TaxTMI 
TaxTMI 
2026 (9) TMI 437
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.... various countries. The assessee filed its original return of income for the assessment year under consideration on 11.10.2022 declaring total income of Rs. Nil. The return was processed under section 143(1) of the Act and the returned income was accepted. Subsequently, in response to the notice issued under section 148 of the Act, the assessee filed its return of income on 19.04.2024, again declaring total income of Rs. Nil. 3. The reassessment proceedings were initiated on the basis of information received from the Investigation Wing of the Income Tax Department pursuant to a search and seizure operation conducted in the case of the Qutone Group of Companies. During the course of the search, parallel books of account allegedly maintained by the group in respect of M/s Qutone Ceramics Private Limited were found. The Assessing Officer recorded that Mr. Sunil S. Manglunia, stated to be a key person of the group, had admitted that the transactions recorded in such parallel books were not entered in the regular books of account and that most of the transactions were carried out in cash. 4. The Assessing Officer further recorded that the Tally data recovered during the search con....
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....er the material had been supplied to the assessee, the burden was upon the assessee to rebut the same, which, according to him, the assessee had failed to discharge. The Assessing Officer accordingly treated Rs. 50,00,000/- as unexplained money in the hands of the assessee and added the same under section 69A of the Act. Penalty proceedings under section 271AAC(1) of the Act were also initiated separately. The Assessing Officer thus completed the assessment under section 147 of the Act vide order dated 28.03.2025, determining the total income of the assessee at Rs. 50,00,000/-. 9. Aggrieved, the assessee preferred an appeal before the CIT(A). The assessee challenged the validity of the reassessment proceedings as well as the addition made under section 69A of the Act. It contended, inter alia, that the reassessment had been initiated merely on the basis of information received from the Investigation Wing without independent application of mind, that the addition was based entirely upon third-party statements and coded entries found from the premises of the Qutone Group, and that no opportunity to cross-examine the persons whose statements were relied upon had been granted. The a....
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....he case and in law, the Learned National Faceless Appeal Centre (NFAC) CIT(A) has erred in upholding the action of Ld. Assessing Officer of initiating reassessment on the basis of issuing a vague and incorrect notice under section 148. 3. In the facts and circumstances of the case and in law, the Learned National Faceless Appeal Centre (NFAC), CIT (Appeals) has erred in upholding the issuance of notice under section 148 without following the procedure of section 148A by relying on a mechanical sanction under Explanation 2(iv) to section 148 of the Act, thereby rendering the reassessment proceedings void ab initio. 4. In the facts and circumstances of the case and in law, the Learned NFAC, CIT (Appeals) has erred in confirming the action of the Learned Assessing Officer in issuing notice under section 148 of the Act merely on surmises and conjectures without being in possession of any information suggesting escapement of income. 5. In the facts and circumstances of the case and in law, the Learned NFAC erred in upholding the reassessment proceedings initiated on the basis of a mechanical and non-speaking approval granted under section 151 of the Act, witho....
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....ely the information contained therein related to the assessee. According to him, these expressions operate in different statutory fields and carry distinct legal consequences. Instead of recording a definite satisfaction on the relevant jurisdictional fact, the Assessing Officer merely reproduced all possible statutory expressions in a standard format. 18. The learned AR further invited our attention to the satisfaction note placed at pages 46 and 47 of the paper book, which formed the basis for initiation of proceedings under section 148 of the Act. Referring to paragraph 3 of the satisfaction note, he submitted that the Assessing Officer had merely recorded that, on verification of the seized material, it was noticed that the assessee had carried out "unaccounted cash transactions" with M/s Qutone Ceramics Private Limited. The tabular statement incorporated therein mentioned the ledger name as "NERO CERAMIC", the proposed addition in the name of Niro Ceramics, the assessment year, the amount of Rs. 5,00,000/- and described the nature of addition merely as "Cash Transactions". 19. The learned AR submitted that neither the satisfaction note nor the table contained therein dis....
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....n note nor the notice disclosed whether the alleged transaction was a receipt or payment, the nature of the income allegedly escaping assessment, or the precise jurisdictional clause invoked. The approval granted despite these patent inconsistencies demonstrated that the sanctioning authority had merely endorsed the proposal without recording an informed and independent satisfaction. It was, therefore, submitted that the notice was a mechanical reproduction of a pro forma and the sanction accorded thereto was a routine and non-speaking approval. The Assessing Officer had failed to disclose the exact jurisdictional foundation for assuming jurisdiction under section 148 of the Act, while the specified authority had failed to examine and rectify the inherent vagueness and contradictions in the proposal. 23. In support of the aforesaid contentions, the learned AR placed reliance upon the decision of the Hon'ble jurisdictional Bombay High Court in Commissioner of Income-tax v. Ramsukh Motilal [1955] 27 ITR 54 (Bom.). He submitted that the Hon'ble High Court had held that issuance of a notice in accordance with the statutory requirements is a condition precedent to the assumption of j....
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....l S. Manglunia, stated to be a key person of the group, had admitted that the transactions recorded in such parallel books were not entered in the regular books of account and that most of them were in cash. In the case of the assessee, the recovered Tally data contained a ledger in the name of "Nero Ceramic", bearing GST No. 24AAECN6757G1ZB, which corresponded with the GST number of the assessee. The said ledger contained an entry dated 30.06.2021 with the narration "Cash Granite" and a debit amount of Rs. 5,00,000/-. 28. The learned DR further referred to paragraph 4 of the assessment order and submitted that cash registers were also found during the search. Mr. Bhuwan Vikram, who maintained such registers, had admitted that the amounts were recorded in coded form by omitting one zero from the unit's place. Since the entries from the cash registers were transferred to the seized Tally accounts, the amount of Rs. 5,00,000/- appearing in the Tally ledger was required to be read as Rs. 50,00,000/-. He submitted that the entry was recorded as an amount paid to the assessee and, therefore, represented an actual cash payment of Rs. 50,00,000/- to the assessee. 29. According to th....
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....d therein "related to" the assessee. These are not interchangeable expressions. The notice nevertheless retained all the alternatives appearing in the statutory format without striking off the inapplicable portions or recording the precise jurisdictional fact. 33. The ambiguity in the notice assumes greater significance when the satisfaction note is examined. In paragraph 3 of the satisfaction note, the Assessing Officer recorded that the seized material showed that the assessee had carried out "unaccounted cash transactions" with M/s Qutone Ceramics Private Limited. The table forming part of the satisfaction note merely described the nature of the proposed addition as "Cash Transactions" and mentioned an amount of Rs. 5,00,000/-. Paragraph 8 of the satisfaction note again stated that the assessee had carried out unaccounted cash transactions of Rs. 5,00,000/- with the said concern. 34. The satisfaction note does not record whether the impugned amount represented cash received by the assessee, cash paid by the assessee, unexplained money found in its possession, unexplained expenditure incurred by it or any other transaction having a taxable character. It also does not identi....
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....of the seized material and the statements relied upon and had also sought an opportunity to cross-examine the concerned persons. The assessment order records that a copy of the seized ledger and selected pages of the statements were attached to the show-cause notice dated 05.03.2025. However, there is nothing in the assessment order to establish that the complete seized Tally data, the underlying cash registers from which the data was allegedly transferred, or the entire statements necessary to understand the context of the alleged coding mechanism were furnished to the assessee. The assessee's grievance is, therefore, not answered merely by supplying a single ledger extract and selected portions of statements. 39. More importantly, despite the specific request, no opportunity to cross-examine the persons whose statements were relied upon was granted. The statements were not peripheral material. They constituted the sole basis for multiplying the ledger amount by ten and for characterising the entry as an unaccounted cash payment to the assessee. In the absence of cross-examination and independent corroborative material directly establishing that the assessee received Rs. 50,00,....
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....lternative expressions. The defect goes to the assumption of jurisdiction and cannot be regarded as an inconsequential irregularity. 44. The learned Authorised Representative has also relied upon the decision of the Hon'ble Supreme Court in Y. Narayana Chetty v. Income-tax Officer [1959] 35 ITR 388 (SC). The copy of this judgment placed before us also does not contain consecutively numbered paragraphs. The relevant portion reads as under: "The service of the requisite notice on the assessee was a condition precedent to the validity of any re-assessment made under section 34; and if a valid notice was not issued as required proceedings taken by the Income-tax Officer in pursuance of an invalid notice and consequent orders of re-assessment passed by him would be void and inoperative." 45. The Hon'ble Supreme Court further observed: "The notice prescribed by section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required that the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of the....