M/S. DESAI IMPEX PVT. LTD.,AHMEDABAD V. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), AHMEDABAD

CO 8/AHD/2023

AI Insights

The case involves the Deputy Commissioner of Income-tax, Central Circle-1(3), Ahmedabad as the appellant and M/s. Desai Impex Pvt. Ltd. as the respondent. The dispute centered around additions made by the Assessing Officer based on unexplained entries and credits in seized material, as well as other financial discrepancies noted during the assessment years 2016-17 and 2017-18. The Income Tax Appellate Tribunal in Ahmedabad heard the appeals and cross-objections together due to the interconnected issues and common set of facts. The Tribunal's decision was influenced by precedents set by the Supreme Court regarding the interpretation of Section 153C, particularly concerning the timeline for assessing years following the receipt of seized material.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 827271 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-01-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 20-04-2023
• Other Referred Cases: National Thermal Power Co. Ltd. Vs CIT, CIT Vs. Jasjit Singh, Pr. CIT (Central) v. Ojjus Medicare (P.) Ltd., Pr. CIT Vs. VSL Mining Company (P.) Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: MANISH J. SHAH; RUSHIN PATEL; ARS
• Keywords: Opportunity of being heard; Revised return; Question of law; Unexplained cash credit; Bogus purchase; Tax effect; TDS; Loose papers; Right to appeal; Bogus
• Section: 132; 40(a)(ia)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER IT(SS)A No. 10/Ahd/2023 & CO No. 8/Ahd/2023 (Assessment Year: 2017-18) Dy. Commissioner of Income-tax, Central Circle-1(3), Ahmedabad Vs. M/s. Desai Impex Pvt. Ltd., 407, 4th Floor, Sigma Ceejay Legacy, Nr. Panjara Pole Char Rasta, Ambawadi, Ahmedabad-380015 [PAN No. AABCD 4327 M] (Appellant) .. (Respondent/Cross Objector) CO No. 7/Ahd/2023 (in IT(SS)A No. 26/Ahd/2023) (Assessment Year: 2016-17) M/s. Desai Impex Pvt. Ltd., 407, 4th Floor, Sigma Ceejay Legacy, Nr. Panjara Pole Char Rasta, Ambawadi, Ahmedabad-380015 [PAN No. AABCD 4327 M] Vs. Dy. Commissioner of Income-tax, Central Circle-1(3), Ahmedabad (Cross-Objector) .. (Orig. Appellant) Assessee by : Shri Manish J. Shah & Shri Rushin Patel, ARs Respondent by: Shri R.P. Rastogi, CIT (DR) Date of Hearing 26.11.2025 Date of Pronouncement 07.01.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- IT(SS)A No. 10/Ahd/2023 is the appeal filed by the Revenue and CO No. 8/Ahd/2023 is the corresponding Cross Objection filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)-11, Ahmedabad (hereinafter referred to as \"CIT(A)\" for short), dated 30.11.2022, passed Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 2– under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\" for short], for Assessment Year (AY) 2017-18. CO No. 7/Ahd/2023 is the Cross Objection filed by the assessee against the order of the Ld. CIT(A) dated 26.12.2022, passed under Section 250 of the Act for AY 2016-17. 2. Since the issues involved in the Revenue’s appeal and the Cross Objections are inter-connected and rest on a common set of facts, they were heard together and are being disposed of by this consolidated order for the sake of convenience. IT(SS)A No. 10/Ahd/2023 for AY 2017-18 3. The Revenue has raised following grounds of appeal:- “1. On the facts and on the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of unexplained entries in seized / impounded material of Rs.17,50,20,879/- out of total addition of Rs.20,74,80,608/-. 2. On the facts and on the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of unexplained credit entries of Rs.6,39,44,941/- out of total addition of Rs.9,91,03,950/-.” CO No. 8/Ahd/2023 for AY 2017-18 4. The grounds raised by the Assessee in the cross-objection are as under:- 1. The C.I.T. (Appeals) erred in law and on facts of the case in sustaining additions to the extent of Rs.3,24,59,729/ on the basis of loose papers impounded. (Tax Effect: Rs.2,00,60,112/-) 2. The C.I.T. (Appeals) erred in law and on facts of the case in sustaining additions of Rs.6,33,800/- on account of unexplained cash deposits. (Tax Effect: Rs.3,91,688/-) 3. The C.I.T. (Appeals) erred in law and on facts of the case in sustaining additions of unsecured loan amounting to Rs.3,51,59,099/- as unexplained cash credit u/s.68. (Tax Effect: Rs.2,17,28,323/-) 4. The C.I.T. (Appeals) erred in law and on facts of the case in sustaining the disallowance u/s.40(a)(ia) with respect to expenses of R.76,28,052/-. (Tax Effect: Rs.7,07,120/-). Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 3– 5. The assessee has also raised following additional grounds:- “The ld. Assessing Officer has erred in law and on facts of the case, in framing the assessment without issuing the jurisdictional notice u/s 153C of the Act.” 6. Admission of the additional ground has been opposed in principle by the ld. DR. Keeping in view, the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, the additional ground filed by the assessee is accepted. The relevant portion of the judgment is as under: “5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. C.I.T. . this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 4– be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (Delhi), C.I.T. v. Karamchand Premchand P. Ltd. and C.I.T. v. Cellulose Products of India Ltd. . Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 8. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits.” 7. Respectfully following the above judgment of the Hon’ble Apex Court, the additional grounds taken up by the assessee are hereby admitted. 8. Adjudication on additional grounds:- The Ld. AR relied on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Jasjit Singh, 458 ITR 437, on the other hand, ld. DR relied on the provisions of the Act and the orders of the Assessing Officer. 9. The pertinent facts for the adjudication of the case are as under:- • Date of search in the main case of - 06.02.2017 (AY 2018-19) Shri Mahendra Shantilal Patel • Date of satisfaction in the case of the - 10.09.2018 (AY 2019-20) assessee 10. Prior to 1st April, 2017, assessment under Section 153C could cover up to six assessment years, preceding the assessment year relevant to the previous Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 5– year in which the seized material was handed over to the Assessing Officer of the other person. Supreme Court in CIT v. Jasjit Singh 458 ITR 437 (SC)held that the block period under Section 153C has to be computed from the date of receipt of books of accounts or documents by the Assessing Officer of the other person and not from the date of search. The seized materials are handed over after recording of the satisfaction by the Assessing Officer of the searched party. The Act does not specify a time limit in Section 153C for the Assessing Officer of the searched person to transfer seized material to the Assessing Officer of the other person. Thus, the clock starts from the year the material was received by the Assessing Officer of the other person, in this case the assessee. 11. Further, the Hon’ble Delhi High Court in the case of Pr. CIT (Central) v. Ojjus Medicare (P.) Ltd. 465 ITR 101 held that the first proviso to Section 153C introduced a legal fiction on the basis of which the commencement date for computation of the six years block was to be reckoned from the date of receipt of seized material by the AO of the other person. Reference in this regard was also made to the decision of Supreme Court in the case of Jasjit Singh (supra) and ITO v. Vikram Sujitkumar Bhatia. Accordingly, contention of the revenue that the block periods would have to be reckoned with reference to the date of search was not acceptable and against the provisions of the Act and the judgement of the Hon’ble Supreme Court. The Hon’ble High Court of Karnataka in the case of Pr. CIT Vs. VSL Mining Company (P.) Ltd, 167 taxmann.com 373, has held that pursuant to a search, the Assessing Officer is required to follow procedure as contemplated under Section 153A, 153B and 153C and it is impermissible for Assessing Officer to continue regular assessment. 12. Since no notice u/s 153C of the Act has been issued by the Assessing Officer and the assessment has not been completed u/s 153C of the Act as envisaged by the Act, the assessment order is treated as null and void. In the result, the CO is dismissed as infructuous and the appeal of the Revenue stands dismissed. Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 6– CO No. 07/Ahd/2023, AY 2016-17 13. The grounds raised by the assessee in this CO read as under:- “1. The ld. Assessing Officer has erred in law and on facts of the case, in not confining the additions in framing assessment u/s 153C, to the alleged incriminating material found during the course of search u/s 132 on the searched person. 2. The Id. CIT(A) has erred in law and on facts of the case, in not deleting the addition of Rs.27,88,751/- relating to the alleged bogus purchases. 3. The Id. CIT(A) has erred in law and on facts of the case, in sustaining the addition of Rs. 1,42,600/- on account of unexplained cash deposits. 4. The ld. CIT(A) has erred in law and on facts of the case, in sustaining the addition of unsecured loan amounting to Rs.2,25,000/- as unexplained cash credit u/s 68. 5. The Id. CIT(A) has erred in law and on facts of the case, in sustaining the disallowance u/s 40(a)(ia) with respect to expenses of Rs.64,68,785/-.” Bogus Purchases - Rs.27,88,751/- 14. It was submitted that the assessee has filed revised return and removed the alleged bogus purchases from the total purchases. The revenue could not dispute this fact. Hence, we hold that no further addition is required to be made by the Assessing Officer. Accordingly, this ground of CO is allowed. Unexplained cash deposits - Rs. 1,42,600/- 15. The assessee has submitted vouchers amounting to Rs. 25,000/-, Rs.50,000/, Rs.22,600/- and Rs.45,000/- at page no. 51 to 54 of the paper-book pertaining to the cash deposits. Hence, we hold that no addition is required to be made by the Assessing Officer. Accordingly, this ground of CO is allowed. Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 7– Unsecured loan - Rs.2,25,000/- 16. Unsecured loan of Rs.2,25,000/- is received from Hem Desai who is a director in the assessee company. The director has been paid a salary of Rs.10,80,000/-, hence, the identity, creditworthiness and genuineness of the loan has been proved. Hence, no addition is called for. The CO of the assessee on this ground is allowed. Disallowance u/s 40(a)(ia) - Rs.64,68,785/- 17. Assessee has submitted that they have deducted tax on expenses aggregating to Rs.11,02,008/-. The assessee has obtained certificate from parties of no liability of tax u/s 172, to whom Freight Charges are paid. It was submitted that they are in process of obtaining certificates from other parties that they have already offered the income in their returns to meet the 2nd proviso to section 40(a)(ia). Hence, this matter is remanded to ld. AO with direction to obliterate addition on production of TDS returns and certificates from parties. Accordingly, this ground of CO is allowed in above terms. 18. In the result, the appeal of the Revenue bearing IT(SS) No. 10/Ahd/2023 and Cross-Objection of the assessee bearing CO No. 8/Ahd/2023 are dismissed, while Cross-Objections filed by the assessee bearing CO No.7/Ahd/2023 is allowed. The order is pronounced in the open Court on 07.01.2026. Sd/- Sd/- (SIDDHARTHA NAUTITAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 07.01.2026 **btk Printed from counselvise.com ITSSA No. 10/Ahd/2023 & CO Nos. 7 & 8/Ahd/2023 DCIT Vs. Desai Impex Pvt Ltd Asst. Year : 2016-17 & 2017-18 - 8– आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation words processed by Hon’ble VP on his PC on 05.01.2025 2. Date on which the typed draft is placed before the Dictating Member …..05.01.2025 3. Other Member… ……..05.01.2025 4. Date on which the approved draft comes to the Sr.P.S./P.S .. ……06.01.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement …07.01.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S ….07.01.2025 7. Date on which the file goes to the Bench Clerk .. ……07..01.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "