is treated as unexplained cash credit by the AO. During the course of appellate proceedings also, the appellant has not submitted any supporting documents for his contention. The contention of the appellant remained unjustified and unsubstantiated. Hence, the Assessment order is upheld and the ground is noted as dismissed." 5. Now the assessee is before the tribunal on the grounds contained in the memo of appeal. At the onset the Ld. AR of the assessee withdrew grounds No 2 (disputing service of reassessment notice) and ground No 4 (alleging mechanical approval by PCIT) as not pressed. 6. The Ld. AR of the assessee has filed a paper book containing copies of audited accounts with schedules, copies of recorded reasons, original assessment order u/s 143(3) dated 09/11/2016, copies of various letters, correspondence, explanations and submissions filed in course of reassessment along with copies of ledger A/c of expenses claimed in profit and loss A/c and regarding the legal issues taken up....
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....vident from the assessment order itself. 6.2 He further submitted that after full scrutiny of all accounts vis a vis books of accounts produced in course of scrutiny, and in order to cover up any revenue losses has made an addition of Rs. 3.50 lakhs, which points to towards the fact that the AO has applied his mind in course of original proceedings and was fully satisfied that there has not been any cash payment to any single payee above the stipulated limit so as to attract the provisions of section 40A(3). 6.3 Regarding the second issue of unsecured loans, it is submitted by the Ld. AR that in course of original proceedings the said issue has been looked into and the same is evident from the body of the assessment order (para- 3) which is reproduced below: 3. 1 During the course of assessment proceedings, it has been noticed that the assessee firm has debited an amount of Rs.2378634 on account of intt. paid to bank and other parties. It is also seen that in the following mentioned cases the assessee firm has mentioned the intt.paid to them @ 12% whereas as per calculation the intt. paid is more than 12% :- S. No. Name of the persons to whom the intt. has been....
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....3] 458 ITR 462 (Bom). v. Cliantha Research Ltd. Vs. DCIT, Ahmedabad reported in [2013] 35 taxman.com 254 (Delhi). 8. Regarding Ground No 5 the Ld AR submitted that in course of reassessment proceedings, even though manual return of income has been filed in response to notice u/s 148 (on line filing of return being not possible due to technical glitches), copy of recorded reasons has not been issued by the AO in spite of repeated requests by the assessee, as a consequence of which the assessee was debarred from raising objections to notice u/s 148, and non issue of recorded reasons is against the settled principles of law and has vitiated the entire reassessment proceedings and the reassessment order cannot be sustained. In support of his argument he relied on the following for support: "i. GKN Driveshafts (India) Ltd. v. ITO (SC) Mandatory to furnish reasons and decide objections before reassessment. ii. Principal Commissioner of Income-tax vs. V. Ramaiah [2019] 103 taxmann.com 202 (SC) Where High Court upheld Tribunal's order quashing reassessment proceedings ground that reasons recorded by assessing authority for reopening asses....
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....ich has all been examined in course of original proceedings and the same are not hit by the provisions of section 40A(3) and the same is as per reflection in cash book where names of different individuals are clearly mentioned in respect of each payment and there is nothing to disbelieve the said entries in regular books. "23. Further, regarding difference between credit balance of unsecured loan party namely M/s Ramesh Kumar and Co. in the books of that party and in the book of assessee, it was explained to the Ld. AO as well as to the CIT(A) that due to clerical mistake of accountant, a sum of Rs. 15,00,000/- was wrongly credited to the ledger account of M/s Ramesh Kumar & Co Instead of ledger account of partner Smt. Bindu Jindal. It is also explained that to rectify the above mistake, in the Immediate next year the assessee has reversed this entry of Rs. 16,26,000/- (Rs. 15,00,000/- interest of Rs. 1,26,000/-) from the ledger account of M/s Ramesh Kumar and Co. and transferred it to the ledger account of Smt. Bindu Jindal. To justify the same the following paper are forming par to paper book. a. Copy of ledger account of Smt. Bindu Jindal in the books of assess....
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.... AR are factually different because in all cases cited, return was filed in response to 148 notice or letters were filed to treat the original return as return u/s 148, which is not the case here. 12.1 He concluded his submission with a prayer for sustaining the appellate order, because according to him the internal audit report is a tangible material on the basis of which reassessment proceedings can be commenced. 13. We have heard the rival submissions and considered the materials on record and we find that in the instant case the reopening is after four years from the end of the assessment year, and it is to be seen whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the relevant assessment year. On perusal of the factual position we find that full set of books of accounts along with audited financials and copies of ledger accounts of " Machinery Rent ", Purchase A/c and Carriage of Material A/c has been produced and examined in details along with supporting bills / vouchers vis a vis entries in regular cash book and the ledger A/c contains the break up and the names of the payees to whom c....