DEPUTY COMMISSIONER OF INCOME TAX, JALGAON V. TARADEVI RATANLAL BAFNA, JALGAON

ITA 499/PUN/2025

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle \\u2013 1, Jalgaon (Appellant) against Taradevi Ratanlal Bafna (Respondent) concerning the reassessment for the assessment year 2018-19. The reassessment was initiated based on information that the assessee received accommodation entries and unverified credits in her bank accounts, among other discrepancies. The Assessing Officer reopened the case under section 148A of the Income Tax Act, 1961, which was contested by the assessee. The CIT(A) upheld the reopening but deleted the additions made by the Assessing Officer. The Revenue appealed against this decision, leading to the Tribunal's final decision, which quashed the reassessment due to procedural lapses in the approval process for reopening the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781174 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 25-02-2025
• Other Referred Cases: Ayaaubkhan Noorkham Pathan v. State of Maharashtra & others, Omar Salav Mohammad Sait, 37 ITR, 151, Hareshkumar Dungarmal Jain vs. DCIT, Akash Hareshkumar Jain vs. DCIT, Vodafone Idea Limited vs. DCIT, Davos International Fund vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT BOBDE
• Assessee Lawyers: S SUCHEK ANCHALIYA
• Keywords: Set aside; Unexplained cash credit; Reopening of assessment; Principle of natural justice; Accommodation entries; Earning of tax free income; Competent authority; Bogus
• Section: 147; 148; 143(3); 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.499/PUN/2025 Assessment year : 2018-19 DCIT, Circle – 1, Jalgaon Vs. Taradevi Ratanlal Bafna 91, PO R C Bafna Jewellers Nayantara, Subhash Chowk, Jalgaon – 425001 PAN AADPB9424E (Appellant) (Respondent) Assessee by : S/Shri Suchek Anchaliya and Tushar Nagori Department by : Shri Amit Bobde, CIT Date of hearing : 12-08-2025 Date of pronouncement : 24-10-2025 O R D E R PER R.K. PANDA, VP: This appeal filed by the Revenue is directed against the order dated 30.12.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2018-19. 2. Facts of the case, in brief, are that the assessee is an individual and has filed her return of income on 26.02.2021 u/s 139(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) declaring total income of Rs.93,17,87,280/-. The case of the assessee was selected for scrutiny under CASS and the Assessing Officer completed the assessment u/s 143(3) of the Act determining the total income of the assessee at Rs.93,29,10,190/-. Subsequently, specific information was obtained by the Assessing Officer that the assessee has received Printed from counselvise.com 2 ITA No.499/PUN/2025 accommodation entries of Rs.27,21,035/- in the form of long term capital gain during the period 29.06.2017 to 06.12.2017, total credits in the assessee’s bank accounts to the tune of Rs.7,68,00,000/- which remained unverified and that the assessee has claimed exempt income u/s 10(38) of the Act in the form of long term capital gain amounting to Rs.1,10,96,685/-. Accordingly, the case of the assessee was sought to be reopened and notice u/s 148A(b) of the Act was issued on 30.03.2022 asking the assessee to show cause as to why her case should not be reopened. The assessee in response to the same objected for such reopening of the assessment. However, rejecting the various explanations given by the assessee, the Assessing Officer passed the order u/s 148A(d) and thereafter issued notice u/s 148 of the Act on 07.04.2022. The assessee in response to the same filed the return of income u/s 148 declaring total income of Rs.93,17,87,280/-. The Assessing Officer completed the assessment u/s 147 r.w.s. 144B of the Act on 30.03.2024 determining the total income of Rs.94,40,61,296/- wherein he made the following additions: a) addition on account of unexplained cash credits u/s 68 Rs.27,21,035/- b) addition u/s 69C on account of commission paid in lieu of obtaining bogus accommodation entries in the shape of LTCG Rs.54,421/- c) Disallowance of exemption u/s 10(38) Rs.83,75,650/- 3. Before the Ld. CIT(A) / NFAC the assessee challenged the validity of reopening of assessment as well as additions on merit. Based on the arguments advanced by the assessee the Ld. CIT(A) / NFAC dismissed the grounds challenging the validity of reopening of the assessment. However, he deleted the Printed from counselvise.com 3 ITA No.499/PUN/2025 other additions made by the Assessing Officer. So far as the addition / disallowance of exemption u/s 10(38) of the Act is concerned, he allowed the claim of the assessee by observing as under: “The appellant is of the view that ignoring the request for cross examination and failure to supply the materials/statements etc, relied upon by the AO during the entire assessment proceedings, is not permissible under the law, as it amounts to collecting the material behind the back of the appellant, thus violating the principles of natural justice. The appellant argued that the any order passed against such principles of natural justice is liable to be quashed. I find force in the plea of the appellant. The AO is bound to supply the statements of these persons to the appellant, as he relied on them to the extent that they led him to Naresh Jain. As regards the request for cross-examination of third parties, the AO maintained that the statement of Naresh Jain has not been used as sole evidence, and has only corroborative value. I am however, of the opinion that the AO should have allowed the appellant an opportunity to cross-examine Naresh Jain, even if his statement was not used as sole evidence. There is a plethora of judicial decisions in favour of the appellant. The hon'ble Supreme Court of India in the case of Ayaaubkhan Noorkham Pathan v. State of Maharashtra & others (4 SCC 465), has held that the opportunity of cross-examination should be made available, and it should be one of effective cross-examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross examination is a part and parcel of the principles of natural justice. In this case, the appellant has specifically sought to cross-examine the third parties whose statements were relied upon by the assessing officer, and this was not granted. The copies of their statements were not supplied too. The AO has not disputed the facts and evidences submitted by the appellant at the assessment stage. He has simply relied on the report of investigation wing and has not carried out any further verification on the basis of documents furnished by the appellant. Hon'ble Supreme Court in the case of Omar Salav Mohammad Sait, 37 ITR, 151, held that no addition can be made on the basis of surmises, suspicion and conjunctures. Respectfully following the decisions of the Hon'ble Supreme Court and other courts, I hold that not allowing the appellant to cross-examine Naresh Jain and others whose statement(s) were made the basis of the impugned order is a serious flaw and has amounted to violation of principles of natural justice. ACCORDINGLY, GROUND NOS.4 TO 7 STAND ALLOWED.” Printed from counselvise.com 4 ITA No.499/PUN/2025 4. So far as the addition of Rs.54,421/- being the commission paid for acquiring accommodation entries is concerned, he deleted the same on the ground that the exempt income u/s 10(38) of the Act was already deleted by him. 5. Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. On the facts and in the circumstances of the case, the decision of Ld. CIT(A), NFAC, New Delhi is not justified as the addition made by the then AO is based on specific information received from Investigation Wing and thorough inquiry was made by the then AO before making the addition. 2. On the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A), NFAC, be cancelled on the above issue and that of the A.O. be restored, as the addition was not made solely on the basis of the statements. 3. On the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A), NFAC, be cancelled on the above issue and that of the A.O. be restored, as the statements of the accountant was recorded in front of the assessee himself and no question of cross examination arises. 4. On the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A), NFAC, be cancelled on the above issue as same has failed to consider the detailed & scientific report of Investigation wing treating the PFIL as bogus entry provider. 5. The appellant craves leave to add, alter, delete, amend any of the ground of appeal, if felt necessary. 6. The Ld. Counsel for the assessee at the outset referred to Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 and submitted that although the assessee has not filed any appeal or cross objection, however, the assessee may support the order appealed against on any of the grounds decided against him. The Ld. Counsel for the assessee referring to page 197 of the paper book drew the Printed from counselvise.com 5 ITA No.499/PUN/2025 attention of the Bench to the notice issued u/s 148 of the Act which is dated 07.04.2022 and the assessment year mentioned therein is assessment year 2018-19. 7. Referring to provisions of section 151 of the Income Tax Act, 1961, he submitted that specified authority for sanction for issue of notice is Principal Chief Commissioner of Income Tax or Principal Director General or Chief Commissioner of Income Tax or Director General of Income Tax if more than 3 years have elapsed from the end of the relevant assessment year. He submitted that since 148 notice is dated 07.04.2022 and the assessment year involved is assessment year 2018-19, therefore, the sanctioning authority is Principal Chief Commissioner of Income Tax or Principal Director General or Chief Commissioner of Income Tax or Director General of Income Tax. However, in the instant case the approval for issue of 148 notice is given by the PCIT. Therefore, such approval is not in accordance with law. 8. Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of Hareshkumar Dungarmal Jain vs. DCIT and Akash Hareshkumar Jain vide ITA Nos.1933/PUN/2024 and 1934/PUN/2024 respectively for assessment year 2018-19, order dated 24.02.2025, he submitted that the 148 proceedings were quashed on the ground that the competent authority who should have given sanction for reopening proceedings is the Principal Chief Commissioner / Principal Director General and not the PCIT. He submitted that the above order has been passed following the decision of Hon’ble Bombay High Court in the case of Printed from counselvise.com 6 ITA No.499/PUN/2025 Vodafone Idea Limited vs. DCIT in WP No.2768 of 2022, order dated 06.02.2024 and the Mumbai Bench of the Tribunal in the case of Davos International Fund vs. ACIT vide ITA No.1190/Mum/2024, order dated 13.01.2025. Since in the instant case the approval was given by the PCIT instead of the Principal Chief Commissioner / Principal Director General, therefore, such reopening being not in accordance with law has to be quashed. 9. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A) / NFAC sustaining the reopening of assessment. He submitted that since the PCIT has given the approval for reopening of the assessment, therefore, the same being in order the arguments of the Ld. Counsel for the assessee should be dismissed. 10. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the Ld. CIT(A) / NFAC while adjudicating the validity of reopening of the assessment has decided the issue against the assessee, although on the issue of technicality of re-assessment proceedings. We find Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 read as under: “Rule 27 - Respondent may support order on grounds decided against him: The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” Printed from counselvise.com 7 ITA No.499/PUN/2025 11. We find the notice issued u/s 148 of the Act, copy of which is placed at page 197 of the paper book reads as under: 12. Since the assessment year involved is assessment year 2018-19 and the notice has been issued on 07.04.2022, therefore, the competent authority who should have given the approval as per provisions of section 151 is the Principal Chief Commissioner or Principal Director General or Chief Commissioner or the Printed from counselvise.com 8 ITA No.499/PUN/2025 Director General of Income Tax. However, in the instant case the approval has been given by the PCIT. 13. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of Hareshkumar Dungarmal Jain (supra) where the Tribunal after considering the decision of Hon’ble Bombay High Court in the case of in the case of Vodafone Idea Limited vs. DCIT (supra) and the decision of the Mumbai Bench of the Tribunal in the case of Davos International Fund vs. ACIT (supra) has quashed the re-assessment proceedings by observing as under: “11. 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. We find clauses 1, 2, 6 and 7 of the order dated 13.04.2022 passed under clause (d) of section 148A of the Income Tax Act, 1961 read as under: “GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, KOLHAPUR. To HARESHKUMAR DUNGARMAL JAIN 39 SHIVAJI PARK, E WARD NEAR CBS KOLHAPUR 416003, Maharashtra India PAN: AAHPH2287D AY 2018-19 Dated 13/04/2022 DIN & Notice No: TBA/AST/F/148A/2022- 23/1042737900(1) Name of the assessee HARESHKUMAR DUNGARMAL JAIN Address of the assessee 39 SHIVAJI PARK, E WARD NEAR CBS KOLHAPUR 416003, Maharashtra India Resident Not Ordinarily Resident Non-Resident Printed from counselvise.com 9 ITA No.499/PUN/2025 Date of order 13/04/2022 Specified authority approval Name PCIT, Pune-1 Reference No. 100000029101926 Date Order under clause (d) of section 148A of the Income-tax Act.1961 1. Brief Details of the Assessee: The assessee Harishkumar Dungarmal Jain has filed return of income for the A Y 2018-19 in ITR-3 on 26/09/2018 declaring total income at Rs.30,63,633/-. The assessee is a beneficiary of LTC gain/loss or STC Gain/loss and has received Rs.23,39,899/- during the A.Y 2018-19. 2. Brief details of information collected/received by the AO: In this case the information is received through Insight portal, in accordance with the risk management strategy formulated by the CBDT (Board). The Information of transaction done by the assessee during AY 2018-19 is as under- The assessee is a beneficiary of LTC gain/loss or STC Gain/loss and has received Rs.28,39,899/- during the A.Y 2018-19. 3……….. 3.1……... 04……… 05…….. 6. It is evident that income of Rs.23,39,899/- or more has escaped assessment for year under consideration within the meaning of sec. 147 read with provision & explanation to the said section and it is evident that this is a fit case made out for issue of notice u/s 148 r.w.s 151 of the IT Act, 1961 for the AY 2018-19 to assess income in the case. 7. As this case is within 3 years, from the end of the assessment under consideration the approval is sought from specified authority u/s 151 i.e. Pr.CIT-1, Pune. Therefore, an approval of the PCIT, Pune-1 to re-open the assessment u/s 147 of the Act, is sought u/s 148A(d) and subsequent issue of notice u/s 148 for AY 2018-19 in the present case, if approved. JAGDISH SHANKAR JAGTAP CIRCLE 1, KOLHAPUR” 12. A perusal of the above shows that the order under clause (d) of section 148A of the Act was passed on 13.04.2022 after obtaining the approval of the PCIT, Pune. Since the assessment year involved is assessment year 2018-19 and the notice u/s 148 was issued on 13.04.2022 it has to be seen as to who is the competent authority from whom the approval has to be obtained. Printed from counselvise.com 10 ITA No.499/PUN/2025 13. We find the provisions of section 151 of the Act read as under: “151. Specified authority for the purposes of section 148 and section 148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year: Provided……” 14. A perusal of the above provisions clearly shows that w.e.f. 01.04.2021 the Principal Chief Commissioner or the Principal Director General is the competent authority for giving sanction if more than 3 years have elapsed from the end of the relevant assessment year. 15. We find an identical issue had come up before the Mumbai Bench of the Tribunal in the case of Davos International Fund vs. ACIT (supra). We find the Tribunal after considering various decisions including the decision of the Hon’ble jurisdictional High Court has observed as under: “7. We heard the parties and perused the material on record. In assessee's case the 148A notice for AY 2017-18 was issued on 12.03.2022 and the order disposing the objections of the assessee was passed on 04.04.2022 under section 148A(d) of the Act. The AO issued notice under section 148 dated 04.04.2022. On perusal of the order under section 148A(d) of the Act and 148 (page 42 to 46 and 47 of PB) we notice that the impugned notices are issued after obtaining the prior approval of CIT (IT), Mumbai-2. The case of the revenue is that the notice dated 04.04.2022 is issued within three years since as per the 5th proviso to section 149, the AO has got additional 9 days for issue of notice under section 148 i.e. upto 09.04.2022. since the extended time of 9 days i.e. from 22.03.2022 to 31.03.2022 was given to the assessee. Therefore, it is argued by the revenue that notice issued on 04.04.2022 is within period of three years and the approval has been correctly obtained by the authority as specified in section 151(i) of the Act. The assessee is contending that the 5th proviso to section 149 under which the revenue is taking cover is inserted w.e.f. 01.04.2023 and therefore not applicable to assessee's case. In this regard, we notice that the Hon'ble Bombay High Court iIn the case of Vodafone Idea Ltd (supra) has held that – “1. Petitioner is impugning a notice dated 19th March 2022 issued under Section 148A(b) of the Income Tax Act, 1961 (\"the Act\"), the order passed under Section 148A(d) of the Act and the notice both Printed from counselvise.com 11 ITA No.499/PUN/2025 dated 7th April 2022 issued under Section 148 of the Act. One of the grounds raised is that the sanction to pass the order under Section 148A(d) of the Act and issuance of notice under Section 148 of the Act is invalid inasmuch as the sanction has been admittedly issued by the Principal Commissioner of Income Tax (\"PCIT\") and not by the Principal Chief Commissioner of Income Tax (PCCIT\"). 2. Petitioner's request for a copy of the sanction has also been denied. Even in the affidavit in reply, the Department is refusing to give the sanction which makes us wonder what is the national secret involved in that, that Assessee is being refused what he is rightfully entitled to receive from the Department. In the affidavit in reply, the stand taken by the Revenue is it will be made available during the re- assessment proceeding. 3. The impugned order and the impugned notice both dated 7th April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai 5. The matter pertains to Assessment Year (\"AY\") 2018-19 and since the impugned order as well as the notice are issued on 7th April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section 151 (ii) of the Act. The proviso to Section 151 has been inserted only with effect from 1\" April 2023 and, therefore, shall not be applicable to the matter at hand. 4. In this circumstances, as held by this Court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside.” 8. Similar view is held by the jurisdictional High Court also in other cases as listed herein above. In the decision of the Vodafone Idea (supra), the Hon'ble High Court has given a specific finding that the proviso to section 151 extending the time limit as per the third, fourth or fifth proviso to section 149 is not applicable for AY 2018-19 as the same is inserted only w.e.f. 01.04.2023. When we apply the said ratio to assessee's case, in our considered view, the claim of the revenue that the period of 3 years expires only on 09.04.2022 is not correct and that revenue cannot take shelter under the proviso to section 151 which came into effect only from 01.04.2023. Accordingly the notice issued on 04.04.2022 by the AO is issuedbeyond three years and therefore the approval should have been obtained by the authorities as specified under section 151(ii) Principle Chief Commission. As already stated the approval in assessee's case is obtained from CIT(IT) and therefore we are inclined to agree with the contention of the assessee that the notice under section 148 has been issued without obtaining the approval from the correct authority as specified under section 151. Respectfully following the above decisions of the Hon'ble Bombay High Court we hold that the notice issued by the AO under Printed from counselvise.com 12 ITA No.499/PUN/2025 section 148 without obtaining approval from correct appropriate authority is invalid and the assessment done under section 147 r.w.s. 144(13) of the Act is liable to be quashed. 9. Since we have adjudicated the legal contentions raised through additional ground in favour of the assessee, the grounds raised on merits have become academic and not warranting any specific adjudication.” 16. Since in the instant case the notice u/s 148 of the Act has been issued on 13.04.2022 which is beyond the period of three years from the end of the relevant assessment year, therefore, the competent authority who should have given sanction for reopening proceedings is the Principal Chief Commissioner / Principal Director General. However, in the instant case, the same has been approved by the PCIT-1, Pune. Therefore, such approval being not in accordance with law, is invalid and consequently, the entire re-assessment proceedings are vitiated. We, therefore, quash the re-assessment proceedings. 17. Since the assessee succeeds on this preliminary issue, the other grounds challenging the validity of re-assessment proceedings and the grounds challenging the addition on merit are not being adjudicated being academic in nature. 18. In the result, the appeal filed by the assessee is allowed.” 14. Since in the instant case, the notice u/s 148 of the Act has been issued on 07.04.2022 which is beyond the period of 3 years from the end of the relevant assessment year i.e. assessment year 2018-19, therefore, the competent authority who should have given the approval for reopening the assessment is the Chief Commissioner or Director General or Principal Chief Commissioner or the Principal Director General. However, in the instant case the same has been approved by the PCIT-1, Nashik. Therefore, such approval being not in accordance with law is invalid and consequently the entire re-assessment proceedings are vitiated. We, therefore, quash the re-assessment proceedings. Since the assessee succeeds on this legal ground, the grounds raised by the Printed from counselvise.com 13 ITA No.499/PUN/2025 Revenue become infructuous. Accordingly the appeal filed by the Revenue is dismissed. 15. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on 24th October, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 24th 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, ‘B’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 13.10.2025 Sr. PS/PS 2 Draft placed before author 13.10.2025 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 "