DILIP DAYABHAI DHORIYANI,MORBI V. INCOME TAX OFFICER WARD 1, MORBI, MORBI

ITA 401/RJT/2025

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The case involves Dilip Dayabhai Dhoriyani, who was the proprietor of Sairam Enterprise, contesting the reassessment of his income for the assessment year 2017-18. The Income Tax Officer had reopened his assessment based on information that he had made an unexplained investment of Rs. 21,73,000 in a partnership firm, which did not match his declared income. The reassessment was challenged on grounds of being time-barred and lacking proper jurisdictional approval. The Commissioner of Income-tax (Appeals) remitted the issue back to the Assessing Officer without addressing the reopening's validity, leading to the appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780651 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 12-06-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV; LD.
• Assessee Lawyers: CHETAN AGARWAL; LD
• Keywords: Opportunity of being heard; Reassessment proceedings; Period of limitation; Reopening of assessment
• Section: 147; 148; 15

Judgement Text

" आयकर अपीलȣय अͬधकरण, राजकोट Ûयायपीठ, राजकोट। IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं/.ITA No.401/RJT/2025 Ǔनधा[रण वष[ / Assessment Year: (2017-18) Dilip Dayabhai Dhoriyani, Prop. of Sairam Enterprise, Ceramic Plaza Shop No.0808 A National Highway, Trajpur, Morbi-363 642(Gujarat) बनाम/ Vs. Income Tax Officer, Ward-1, Morbi Income Tax Office, Morvi- 363 642 èथायीलेखासं /. जीआइआरसं /. PAN/GIR No ASXPD1808J (अपीलाथȸ/Appellant) .. (Ĥ×यथȸ/Respondent) Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Chetan Agarwal, Ld. AR राजèव कȧ ओर से/Revenue by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR सुनवाई कȧ तारȣख /Date of Hearing : 06/08/2025 घोषणा कȧ तारȣख /Date of Pronouncement : 09/10/2025 आदेश/Order Per Dr. Arjun Lal Saini, A.M: Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2017-18, is directed against the order passed under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘Ld.CIT(A)’], dated 21.04.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 r.w.s. 144B of the Act, dated 15.05.2023. 2. Grievances raised by the assessee, which, being interconnected, will be taken up together, are as follows: Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 2 “1. The Ld. CIT(A) erred in upholding reopening of assessment u/s 147 which is invalid, illegal and bad in law and the assessment based on illegal and invalid initiation is also bad in law and void-ab initio and may kindly be quashed. 2. The Ld. CIT(A) erred in law as well as on fact in setting aside assessment order to Ld.AO without deciding jurisdictional issue of invalid reopening of assessment u/s 147 of the Act.” 3. Succinctly, the factual panorama of the case is that assessee before us is an Individual and had filed return of income for the relevant assessment year, on 16.03.2018, declaring therein total income at Rs.2,44,180/-. Thereafter, assessing officer received credible information to the effect that during the previous year corresponding to the relevant assessment year 2017-18, the assessee had made an investment of Rs.21,73,000/-, by way of capital/unsecured loan in a partnership firm/LLP, namely M/s Stenford Ceramic (PAN-ADAFS9166N). However, on, going through the particulars of return of income filed by the assessee for the relevant year, it was observed by the assessing officer that the said investment does not commensurate with the return profile of the assessee, and the same had escaped assessment and therefore, before forming the opinion for issuing the notice under section 148 of the Act, an opportunity of being heard was provided to the assessee, as per provisions of section 148A(b) of the Income Tax Act, by issuing show-cause notice, on 19.05.2022. 4. The assessing officer noticed that assessee had filed return of his income for the relevant assessment year on 16.03.2018, declaring therein total income at Rs.2,44,180/-. The assessee had made an investment of Rs.21,73,000/- by way of capital/unsecured loan in a partnership firm/LLP namely M/s Stenford Ceramic (PAN-ADAFS9166N), however, the said investment does not commensurate with the return profile of the assessee. All the above information suggest that that the income chargeable to tax has escaped assessment in assessee`s case by reason of failure to disclose fully and truly all the material Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 3 facts. In view of the facts and considering the circumstances of the case, it was considered a fit case for issue of notice u/s 148 of the Income Tax Act, 1961 and order u/s 148A(d) of the Act was issued, after obtaining due approval, detailing the above facts on 10.07.2022. Therefore, the case of the assessee was reopened within the meaning of section 147 of the Act and notice u/s 148 of the Act, dated 10.07.2022 was issued to the assessee. The assessee did not comply with the above notice, therefore, assessing officer made addition of Rs.21,73,000/-. 5. The assessing officer also observed that as per information available on the ITS, the assessee has deposited cash of Rs.14,15,000/-, in bank account no. 03072020005410 with HDFC under the name M/s Siya Ram enterprises with the PAN of the assessee. The assessee has not explained the source of the above transactions and has not offered the same for taxation. The various notices were issued to the assessee but no response has been received from the assessee. Therefore, assessing officer made addition, under section 69A of the Act, at Rs.14,15,000/-. 6.Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A), who has remitted the issue back to the file of the assessing officer, and directed the Assessing Officer to make fresh assessment order, therefore, appeal of the assessee was treated for statistical purposes by ld.CIT(A). 7. Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us. 8. Shri Chetan Agarwal, Learned Counsel for the assessee, argued that issue raised by the assessee, before learned CIT(A), pertaining to section147/148 of the Act, challenging the assessment proceedings as bad in law, has not been Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 4 adjudicated by ld.CIT(A). The ld.CIT(A) has remitted the entire appeal back to the file of Assessing Officer, without adjudicating the technical ground regarding reopening u/s 147/148 of the Act, therefore, order passed by the learned CIT(A) should be quashed. 9. The Ld.Counsel for the assessee submitted that reopening of the assessment made by the Assessing Officer is time barred as the last date of issuing notice under section 148 of the Act under the new regime was up to 21.06.2022. However, notice under section 148 of the Act was issued on 12.07.2022, which is clearly time barred, hence reassessment proceedings may be quashed. 10.The Ld. Counsel for the assessee further on second technical issue submitted that the approval taken by the Ld.PCIT ( Principal Commissioner of Income Tax), for reopening the assessee`s case, under section 147/148 of the Act is bad in law, as the assessee’s assessment year is for the assessment year (AY) 2017- 18 and order u/s 148A(d) of the Act was framed by the assessing officer, on 10.07.2022, which is beyond the period of three years. Therefore, as per section 151(2) of the Act, the approval, beyond three years period, should be given by the Ld.PCCIT ( Principal, Chief Commissioner of Income Tax). Therefore, permission taken by the Ld.PCIT ( Principal Commissioner of Income Tax), for reopening the assessee`s case, under section 147/148 of the Act is bad in law, hence, reassessment proceeding should be quashed. 11. The Ld. Counsel for the assessee also on third technical issue submitted that amount escaped for assessment, as per assessing officer, is Rs.21,73,000/- which is mentioned in the reasons recorded by the assessing officer, and the said amount is also mentioned in the notice issued by the assessing officer, which is below Rs.50,00,000/-, threshold limit prescribed, as per provisions of Section 149(2) of the Act. That is, the assessment cannot be reopened after expiry of Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 5 three years, unless Rs.50,00,000/- or more, has escaped from assessment. However, in the order u/s 148A(d) of the Act, dated 10.07.2022, the amount is mentioned at Rs.21,73,000/-, which is below Rs.50,00,000/-. Hence, re- assessment proceedings cannot be initiated against the assessee, therefore, re- assessment order framed by the Assessing Officer u/s 147/148 of the Act, dated 15.05.2023 may be quashed. 12. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 13. We have heard the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, we reproduce, the provisions of section 151 of the Income Tax Act 1961: \"151. Sanction for issue of notice. Specified authority for the purposes of section 148 and section 148A shall be, (1) 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 that the period of three years for the purposes of clause (1) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.\" From the above provisions of section 151 of the Act, it is vivid that in the assessee’s case, the assessment year, involved is the assessment year (AY) 2017-18 and order u/s 148A(d) of the Act was framed on 10.07.2022, which is beyond the period of three years, therefore sanction for issue of notice under section 148 of the Act should be given by the Principal Chief Commissioner or Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 6 Principal Director General or Chief Commissioner or Director General, as in the assessee`s case more than three years have elapsed from the end of the relevant assessment year. However, in the assessee case, sanction for issue of notice, was given by the Ld.PCIT ( Principal Commissioner of Income Tax), for reopening the assessee`s case, under section 147/148 of the Act, which is not in accordance with Act, hence, reassessment proceeding should be quashed, on this score only. 14. We note that threshold limit to reopen the assessment beyond the period of three years is Rs.50,00,000/-, that is, Rs.50,00,000/-, or more should have escaped from assessment. However, in the assessee`s case under consideration, the assessing officer mentioned, in the notice under section 148 of the Act that an amount of Rs. 21,73,000/-, has escaped from assessment. The relevant para of the reasons recorded are reproduced below: “6. In view of the above facts, it can be derived that the source of impugned investment of Rs.21,73,000/- still remains unexplained within the meaning of relevant provision the Act. It is also very much clear from the material facts available on record that such transaction has never been offered for taxation under the relevant provision of the Act. 7. In view of the above facts & on the basis of material available on record, it is conclusively proves that income chargeable to tax to the extent of Rs.21,73,000/- has escaped assessment within the meaning of section 147 in the case of assessee for the AY 2017-18. In view of ethe above facts, I am satisfied that it I a fit case to issue a notice u/ 148 for the relevant yer i.e. AY 2017-18. This order has been passed with the prior approval of the Pr.CIT-`1, Rajkot vide approval letter No.PCIT-1/RJT/148A(d)/Approval/DDD/2022-23, dated 08.07.2022.” 15. It is abundantly clear from the above reasons recorded by the assessing officer that amount escaped from assessment is to the tune of Rs.21,73,000/-, which is below Rs.50,00,000/-. Therefore, as per provisions of Section 149(2) of the Act, assessment cannot be reopened after expiry of three years unless Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 7 Rs.50,00,000/- or more has escaped from assessment. The relevant provisions of section 149 (2) is reproduced below for ready reference: “Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more. (2) No notice to show cause under section 148A shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than five years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts to or is likely to amount to fifty lakh rupees or more.]” 16. However, we find that in the order u/s 148A(d) of the Act, dated 10.07.2022, the amount is mentioned at Rs. 21,73,000/- (in the reasons recorded), which is below Rs. 50,00,000/-. Hence, re-assessment proceedings, after the period of three years cannot be initiated in the assessee`s case under consideration, therefore re-assessment order framed by the Assessing Officer u/s 147 dated 15 .05.2023 should be quashed, and accordingly, we quash the same. 17. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reassessment proceedings initiated against the assessee, under section 147 of the Act, by the assessing officer, is not as per the provisions of the Act, as narrated above. We, therefore, quash Printed from counselvise.com ITA No.401/Rjt/2025 (AY-17-18) Dilip D Dhoriyani 8 the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of the additions/other technical issues, in the impugned assessment proceedings, are rendered academic and infructuous. 18.In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 09/10/2025. Sd/- Sd/- (DINESH MOHAN SINHA) (DR.ARJUN LAL SAINI) Æयाियक सदÖय/JUDICIAL MEMBER लेखा सदÖय/ACCOUNTANT MEMBER राजकोट /Rajkot (True Copy) िदनांक/ Date: 09/10/2025 आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to :  अपीलाथê/ The Appellant  ÿÂयथê/ The Respondent  आयकर आयुĉ/ CIT  आयकर आयुĉ(अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, राजकोट/ DR, ITAT, RAJKOT  गाडª फाईल/ Guard File By order/आदेश से , सहायक पंजीकार आयकर अपीलीय अिधकरण ,राजकोट Printed from counselvise.com "