KAILASH CHAND,JAIPUR V. ITO WARD, BEHROR, BEHROR

ITA 565/JPR/2024

AI Insights

The case involves Kailash Chand, an individual engaged in the business of plying trucks on hire, who appealed against the order of the National Faceless Appeal Centre (CIT(A)), which confirmed the additions made by the AO under section 144 read with section 147 of the Income Tax Act for the assessment year 2012-13. The AO had reopened the assessment based on the information that Kailash Chand deposited a sum of Rs 42,46,000 during the financial year 2011-12 in his savings account, and he had not filed his return of income for the year under consideration. The AO made several additions to the income of Kailash Chand, including additions on account of fixed assets, interest on loans, depreciation, and truck operating expenses, among others. The CIT(A) upheld these additions, leading to the present appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469928 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: Gangasharan & Sons Pvt. Ltd. v/s ITO & Anr., ITO v/s Lakhmani Mewal Das, CIT v. Kelvinator of India Ltd., CIT vs. Shri Ram Singh, CIT vs. Mohmed Juned Dadani, Addl. CIT vs. Jay Engineering Works Ltd., CIT vs. Maharaja Shree Umed Mills Ltd., DCIT v. Mewar Textiles Mills Ltd., Mohd. Umer v. CIT, Ajanta Constructions (P.) Ltd. Vs. ACIT, DCIT Vs. Associated Stone Industries (Kotah) Ltd., Ghewarchand Vs. ITO, Dhakeshwari Cotton Mills v/s CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH BADGUJAR
• Assessee Lawyers: MAHENDRA GARGIEYA; DEVANG GARGIEYA
• Keywords: Set aside; Difference of opinion; Change of opinion; Additional evidence; Question of law; Corroborative evidences; Depreciation; Unexplained investment; Principle of natural justice; Search and seizure; Reason to believe; Non compliance; Fuel Charges
• Section: 147; 148; 144; 142(1); 119; 192; 48; 153; 113; 139; 234B; 139(4); 72; 101

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 565/JP/2024 fu/kZkj.k o\"kZ@Assessment Year : 2012-13 Kailash Chand Village Patharedi, Tehsil- Kotputli, Jaipur cuke Vs. ITO, Ward-Behror LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHDPC7760R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Mahendra Gargieya, Adv. & Sh. Devang Gargieya, Adv. jktLo dh vksj ls@ Revenue by : Sh. Dinesh Badgujar, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 05/02/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 10/03/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM On being aggrieved by the order of the National Faceless Appeal Centre, Delhi dated 27/02/2024 [ for short CIT(A)] the captioned assessee preferred the present appeal. The dispute relates to the assessment year 2012-13. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order dated 03.12.2019 passed under section 144 of the Income Tax Act, [ for short “AO”] by ITO, Ward, Behror. 2 ITA No. 565/JP/2024 Kailash Chand vs. ITO 2. In this appeal, the assessee has raised following grounds: - 1. The impugned order u/s 147/144 of the Act dated 03.12.2019 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be quashed. 2. The ld. AO erred in law as well as on the facts of the case in framing the assessment order u/s 144 of the Act dated 03.12.2019 without affording adequate and reasonable opportunity and even without complying with the mandatory statutory requirement of law. The impugned order having been framed in gross breach of natural justice, kindly be quashed. 3. The Ld. AO/ NFAC seriously erred in law as well as on the facts of the case in not adhering to the mandatory procedure statutorily prescribed u/s 144B of the Act hence the impugned order so passed deserves to be quashed being in violation thereof. 4. Rs. 27,70,909/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition made on account of the investment in/acquisition of the fixed assets of Rs. 27,70,909/-. The addition so made and confirmed by the CIT(A) being contrary to provisions of law and facts may be kindly deleted in full. 5. Rs.7,37,657/-: The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the disallowance of interest paid on account of loan of Rs.7,37,657/-. The disallowance so made and confirmed by the CIT(A) being contrary to the provisions of law and the facts may kindly be deleted in full. 6. Rs.27,39,791/-: The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the disallowance of depreciation of Rs.27,39,791/-. The disallowance so made and confirmed by the CIT(A) being contrary to the provisions of law and the facts may kindly be deleted in full. 7. Rs.24,19,833/-: The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the disallowance of the truck operating expenses of Rs.24,19,833/-. The disallowance so made and confirmed by the CIT(A) being contrary to the provisions of law and the facts may kindly be deleted in full. 8. Rs.2,73,752/-: The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the addition made on account of the expense payable of 3 ITA No. 565/JP/2024 Kailash Chand vs. ITO Rs.2,73,752/-. The disallowance so made and confirmed by the CIT(A) being contrary to the provisions of law and the facts may kindly be deleted in full. 9. The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the charging interest u/s 234A, & 234B of the Act. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full. 10. The appellant prays your honor to add, amend or alter any of the grounds of the appeal on or before the date of hearing.” 3. Succinctly, the fact as culled out from the records is that the assessee has filed his return of income declaring a total income of Rs 1,52,500/- on 23.12.2013. Based on the information in the possession of the AO he revealed that the assessee has deposited a sum of Rs 42,46,000/- during the F.Y. 2011-12 in his saving bank account held with ICICI Bank Ltd. The assessee has not filed his return of income for the year under consideration. In absence of return of income the above transactions considered as not verifiable, whereas he has having income chargeable to tax. Accordingly, reasons for reopening of the case were recorded, and notice u/s 148 of the I.T. Act, 1961 was issued on 19.03.2019, which was duly served upon the assessee through registered post. Notice u/s 142(1) issued on 19.06.2019 along with query letter fixing the case for hearing on 28.06.2019. No compliance made by the assessee. Again online notice u/s 142(1) of the IT Act, 1961 issued on 22.07.2019 fixing the case for hearing 4 ITA No. 565/JP/2024 Kailash Chand vs. ITO on 02.08.2019. No compliance made by the assessee. Thereafter notice u/s 144 of the IT Act, 1961 was issued on 21.08.2019 fixing the case for hearing on 30.08.2019. In compliance to this notice Sh. Raman Kumar Saini, CA/AR of the assessee attended submitted power of attorney, copy of balance Sheet and Profit & loss account. Thereafter notice u/s 142(1) was issued on 04.09.2019 fixing the case for hearing on 12.09.2019. Despite various opportunities provided to it during assessment proceedings, assessee failed to furnish any details/documents/clarification as called for. The assessee has not complied with the statutory notices issued u/s 142(1) of the I.T. Act, 1961 hence ld. AO left with no other alternative but to complete the assessment to the best of his knowledge as per the provisions of section 144 of the Income Tax Act, 1961. Ld. AO noted that the assessee has not furnished return of income in compliance of notice issued u/s 148 of the I.T. Act, 1961. Ample opportunities were provided to the assessee, but no details/documents have been furnished till the date of completion of the assessment u/s. 144 of the Act. 3.1 As per the records, the assessee was engaged in the business of plying of trucks on hire during the relevant period of F.Y. 2011-12. During the year under consideration the assessee has declared gross receipts of Rs 2,91,01,799/- on which net profit of Rs 1,07,648/- @ 0.37% has been 5 ITA No. 565/JP/2024 Kailash Chand vs. ITO declared for the year under consideration. On scrutiny of details and documents filed with the return and submission made during the course of assessment proceeding, ld. AO noted the discrepancies and thereby various addition were made. 3.2 During the year under consideration, the assessee has debited of Rs. 27,70,909/- on account of addition of fixed assets in the balance Sheet. During assessment proceedings, the assessee was asked to produce complete details/bills & vouchers of the fixed assets of Rs 27,70,909/- but the assessee not produced any documentary evidence. In view of these facts an addition of Rs. 27,70,909 on account of fixed assets and added to the total income of the assessee for the year under consideration. The assessee has debited Rs. 7,37,657/- on account of interest on loan expenses. in the profit & loss account as the assessee did not produce complete details of interest paid, addition of Rs 7,37,657/- on account of Interest on loan and added to the total income of the assessee. The assessee also debited Rs. 27,39,791/- on account of Deprecation expenses in the P&L Account as the assessee could not substantiate the claim was denied to the assessee. In the books of account the assessee has claimed Rs. 2,41,98,338/- on account of truck operating expenses. Ld. AO noted that as the assessee could not produce complete & full 6 ITA No. 565/JP/2024 Kailash Chand vs. ITO vouchers/bills for claiming the above expenses. It was found that most of vouchers of the expenses are self-made vouchers and accordingly 10% disallowance out of above expenses was made and added back to the income of the assessee. This resulted in the addition of Rs. 24,19,833/- to the total income. In the balance sheet assessee has shown Rs 2,73,752/- as expenses payable. As the assessee has not produced date of payment of the above expenses and not filed any reply the same was added back to the income of the assessee. 4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below: “4.3 I have considered the facts of the case, grounds of appeal and assessment order and the ground-wise submissions of the appellant along with enclosures. 4.3.1 With regard to the addition on account of fixed assets, the AO held that the assessee has not produced bills and vouchers of the fixed assets introduced during the year under consideration. The appellant argued that it is evident from the bank statements and the loan installment debited in the bank account details. The submissions of the appellant are not acceptable. It is the duty of the appellant to provide the information called for. The onus always lies on the assessee to prove the genuineness of the transaction. During the appellate proceedings also, the appellant had not filed the bills and vouchers in support of his claim of additions to fixed assets. In the remand report, it was submitted by the AO that the assessee has not submitted any documentary evidence to show that such investment was made during the year for business purpose. A copy of the said remand report was provided to the appellant for his comments. Till date no 7 ITA No. 565/JP/2024 Kailash Chand vs. ITO rejoinder is received from the appellant. In the absence of any details, I have no reason to interfere with the decision of the Assessing officer. Hence the addition is upheld. 4.3.2 With regard to disallowance of interest on loan of Rs. 7,37,657/- it is submitted that the bank statement for the relevant period is attached herewith for your reference wherein clearly mentioned payment of per month instalment in respect of finance of trucks. In the remand report, the AO submitted that expenditure could not explained / verified only on the basis of certain amounts shown in Bank account statement or amounts shown in P & L account. The assessee has not submitted any documentary evidence to show that interest payments were related to amount taken for business purposes, genuiness of the transactions etc. There is a strength in the argument of the assessing officer and hence the addition in this regard is upheld. 4.3.3 In respect of addition of Rs. 27,39,791/- disallowance of depreciation expenses, it is submitted by the appellant that depreciation statements for the relevant period clearly mentioned depreciation in respect of fixed assets. In the remand report it is submitted by the AO that the assessee has not submitted any documentary evidence. It is the duty of the appellant to provide the depreciation schedule as per IT Act. In the absence of depreciation schedule it is not possible to the AO to arrive the written down value of the operative vehicles. In the absence of depreciation schedule, I have no reason to interfere in the order of the AO. 4.3.4 With regard to the truck operation expenses of Rs. 24,19,,833/-, it is submitted by the appellant that making an adhoc disallowance by not specifically assigning any reason to a voucher or bunch of vouchers is not legally tenable. In the remand report the AO held that the appellant had not submitted any documentary evidence during the assessment proceedings well as appellate proceedings. Expenditure could not be verified only on the basis of certain amounts shown in bank account statement. There is a strength in the argument of the assessing officer and hence the addition in this regard is upheld. 4.3.5 In respect of addition on account of expenses, the assessee has shown in the balance sheet of Rs. 2,73,752/- as expenses payable. The assessee has not produced the date of payment of the above expenses. During the course of appellate proceedings, the appellant argued that the addition was wrong but not proved on which way it was wrong. Mere taking a ground using the words that order is unsubstantiated and opposed to facts and law is not sufficient. The 8 ITA No. 565/JP/2024 Kailash Chand vs. ITO appellant has to prove by argument and demonstration as to how the order is unsubstantiated and opposed to facts and law. In the absence of details, I have no reason to hold that the AO was wrong in passing the order u/s. 144 of the Act. So it is held that in the fact of non compliance to the notices issued, AO was right in completing the assessment ex-parte and all the grounds raised in this appeal is dismissed. 5. Vide 4th ground of appeal the appellant craves her rights to add, amend or alter any of the grounds on or before the hearing. However, the appellant has not opted the option by her during appeal proceedings. Hence, this ground of appeal is dismissed 6. In the result, the appeal is dismissed.” 5. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submissions in respect of the various grounds raised by the assessee and the same is reproduced herein below: “Brief General Facts: The assessee Shri Kailash Chand, R/o Village Patharedi, Tehsil Kotputli, Jaipur, is an individual (hereinafter referred as “Assessee”). During the relevant period of F.Y. 2011-12 (AY2012-13), the assessee was engaged in the business of plying of trucks on hire. The assessee e-filed his Return of Income “ROI” u/s 139(4) of Income Tax Act, 1961 (for short “the Act”) declaring total income of Rs. 1,52,000/- on 23.12.2013 (PB 01). In the present case, the ld. AO issued notice u/s 148 dt.19.03.2019 (PB 02) for the sole reason of Cash deposits of Rs. 42.46 lakhs in the saving Bank A/c held with ICICI Bank during the relevant point in time and alleged that assessee did not filed ROI thereby stating the deposits so made to be unverified and treated the case to be covered under the provisions of Income Escaping assessment u/s148/147. The ld. AO issued various notice(s) but unfortunately, the assessee was not able to 9 ITA No. 565/JP/2024 Kailash Chand vs. ITO submit response except Balance Sheet and Profit and loss A/c through Authorized Representative Shri Raman Kumar Saini CA/AR. The ld. AO however completed the assessment u/s 144 r/w 147 on dt.03.12.2019 with huge impugned addition/disallowance as under: - Rs. 27,70,909/- being addition on account of Fixed Assets; - Rs. 7,37,657/- disallowance on account of Interest paid on loan as expense; - Rs. 27,39,791/- disallowance on account of depreciation claimed on Fixed asset; - Rs.24,19,833/- disallowance on account of Truck’s operating expenses and - Rs. 2,73,752/- addition on account of expenses payable. Aggrieved from the above order, the assessee filed appeal before ld. CIT(A)/NFAC on 07.01.2020 which was unfortunately dismissed vide order dt. 27.02.2024. Against the above order, the assessee filed this appeal. GOA-1: Addition without jurisdiction: At the outset it is submitted that all the input and additions are completely beyond jurisdiction, were beyond jurisdiction before the AO as detailed here in below. Facts: The ld. AO at page 1 of assessment order stated the reason to believe as under: “On the basis of information in my possession revealed that the assessee has deposited a sum of Rs. 42,46,000/- during the F.Y. 2011-I 2 in his saving bank account held with ICICI Bank Ltd. The assessee has not filed his return of income for the year under consideration. In absence of return of income the above transactions has not verifiable, whereas he has having income chargeable to tax. Accordingly, reasons for reopening of the case were recorded, and notice u/s 148 of the I.T. Act. 1961 was issued on 19.03.2019, which was duly served upon the assessee through registered post…” The ld. AO’s sole contention of reopening of the case of the assessee stands to be two-fold: firstly, cash deposit of Rs.42.46 lakhs and secondly non filing of return of income which is completely biased and contrary to the facts of present case. Hence this ground. Submission: 1. No Reason to believe existed: 1.1 A bare perusal of reasons recorded appears more to be reasons to suspicion as against reason to believe for the simple reason that in the entire reasons alleged to be recorded, not at all disclosed what type of information or material came to his possession so as to give rise to a ground for the formation of the belief by the AO that some income really escaped assessment. Thus, what appears is firstly, there is no reason to believe as such. There is an attempt and 10 ITA No. 565/JP/2024 Kailash Chand vs. ITO more so endeavor of making roving enquiry in as much as some cash deposits not corroborative with the income in absence of ROI for the year under consideration and hence, alleged that there was escapement of income. 1.2 The law of reopening u/s 147 is well settled that there must be some information or material coming to the possession of the AO, based on which, the AO has to form his reason to believe as to escapement. Further, there has to be a proximate connection/nexus between the material/information coming to possession and the formation of the believe. It cannot be a mere rumour, gossip or here say. The AO, acting as an honest person with reasonable prudence has to form a belief. Belief indicates something concrete or reliable. Kindly refer: Gangasharan & Sons Pvt. Ltd. v/s ITO & Anr. (1981) 130 ITR 1 (SC) and ITO v/s Lakhmani Mewal Das (1976) 103 ITR 437 (SC). 1.3 A belief can’t be without any reason, surprisingly however, in present case it is not at all known what is the genesis i.e. material/information coming to his possession even remotely. The ld. AO in present case merely had a look at the P&L A/c and Balance Sheet (PB 14-16) and selected certain items of the expenditure i.r.t. Truck and merely on that basis he presumed that the assessee claimed expense not allowable under relevant provision of law. This is however, height of imagination. It is evident that the AO did not have any material showing that in relation to these items of expenditures failed to justify the claim calling for disallowance. He was not in possession of any independent source of information in the shape of the enclosure of ROI e-filed, initially, u/s 139 on 23.12.2013 (which did not contain any such information which could give any indication even remotely that some disallowance of the nature alleged, was called for). 1.4 This contention is further fortified by the facts that during the course of the reassessment proceeding the AO himself relying on the final accounts furnished by A/R contended hypothetical discrepancies noted from the submission and details in ROI later on alleging non filling of documents/details, he made disallowance in para 1-5 but partly with reference to the 3 items of expense claimed out of total 14 items (being Truck operating expense, Depreciation and Interest on loan) and further w.r.t. Balance sheet, 1 item under Assets (being addition in fixed asset of truck) and 1 item under Liabilities (being expense payable). The approach adopted by the ld. AO itself is based on cherry picking which is not tenable under the eyes of law in as much as the AO felt satisfied with other items of expense claimed by assessee without any corroborative evidences. Admittedly, the AO did not refer to any paper found during some Search or any statement recorded which might have indicated any possible disallowance revealing personal expense claimed by assessee. Thus, it is evidently a case of subjective satisfaction recorded and not an objective one which is the requirement u/s 147. Hence, the AO proceeded on mere reasons to suspicion as against reasons to believe. 11 ITA No. 565/JP/2024 Kailash Chand vs. ITO 1.5 Reliance is placed on CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312/320 ITR 561 (SC) where Hon’ble Apex court held as under: \"However, one needs to give a schematic interpretation to the words \"reason to believe\" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of \"mere change of opinion\", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of \"change of opinion\" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the Assessing Officer.\" Therefore, the impugned notice issued u/s 148 as also the consequent impugned assessment framed u/s 144 r.w.s. 147 dated 03.12.2019 deserves to be quashed on this ground alone. 2. New items of income / expenses (not part of reasons) raised - not permissible: 2.1 Admittedly, the very escaped income of Rs. 42.46 Lakhs which formed part of reasons to believe was not added to declared income as against which however, the ld. AO chose to take up a new item of income as elaborated hereinabove, which are completely unconnected, and did not form part of the specific reasons to believe, recorded for the reopening of the present case. Such an approach is, completely impermissible by law and the AO has acted completely beyond jurisdiction. Thus, once the addition on account of the income believed to have been escaped, has not been made, no addition of any other income could be made u/s 147, more so when prescribed legal procedure was not followed. 2.2 Supporting Case Laws: 2.2.1 CIT vs. Shri Ram Singh (2008) 217 CTR (Raj) 345: (2008) 306 ITR 343 (Raj) (DC 1-6). The Rajasthan High Court construed the words used by Parliament in s. 147 particularly the words that the AO may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under s. 147. The Hon’ble Court held as follows: \"It is only when, in proceedings under s. 147 the AO, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had 'reason to believe' to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has 12 ITA No. 565/JP/2024 Kailash Chand vs. ITO escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s. 147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under s. 147, the AO were to come to the conclusion, that any income chargeable to tax, which, according to his 'reason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s. 147.\" 2.2.2 CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 236 (Mum), wherein it was held as under: “Reassessment—Scope—Income in respect of which notice issued not found to be escaped income—Once the AO accepts that the income in respect of which he entertained reason to believe to have escaped assessment, was not in fact escaped income; he has no jurisdiction to reassess other items of income—In such a situation, Expln. 3 to s.147 does not come to the reserve of AO” 2.2.3 This followed by Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v/s CIT (2011) 336 ITR 136 (Del HC) wherein, it was held that the AO had jurisdiction to reassess income other than the income in respect of which proceedings u/s 147 were initiated but he was not justified in doing so when the very reasons for initiation of those proceedings ceased to survive. Legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction u/s 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiries and thereby including different items of income, not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. It was further held that the Tribunal was right in holding that the AO had the jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated but he was not so justified when the reasons for initiation of those proceedings ceased to survive. The observations of the Hon’ble High Court on pages 147 and 148 of in 336 ITR 136 are worth noting. 2.2.4 Also kindly refer CIT vs Mohmed Juned Dadani (2013) 355 ITR 172 (Guj) (DC 7-15). However, it may be clarified that, nothing came to the notice of the AO as contemplated by Explanation-III to S. 147 as much as the AO himself, first, made inquiries through notices u/s142, and when no reply was received, made the impugned additions and disallowances. Therefore, the AO cannot take help of the said Explanation, nor even he has whispered a single word on this aspect. 13 ITA No. 565/JP/2024 Kailash Chand vs. ITO Therefore, all the impugned additions, deserves to be, deleted, in toto, on this legal ground alone. GOA-2 to 8: Addition/disallowances – bad in law: Submission: 1. No reasonable opportunity given by the AO: Firstly, it is submitted that the AO himself at page 1 para 1 admitted that “In compliance to this notice Sh Raman Kumar Saini, CA/ AR of the assessee attended submitted power of attorney, copy of balance Sheet and Pofit &loss account.” Thus, it was not a case of complete non compliance as evident from noting by ld. AO. However, immediately thereafter on 04.09.2019 very hurriedly the AO issued notice u/s 142(1) and on 03.12.2019, completed the assessment i.e. within a short period of 3 months only i.e. September to November,2019. Needless to say, that if the assessment was getting time barred on 31.12.2019, he should not have kept a silence and to wake up at the fage end and then to pressurize the assessee for submitting details in a short time. The Legislature has intentionally kept a reasonable period to complete the assessment after filing the return. This way, even though some opportunities might have been given but were illusory and not effective and adequate. Kindly refer Harendra Singh Dhillon, Naagaon v/s ITO (2012) 32 CCH 103 (Del). General Submissions on Merits: For all the grounds: 2. The impugned assessment is not a best judgment assessment as contemplated by law: 2.1 It is submitted that the AO also did not meet with the requirements of making a “best judgment assessment”. It is submitted that while making an assessment u/s 144 the AO does not have blind and arbitrary powers to make the assessment, the way he wants. On the contrary, the law enjoins upon him a more onerous duty in such a circumstance in as much as he has to act in the capacity of quasi-judicial authority, who is supposed to take a best judgment, while making a fairest possible assessment of the income of an assessee. 2.2 Fair estimation required- Judicial Guideline: For a better appreciation, a reference may kindly be made to the commentary by the ld. Authors Chaturvedi Pethisaria Vol. 3 Edition V at page 4932, reproduced hereunder verbatim:- “Best Judgment assessment – how to be made? – In making a best judgment assessment the Assessing Officer must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, 14 ITA No. 565/JP/2024 Kailash Chand vs. ITO and for this purpose he must be able to take into consideration local knowledge and repute in regard to the assessee’s circumstances, and his own knowledge of previous returns by and assessments of the assessee and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work [CIT Vs. Laxmi Narain Badridas , (1937) 5 ITR 170, 180 (PC), reversing (1934) 2 ITR 246 (Nag); CIT Vs. S. Sen, (1949) 17 ITR 355 (Orissa); Singh Engineering Works Vs. CIT , (1953) 24 ITR 93 (All); M.A. Rauf Vs. CIT, (1958) 33 ITR 843 (Pat); Mohanlal Mahribal Vs. CIT, (1982) 133 ITR 683 (MP) ; Ganga Prasad Sharma Vs. CIT, (1981) 132 ITR 87 (MP) & (1981) 127 ITR 27 (MO); Balchand Udairam Vs. State of Sikkim, (1989) 180 ITR 530, 553 (Sikkim); K.T. Thomas Vs. Ag ITO, (1990) 184 ITR 561, 565 (Ker.)]. In making a best judgment assessment the Assessing Officer does not possess absolutely arbitrary authority to assessee at any figure he likes and that although he is not bound by strict judicial principles he should be guided by rules of justice, equity and good conscience [Abdul Qayum & Co., Vs. CIT, (1933) 1 ITR 375, 378 (Oudh)]. A best judgment assessment is not by way penalty for non-compliance [Jot Ram Sher Singh Vs. CIT, (1934) 2 ITR 129 (All) and it cannot be made capriciously in utter disregard to the material on record [Gunda Subbayya Vs. CIT, (1939) 7 ITR 21, 26-7 (Mad-- FB); CIT Vs. S. Sen, (1949) 17 ITR 355 (Orissa)].” 2.3 Supporting Case Laws: 2.3.1 In Jot Ram Sher Singh v/s CIT (1934) 2 ITR 129 (All.): An ex-parte assessment should not be influenced by a desire to punish the assessee for non- compliance with a notice. 2.3.2 In Brij Bhushan Lal Parduman Kumar v/s CIT (1978) 115 ITR 524 (SC): The authority making a best judgment assessment must make an honest and fair estimate of the income of the assessee and though arbitrariness cannot be avoided in such estimate, the same must not be capricious but should have a reasonable nexus to the available material and the circumstances of the case. 2.3.3 In Sri Shankar Khandasari Sugar Mills v/s CIT (1992) 193 ITR 669 (Kar.): Best judgment assessment ought to be based on a fair and proper estimate of assessee’s income and inferences to be drawn from available material should be properly inferable inferences. 2.3.4 The same principles were propounded by Hon’ble Rajasthan High Court in the case of CIT v/s Gotan Lime Khaniz Udyog (2002) 256 ITR 243 (Raj): 3. However, your honour shall find that the lower authorities in the present case have not conformed to these settled principles by the courts, while making the impugned assessment u/s 144 as elaborated hereunder: 15 ITA No. 565/JP/2024 Kailash Chand vs. ITO 3.1 The very first eye-opening example of complete non-application of mind and the highly arbitrary and capricious approach adopted by the authorities below is that the entire amount of the investment made in the purchase of a new truck (fixed assets) of Rs. 27,70,909/- has been added. The allegations is that the appellant failed to file bills / vouchers and other documentary evidence to show that such investment was made during the year (by the CIT(A)). However, it is not denied that such addition in the fixed asset is apparent and evident from the Audited Annual Statement of Accounts (PB 14). Audited Balance Sheet as on 31.03.2012 (PB 14) shows fixed assets as per Schedule – I at Rs. 65,47,127/- and the Schedule (PB 16) shows purchase of the truck during the year at Rs. 27,70,909/- w.r.t. which the impugned addition has been made. There is no allegation that there was no source behind the purchase of the truck (fixed assets) and that it was unexplained investment. In view of these admitted facts, it is beyond one's understanding as to how and under what provision, any addition to the declared income could be made. Authorities below are completely silent on the specific provision of law which has empowered them to make addition. Even assuming there was absence of bills & vouchers how that could justify the making of impugned addition. Once the audited Balance Sheet shows addition of the fixed assets of Rs. 27.70 lakh this year, in absence of any contrary evidence, the authorities below are bound to have accepted this fact. Neither the accounts were rejected nor the audited balance sheet has been doubted or rejected. No inquiry was made from the concerned Chartered Accountant M/s Santosh Sushma K. Shree and Company, New Delhi. 3.2 With regard to disallowance of interest on repayment of loan: Allegation is that no documentary evidence was submitted to show that the loans were taken for business purposes. Even if assuming no document was submitted however, the admitted fact was that in the Audited Balance Sheet, fact of loan is clearly appearing. Further, the bank statement (PB 9-13) and loan amortisation schedule (PB 4-8) clearly shows payment of loan instalments, which is admittedly in the name of the appellant and relates to the year under consideration w.r.t. two loans from ICICI Bank with Loan Application No. “LAN” LVKTP00023602592 for loan of Rs. 21.80 lakhs payable in 46 EMI of Rs. 58,993/- each (PB 4-5) and another loan of Rs. 3.5 lakhs with LAN LVKTP00023602593 payable in 46 EMI of Rs. 9,471/- each (PB 6-7). Undisputedly, no enquiry was made by the authorities below from the bank. Interestingly, the addition of the new asset this year, was partly sourced from such loan itself, which fact is evident from the Audited Balance Sheet (PB 14). Once the source is not disputed the fact of taking loan also stands established. 3.3 As regards disallowance of the depreciation: The allegation of the authorities below is that the appellant did not submit any documentary evidence and that depreciation schedule was not submitted. At the same time however, it is admitted that in the Audited P&L Account there is a truck operating expense of Rs. 2,41,98,338/- and other expenses. It can't be denied that it is only with the help of the truck and incurring various expenses for running and operating the truck for 16 ITA No. 565/JP/2024 Kailash Chand vs. ITO plying (direct or indirect), the assessee was able to declare huge gross receipts of Rs. 2.91 Cr. as per the Audited P&L Account. The ld. AO happily taxed the profit/income arising from the truck driving but is not agreeable to allow the expenses and the depreciation. Needless to say, that income tax is a tax on income and not on gross receipts. By making wholesale disallowances of the expenditure including depreciation, what the authorities below have taxed is the Gross Receipts but not the income which is against the very concept under the Income Tax Act. Kindly refer Sanath Kumar Murali v ITO & Ors) Karnataka HC Citation (2023) 333 CTR (Kar) 189. 3.4 Interestingly, the AO himself made ad hoc disallowance of 10% out of Rs. 2,41,98,338/- operating expenses meaning thereby the fact of incurring of 90% of the expenses has been accepted. There is absolutely no basis as to why and how 10% disallowance has been made because even for estimation good basis of the material is required. All the claimed expenses are part of and coming from the audited P&L account. 3.5 Thus, by making huge, arbitrary and capricious additions merely based on surmises, conjecture and suspicion, the Returned Income of Rs. 1,52,500/- was artificially raised up to a huge of Rs. 90,94,442/-i.e. many times more. This is evident from the following chart wherein the declared income ranged between Rs. 1lakh to maximum 10 lakh only in the ROIs filed for A.Y. 2024-25. SRN AY Filing Type ITR Acknowledgment No Filing Date Filing Section Total Income declared in ROI 1 2008-09 In response to notice u/s 148 ITR-4 571280411150515 15-05-2015 148 97,771 2 2011-12 In response to notice u/s 148 ITR-4 392215051211218 21-12-2018 148 1,49,070 3 2012-13 Original ITR-4 853074261231213 23-12-2013 139(4) 1,52,500 4 2013-14 Original ITR-4 824536511241013 24-10-2013 139(1) 2,35,590 5 2014-15 Original ITR-4 417321391231114 23-11-2014 139(1) 2,54,130 6 2015-16 Original ITR-4 863230501201015 20-10-2015 139(1) 4,97,840 7 2016-17 Original ITR-4 512648941171016 17-10-2016 139(1) 12,27,710 8 2017-18 Original ITR-3 289856511051117 05-11-2017 139(1) 12,84,860 9 2018-19 Original ITR-3 362333991311018 31-10-2018 139(1) 8,49,910 10 2019-20 Original ITR-3 241029691311019 31-10-2019 139(1) 4,89,050 11 2020-21 Original ITR-3 214302411150121 15-01-2021 139(1) 6,00,180 17 ITA No. 565/JP/2024 Kailash Chand vs. ITO 12 2021-22 Original ITR-3 919511040291121 29-11-2021 139(1) 4,86,190 13 2022-23 Original ITR-3 504218971180922 18-09-2022 139(1) 4,91,340 14 2023-24 Original ITR-3 354537381300923 30-09-2023 139(1) 10,28,320 15 2024-25 Original ITR-3 523348980280924 28-09-2024 139(1) 10,60,000 Such approach is completely against the basic principle contemplated u/s 144 of making a best judgment assessment. On this ground alone, all the additions deserve to be deleted or in any case alternatively, the entire assessment order deserves to be set aside and restored to the file of the AO for assessing the income afresh. 4. Regular Accounts-Binding Evidence: The Assessee has been maintaining regular books of accounts. The same were subject to the audit. Notably, there is no adverse remark made by the auditors. It is now well settled that the regularly maintained books of accounts, is an admissible evidence under Indian Evidence Act, 1872.The authorities below do not dispute this legal position and the facts narrated herein above. In the present case, the AO did not disbelieve or even did not reject the accounts. Once the accounts are not rejected, the same are binding upon the revenue authorities and all other concerned. Even the result declared therein are binding upon the AO authorities as held in the cases of: 4.1 R.B. Bansilal Abirchand Spinning & Weaving Mills vs. CIT (1970) 75 ITR 260 (Bombay) (DPB 17-18) “a. A finding has to be recorded as to the unacceptability of the method and irregularity of the method and irregularity of accounts kept. b. The mere fact that percentage of dead loss of cotton is high in a particular year cannot lead to the loan inference that thereby there has been a suppression of the production in a spinning mill. c. If it is not possible to keep such record (record of loss or wastage at subsequent stages) there was no other reason not to accept the book results of the records kept addition by way of estimate not permissible. d. Merely by comparison of the percentage of loss in a particular year, we do not think it is possible to say with any reasonable certainty that the increase in the percentage of loss must be attributable and must lead to a reasonable inference of suppression of production of yarn. e. Higher wastages alone was no ground for rejecting the claim for wastage”. 4.2 CIT vs. Maharaja Shree Umed Mills Ltd. (1991) 192 ITR 565 (Raj.) (DPB1-3) 18 ITA No. 565/JP/2024 Kailash Chand vs. ITO \"The Tribunal was justified in holding that since the books of account had not been rejected the mere fact that there had been a fall in the gross profit rate would not lead to the inference that the expenditure had been inflated. No question of law arose from the order of the Tribunal.\" 4.3 DCIT v. Mewar Textiles Mills Ltd. (1999) 105 TAXMAN 199 (JP.) (MAG.) (DPB 4-8) \"The AO has nowhere invoked the provisions of section 145(1) and if the provisions are not invoked then the estimate of profit is not possible in the eyes of law. No defect of any kind was pointed out by the AO\" 4.4 Mohd. Umer v. CIT 101 ITR 525 (Pat) (Page 528) \"No finding was recorded by the departmental authorities as to the unacceptability of the method and irregularity of the account kept by the assessee. It is well settled that in the absence of such a finding recorded by the authorities, the book results cannot be ignored or brushed aside.\" \"In the absence of any such finding, there being no reason germane to the unacceptability of the book results....\" 4.5 Ajanta Constructions (P.) Ltd. Vs. ACIT XXII TW 606 (ITAT Jaipur) \"The maintenance of books of accounts in the normal course of business activities have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable.\" 4.6 DCIT Vs. Associated Stone Industries (Kotah) Ltd. XXII TW 155 (JP) held that: \"......No additions can be sustained on this account. Books of accounts of the assessee was not rejected and no defect of any kind was found by the AO or by the CIT (A).\" 4.7 Ghewarchand Vs. ITO - XXI TW 571 held that: \"Therefore we hold that books of account maintained by the assessee were the books of account maintained in the regular course of business. Therefore, the income should be deduced on the basis of books of account maintained by the assessee.\" 5. Even audited balance sheet is sufficient and valid evidence: The facts are admitted that the appellant filed audited Balance Sheet and P&L account before the AO which was not even doubted what to talk of rejection thereof and no enquiry was made further. The audited final accounts, based on which the return was filed is a good and valid evidence (in absence of any contrary evidence brought on record by the AO) and is binding upon all the concern. Reliance is placed on decision of Hon’ble Delhi High Court in the case of Addl. CIT vs. Jay Engineering Works Ltd. (1978) 113 ITR 389 (Del) (DC 16-18) wherein it was held 19 ITA No. 565/JP/2024 Kailash Chand vs. ITO that if the account books were destroyed in fire then the audited accounts examined by the external auditors can be accepted as evidence in support of the return of income. Therefore, the addition / disallowance made by the AO is arbitrary and unsupported by any credible evidence and deserves to be deleted in toto. 6. No addition permissible merely on suspicion: It is well settled that suspicion howsoever strong, cannot take place of reality. Thus, the impugned additions have been made merely on suspicion, impugned addition deserves to be deleted here itself. Kindly refer Dhakeshwari Cotton Mills v/s CIT (1954) 26 ITR 775 (SC), wherein it is held as under: “Assessment—Validity—ITO is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under sub-s. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all—There must be something more than bare suspicion to support the assessment under s. 23(3)—ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion—In arriving at its estimate of gross profits and sales Tribunal should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries” Hence, the impugned order kindly be quashed or alternatively be set-aside to the AO to be made afresh or alternatively to the ld. CIT(A).” 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S. No. Particulars Page No. 1. Copy of ROI filed for A.Y. 2012-13 dated 23.12.2013 1 2. Copy of notice u/s 148 dated 19.03.2019 2 3. Copy of Purchase Invoices of the Trucks purchased 3 20 ITA No. 565/JP/2024 Kailash Chand vs. ITO Case laws relied upon: S.No. Particulars Pg. No. 1. CIT vs. Shri Ram Singh (2008) 217 CTR (Raj) 345: (2008) 306 ITR 343 (Raj) 1-6 2. CIT vs Mohmed Juned Dadani (2013) 355 ITR 172 (Guj) 7-15 3. Addl. CIT vs. Jay Engineering Works Ltd. (1978) 113 ITR 389 (Del) 16-18 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the as per the reason recorded during the AY 2012-13. 4. Copy of Loan statements/ Interest certificate 4-8 5. Copy of Bank statement for the period of 01.04.2011 to 31.03.2012 9-13 6. Copy of Financial Statements for the A.Y. 2012-13 14-16 7. Copy of written submission filed before the ld. CIT(A) dated 06.11.2024 17-24 8. Copy of summary of Direct Expenses for the period of 01.04.2011-31.03.2012 25 9. Copy of monthly summary ledger of Dala & Other Expenses for the period of 01.04.2011-31.03.2012 26 10. Copy of monthly summary ledger of Diesel & Fuel Charges for the period of 01.04.2011-31.03.2012 27 11. Copy of monthly summary ledger of Fooding Expenses for the period of 01.04.2011-31.03.2012 28 12. Copy of monthly summary ledger of Jeep Rent for the period of 01.04.2011-31.03.2012 29 13. Copy of monthly summary ledger of Supervisor Exp & Mistry expenses for the period of 01.04.2011- 31.03.2012 30 14. Copy of monthly summary ledger of Tool Charges for the period of 01.04.2011-31.03.2012 31 15. Computation of Income for the A.Y. 2012-13 32 21 ITA No. 565/JP/2024 Kailash Chand vs. ITO the notice u/s. 148 was issued to verify the cash deposited by the assessee. Whereas the ld. AO has not made any addition on the issue of cash deposits and went on making the other addition based the books of the account so produced by the assessee. On this jurisdictional aspect of the matter he serviced the decision of our jurisdictional High Court in the case of CIT Vs. Shri Ram Singh [ 217 CTR 345 (Rajasthan) ] wherein Hon’ble high court held that once the assessing officer comes to conclusion that income with respect to which he had entertained “reason to believe” to have escaped assessment, was found to have been explained, his jurisdiction comes to a stop at that, and he does not continue to possess jurisdiction to put to tax any other income which subsequently came to his notice in course of proceedings. Whichh was found by him to have escaped assessment. On the merits of the issue he relied upon the written submission stating that even otherwise the addition made are based on the surmises and conjecture has no merits. 8. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). In support of the contentions raised on the legal 22 ITA No. 565/JP/2024 Kailash Chand vs. ITO aspect of having jurisdiction of 148 ld. DR also relied upon certain case laws as submitted, which reads as follows : Sr. No. Name of the case I. [1999] 236 ITR 34 (SC) SUPREME COURT OF INDIA Raymond Woollen Mills Ltd. v. Income-tax Officer 2. [2023] 148 taxmann.com 446 (Delhi) HIGH COURT OF DELHI Saif II Mauritius Company Ltd. v. Assistant Commissioner of Income-tax 3. [1999] 103 TAXMAN 562 (PAT.) HIGH COURT OF PATNA P.K. Haldar & Co. v. Commissioner of Income-tax 4. [2002] 123 Taxman 756 (Calcutta) HIGH COURT OF CALCUTTA Ispat Industries Ltd. v. Deputy Commissioner of Income-tax 5. [2023] 153 taxmann.com 25 (Gujarat) HIGH COURT OF GUJARAT Akshat Pramodkumar Chaudhary v. Deputy Commissioner of Income-tax 6. [2022] 139 taxmann.com 198 (Gujarat) HIGH COURT OF GUJARAT Amar Jewellers Ltd. v.Assistant Commissioner of Income-tax 7. [2018] 94 taxmann.com 393 (Gujarat) HIGH COURT OF GUJARAT Amit Polyprints (P.) Ltd.v.Deputy Commissioner of Income-tax 8. [2018] 91 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Aradhna Estate (P.) Ltd.v.Deputy Commissioner of Income-tax, Circle-1(1) 9. [2023] 152 taxmann.com 573 (SC) SUPREME COURT OF INDIA Ajay Gupta v. Income-tax Officer 0. [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH Etiam Emedia Ltd.v. Income-tax Officer-2(2) 1 1 . [2020] 115 taxmann.com 338 (Delhi) HIGH COURT OF DELHI Experion Developers (P.) Ltd. v.Assistant Commissioner of Income-tax 12. [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd.v.Assistant Commissioner of Income-tax, officer Circle 1(1) 13. [2012] 18 taxmann.com 83 (Delhi) IN THE ITAT DELHI BENCH Ms. Rainee Singh v.Income-tax Officer 14. [1995] 83 TAXMAN 194 ( MAD.)111GI I COURT OF MADRAS Panchugurumurthy v. Commissioner of Income-tax 15. [2016] 72 taxmann.com 302 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v.Deputy Commissioner of Income-tax 19. [2021] 128 taxmann.com -229 (Gujarat) HIGH COURT OF GUJARAT Bhanuben Mansukhlal Khimashia v.Income Tax Officer Ward 3(1) 23 ITA No. 565/JP/2024 Kailash Chand vs. ITO 20. [2021] 129 taxmann.com 48 (Gujarat) HIGH COURT OF GUJARAT Kaushaliya Sampatlal Dudani I/Income-tax Officer. Ward 1(3) 21. [2021] 129 taxmann.com 119 (Gujarat) HIGI I COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer, Ward 1(3) 22. [2022] 138 taxmann.com 50 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh vincorne-tax Officer 23. [2021] 131 taxmann.com 42 (Gujarat) HIGH COURT OF GUJARAT Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) 24. [2021] 127 taxmann.com 679 (Gujarat) HIGH COURT OF GUJARAT Silverdale Inn (P.) Ltd. v. Income Tax Officer 25. [2021] 129 taxmann.com 68 (Gujarat) HIGH COURT OF' GUJARAT Vilas Vrajlal Parekh HUF v.Income-tax Officer, Ward(1)3 26. [2021] 133 taxmann.com 397 (Gujarat) HIGH COURT OF GUJARAT Zaveri & Company (P.) Ltd.v.Deputy Commissioner of Income-tax 27. [1980] 4 Taxman 83 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. H.P. Sharma S. RANGANATHAN AND D.R. KHANNA, .1,1 28. [2006] 151 Taxman 41 (Delhi) HIGH COURT OF DELHI Consolidated Photo & Finvest Ltd. v. Assistant Commissioner of Income-tax 29. [2009] 315 ITR 84 (Bombay) HIGH COURT OF BOMBAY Yuvraj v. Union of India 30. [2011] 197 Taxman 415 (Delhi) HIGH COURT OF DELHI Honda Siel Power Products Ltd. v. Deputy Commissioner of Income-tax. 31. [2012] 21taxmann.com438 (Delhi) HIGH COURT OF DELHI Money Growth Investment & Consultants (P.) Ltd. v. Income-tax Officer 32. [2014] 4Itaxmann.com2 I (Delhi) HIGH COURT OF DELHI OPG Metals & Finsec Ltd. v. Commissioner of Income-tax 33. [2021] 128 taxmann.com369 (Jaipur - Trib.) IN THE ITAT JAIPUR BENCH 'A' Smt. Uma Mandal v. Income Tax Officer. Ward 5(4). Jaipur 34. [1997] 90 Taxman 553 (SC) SUPREME COURT OF INDIA Associated Stone Industries (Kotah) Ltd. v. Commissioner of Income-tax Ld. DR also relied upon the detailed report of the assessing officer dated 03.02.2025 on the technical ground which reads as under: No. ITO/W BEHROR/2024-25/725 Dated 03.02.2025 To The Commissioner of Income Tax (In Situ) (S DR)-II Income Tax Appellate Tribunal, Jaipur 24 ITA No. 565/JP/2024 Kailash Chand vs. ITO (Through Proper Channel) Sir. Sub: Appellate proceedings in the sense of Kailash Chand. PAN-AHOPC7760R. ITA 565/JPR/2024) for the A.Y. 2012-13-reg- Ref. Earlier report submitted vide letter no 567 dated 03.12.2024. Kindly refer to the aanve subject: in this regard, comments on written submission of the assessee dated 27.11.2024 are as below:- 1. Notice u/s 148 was issued according to the provisions of Income tax Act, 1961. It was issued on the basis of deposit of Rs. 42,46,000/- in saving bank account of the assessee. The assessee filed return of income with total income of Rs 1,52,500/- Reasons were recording by the then ITO-Ward-Behror. After taking approval from the Pr. Commissioner of Income tax, Alwar, Notice u/s 148 was issued. The assessor failed to explain how the order is bad in law. Address of the assessee is Tehsil Kotputli which is within jurisdiction of the O/O ITO. Ward-Behror. The assessee failed to explain how the order is for want of jurisdiction. The assessee has not submitted that no such bank account is maintained by him during the year under consideration. Thus there was material available on record and notice u/s 148 was issued according to the provisions of Income Tax Act, 1961. 2. The assessee submitted that new items of income / expenses were raised while making addition to total income in assessment order. However the assessee failed to consider that additions made were directly related to reasons on the basis of which notice u/s 148 was issued. Notice u/s 148 was issued on the basis of cash deposit of Rs. 42 46 lakh in saving bank account maintained with ICICI Bank Ltd. During the assessment proceedings the assessee submitted copy of balance sheet showing bank account balance of Rs. 8,98,606/-in ICICI saving bank account This means the assess made certain transactions with this bank account which resulted in assets/liabilities of balance sheet as well as transactions of profit & loss account. The assessee has not proved that cash deposits in the above said bank account are not related to transactions shown in profit & loss account and assets/liabilities shown in balance sheet. During the course of assessment addition Therefore, instead of making addition of cash deposits, additions were made on the basis of unexplained fixed assets etc. 3. The assessee was given adequate and reasonable opportunity of hearing during the assessment proceedings. There was no breach of natural justice. Notice u/s 148 was issued to the assessee vide speed post no. ER0404454751N dated 23.03.2019. Subsequently, Notices u/s 142(1) dated 19.06.2019 and dated 22.07.2019 were issued 25 ITA No. 565/JP/2024 Kailash Chand vs. ITO to the assessee. Letter dated 21.08.2019 was issued show causing the assessee why the assessment should not be completed according to the provisions of section 144 Shri Raman Kumar Saini CA and A/R attended office of behalf of the assessee. He submitted power of attorney, copy of Balance sheet and P& 1 account. Notice u/s 142(1) dated 04.09.2019 was issued and served to him. However, assessee failed to furnished the requisite documents/explanation and hence assessment order was made u/s 144 on 03.12.2019 al total income of Rs. 90,94,442/-. 4. The assessee submitted that once audited balance sheet is submitted then the authorities are bound to accept the facts. But it is relevant to mention here that the assessee only submitted copy of balance sheet and Profit & loss account Even complete audit report was not submitted by the assessee so as to ascertain which books of account are maintained by the assessor adverse remarks made by the auditor, if any ete The assessee submitted that no enquiry was made by then ITQ, But the assessee failed to explain why no compliance was made during the assessment proceedings. The assessee failed to explain why no complete details/documents/information were submitted during the assessment proceedings so as make further enquiries. Submitted for your kind consideration. Ld. DR also relied upon the report of the ld. AO on the merits of the case which was submitted vide letter dated 03.12.2024 which reads as under : No. ITO/W-BEHROR/2024-25/567 Dated: 03.12.2024 To The Additional Commissioner of Income Tax (Sr. DR)-II Income Tax Appellate Tribunal, Jaipur (Through Proper Channel) Sir, Sub: Appellate proceedings in the case of Kailash Chand. PAN-AHDPC7760R. ITA 565/JPR/2024) for the A.Y. 2012-13-reg.- 26 ITA No. 565/JP/2024 Kailash Chand vs. ITO Kindly refer to letter no. 767 dated 28.11.2024 on the above subject. In this regard, grounds wise comments are as below:- Grounds of Appeal 1. Notice u/s 148 was issued according to the provisions of Income tax Act, 1961. It was issued on the basis of information that deposit of Rs. 42,46,000/- was made in saving bank account of the assessee. The assessee filed return of income with total income of Rs. 1,52,500/-. Reasons were recording by the ITO-Ward-Behror. After taking approval from the Pr. Commissioner of Income tax, Alwar, Notice u/s 148 was issued. The assessee failed to explain how the order is bad in law and on facts of the case. Address of the assessee is Tehsil Kotputli which is within jurisdiction of the O/o ITO-Ward-Behror. The assessee failed to explain how the order is for want of jurisdiction. Grounds of Appeal 2. The assessee was given adequate and reasonable opportunity of hearing during the assessment proceedings. There was no breach of natural justice. Notice u/s 148 was issued to the assessee vide speed post no. ER040445475IN dated 23.03.2019 (copy enclosed). Subsequently, Notices u/s 142(1) dated 19.06.2019 and dated 22.07.2019 (copy enclosed) were issued to the assessee. Letter dated 21.08.2019 was issued show causing the assessee why the assessment should not be completed according to the provisions of section 144. Shri Raman Kumar Saini CA and A/R attended office of behalf of the assessee. He submitted power of attorney, copy of Balance sheet and P& L account. Notice u/s 142(1) dated 04.09.2019 (copy enclosed) was issued and served to him. However, assessee failed to furnished the requisite/documents/explanation and hence assessment order was made u/s 144 on 03.12.2019 at total income of Rs. 90,94,442/-. Grounds of Appeal 3. The assessee was given adequate and reasonable opportunity of hearing during the assessment proceedings. However, assessee failed to furnished the requisite/ documents/explanation and hence assessment order was made u/s 144 on 03.12.2019. The assessee failed to specify error in law as well as on the facts of the case in passing the assessment order. Grounds of Appeal 4 to 9. The Ld. CIT (A) upheld the additions made by the assessing officer after considering submission of the assessee and dismissed appeal of the assessee. Therefore, The Ld. CIT (A) has not erred in law as well as on facts of the case. Grounds of Appeal 10. No comments 27 ITA No. 565/JP/2024 Kailash Chand vs. ITO In additional evidence, the assessee submitted monthly summery of direct expenses, diesel charges, DALA & Other, Fooding expenses, Jeep Rent, Supervisor expenses & Mistry and Tool charges. In absence of details of these monthly summery of expenses along with relevant documentary evidence, these additional evidence could not satisfactory explain the expenditure claimed by the assessee. Submitted for your kind consideration.” 9. Since, the case of the assessee was decided exparte by the ld. AO, ld. AR of the assessee also filed a detailed application under rule 29 prayer therein to admit the additional evidence on the merits of the dispute. The prayer of the assessee reads as follows: “PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCES U/R 29 A. In the above case, the humble applicant-assessee humbly prays for admission of following Additional Evidences as under: 1. Copy of Purchase Invoices of the Trucks purchased during the AY 2012-13 2. Copy of Loan statements/ Interest certificate 3. Copy of Bank statement for the period of 01.04.2011 to 31.03.2012. 4. Copy of monthly summary ledger of Dala & Other Expenses for the period of 01.04.2011- 31.03.2012 5. Copy of monthly summary ledger of Diesel & Fuel Charges for the period of 01.04.2011- 31.03.2012 6. Copy of monthly summary ledger of Fooding Expenses for the period of 01.04.2011- 31.03.2012 7. Copy of monthly summary ledger of Jeep Rent for the period of 01.04.2011-31.03.2012 8. Copy of monthly summary ledger of Supervisor Exp & Mistry expenses for the period of 01.04.2011-31.03.2012 9. Copy of monthly summary ledger of Tool Charges for the period of 01.04.2011-31.03.2012 10. Copy of summary of Direct Expenses for the period of 01.04.2011-31.03.2012 B. The assessment in this case was made ex- parte u/s 144 of the act hence above papers and details could not be submitted although admittedly audited balance sheet and P&L account filed before the AO (Pg.1 of AO) and only in support of the same these evidences are being filed, most of which are the copies of ledger accounts only. Even before the Ld. CIT(A) papers could 28 ITA No. 565/JP/2024 Kailash Chand vs. ITO not be filed due to lack of proper advice. There did exist reasonable and sufficient cause due to the circumstances as elaborated in my duly sworn affidavit date17.12.2024(Anx-A) being filed in support of the present application. C. There can’t be any dispute over the settled legal proposition that Rule 29 enables the Tribunal to admit the additional evidence in its discretion if such additional evidence would be necessary to do substantial justice in the matter. Kindly refer CIT v/s Text Hundred India (P) Ltd. (2011) 239 CTR (Del) 263, ITO v/s B.N. Bhattacharya (1978) 112 ITR 423 (Cal), Prabhavati S. Shah vs CIT 1998 231 ITR 1 (Bom.) D. These evidences go to the root of the issues and consideration thereof is must for a just decision thereon. Hence, under the totality of facts and circumstances, it is very humbly prayed that such evidence/s kindly be taken on record, considered and obliged. ” 10. We have heard the rival contentions and perused the material placed on record. Vide Ground no. 1 the assessee challenges the order of the assessment passed under section 148 r.w.s. 144 of the Act. The brief fact of the case are that the assessee engaged in the business of plying of trucks on hire during the relevant period and the assessee has declared gross receipts of Rs 2,91,01,799/- on which net profit of Rs 1,07,648/- @ 0.37% has been declared for the year under consideration. Revenue was in possession of the information that the assessee has deposited a sum of Rs 42,46,000/- during the F.Y. 2011-12 in his saving bank account held with ICICI Bank Ltd. The assessee has not filed his return of income for the year under consideration. In absence of return of income the above transactions considered was considered as not verifiable and accordingly, reasons for 29 ITA No. 565/JP/2024 Kailash Chand vs. ITO reopening of the case were recorded, and notice u/s 148 of the Act was issued on 19.03.2019, which was duly served upon the assessee through registered post. The assessee made part compliance and submitted the copy of balance Sheet and Profit & loss account. Thereafter despite various opportunities provided assessee remained non-compliant and ld. AO went on making the addition which were based on the profit and loss account and Balance Sheet filed by the assessee and the has abstained from making any addition on account of cash deposited to the Saving Bank account as alleged in the reasons recorded for re-opening of the case. Thus, Once the Assessing Officer is satisfied with the reasons recorded for reopening the case, they no longer have the jurisdiction to tax any other income. We get strength of this view from a decision our own High Court serviced by the ld. AR of the assessee in the case of Commissioner of Income Tax V. Shri Ram Singh [ 217 CTR 345 (Rajasthan) ] wherein the Jurisdictional High Court held as under: 32. The result of the aforesaid discussion is, that the question framed, in the order dated. 23rd May, 2006, is required to be, and is, answered in the manner, that the Tribunal was not justified in holding, that the proceedings for reassessment under section 148/147 were initiated by the AO, on non-existing facts. because ultimately the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It is further held, that the AO was justified in initiating the proceedings under section 147/148, but then, once he came to the conclusion, that the income, with respect to which he had entertained \"reason to believe\" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to 30 ITA No. 565/JP/2024 Kailash Chand vs. ITO his notice, in the course of the proceedings, which were found by him, to have escaped assessment. 33. Consequently, the result is, that the appeal is dismissed. Respectfully following the above binding precedent we consider the ground no. 1 raised by the assessee as once the ld. AO abstained from making any addition on the reasons recorded his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment. Based on these observations ground no. 1 raised by the assessee is allowed. Since we considered the assessee's appeal on a technicality, the other merit-based grounds are educational and do not require a finding. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 10/03/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 10/03/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Kailash Chand, Jaipur 31 ITA No. 565/JP/2024 Kailash Chand vs. ITO 2. izR;FkhZ@ The Respondent- ITO, Ward, Behror 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 565/JP/2024) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar "