DHAVAL MAHENDRAKUMAR PATEL,MUMBAI V. THE ITO, WARD 42(1)(2), MUMBAI., MUMBAI

ITA 1226/MUM/2025

AI Insights

The case involves Dhaval Mahendrakumar Patel, the appellant, contesting the validity of a notice issued under section 148 of the Income Tax Act for the assessment year 2015-16. The notice was initially issued on 28.06.2021, which the appellant argued was beyond the statutory period allowed under TOLA, specifically after 31.03.2021. The Income Tax Officer (ITO) had reopened the case citing unexplained investments under section 69 of the Act, which the appellant contested both on procedural grounds (timeliness of the notice) and substantive grounds (merit of the reopening). The tribunal, referencing decisions from the Supreme Court and various High Courts, upheld the appellant's contention regarding the invalidity of the notice, leading to the quashing of the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668717 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Other Referred Cases: Union of India vs. Rajeev Bansal, Genpact India Privates Limited vs. ACIT, IBIBO Group Pvt. Ltd. vs. ACIT, Mark Foods vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAMKOSURI
• Assessee Lawyers: RAJESH SHAH VIRTUALLY
• Keywords: Set aside; Invalid notice; Unexplained investment; Source of fund
• Section: 147; 148; 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 1226/MUM/2025 (AY : 2015-16) (Hybrid hearing) Dhaval Mahrndrakumar Patel 117 BA, Panchratna, Opera House, Mumbai – 400004. [PAN No. AOAPP1829A] Vs ITO, Ward-42(1)(2), Mumbai Kautilya Bhavan, Bandra Kurla Complex, Mumbai,Maharashtra-400051 Appellant / Assessee Respondent / Revenue Assessee by Sh. Rajesh Shah CA (Virtually appeared) Revenue by Sh. Annavaram Kosuri, Sr. DR Date of hearing 24.06.2025 Date of pronouncement 24.06.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order ofld. CIT(A) dated 18.02.2024 for A.Y. 2015-16. The assessee has raised following grounds of appeal: “1. The Ld. Assessing Officer has erred in reopening the case u/s 147 of the Act and in issuing the notice u/s 148 of the Act and also the Ld. CIT(A) has erred in confirming the same. 2. The Ld. Assessing Officer has erred in applying section 69 of the Act and also the Ld. CIT(A) has erred in confirming the same. 3. The Ld. Assessing Officer has erred in making addition of Rs. 2,50,00,000/- as unexplained investment u/s 69 of the Act without verifying the return of income and without bringing any material on record and also the Ld. CIT(A) has erred in confirming the same. 4. The appellant reserves the right to add, alter, amend or withdraw any grounds of appeal.” 2. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that ITA No. 1226/Mum/2025 Dhaval Mahendrakumar Patel 2 he has challenged the validity of reopening being barred by limitation. The ld. AR of the assessee submits that case of assessee for AY 2015-16 was reopened under section 147. Initial notice under section 148 was issued on 28.06.2021. Subsequently, the AO also notice under section 148 dated 20.07.2022. The time limit for issuance of notice under section 148 was upto 31.03.2021 i.e. within six years. Thus, the notice could be issued upto 31.03.2021. The period covered under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) was from 20.03.2020 to 31.03.2021, thus, the notice under section 148 was issued beyond the prescribed period under TOLA. Notice issued under old section 148 on 28.06.2021 was not valid and could be issued on or before 01.04.2021. The ld. AR further submits that case of assessee is otherwise also covered by the decision of Hon’ble Apex Court in Union of India vs. Rajeev Bansal (2024) 167 taxmann.com 70 (SC). In the said case, revenue fairly accepted before Hon’ble Supreme Court as recorded in para 19(f) for dropping all the notices issued on or after 01.04.2021 for A.Y. 2015-16. The Judgment of Rajeev Bansal (supra) followed by various High Courts including Delhi High Court in Genpact India Privates Limited vs. ACIT, W.P.(C) 17364/2022 dated 09.09.2024 and IBIBO Group Pvt. Ltd. vs. ACIT, WP© 17639 of 2022 dated 13.12.2024. Mumbai Tribunal in Mark Foods vs. ITO in ITA No. No. 4102/M/2024 dated 09.04.2025 also followed the same ratio. 3. The ld. AR further submits that ld. CIT(A) dismissed his appeal on technical issue that no advance tax has been paid as per section 249(4). Section 249(4) speaks about tax on returned income; the assessing officer in ITA No. 1226/Mum/2025 Dhaval Mahendrakumar Patel 3 assessment order recorded that assessee filed return of income on 30.09.2015 declaring total income of Rs. 11.64 lacs. No such issue was raised by assessing officer that assessee has not paid advance tax. The assessee while filing appeal, in para 9 of Form 35 mentioned that assessee has filed original return of income. The ld. AR further submits that even on merit, he has good case. The assessee advanced loan of Rs. 2.50 crore to Jalaram Builders & Developers. The case of assessee was reopened that assessee has not provided the source of funds nor charged any interest. Such reason cannot be a valid reason for reopening when return was supported audited financial statement. Case cannot be reopened on non-charging of interest on loan. 4. On the other hand, the learned Senior Departmental Representative (ld. DR) for the revenue supported the order of lower authorities. 5. We have considered the rival submissions of both the parties and perused the order of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. It is an admitted fact that case of assessee for A.Y. 2015-16 was reopened by issuing notice under section 148 dated 28.06.2021. Such notice was issued beyond six years from the end of relevant assessment year. Such notice is not sustainable as per the ratio of decision of Hon’ble Apex Court in Rajeev Bansal which has been followed by Hon’ble Delhi High Court in IBIBO Group Pvt. Ltd. (supra). The Hon’ble Supreme Court also consider the issue whether the TOLA will extend the time period for issuance of notice under section 148 and held that extended time period is covered upto 31.03.2021. Hence, notice under section 148 issued ITA No. 1226/Mum/2025 Dhaval Mahendrakumar Patel 4 initially on 28.06.2021 was not a valid notice. As the initiation of reopening is based on invalid notice, therefore, subsequent action thereto is void ab initio. Therefore, the assessment order completed in pursuance of notice under section 148 is quashed/set aside. In the result, the assessee succeeded on primary submission of assessee. Considering the fact that appeal of assessee is allowed on preliminary submission of ld. AR of the assessee, therefore, adjudication on other submission have become academic. 6. In the result, the appeal of assessee is allowed. Order was pronounced in the open Court on 24/06/2025. Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated:24/06/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "