TaxTMI 
TaxTMI 
2026 (9) TMI 1445
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the DC/ACIT (Central), Haldwani for the A.Y. 2015-16, 2016-17, 2017-18, 2018-19, 2019-20, 2020-21, order passed u/s 143(3)/147 dated 26.03.2024 of the Act by the ACIT Central Circle, Haldwani for the A.Y. 2021-22. 2. The brief facts for all AYs, is that information has been received from the DDIT(Inv.)-III, Ghaziabad that a search and seizure operation u/s 132 of the Act was conducted in the case of M/s Ravindra Oil and Ginning Mills, 1/1, Khurja Peach, Road, Hapur 02.06.2022 wherein it was found that the said entity was engaged in out of books sales and purchases of raw material and finished goods, in collaboration with its suppliers and buyers. In the course of search conducted in the case of M/s Ravindra Oil & Ginning Mills, certain digital data, named as "Sanjeev Tally", was found. This M/s Ravindra Oil & Ginning Mills used to maintain two sets of books of account, one for the purchases of raw materials for the purpose of submission to the Income-tax department and another to record out of books sales/purchases. On the basis of the said data, the Ld. AO recorded satisfaction under Explanation 2 (iv) of section 148 of the Act, that M/s Ravindra Oil & Ginning Mills was engag....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., rendering the impugned assessment order void ab initio. 6. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in sustaining the addition of Rs. 9,22,21,733/- made u/s 69C alleging out-of-books purchases, which is contrary to the facts and unsustainable in law. 7. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition u/s 69C solely on the basis of third-party seized material / "Sanjeev Tally" without any independent corroboration and without establishing that the same pertains to the appellant. 8. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition without providing the appellant an opportunity to cross-examine the persons whose statements / records were relied upon, thereby violating principles of natural justice. 9. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in sustaining the addition without rejection of books of account u/s 145(3) and without pointing out any defect in the audited books of the appellant. 10. That on the facts a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....initio and liable to be quashed. 17 2016-17 to 2018-19 That the Ld. CIT(A) has erred in law and on facts in confirming the invocation of extended limitation under section 149(1)(b)(iii) of the Income Tax Act, 1961, without appreciating that the mandatory twin conditions, namely escapement of income of Rs. 50,00,000/- or more and representation thereof in the form of entry or entries in the books of account of the assessee, were not satisfied. Hence, the reassessment proceedings are barred by limitation, without jurisdiction and liable to be quashed. 6. On ground 13, for AY 2014-15 to 2021-22 that there is erroneous and mechanical satisfaction under explanation 2(iv) to section 148, the ld AR of the assessee submitted that the satisfaction recorded is substantially similar for all the assessment years and, therefore, AY 2014-15 is being taken as the base year for the present submission. The ld AR stated that the entire reassessment proceedings have culminated from the satisfaction recorded under section 148 of the Act by invoking clause (iv) of Explanation 2 to section 148 for all the A.Ys. The Ld. AR, referring to para 7 of the satisfaction note, stated that the AO, sol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 (Madras); vi) PCIT v. N.S. Software (Firm) [2018] 93 taxmann.com 21 (Delhi). 9. On ground 15 (A.Y. 2014-15 to 2016-17), on the issue of limitation that reopening is beyond Six Years and the escapement is not an "Asset" (1st Proviso to s.149 r/w s.153A), the ld AR submitted that the search was initiated after 01.04.2021 and hence A.Ys. 201415 to 2016-17 fall outside the six-year limit under the first proviso to s.149(1) and can be reopened only if the fourth proviso to s.153A r/w Explanation 2 is satisfied. The ld AR stated that the charge relates to alleged undisclosed purchases, which fall outside the definition of "asset" restricted under Explanation 2 to section 153A to immovable property, shares/securities, loans/advances and bank deposits, and excluding bogus purchases, expenditure or book entries. The s.148 notices for A.Ys. 2014-15, 2015-16 and 2016-17 were issued on 30.03.2023, 31.03.2023 and 31.03.2023 respectively, with satisfaction recorded on 27.03.2023; the year of search is F.Y. 202223 corresponding to A.Y. 2023-24. On a correct reckoning of the block from the F.Y. of search, A.Ys. 2014-15 to 2016-17 fall at years 8-10 which is beyond the permissible six....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1,733 Rs. 9,22,217 No. 2015-16 Rs. 15,03,04,683 Rs. 15,03,047 No. 2016-17 Rs. 15,94,82,727 Rs. 15,94,82,727 No. 2017-18 Rs. 15,54,81,184 Rs. 15,54,812 No. 2018-19 Rs. 9,33,41,045 Rs. 9,33,410 No. The ld AR stated that "Income chargeable to tax" means receipts minus expenditure, not gross receipts/purchases. Once only the profit element is taken, the jurisdictional condition for extended limitation under s.149(1)(b) is not satisfied, rendering the s.148 notices time-barred and without jurisdiction. The ld AR relied on: i) PCCIT, Bhopal v. Nitin Nema, 2024 (9) TMI 1138 (SC ) ii) ITO v. Sanath Kumar Murali, 2025 (3) TMI 833 (Karnataka HC). 11. On Ground 16 (A.Y. 2014-15), regarding mandatory Notice under Section 143(2) being not Issued, the ld AR stated that the s. 148 notice for A.Y. 2014-15 was issued on 31.03.2023; the Assessee filed the return on 14.03.2024 in response (PB pp. 65-66; order-sheet pp. 6-9). Despite this, the AO completed the reassessment without issuing any notice u/s 143(2). Once the original return is treated as the return in response to the s. 148 notice, the AO is statutorily bound to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ranting effective cross-examination. The denial vitiates the proceedings; such statements/material lose their evidentiary value and cannot be the sole basis for additions. The ld AR relied on: i) PCIT v. Anand Kumar Jain [2021] 133 taxmann.com 289 (SC)/[2022] ii) PCIT v. Hadoti Punj Vikas Ltd. [2023] 157 taxmann.com 193 (SC)/[2024] iii) PCIT v. Kishore Kumar Mohapatra [2024] 162 taxmann.com 5 (SC) [2025] 14. Per contra the ld DR placed heavy reliance on the orders of the AO and the CIT(A). The ld DR vehemently argued that the satisfaction under Explanation 2(iv) of section 148 was properly recorded. 15. We have heard the rival submissions and have perused the materials on record. We first deal with the additional legal grounds raised by the assessee. The additional grounds pertains to various assessment years involved, hence the adjudication is being made assessment year wise and the decision rendered herein would apply to each assessment year involved. For that purpose it would be necessary to reproduce the reasons recorded for reopening the cases for impugned years u/s 148 of the Act, as below: "1. The assessee, Shri Chandra Mohan, Prop. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich was presented to the Income Tax Department for taxation purpose. The other was named "Sanjeev Tally" firms/companies of the Ravindra Oil Group. Investigation into the matter has revealed that Sanjeev Tally data shows the actual sales and purchases made by the group. On matching the official data with the Sanjeev tally, it has been found that several suppliers/buyers have also engaged in out of books sale/purchases in their dealings with Ravindra Oil Group. 3. One such supplier/buyer is Buddishah Brijbasi Lal, Address-Kosi Road, Ramnagar (PAN: ADQPM7100G), who's PAN falls under your jurisdiction. The official purchase of Buddishah Brijbasi Lal from Ravindra oil Group, as well as their actual purchase as per Sanjeev tally is shown in the table below: FY 2013-14 Sale as per Sanjeev Tally 9,18,77,513/- Sale as per Official Data - Difference 9,18,77,513/- 6. The return of income of the assessee furnished for the assessment year 2014-15 has been examined and it was found that the assessee has declared total purchase of Rs. 2,40,97,573/- for the relevant previous year. 7. On perusal of the information shared by the DDIT(Inv.)-III, Gh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t." 16. With the 'satisfaction' recorded reproduced as above, we shall examine the objections against the very assumption of jurisdiction under section 148 of the Income-tax Act, 1961, on the ground that the satisfaction recorded by the Ld. AO under Explanation 2(iv) to section 148 is based on incorrect, incomplete and unverified facts. The assessee has objected that the 'satisfaction' is identical/verbatim similar for all the assessment years and solely relies upon the information shared by the DDIT (Inv.) and is defective as it is mere reproduction of Investigation Wing Information. The assessee's further grievance is that the Ld. AO has not carried out any independent enquiry, verification, examination or analysis of the alleged material before assuming jurisdiction. The satisfaction recorded is thus not based on the independent application of mind of the Ld. AO, but is merely borrowed satisfaction based on DDIT information. 17. We are not convinced with the various objections to the 'satisfaction' recorded. The law as amended from 01.04.2021 has substantially altered the landscape with regard to the reopening proceedings u/s 147/148 of the Act. We shall reproduce the rele....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ond the period allowed shall not be deemed to be a return under section 139. Explanation 1. For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (1) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court. Explanation 2.-For the purposes of this section, where,- (1) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r section 132 in case of any other person, relate to the assessee, the AO would be deemed to have information which suggests escapement of income. 19. We are of the considered view that in the instant case, the AO received information in "Sanjeev Tally" data regarding the purchases made by assessee not recorded in the books of account, from M/s Ravindra Oil & Ginning Mills. From the search on 'other person' i.e., M/s Ravindra Oil & Ginning Mills, documents, as defined in section 2(22AA), were seized which related to the assessee. We are of the view that the law, under the amended provisions, at this stage only requires the AO to be satisfied with regard to the information contained in the seized documents, being related to the assessee and also to obtain prior approval from the PCIT. In the instant case, from the satisfaction note recorded, we find that the information forwarded by the Investigation Wing has been examined by the AO who, after examination, reached at a conclusion that the documents namely "Sanjeev Tally" data, relates to the assessee. The AO was satisfied that the said information regarding, purchase made out of books from M/s Ravindra Oil and Ginning Mills, rela....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bjection that the satisfaction is not based on the independent application of mind and is merely borrowed satisfaction based on DDIT information. 23. We would now deal with the case laws relied upon by the assessee on the subject of "satisfaction" recorded under Explanation 2(iv) of section 148 of the Act. We find that all the case laws relied upon, deals with the issue of recording of satisfaction under the provisions of section 153C of the Act. We also find that the facts in all these cases were also distinguishable. In Canyon Financial Services Ltd v. ITO, the hon'ble Delhi High Court was dealing with validity of satisfaction note under section 153C(1) and whether the legal requirement of recording seized documents "belong to" to the assessee was fulfilled or not. In that case, the AO did not record that seized documents belonged to the assessee and hence the satisfaction note was quashed. 23.1 In Shokeen Construction Co. v. DCIT, the hon'ble ITAT was again dealing with validity of satisfaction note under section 153C(1). The ITAT found that the satisfaction note recorded u/s 153C, did not record that it contained entries which had direct bearing on the determination of in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 15,94,827 No. 2017-18 Rs. 15,54,81,184 Rs. 15,54,812 No. 2018-19 Rs. 9,33,41,045 Rs. 9,33,410 No. The assessee has argued that since the Rs 50 lakh threshold of escaped income is not met in any year, the extended period under section 149(1)(b) is not available to the AO and consequently, the reopening is bad in law. 26. In so far as estimation of income is concerned, we find substantial force in the assertion of the assessee that only the embedded profit element in the bogus purchase can be brought to tax as judicial precedent, established by the hon'ble Supreme Court in the case of PCCIT, Bhopal v. Nitin Nema, 2024 (9) TMI 1138 (SC), which mandates that "Income chargeable to tax" means receipts minus expenditure, not gross receipts/purchases. Moreover, the Revenue itself has estimated the undisclosed income at a 1% net profit rate of the undisclosed sale in the case of the searched person's (M/s Ravindra Oil & Ginning Mills) assessment u/s 153A of the Act which strengthened the assessee's assertion. We therefore are of the considered view, following the decision of hon'ble Karnataka High Court in the case of ITO v. Sanath Kumar Murali, (s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isfaction, in the case of the assessee, for issuing the said notices u/s 148 for AY 2014-15 to 201617, were recorded on 27.03.2023 and the notices u/s 148 was issued on 30.03.2023, the relevant assessment year of search, in the case of non-searched person i.e., the assessee, would become F.Y. 2022-23 corresponding to AY 2023-24. In such factual matrix of the instant case, the block of six years would commence from the AY 2023-24. Counting backwards from AY 2023-24, the first year would be AY. 2023-24, the 2nd year would be AY 2022-23 and so forth. The period beyond six years is calculated as under:- Computation of ten year block No. of years Remarks A.Y. 2023-24 1 Search year A.Y. 2022-23 2 The period of six years if provisions of sec 153C were made applicable A.Y. 2021-22 3 A.Y. 2020-21 4 A.Y. 2019-20 5 A.Y. 2018-18 6 A.Y. 2017-18 7 A.Y. 2016-17 8 Extended period by taking into consideration the provision of sec 153A r.w.s 153C. The definition of assets as per 4th proviso to sec 153A should be made applicable. A.Y. 2015-16 9 A.Y. 2014-15 10 Accordingly, the AY 2016-17 to AY 2014-15 would fall at years....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as return u/s 139 of the Act. We find that it is an unrebutted fact that the AO issued the notice u/s 148 for AY 2014-15, on 31.03.2023, requiring him to file return within 30 days of the service of the notice. It is also an undisputed fact that return in response to notice u/s 148 was filed on 14.03.2024, beyond the allowed period. The assessee has further not placed any evidence/materials before us to suggest that the assessee requested for any extension of the period for filing the return. Given these facts and circumstances of the case, the provisions of third proviso of the section 148, as amended w.e.f 01.04.2022, kicks in. While section 148 provides that return filed in response to notice u/s 148 of the Act will be treated as return furnished u/s 139, the third proviso of section 148 postulates that any return filed beyond the period allowed in notice u/s 148, shall not be deemed to be return under section 139 of the Act. Once such return filed is not considered as deemed return under section 139, the provision of section 143(2) do not apply to such return as the provisions of section u/s 143(2) mandates service of notice u/s 143(2) only against return filed u/s 139 or in re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....return filed u/s 139(1) as the starting point for the purpose of income computation. In the given facts and circumstances of the case, we are of the view that in absence of any return u/s 139 of the Act, there was nothing before the AO to repudiate the claim after making enquiry. In other words, since the return filed in response to notice u/s 148 is beyond the period allowed and consequently under the prevailing law, it has to be considered that no return exists u/s 139, in repudiation of which the AO could proceed to make an enquiry. In such situation, we are of the view that the AO is not legally required to issue notice u/s 143(2) of the Act for making an assessment. We are therefore, inclined to reject the assessee argument that the return, in response to notice u/s 148, filed beyond period allowed by the AO, can be treated as the original return u/s 139 and therefore, the AO is statutorily bound to issue notice u/s 143(2) of the Act before completing assessment. The ground 16 is dismissed. 35. With ground 17, for A.Y. 2016-17, 2017-18, 2018-19, the assessee has contested that the AO has wrongly invoked section 149(1)(b)(iii) of the Act by treating the alleged escapement as....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... being relied upon against the assessee. We find that the ld AO however, denied any opportunity of cross-examination the person on whose statement the ld AO has relied upon adversely against the assessee. The denial was on the ground that the witness were connected person. It is a settled principle of law that no adverse statement or third-party material can be used against the assessee unless the assessee is supplied with such material and granted an effective opportunity to cross-examine the person whose statement is relied upon. The assessee has a valuable right to test the correctness and credibility of such data by way of cross-examination. In the instant case, it is a denial of right as the assessee especially had questioned the name appearing in the seized ledger which is merely "Buddishah", whereas the correct name of the assessee is "Budhi Shah Brijvasi Lal". We find that the Ld. AO has not brought any material or corroborative evidence on record to establish how the said name appearing in the seized material was identified and linked with the assessee. Further, no statement of the searched person has been provided to the assessee wherein the said party has been specifical....