DEVKRUPA INTERNATIONAL,BHAVNAGAR V. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE -1 BHAVNAGAR, BHAVNAGAR

ITA 820/AHD/2025

AI Insights

The case involves Devkrupa International, a partnership firm engaged in trading of iron and steel products, which appealed against the order of the Commissioner of Income-Tax (Appeals) confirming the reopening of its assessment and the addition of Rs. 71,42,500 as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The reassessment was initiated based on information from the Insight Portal alleging that the firm had availed accommodation entries. The Tribunal found that the reopening was based on borrowed satisfaction without independent verification, leading to the quashing of the reassessment proceedings.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 833531 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 18-04-2025
• Other Referred Cases: Sabh Infrastructure Ltd. v. ACIT [2017] 398 ITR 198 (Delhi), Surani Steel Tubes Ltd. v. ITO [2022] 136 taxmann.com 139 (Guj.), Harikishan Sundarlal Virmani v. DCIT [2017] 394 ITR 146 (Guj.), 03 Developers Pvt. Ltd. v. ITO [2025] 174 taxmann.com 1028 (Guj.)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Reassessment proceedings; Unexplained cash credit; Reopening of assessment; Accommodation entries; Reason to believe; Tangible material; Borrowed satisfaction
• Section: 147; 148; 143(3); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 820/Ahd/2025 (Assessment Year: 2017-18) Devkrupa International, Shop No.1 Navkar Tower, Kalubha Road, Bhavnagar – 364001 [PAN: AAEFD0184G] Vs. The Assistant Commissioner of Income-Tax Circle-1, Bhavnagar (Appellant) .. (Respondent) Appellant by: Shri Tushar Hemani, Sr. Advocate Respondent by: Shri Abhijit, Sr. DR Date of Hearing 27.11.2025 Date of Pronouncement 03.02.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT: - This appeal has been filed by the assessee against the order dated 24.02.2025 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (‘Ld. CIT(A)’ in short), under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short), relating to the Assessment Year 2017-18. 2. The assessee has raised the following grounds of appeal: “1. The Hon’ble CIT(A) has erred in facts and in law in confirming re-opening of assessment as valid. 2. The Hon’ble CIT(A) has erred in facts and in law in confirming addition of Rs. 71,42,500/- on account of alleged unexplained cash credit as per section 68 of the Income Tax Act”. 3. The brief facts of the case are that the assessee is a partnership firm, engaged in the business of trading of Iron and Steel products. The assessee filed its return of income for A.Y. 2017–18 declaring total income of Rs. 64,87,990/-, which was processed under section 143(1) of the Act. Subsequently, the Assessing Officer issued a notice u/s 148 dated 29.03.2021, reopening the assessment on the basis of information received from the Insight Portal, alleging that the assessee had availed accommodation entries of Printed from counselvise.com 2 ITA No.820/Ahd/2025 Devkrupra International Vs. ACIT A.Y 2017-18 2 Rs. 71,42,500/- from M/s. Kasturi Commodities Pvt. Ltd. The reassessment was completed u/s 147 r.w.s. 144B of the Act on 31.03.2022, assessing total income at Rs. 1,36,30,490/- by making an addition of Rs. 71,42,500/- u/s 68 of the Act. 4. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A), who dismissed the assessee’s appeal and upheld both the reopening and the addition. 5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 6. Before us, the Ld. AR submitted that the reopening is based merely on information from the Insight Portal without any independent application of mind by the Assessing Officer. The Ld. AR also contended that the assessee never received any accommodation entry; rather, it had advanced short-term loans to M/s. Kasturi Commodities Pvt. Ltd., which were repaid during the same year along with interest. He further submitted that all relevant documentary evidences such as ledger account, confirmations, ITR acknowledgement and bank statements were furnished before the Revenue Authorities. The Ld. AR argued that the reasons recorded do not disclose the nature, date, or source of alleged transactions, nor any tangible material suggesting escapement of income. 7. The Ld. DR, on the other hand, relied upon the order of the authorities below. 8. We have carefully considered the rival submissions and perused the material available on record. 8.1 The reasons recorded by the Assessing Officer for reopening the assessment read as under:- “1. Brief details of the Assessee: The assessee is a Firm, and has filed Return of Income for the A.Y. 2017-18 of Rs. 64,87,990/- which was processed as per the provisions of IT Act, 1961. 2. Brief details of information collected / received by the AO: Printed from counselvise.com 3 ITA No.820/Ahd/2025 Devkrupra International Vs. ACIT A.Y 2017-18 3 In this case, information was received from insight portal. As per the information, the Kasturi Commodities Pvt Ltd is engaged in the providing of accommodation entry. It is seen from the system that M/s. Dev Krupa International (PAN: AAEFD0184G) (beneficiaries) had availed accommodation entry of Rs.71,42,500/- during the year under consideration. 3. Analysis of information collected/received. As mentioned above the assessee has taken the accommodation entry during the year under consideration. In this matter as discussed the assessee has not made any real business, therefore, the amount mentioned above is required to be taxed as per the provisions of the IT Act, 1961 as the amount is unexplained. 4. Enquiries made by the AO as sequel to information collected/received: On verification of the system it was seen that assessee has filed the return for the year under consideration. In this case no any further enquiry required as the investigation has been already made in this case. 5. Finding of AO: From the above facts it is noticed that assessee has not made any real business therefore, the amount of Rs. 71,42,500/- are unexplained income of assessee and required to be taxed as per the provisions of the IT Act, 1961. It is suppression of fact on the part of the assessee. 6. Basis of forming reason to believe and details of escapement of income: Therefore, I have reason to believe, that income of Rs.71,42,500/- which is chargeable to tax has escaped assessment and is considered a fit case for initiation of proceedings u/s. 147 of the Income tax Act 1961. 7. No information about any asset outside India. 8. Applicability of the provisions of section 147/151 to the facts of the case In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above. (refer paragraphs 6). It is pertinent to mention here that in this case the assessee filed return of income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and the return of income only processed u/s 143(1) of the Act. In view of the above, the provisions of clause(a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment In this case not more than four years has been elapsed from the end of the assessment year under consideration. Hence necessary sanction to issue the notice u/s 148 has been obtained separately from Addl. Commissioner of income tax as per the provisions of section 151 of the Act.” Printed from counselvise.com 4 ITA No.820/Ahd/2025 Devkrupra International Vs. ACIT A.Y 2017-18 4 8.2 On perusal of the reasons recorded for reopening, it is evident that the reopening of assessment is solely based on information received from the Insight Portal alleging that M/s. Kasturi Commodities Pvt. Ltd. is an accommodation entry provider, and the reasons do not disclose the source of such information, whether it is based on any investigation report / any statement recorded, or any seized or incriminating material. The Assessing Officer has merely reproduced the information and proceeded to conclude that income has escaped assessment without conducting any independent verification or inquiry. Thus, the reopening has initiated in a mechanical manner, without due application of mind. We find considerable merit in the submissions advanced by the assessee, which are duly supported by the following judicial precedents :- a) Sabh Infrastructure Ltd. v. ACIT [2017] 398 ITR 198 (Delhi); b) Surani Steel Tubes Ltd. v. ITO [2022] 136 taxmann.com 139 (Guj.); c) Harikishan Sundarlal Virmani v. DCIT [2017] 394 ITR 146 (Guj.); d) 03 Developers Pvt. Ltd. v. ITO [2025] 174 taxmann.com 1028 (Guj.). 8.3 In view of the above discussion, we hold that the reopening of assessment u/s 147 is based on borrowed satisfaction, without independent application of mind, and in absence of any tangible material. Consequently, the reassessment proceedings are held to be invalid in law and are hereby quashed. 8.4 Since the facts reveal that the amounts credited in the bank account of the assessee were repayment of the advances made by the assessee, the reasons recorded are held to be contrary to the facts on record making the reasons recorded as trivial. Hence, the reassessment is held to be void ab initio. Ergo, the addition made u/s 68 of the Act does not survive and is rendered theoretical. 9. In the result, the appeal of the assessee is allowed. The order is pronounced in the open Court on 03.02.2026 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 03.02.2026 Printed from counselvise.com 5 ITA No.820/Ahd/2025 Devkrupra International Vs. ACIT A.Y 2017-18 5 **btk आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation ……..words processed by Hon’ble VP on his PC on……02.02.2026 2. Date on which the typed draft is placed before the Dictating Member 02.02.2026 3. Other Member 02.02.2026 4. Date on which the approved draft comes to the Sr.P.S./P.S 02.02.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 03.02.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S 03.02.2026 7. Date on which the file goes to the Bench Clerk .02.2026 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "