BABABHAI SADARBHAI SHAIKH,AHMEDNAGAR V. ITO WARD 1, AHMEDNAGAR, AHMEDNAGAR

ITA 144/PUN/2025

AI Insights

The case involves Bababhai Sadarbhai Shaikh, an individual engaged in the business of sales and purchase of various commodities, who did not file his income tax return for the assessment year 2015-16. The Income Tax Department noticed substantial cash deposits in his bank accounts, leading to a reassessment under Section 147 of the Income Tax Act, 1961. The Assessing Officer treated these deposits as unexplained cash deposits from undisclosed sources under Section 69A, resulting in a tax demand of Rs.81,03,320. The assessee contested the validity of the reassessment and the additions made, citing non-compliance with procedural requirements and violation of natural justice. The CIT(A) upheld the reassessment and the additions, leading to the current appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781313 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 17-01-2025
• Other Referred Cases: National Thermal Power Co. Ltd. v. CIT, Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr, CIT vs. Nagendra Prasad, ACIT vs. Hotel Blue Moon, Chand Bihari Agrawal vs. CIT, Sanjay Sadashiv Navale vs. DCIT, Bir Bahadur Singh Sijwali vs. ITO, Milind Madhukar Edke vs. ITO, Sejal Jewellary vs. UoI, ITO vs. Narendra Sampatlal Bafna, Vijaykumar Mangilalji Chordiya vs. NFAC, Cheftalk Food and Hospitality Services (P.) Ltd. vs. ITO, Madhuri Sameer Gokhale vs. Addl.Joint ITO, Vikas Gupta vs. UoI & Ors., Shri Tek Chand vs. ITO, Swami Keshwanand Sikshan Sansthan vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RATNAKAR BHIMRAO SHELAKE
• Assessee Lawyers: SUHAS P BORA
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Question of law; Peak credit; Reopening of assessment; Principle of natural justice; Competent authority; Reason to believe; Validity of assessment; Borrowed satisfaction; Co-operative Credit Society
• Section: 147; 148; 144; 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.144/PUN/2025 Assessment year : 2015-16 Bababhai Sadarbhai Shaikh Nr Goraba Takies Jamkhed, Ahmednagar – 413201 Vs. ITO, Ward 1, Ahmednagar PAN: HOZPS1445M (Appellant) (Respondent) Assessee by : Shri Suhas P Bora Department by : Shri Ratnakar Bhimrao Shelake Date of hearing : 10-09-2025 Date of pronouncement : 23-10-2025 O R D E R PER R.K. PANDA, VP: This appeal filed by the assessee is directed against the order dated 25.11.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2015-16. 2. Facts of the case, in brief, are that the assessee is an individual and has not filed his return of income for the impugned assessment year. The assessee is engaged in the business of sales and purchase of onion, food grains, oilseeds, dhana, etc. Information was available with the department that the assessee, during the year under consideration, has entered into high financial transactions i.e. huge money was deposited in cash by him in the bank accounts maintained in the society namely Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. and during the course of assessment proceedings the society could not explain Printed from counselvise.com 2 ITA No.144/PUN/2025 the source for the same. The Assessing Officer, therefore, had reason to believe that income chargeable to tax has escaped assessment to the tune of Rs.81,03,323/-. Accordingly, the case of the assessee was reopened and notice u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.03.2021 was issued. The assessee in response to the same filed the return declaring income of Rs.5,75,910/- on 14.03.2022. Subsequently statutory notice u/s 142(1) of the Act was issued and served on the assessee. Thereafter, the Assessing Officer completed the assessment u/s 147 r.w.s. 144 r.w.s. 144B of the Act determining the total income of the assessee at Rs.81,03,320/- by making addition of the same u/s 69A of the Act treating the deposits in the bank account as unexplained cash deposits from undisclosed sources. 3. Before the Ld. CIT(A) / NFAC the assessee apart from challenging the addition on merit, challenged the validity of the assessment on the ground that no notice u/s 143(2) of the Act was issued by the Assessing Officer. It was argued that the Assessing Officer has only given 2 days time for making the compliance. So far as the addition on merit is concerned, it was argued that the order has been passed in gross violation of principles of natural justice. Further, income declared in the return was not given credit by the Assessing Officer. 4. However, the Ld. CIT(A) / NFAC was not satisfied with the arguments advanced by the assessee and upheld the validity of re-assessment proceedings as well as the addition on merit. So far as the validity of re-assessment proceedings Printed from counselvise.com 3 ITA No.144/PUN/2025 are concerned, he noted that the Assessing Officer had prima facie belief that the income of the assessee has escaped assessment. The Assessing Officer after recording the reasons and after obtaining the requisite approval from the competent authority to issue notice on the basis of credible information has issued the notice u/s 148. So far as the validity of assessment on account of non-issue of notice u/s 143(2) of the Act is concerned, he also dismissed the same on the ground that the Assessing Officer had categorically given the findings that even till the date of passing the assessment order the assessee failed to file any reply even to inform that the return was filed by him on 15.03.2022. Therefore, in absence of filing of any return, non-issue of notice u/s 143(2) of the Act cannot invalidate the assessment proceedings. So far as the merit of the addition is concerned, the Ld. CIT(A) / NFAC, in absence of any satisfactory explanation given by the assessee, upheld the addition made by the Assessing Officer. 5. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1. The assessment order passed by the Learned Assessing Officer (Ld. AO) under Section 147 read with Section 144 and Section 144B of the Act and subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], is bad in law due to the following reasons: a) The reassessment proceedings were initiated solely based on the assessment proceedings carried out in the case of M/s Sri Renuka Mata Multi-State Urban Co-operative Credit Society Limited, without independent application of mind. b) Non-issuance of notice under Section 143(2) of the Act renders the proceedings invalid, violating mandatory statutory requirements. c) Non-compliance with the procedural mandates of Section 144B of the Act, which governs the faceless assessment process. Printed from counselvise.com 4 ITA No.144/PUN/2025 d) The reopening of the assessment was based on presumption and surmises, reflecting borrowed satisfaction by the Ld. AO. e) Mere cash deposits in the bank account cannot per se justify the invocation of jurisdiction under Section 147 of the Act. 2. The assessment order passed by the Ld.AO is bad in law and void ab initio as once reassessment proceedings are initiated on the basis of incriminating material found in the search of 3rd party then the provisions of section 153C of the Act are applicable which override the applicability of sections 147 and 148 of the Act. 3. The Ld. CIT(A) erred in confirming the addition of Rs.81,03,320/- made by the Ld. AO under Section 69A of the Act on account of unexplained cash deposits in the bank account, without adequately verifying whether the basic ingredients of Section 69A were satisfied. 4. The Ld. CIT(A) failed to appreciate the peak credit theory. The account statements clearly demonstrate both deposits and withdrawals, which ought to have been considered while determining the unexplained cash deposits. 6. The assessee has also raised an additional ground which reads as under: “The assessment order passed by the Ld.AO is bad in law and void ab initio as once reassessment proceedings are initiated on the basis of incriminating material found in the search of 3rd party then the provisions of section 153C of the Act are applicable which override the applicability of sections 147 and 148 of the Act.” 7. The Learned Counsel for the assessee referring to the above additional ground submitted that the additional ground raised is purely legal in nature which goes to the root of the matter and all the necessary facts are already available on record. Referring to the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (1991) 187 ITR 688 (SC) submitted that the additional ground raised by the assessee should be admitted. Printed from counselvise.com 5 ITA No.144/PUN/2025 8. The Ld. DR on the other hand strongly objected to the admission of the additional ground raised by the assessee. 9. After hearing both the sides and considering the fact that the additional ground raised by the assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional ground raised by the assessee is admitted for adjudication. 10. The Ld. Counsel for the assessee at the outset submitted that the provisions of section 144B of the Act have not been properly followed. 11. The Ld. Counsel for the assessee referring to the decision of the Hon’ble Patna High Court in the case of CIT vs. Nagendra Prasad reported in (2023) 156 taxmann.com 19 (Patna) submitted that where notice was issued by the Assessing Officer under section 148 requiring the assessee to file a return within thirty days but return was filed after eight and a half months, since return was filed by the assessee in response to said notice though delayed, there should have been a notice issued under Section 143(2) as requirement to issue notice could not be dispensed with. He submitted that in the instant case the assessee has filed the return of income in response to notice u/s 148 though belatedly. Therefore, in light of the decision of the Hon’ble Patna High Court in the case of CIT vs. Nagendra Prasad Printed from counselvise.com 6 ITA No.144/PUN/2025 (supra) in absence of any notice issued u/s 143(2), the re-assessment proceedings are liable to be quashed. For the above proposition, he also relied on the following decisions: i) ACIT vs. Hotel Blue Moon (2010) 188 Taxman 113 (SC) ii) Chand Bihari Agrawal vs. CIT (2023) 154 taxmann.com 245 (Patna) 12. Referring to the following decisions, he submitted that since the Assessing Officer has only given two days time to the assessee to comply to the statutory notices, therefore, the assessment order has to be set aside due to insufficient time for submitting the details: i) Cheftalk Food and Hospitality Services (P.) Ltd. vs. ITO reported in 165 taxmann.com 415 (Bom) ii) Madhuri Sameer Gokhale vs. Addl.Joint ITO reported in (2025) 172 taxmann.com 696 (Bom) 13. He submitted that since the approval has been given by the superior authority merely in a mechanical manner, therefore, such approval being not in accordance with law, the re-assessment proceedings are liable to be quashed. For the above proposition, he relied on the following decisions: i) Vikas Gupta vs. UoI & Ors. vide W P No.554 of 2022 & Ors, order dated 08.09.2022 ii) Shri Tek Chand vs. ITO vide ITA No.255/CHD/2020 order dated 15.03.2021 for assessment year 2009-10. iii) Swami Keshwanand Sikshan Sansthan vs. ITO vide ITA Nos.309 & 310/JP/2020 order dated 13.04.2021 for assessment years 2012-13 & 2013-14 14. Referring to the following decisions, the Ld. Counsel for the assessee submitted that mere cash deposits in the bank account does not amount to Printed from counselvise.com 7 ITA No.144/PUN/2025 undisclosed income of the assessee and reopening of assessment merely based on cash deposits is bad in law: i) Sanjay Sadashiv Navale vs. DCIT vide ITA No.452/PUN/2019 order dated 31.05.2022 for assessment year 2012-13 ii) Bir Bahadur Singh Sijwali vs. ITO reported in (2015) 53 taxmann.com 366 (Delhi-Trib.) iii) Milind Madhukar Edke vs. ITO vide ITA No.648/PUN/2020 order dated 18.01.2023 for assessment year 2011-12 15. Referring to the following decisions, he submitted that the proper course of action for reassessment in the instant case was u/s 153C of the Act and not under section 147 of the Act when information is received as a result of third party search: i) Sejal Jewellary vs. UoI reported in 171 taxmann.com 846 (Bom) ii) ITO vs. Narendra Sampatlal Bafna vide ITA No.688/PUN/2024 order dated 2017-18 for assessment year 2017-18 iii) Vijaykumar Mangilalji Chordiya vs. NFAC vide ITA No.1075/PUN/2024 order dated 19.09.2024 for assessment year 2013-14 16. He submitted that the assessment order in the instant case was passed u/s 144 of the Act and the Ld. CIT(A) / NFAC has not decided all the grounds raised before him. He accordingly submitted that the appeal filed by the assessee be allowed. In his alternate contention, he submitted that the matter may be restored to the file of the Assessing Officer for fresh adjudication. 17. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. Printed from counselvise.com 8 ITA No.144/PUN/2025 18. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. A perusal of the details filed by the assessee in the paper book shows that the assessee has filed return of income on 14.03.2022 declaring total income of Rs.5,75,910/-, the details of which are as under: Printed from counselvise.com 9 ITA No.144/PUN/2025 19. We find the Assessing Officer in the instant case issued notice u/s 148 of the Act for assessment year 2015-16 on 31.03.2021 and the assessee vide letter dated 14.03.2022 has responded to the said notice, the details of which are as under: 20. Under these circumstances, we find merit in the arguments of the Ld. Counsel for the assessee that the finding given by the Ld. CIT(A) / NFAC that the assessee has not filed any written response to notice u/s 148 is incorrect. 21. We find the Hon’ble Patna High Court in the case of CIT vs. Nagendra Prasad (supra) has held that where notice was issued by the Assessing Officer under section 148 requiring the assessee to file a return within thirty days but return was filed after eight and a half months, since return was filed by the assessee in response to said notice though delayed, there should have been a notice issued Printed from counselvise.com 10 ITA No.144/PUN/2025 under Section 143(2) as requirement to issue notice could not be dispensed with. The relevant observations of Hon’ble High Court read as under: “1. The appeal is filed against the order of the Tribunal setting aside an order under section 143(3)/147 of the Income-tax Act, 1961. 2. The assessee had initially moved the High Court relying on the decision of the Hon'ble Supreme Court in Assistant Commissioner of Income-Tax v. Hotel Blue Moon [(2010) 321 ITR 362 (SC)] which writ petition was dismissed refusing invocation of the extraordinary remedy and relegating the assessee to the statutory remedy. 3. The Tribunal found, relying on the decision in Hotel Blue Moon (supra) that the proceedings are liable to be struck down. It was held that the return was filed by the assessee in response to the notice under section 148 though delayed and in such circumstance, there should have been a notice issued under section 143(2) as has been held in Hotel Blue Moon (supra). 4. The only question of law arising in the facts and circumstances of the case is whether notice should have been issued under section 143(2) of the Income-tax Act? 5. Admittedly, the notice was issued by the Assessing Officer under section 148 of the Act on 14-7-2008 requiring the assessee to file a return within thirty days. A return was filed much later on 31-3-2009, after eight and a half months. 6. On identical facts, in M.A. No.239 of 2011 titled as Chand Bihari Agrawal vs. Commissioner of Income Tax, Central, Patna decided on 25-7-2023, this Court considered the issue and held against the revenue. 7. We find that the question of law has to be answered in favour of the assessee and against the revenue. Hotel Blue Moon (supra) governs the issue which has been followed in Chand Bihari Agrawal (supra). 8. The Miscellaneous Appeal stand dismissed.” 22. In view of the above and since the Ld. CIT(A) / NFAC has not adjudicated the various grounds raised by the assessee, therefore, without going into merits of the case, we deem it proper to restore the issue to the file of the Ld. CIT(A) / NFAC with a direction to adjudicate all the grounds raised by the assessee afresh and as per fact and law after providing due opportunity of being heard to the Printed from counselvise.com 11 ITA No.144/PUN/2025 assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. 23. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 23rd October, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 23rd October, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune Printed from counselvise.com 12 ITA No.144/PUN/2025 S.No. Details Date Initials Designation 1 Draft dictated on 21.10.2025 Sr. PS/PS 2 Draft placed before author 22.10.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "