TaxTMI 
TaxTMI 
2026 (4) TMI 1627
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....ismissing the appeal filed by the appellant. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. I. CHALLENGING THE VALIDITY OF NOTICE ISSUED u/s. 148 OF THE ACT AND PASSING THE ORDER u/s. 147 R.W.S. 144B OF THE ACT 1. The Ld. CIT(A) has erred in upholding the validity of the reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961, despite the fact that the original assessment was completed under Section 143(3), and all material facts were already examined. The reopening is a mere change of opinion and therefore invalid in law. 2. The Ld. CIT(A) failed to appreciate that the Assessing Officer had no new tangible material to form a valid reason to believe that income had escaped assessment. The reopening was based entirely on information from the Investigation Wing, without any independent verification or inquiry. 3. The appellant humbly submits that the reassessment order is vitiated by gross violation of natural justice, as the appellant was not provided with any copy of the Investigation Report or given any opportunity to rebut the alleged findings or cr....
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....ade in the assessment order as the addition of Rs. 39,51,250/- has no basis in the record and is arbitrary especially when the appellant has disclosed a higher income. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing." 3. The brief facts of the case are that the assessee, an individual, filed his original return of income for Assessment Year 2014-15 declaring total income of Rs.53,47,010/-. The case was assessed under section 143(3) of the Act on 17.11.2016, wherein a disallowance of Rs.8,45,673/- under section 14A of the Act was made and total income was assessed at Rs.61,92,680/-. Subsequently, based on information received from the Investigation Wing, Bhavnagar, and findings of SEBI regarding largescale manipulation in illiquid currency derivatives on BSE and NSE through reversal trades, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment. The Ld. AO was of the view that the assessee had generated fictitious profits amounting to Rs.39,51,250/- through such non-genuine derivative transactions. Accordingly, the Assessing Officer initiated ....
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....eponderance of probability, also referring to alleged involvement of the assessee in similar suspicious transactions in other assessment years, including penny stock and accommodation entry cases. Accordingly, the Assessing Officer treated the sum of Rs.39,51,250/- as unexplained income under section 68 of the Act and added the same to the total income, resulting in assessed income of Rs.1,01,43,930/-. Penalty proceedings under section 271(1)(c) were also initiated. 6. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) noted that the assessee had raised general grounds challenging reopening under section 147 of the Act, but did not find merit in the same. With respect to the substantive grounds challenging the addition of Rs.39,51,250/- under section 68 of the Act, the CIT(A) examined the assessment findings and the material relied upon by the Assessing Officer. The CIT(A) reiterated that SEBI investigations had revealed that the assessee was involved in executing fictitious trades in currency derivatives and had generated artificial profits through reversal trades in illiquid options. The CIT(Appeals) further noted that such ....
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....derivative transactions is factually incorrect. 11. In this backdrop, what assumes critical significance is that the Assessing Officer has not brought on record any independent, cogent or verifiable material to demonstrate that the assessee had in fact entered into currency derivative transactions as alleged in the reasons recorded. The entire reopening is thus premised on a general information report coupled with assumptions, without any live nexus to the specific facts of the assessee's case. The law is well settled that the "reason to believe" contemplated under section 147 must be based on tangible material having a live link with the formation of belief regarding escapement of income in the hands of the assessee. 12. The Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Das 103 ITR 437 (SC) has held that there must be a rational connection or live link between the material coming to the notice of the Assessing Officer and the formation of belief, and such belief cannot be based on mere suspicion, gossip or rumour. Similarly, in CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC), the Hon'ble Apex Court has categorically held that reopening cannot be based on mere c....
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....sessee on merits are rendered academic and do not require adjudication. 18. In the result, the appeal of the assessee is allowed. Now we come to the assessee's appeal for A.Y. 2015-16 in ITA No. 1747/Ahd/2025 19. The assessee has raised the following grounds of appeal: "1. The Ld. CIT (A) has grossly erred in law and on facts in dismissing the appeal filed by the appellant. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. I. CHALLENGING THE VALIDITY OF NOTICE ISSUED u/s. 148 OF THE ACT AND PASSING THE ORDER u/s. 147 R.W.S. 144B OF THE ACT 1. The Ld. AO has erred in law and on facts in invoking the provisions of section 147 of the Act by issuing the notice u/s. 148 of the Act dated 31.03.2021 merely on surmises and conjectures. 2. The Ld. AO has erred in reopening the case of the appellant u/s. 147 of the Act on the basis of the communication so received from Dy. Director of Income Tax (Inv.) Unit 1(3), Ahmedabad regarding search and seizure action in the case of Jignesh Shah and Sanjay Shah on 11.09.2018. However, the Ld. AO has not provided any certified copies of the....
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....dation entries by way of fictitious loans/transactions of Rs. 1.28.02.2977- u/s. 69A of the Act 1. The Ld. CIT(A) has erred in law and on facts in confirming the aforesaid addition merely on surmises and conjectures. 2. The Ld. CIT(A) has erred in law and on facts in not properly considering the written submission filed by the appellant properly wherein, appellant has specifically and categorically denied that appellant has not accepted any cash credit of whatsoever nature, either from Jignesh Shah or from any of the two of his companies. 3. The appellant humbly submits that the Ld. AO has failed to bring on record any cogent material evidence in the form of cash trail, cash vouchers, cash vs cheque entries, any cash deposits or any notings relating to cash given in lieu of cheque by appellant company, in the form of Statements of Jignesh Shah and Sanjay Shah and/or the directors of Mainak Commtrade Pvt.Ltd and Christy Comtrade Ltd operated by Jignesh Shah and others. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing." 20. The brief facts of the case ar....
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....eged records of accommodation entries, the Assessing Officer held that ANR Finance Limited was merely a conduit for providing accommodation entries. The Assessing Officer observed that certain entries in the seized data apparently reflected transactions relatable to the assessee, including specific amounts and dates, which, according to the Assessing Officer, established that the assessee had participated in the modus operandi of obtaining accommodation entries. Accordingly, the Assessing Officer proposed to treat the sum of Rs.1,28,02,297/- as unexplained money under section 69A of the Act on the ground that the assessee had availed accommodation entries in the guise of fictitious transactions through ANR Finance Limited. The assessee, in response dated 22.03.2022, objected to the proposed addition and contended that the entire action of the Assessing Officer was based on third-party material collected behind the back of the assessee without providing copies thereof or granting an opportunity of cross-examination. The assessee further submitted that all transactions were genuine, duly supported by documentary evidences, carried out on recognized exchanges, settled through banking ....
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.... larger accommodation entry scheme. 25. The CIT(A) further concurred with the Assessing Officer's reliance on circumstantial evidence and the theory of preponderance of probabilities, holding that the surrounding facts, including seized digital records and statements of entry operators, sufficiently demonstrated that the transactions were not genuine. The contention of the assessee regarding lack of cross-examination and reliance on third-party material was not accepted, and the CIT(A) held that the evidences on record were adequate to sustain the addition. Accordingly, CIT(Appeals) confirmed the addition of Rs.1,28,02,297/- made under section 69A of the Act and the appeal of the assessee was dismissed. 26. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 27. We have carefully considered the rival submissions, perused the assessment order, the order of the CIT(Appeals), the reasons recorded for reopening, and the material placed in the paper-book, including the specific submissions of the assessee. The primary issue which arises for our adjudication is twofold, namely, whether the assumption of jurisdiction....
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....its, we find that the addition made under section 69A of the Act is unsustainable. The entire addition is based on third-party statements, affidavits of alleged dummy directors, and digital data seized from the premises of Jignesh Shah. Admittedly, no opportunity of cross-examination of such persons has been provided to the assessee. In the present case, the addition is fundamentally based on such third-party material, and in absence of cross-examination, the same cannot be relied upon against the assessee. 32. Further, the assessee has placed on record documentary evidences demonstrating that the transactions were carried out through banking channels, duly recorded in books of account, and supported by invoices and exchange-based records. The Assessing Officer has not pointed out any defect in these evidences. It is well settled that suspicion, however strong, cannot take the place of evidence. 33. We also find that the Assessing Officer has invoked section 69A without establishing the essential ingredients of the said provision, namely that the assessee was found to be the owner of unexplained money not recorded in the books of account. In the present case, the transactions....