TaxTMI 
TaxTMI 
2026 (5) TMI 1254
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....company filed its return of income for A. Y. 2013-14 on 30.09.2013 declaring a total income of Rs. 3,64,700/-. The said return was initially processed under section 143(1) of the Income Tax Act, 1961. Subsequently, the case was reopened under section 147 of the Act on the basis of information flagged on the Insight Portal by the Directorate of Income-tax (Systems). The information revealed that during the course of search proceedings under section 132 of the Act in the case of Sanjay Govindram Agrawal (alias Sanjay Tibrewal), it was found that the assessee had received accommodation entries totalling to Rs. 92,84,166/- from three entities, namely, Krishna Enterprises (Rs. 8,00,000/-), Shankar Corporation (Rs. 44,06,618/-), and Radhe Corp (Rs. 40,77,548/-). After recording reasons and obtaining prior approval of the competent authority, notice under section 148 was issued on 18.08.2022. In response, the assessee filed its return of income on 17.09.2022 declaring the same income of Rs. 3,64,700/-. 3. During the course of the reassessment proceedings, statutory notices under sections 143(2) and 142(1) were issued to the assessee. The assessee denied having any transactions with the....
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....The Ld. CIT(A) noted that the original notice under section 148 was issued on 21.04.2021. Applying the Hon'ble Supreme Court's subsequent judgment in Union of India & Ors. v. Rajeev Bansal, the Ld. CIT(A) calculated that the Assessing Officer had a surviving period of 71 days to complete the action under the new regime. Reckoning this period from 20.06.2022 (the date the assessee filed its reply to the section 148A(b) show-cause notice), the Ld. CIT(A) concluded that the Assessing Officer had time up to 30.08.2022 to issue the fresh notice under section 148. Since the impugned notice was issued on 18.08.2022, the Ld. CIT(A) held that the reopening was well within the statutory time limit. 7. The assessee further challenged the assumption of jurisdiction on the ground that the Assessing Officer failed to conduct an independent inquiry prior to issuing the notice, which the assessee argued was mandated under section 148A(a). The Ld. CIT(A) dismissed this ground by interpreting the statutory language of section 148A(a), observing that the phrase "if required" explicitly makes such an inquiry discretionary rather than mandatory. The Ld. CIT(A) held that since the Assessing O....
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....oup, which demonstrated that these entities were paper concerns operated solely for providing accommodation entries, the Ld. CIT(A) upheld the addition under section 68 of the Act, stating that the assessee failed to establish the identity and creditworthiness of the parties and the genuineness of the transactions. 11. Regarding the second addition of Rs. 12,94,77,588/- (difference between total bank credits of Rs. 32.73 crores and disclosed turnover), the assessee contended that it is an established accounting principle that not all bank deposits represent sales turnover, as they include loans, advances, and contra entries. The Ld. CIT(A) acknowledged this principle but noted that the Assessing Officer had already given relief of Rs. 1.54 crores towards the increase in borrowings. For the remaining unexplained difference, the Ld. CIT(A) held that the assessee provided only a vague and general explanation without furnishing specific ledger accounts or verifiable details regarding the nature and source of the remaining credits. In the absence of corroborating evidence discharging the assessee's onus, the Ld. CIT(A) upheld the addition of Rs. 12,94,77,588/- under section 69A o....
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.... of penalty notice u/s 271(1)(c) of the Income Tax Act. 10. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing/order. Assessee has reserve the right to add/delete any other ground or argument relevant to the case at any time during the proceedings." 14. We have carefully considered the rival submissions and perused the entire material on record, including the chronology of events and the binding precedents of the Hon'ble Supreme Court. First, we take up the Legal/Jurisdictional Ground raised buy the assessee. Whether because of the order 148A(d) of the Act being barred by limitation; the impugned Assessment Order is void: 15. The core legal issue raised by the assessee before us, hitting at the very validity of the assessment order passed by the AO, is whether the outer time- limit/ surviving period as conceptualized by the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal 167 taxmann.com 70 (SC) nullifies/rescinds the internal limitation prescribed under section 148A(d) of the Act (i.e., within one month from the end of the month in which the reply is received). 16. As per ....
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.... to the Assessing Officer to issue the notice under section 148 under the new regime was 70 days from the date of receipt of the assessee's reply. Calculating 70 days from 20.06.2022, the outer limit available with the Assessing Officer to complete the proceedings under section 148A(d) and to issue the consequential notice under section 148 of the Act expired on 29.08.2022. 18. The contention of the Ld. Counsel for the assessee is that under section 148A(d) of the Act, the Assessing Officer is mandatorily required to pass the order "within one month from the end of the month in which the reply referred to in clause (c) is received by him". The reply having been received on 20.06.2022, the end of the month is 30.06.2022, and one month therefrom expires on 31.07.2022. The assessee submits that the order under section 148A(d) passed on 18.08.2022 is therefore barred by limitation. 19. The Ld. DR, on the other hand, has submitted that as per the law laid down by the hon'ble Supreme Court in the case of Rajeev Bansal (supra), the AO was left with the surviving period of 70 days from the date of furnishing the reply by the assessee on 20.06.2022 which was upto 29.08.2022; w....
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....n'ble Supreme Court in the case of Union of India vs. Ashish Agarwal (2022) 138 taxmann.com 64 (SC). Exercising powers under Article 142 of the Constitution, the Hon'ble Supreme Court created a legal fiction, directing that: "8. ... The respective impugned section 148 notices issued to the respective assessee shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b) ... The assessing officers shall thereafter pass an order in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted) ... " 22. Subsequently, a massive wave of litigation arose concerning the calculation of limitation for these converted notices. The Hon'ble Supreme Court conclusively addressed the computation of limitation and the concept of the "surviving period" in the landmark judgment of Union of India & Ors. vs. Rajeev Bansal 167 taxmann.com 70 (SC). The Hon'ble Court explained the mechanics of the surviving period and the ....
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.... passed "within one month from the end of the month in which the reply referred to in clause (c) is received by him". 25. The concept of the "surviving period" ensures that the Assessing Officer has a preserved window of time to complete the entire reassessment process. However, this umbrella extension cannot be interpreted to give the Assessing Officer immunity from the specific procedural deadlines nested within Section 148A itself. If the assessee files a reply, the clock for Section 148A(d) starts ticking, and the Assessing Officer is statutorily bound to dispose of the show-cause proceedings within one month from the end of the month in which that reply is received. Any failure to adhere to this explicit legislative mandate renders the subsequent assumption of jurisdiction fatally flawed. Section 148A(d) employs the word "shall", making it mandatory for the Assessing Officer to pass the order within one month from the end of the month in which the reply is received. 26. The Hon'ble Supreme Court in case of "Union of India v. Rajeev Bansal" [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 69 (SC) in the concluding Para 114 of the judgement has held as under : ....
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....ate, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and; (v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not." (emphasis supplied) 29. Further, the Hon'ble Supreme Court in the case of "Ashish Agarwal" (supra) gave the following concluding directions: " 10. In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at ....
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....ed, or such time, as may be extended by him on the basis of an application in this behalf, ". The Hon'ble Supreme Court thus, taking note of the aforesaid time limit to be given to the assessee to file reply by the assessee in response to notice u/s 148A(b) of the Act taking a rational approach has modified the time period ranging from one week to one month to a fixed period of two weeks. Further, the Hon'ble Supreme Court vide clause (iii) has directed that the AO shall thereafter pass order in terms of Section 148A(d) of the Act and thereafter following the procedure as required u/s 148A may issue notice u/s 148 (as substituted). Further the Hon'ble Supreme Court has made it clear in clause (iv) that all the defenses which may be available to the assessee including those available u/s 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available. 31. At this stage, we deem it proper to reproduce the relevant 3rd and 4th provisos to Section 149(1) of the Act, which read as under: "Provided also that for the purposes of computing the period ....
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....n the remaining limitation falls below that threshold. Permitting the Assessing Officer to pass an order months after the receipt of the reply would render the 3rd and 4th provisos of Section 149(1), as well as the one-month time limit embedded in Section 148A(d), completely otiose and redundant. 34. In the instant case, the statutory reply to the show-cause notice issued under section 148A(b) was filed by the assessee on 20.06.2022. The statute strictly mandates the computation of limitation from the end of the month in which the reply referred to in clause (c) is received. Any subsequent correspondence or piecemeal queries by the Assessing Officer do not reset the statutory clock under section 148A(d), as the Act does not contemplate multiple starting points for limitation. Therefore, the statutory time limit for passing the order under section 148A(d) strictly expired on 31.07.2022 (one month from the end of June 2022). However, he Assessing Officer, in this case, passed the order under section 148A(d) and issued the consequential notice under section 148 on 17.08.2022. While this date falls within the "surviving period" of 70 days (which ended on 29.08.2022) as per the Rajee....
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....53C of the Act. Therefore, the AO having jurisdiction over the assessee was legally precluded from invoking the general provisions of Sections 147/148 of the Act. The Ld. Counsel relied heavily on the recent judgment of the Hon'ble Jurisdictional High Court of Gujarat in a batch of writ petitions, the lead case being Paras Chandreshbhai Koticha vs. Income-tax Officer 182 taxmann.com 204 (Gujarat). He in this respect has also relied upon the decision of the Hon'ble Rajasthan High Court in the case of "Tirupati Construction Vs. ITO" (2024) 165 Taxmann.com 176 (Rajasthan), and another decision of Hon'ble Rajasthan High Court in the case of "Shyam Sunder Khandelwal Vs. Asstt. CIT", 161 Taxmann.com 255. 40. Per contra, the Ld. DR vehemently opposed the submissions of the assessee and supported the orders of the lower authorities. The Ld. DR argued that Sections 147/148 and Section 153C operate in their respective spheres, and the AO is not completely barred from invoking Section 148 if he possesses information suggesting that income has escaped assessment, even if that information stems from a search operation on a third party. 41. We have given our thoughtful consider....
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.... Section 153C. Crucially, the Hon'ble Court found that there was absolutely no independent material or post-search information gathered from any other source. Consequently, the Hon'ble High Court quashed the reassessment proceedings for Groups B and C, holding that the jurisdictional AO cannot bypass Section 153C and invoke Sections 147/148 in the absence of a satisfaction note and without independent material. 44. The Hon'ble Gujarat High Court held that Sections 153A and 153C begin with non-obstante clauses and constitute a special code that overrides the general provisions of Sections 147/148. The Hon'ble High Court ruled that when incriminating material pertaining to a "third/other person" is found during a search, the statute obliges the Assessing Officer of the searched person to record a "satisfaction note" stating that the seized documents belong/pertain to the other person, before transmitting them to the jurisdictional AO of that other person. The Hon'ble High Court held in unequivocal terms: "In the absence of any satisfaction note recorded by the Assessing Officer of the searched person, the jurisdictional Assessing Officer of the other p....
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.... and without any independent post-search material, is fatally flawed. 49. Respectfully following the binding judgment of the Hon'ble Jurisdictional High Court of Gujarat in the case of "Paras Chandreshbhai Koticha" (supra), we hold that the impugned reassessment proceedings initiated under Sections 147/148 of the Act are without jurisdiction, void ab initio, and are hereby quashed. Reopening on the basis of borrowed Satisfaction of the Assessing Officer: 50 . The Ld. Counsel for the assessee has also challenged the assumption of jurisdiction under section 147 of the Act, contending that the Assessing Officer formed the belief merely on the "borrowed satisfaction" from the Investigation Wing, without carrying out any independent inquiry. The Ld. Counsel contended that the Assessing Officer simply borrowed the reasons from the investigation report and the information uploaded on the Insight Portal regarding the search conducted under section 132 of the Act in the case of Shri Sanjay Govindram Agrawal (alias Sanjay Tibrewal). 51. We have examined this contention in light of the amended provisions of Section 148/148A of the Act. Under the new reassessment regime, the As....
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....authorities, which included: i) Copies of the ledger accounts of the purchasing parties. ii) Copies of the corresponding sales invoices. iii) Copies of Lorry Receipts (LRs) as proof of actual delivery and dispatch of goods. iv) Confirmations from the respective purchasing parties acknowledging the purchases and the corresponding payments. 55. The Ld. Counsel further submitted that the assessee had no direct business dealings with the entities operated by Shri Sanjay Tibrewal. The purchasing parties, for their own commercial convenience or internal arrangements, may have routed their payments to the assessee through the bank accounts of the searched person's entities. The assessee merely received its legitimate sale proceeds through banking channels. It was argued that the assessee cannot be faulted or penalized for the mode of payment chosen by its buyers, nor can the genuine trade receipts be branded as accommodation entries merely because the funds traversed through the accounts of a third party who is independently facing investigation. 56. The Ld. DR relied on the orders of the lower authorities and submitted that the burden was on ....
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....m through an entry provider. However, the Assessing Officer has failed to bring any material, let alone a cash trail, to demonstrate that the assessee had paid an equivalent amount of cash to the searched person or his entities in exchange for the cheques. The addition is based merely on the presumption drawn from the investigation report of a third party, completely ignoring the primary books of account and the contemporaneous documentary evidence maintained by the assessee in the regular course of its business. 61. Therefore, on an independent evaluation of the facts on merits, we find that the assessee has successfully discharged its onus by proving the nature and source of the bank credits as genuine trade receipts. The Assessing Officer was not justified in invoking Section 68 of the Act to tax the amounts that were already accounted for as sales. Accordingly, the additions of Rs. 92,84,166/- for AY 2016-17 and Rs. 33,69,062/- for AY 2017-18 are hereby directed to be deleted on merits as well. B. Addition of Rs. 12,94,77,588/- 62. The brief facts relating to this addition are that during the reassessment proceedings, the Assessing Officer observed that the assessee co....
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....rival submissions and perused the material on record. The core issue before us is whether an addition under Section 68 of the Act can be sustained merely by computing the mathematical difference between the gross credits appearing in the bank statements and the turnover/loans declared in the audited financials. 68. It is a well-settled proposition of law that a bank statement is not a "book of account" maintained by the assessee; rather, it is a copy of the assessee's account in the ledger of the bank. To invoke Section 68 of the Act, the primary statutory condition is that "any sum is found credited in the books of an assessee maintained for any previous year." While bank deposits must certainly be reconciled with the assessee's books, the entire gross credits in a bank account cannot automatically be presumed to be income. 69. In the regular course of business, funds traverse through bank accounts for myriad reasons that do not impact the Profit & Loss account. These include: i) Contra entries involving cash withdrawals or transfers between two bank accounts of the same assessee. ii) Cheques deposited but returned unpaid (bounced), which are later ....
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....reditworthiness, and genuineness) to discharge its primary onus under Section 68 of the Act during the appellate proceedings. 75. Before us, the Ld. Counsel for the assessee heavily contested this addition, arguing that it suffers from a total non-application of mind and leads to double taxation. The Ld. Counsel submitted that during the assessment proceedings, the assessee had clearly explained that out of the total increase of Rs. 1,54,02,080/-, a substantial portion pertained to secured loans (borrowings from recognized banking institutions) and the remaining pertained to regular unsecured loans for which PAN, bank statements, and confirmations were available. It was submitted that the AO first gave "credit" for these loans by deducting Rs. 1.54 crores from the gross bank deposits to calculate the remaining unexplained bank credits (Rs. 12.94 crores). By subsequently adding this exact amount of Rs. 1.54 crores back into the total income as a separate unexplained credit under Section 68, the AO has taxed the same amount twice. Furthermore, it was argued that taxing an increase in a secured bank loan under Section 68 is legally unsustainable. 76. The Ld. DR, on the other han....
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....lowed the direction of the Hon'ble Supreme Court and provided the information in parts and incorrect. 2. The order passed u/s 148A(d) is a beyond the period of 30 days from the end of the month of providing reply to the notice u/s 148A(b) by the assessee. 3. That the order passed u/s 147 is bad in law as the AO was required to follow the procedure as prescribed in section 153C of the Act. 4. AO has borrowed the reason to Reason to Believe from the report/ information provided by the Investigation wing during the search and not carried out any independent inquiry. 5. Non providing of opportunity of cross examination and information requested by the assessee during the whole assessment proceedings. B. On Merits and Facts of the case 6. No addition of Rs. 1,15,25,267/- as amount received from parties i.e Rs. 23,20,000/- from Shankar Corporation and Rs. 92,05,267/- from M/s Radhe Corporation can be made as unexplained credit u/s 68 of the Income Tax Act, 1961 7. No addition of Rs. 4,10,86,064/- towards the net credit entries of total of credit entries in the Sarangpur Bank ie. Rs. 23,15,14,194/- and total of credit entr....
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.... 05.07.2022 11 Date on which the assessee has replied to the subsequent notice issued. Copy of reply attached herewith. 11.07.2022 12 Date of the end of the survival period (u/s 149) after receipt of the reply u/s 148A(c) i.e. 20.06.2022 30.08.2022 13 Last date as per section 148A(d) after receipt of the reply u/s 148A(c) i.e. within one month from the end of the month in which the reply was received under section 148A(c) i.e. 22.06.2022 31.07.2022 14 Date of which the order and section 148A(d) is passed by the AO and notice u/s 148 was issued (under New regime) 23.08.2022 84. The rest of the facts and issues involved are exactly identical to that have been discussed above while adjudicating the appeal of the assessee in ITA No.1243/Ahd/2025. Therefore, our findings given above on legal issues as well as on merits will mutatis mutandis apply to the aforesaid grounds. This appeal of the assessee is, accordingly, allowed. ITA No. 1222/Ahd/2025 for AY 2020-21 85. The concise grounds/issues of appeal raised by the assessee reproduced as under: "A. Technical/ Legal Issues 1. That the AO has not followed the procedure as pre....