AI Insights
The case involves Malani Holdings Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi, concerning an assessment order passed under sections 147, 144, and 144B of the Income Tax Act, 1961. The primary contention was the legality of the notice issued under section 148, which the assessee argued was based on a change of opinion and lacked independent reason to believe by the assessing officer. The CIT(A) had remanded the case back to the Assessing Officer for a fresh assessment, which the assessee contested, seeking adjudication on legal grounds that were not addressed initially. The Tribunal's decision supported the CIT(A)'s approach, emphasizing the need for a fair reassessment process.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 708441 (ITAT-RAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-07-2025
Appeal Filed By
Assessee
Order Result
Dismissed
Assessment Year
2013-2014
Judgement Text
"आयकरअपीलीयअिधकरण, रायपुर Ɋायपीठ,रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR Įी पाथ[ सारथी चौधरȣ, Ɋाियक सद˟ एवं ŵीअŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 316/RPR/2025 (िनधाŊरण वषŊ Assessment Year: 2013-14) Malani Holdings Private Limited, 1st Floor, H. No. 69, Rohinipuram Road, Behind Ayurvedic College, Raipur-492010, C.G. v s Income Tax Officer, Ward-4(1), Aayakar Bhavan, Near Raj Bhavan, Civil Lines, Raipur-492001, C.G. PAN: AADCM7533L (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से / Assessee by : Shri Praveen Khandelwal & Praveen Goyal, CAs राजˢ की ओर से / Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई की तारीख / Date of Hearing : 08.07.2025 घोषणा की तारीख / Date of Pronouncement : 14.07.2025 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeal), NFAC, Delhi, [in short “Ld. CIT(A)”], passed under section 250 of the Income Tax Act, 1961 (in short “the Act”), dated 24.03.2025, for the Assessment Year 2013-14, which in turn arises from the assessment order u/s 147 r.w.s. 144 r.w.s. 144B of the Act of the Act, dated 28.03.2022, passed by the Assessing Officer, National Faceless Assessment Centre, Delhi (in short “Ld. AO”). 2 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur 2. The grounds of appeal raised by the assessee are as under: 1. That on the facts and circumstances of the case and in law, the notice u/s 148 of the Act dated 28/03/2021 and assessment order u/s 144 r.w.s. 147 of the Act dated 28/03/2022 is illegal and bad in law. 2. That on the facts and circumstances of the case and in law, the notice u/s 148 of the Act dated 28/03/2021 is illegal and bad in law as per first proviso to section 147 of the Act. 3. That on the facts and circumstances of the case and in law, the notice u/s 148 of the Act dated 28/03/2021 is illegal and bad in law, as the same has been issued on the basis of change of opinion by the assessing officer. 4. That on the facts and circumstances of the case and in law, the notice u/s 148 of the Act dated 28/03/2021 is illegal and bad in law, as the same has been issued on the basis of borrowed satisfaction/no independent reason to believe of the assessing officer. 5. That on the facts and circumstances of the case and in law, the Id. CIT(A) erred in remanding the matter to the assessing officer as per proviso to section 251(1)(a) of the Act and failed to adjudicate on legal ground as well as on merits of the case as raised before him. 6. That on the facts and circumstances of the case and in law, the Id. AO as well as CIT(A) erred in making an addition of Rs. 1,20,00,000/- u/s 68 of the Act. 7. The appellant craves to add, alter or delete any of the above grounds of appeal during the course of appellate proceedings. 3. The brief facts of the case as narrated in the order of Ld. CIT(A) are culled out as under: “The appellant is a company and having its income under the head business and profession. For the AY 2013-14, the appellant has filed its return of income on 26/09/2013 declaring total income at Rs. 10,64,480/-. The case of the appellant was selected for scrutiny assessment through CASS and notice u/s 143(2) of the Act was issued. 3 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur During the course of original assessment proceedings, the assessing officer issued notices u/s 142(1) of the Act and the appellant complied with the same on various dates. After, considering the various submissions filed by the appellant, the assessing officer passed the assessment order u/s 143(3) of the Act dated 30/03/2016 and assessed the total income at Rs.45,24,106/- by making an addition of Rs. 34,59,623/- u/s 14A of the Act. The issue travelled up to Hon’ble Bench and Hon’ble Bench allowed relief to the appellant company vide order dated 26/07/2022, the copy of order is enclosed herewith. Thereafter, the assessing officer has issued notice u/s 148 dated 28/03/2021 which was sent on email id:mhpl.raipur@gmail.com. On the said date, the director of the appellant company namely Shri Sushil Kumar Malani who was aged 72 years was not keeping good health due to COVID infection which he was exposed first in August 2020 and thereafter again in the month of April 2021. On account of this Shri Sushil Kumar Malani director was in complete isolation for a period of 3 months from the date of detection of infection with COVID 19. Further during the month of April, 2021 the director lost his father Shri Bilas Rai Malani who died on 17/04/2021. The director was stressed and disturbed due to these continuous health issues in the family. Later in the month of November 2021 the family Malani Family lost their control in the flagship company Salasar Steel and Power Limited which was referred for insolvency proceeding order for resolution plan was passed by the Cuttack Bench of NCLT on 08.11.2021, resulting in loss of Rs.34.58 crore to the appellant Company. These continuous events disturbed the director who completely lost control over the on going proceedings. Therefore, under these circumstances which were beyond the control of the assessee, resulted in non compliance and passing of an ex parte order u/s 147 r.w.s. 144 of the Act. It is important to mention here that the except this proceeding there is no even a single default 4 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur on the part of the appellant wherein the appellant was exposed to many such proceedings in the earlier years. However, as the appellant missed to check the initial notice issued u/s 148, therefore, all the proceedings subsequent to it also missed resulting in an ex parte order. The assessee company at a very later stage on 29/05/2023 came to know about the recovery proceedings being undertaken in lieu of the ex parte order passed in the case and instantly took the remedial action. Accordingly, the instant appeal has been prepared along with the application for condonation of delay, which may please be considered and allowed. The assessing officer made an addition of Rs. 1,20,00, 000/- to the total income of the appellant on the issue of share application money from Neuraty Agents Private Limited, which is a group company of the appellant. The assessing officer did not mentioned the details of any information on the the basis of which present proceedings has been initiated, however it is stated that information has been received. The appellant has filed a letter .on 05/06/2023 before the Jurisdictional assessing officer for providing copy of original reason recorded and copy of approval accorded u/s 151 of the Act. The appellant being aggrieved by the order passed u/s 147 r.w.s. 144 of the Income Tax Act, 1961 wherein the assessing officer made an addition of Rs. 1,20,00,000/- u/s 68 of the Act to the total income of the appellant, hence, the appellant is before your honor in this appeal filed u/s 246A.” 4. In the aforesaid matter the appeal filed by the assessee before the First Appellate Authority has been disposed of by allowing the appeal of assessee for statistical purposes, as the same has been remitted back to the Ld. AO for fresh adjudication, being the assessment has been completed u/s 5 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur 144 of the Act. The relevant observations and findings of Ld. CIT(A) are extracted as under: Decision: 7. I have examined the appeal filed by the appellant and the order of the Ld. AO. The assessment was completed u/s. 144 read with section 147 of the Act. The appellant has filed appeal and now disputes the assessment d ne y the Ld. AO. 8. In this case, information revealed that the appellant had allotted 120000 nos. of shares worth 1,20,00,000/- (including premium of Rs. 90 per share) to Neuraty Agents Pvt. Ltd. Kolkata during the year under consideration. In enquiries made as sequel to information, it was observed that the appellant had taken share application money of Rs. 1,20,00,000/- during the year against allotment of 120000 shares @Rs. 100/- per shares to Neuraty Agents Pvt Ltd. On perusal of the audited balance sheet of investor companies through MCA site, it was found the financial capacity of the company were not in commensurate to the investment made by it. The financial pattern of the share investor companies showed a peculiar character viz, meagre income, high reserve and surplus in the form of share premium, high non -current investment in share application, no liability and no fixed asset which resembles as a paper company. Notices were issued but the appellant remained non-compliant. After analyzing the information and enquiry, the Ld. AO concluded that the appellant had taken share application money from a company whose identity and and creditworthiness was not established. Thus, the amount, of share application money of Rs. 1,20,00,000/- received by the appellant was unexplained money of the appellant. As a result, the Ld. AO made assessment u/s 144 r.w.s. 47 of the Act. 9. Under the appeal, the appellant has, inter alia, submitted that the assessing officer had issued notice u/s 148 dated 28/03/2021 which was sent on email id:mhpl.raipur@gmail.com. On the said date, the director of the appellant company namely Shri Sushil Kumar Malani who was aged 71 years was not keeping good health due to COVID infection which he was exposed first in August 2020 and thereafter again in the month of April 2021. On account of this Shri Sushil Kumar Malani director was in complete isolation for a period of 3 months from the date of detection of infection with COVID 19. Further during the month of April, 2021 the director lost his father Shri Bilas Rai Malani who die on 17/04/2021. The director was stressed and disturbed due to these continuous health issues in the family. Later in the month of November 2021 the family Malani 6 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur family lost their control in the flagship company Salasar Steel and Power Limited which was referred for insolvency proceeding order for resolution plan was passed by the Cuttack Bench of NCLT on 08.11.2021, resulting in loss of Rs. 34.58 crore to the appellant company. These continuous events disturbed the director who completely lost control over the ongoing proceedings. Therefore, under these circumstances which were beyond the control of the appellant, resulted in non- compliance. 10. In the light of the fact that assessment was completed under section 144 of the Act it is important to discuss the recent amendment carried out regarding the assessment done under section 144. Recently, amendments have been carried out regarding the best judgment assessment. CIT (appeals) can now set aside the best judgment assessment made under section 144 and refer the case back to the Assessing Officer for making a fresh assessment. The background and the development are discussed below. Best Judgement Assessment 11. Section 144 of the Act provides for best judgment assessment. The relevant part of the said section has been reproduced below for ready reference. “Best judgment assessment. 144. (1) If any person— (a) fails to make the return required under sub-section (1) of Section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the term of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or (c) having made a return, fails to comply with all the terms of a notice issued under subsection (2) of section 143, the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his Judgment and determine the sum payable by the assessee on the basis of such assessment: 7 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment : Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section. …..” 12. A best judgement assessment occurs when an Assessing Officer is faced with limited or inadequate information from the taxpayer. In such situations, the Assessing Officer has to make an assessment based on the available knowledge and resources. This type of assessment is invoked when the taxpayer is uncooperative or withholds essential information. It often happens when the taxpayer does not provide the necessary cooperation during the assessment process, hindering the assessing officer's ability to make an accurate assessment. In such cases, the assessing officer resorts to making the assessment based on the information at hand. 13. Before resorting to a best judgement assessment, the AO must make reasonable efforts to obtain the necessary information. This includes sending notices to the taxpayer, providing sufficient response time, and offering multiple opportunities to rectify discrepancies. The best judgement assessment should be conducted prudently and reasonably. The AO must exercise caution and ensure that the assessment is based on facts, evidence, and sound reasoning. It should not be arbitrary or biassed. The assessment should rely on objective criteria rather than personal opinions or biases. The AO should consider relevant laws, regulations, precedents, and established principles while making the assessment. 14. The assessee must be given an opportunity to be heard before the initiation of assessment procedures. If the assessee requests additional time for the submission of relevant documents or faces complications, the request must be judiciously considered rather than abruptly rejected. Bias, prejudice, and unfair treatment should be avoided in taxation. The assessee has the right to a fair and impartial assessment of their returns. The assessing officer must comply with the rules and standards expected of their position, ensuring that the process is conducted honestly and transparently. 8 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur Power of CIT (Appeals) to set aside best judgement assessment Finance Act 2024 15. The Finance Act, 2024 made significant changes to the powers of the Commissioner (Appeals) under Section 251 of the Income-tax Act. The existing provisions of section 251 of the Act specify the powers of the Commissioner (Appeals). Further, sub-section (1) of the said section provides that Commissioner (Appeals) shall have, inter-alia, the following powers in disposing of an appeal: (a) He may confirm, reduce, enhance or annul the assessment, in the case of an appeal against an order of assessment. (b) He may confirm, cancel, or vary to enhance or reduce, the penalty order, in the case of an appeal against an order imposing a penalty. 16. Further, sub-section (4) of section 250 of the Act prescribes that Commissioner (Appeals) may seek the report from the Assessing Officer after making further inquiry, before disposing any appeal. 17. It has been found that in the best judgement cases, taxpayers remain non responsive to the letters or notices issued by the Faceless Assessing 'officer. However, they directly file the appeal to Commissioner (Appeals) against the relevant assessment order. 18. Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, the section has been amended to provide that where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment. 19. This amendment will take effect from the 1st day of October 2024. It will be applicable to appellate orders passed by the Commissioner (Appeals) on or after 01.10.2024. 20. Considering the aforementioned amendment and discussion, and the fact that the director of the company who was responsible for replying to the notices was facing health issues and lost his father during that time and therefore could not participate during assessment proceedings and now the appellant is willing to submit the details and wishes for an opportunity to present the same, it would be 9 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur appropriate to set aside the order passed under Section 144 and remand the case to the Assessing Officer (AO) for fresh adjudication. The appellant shall submit all the relevant details to the Id. AO, who will examine them on their merits. Accordingly, the case is remanded back for a fresh assessment. 21. In the result the appeal is allowed for statistical purposes. 5. Aggrieved with the aforesaid order of Ld. CIT(A), assessee preferred an appeal before us. 6. At the outset, Ld. AR on behalf of the assessee submitted that though the issues raised by the assesse in appeal before the First Appellate Authority are set aside to the file of Ld. AO, however, the legal grounds raised by the assessee which could have been decided are not adjudicated by the Ld. CIT(A), whereas such issues needs to be looked into, as the facts are available before the First Appellate Authority. It is further submitted that such legal contentions are to challenge the validity of the assessment done u/s 144 r.w.s. 147 dated. 28.03.2022, which was an illegal and bad in law order, for the reason that the notice u/s 148 dated 28.03.2021, through which the process of reopening was initiated, itself is illegal and bad in law as per First Proviso to Section 147 of the Act. It was the submission that such information was very much available before the Ld. CIT(A) however, he did not bother to looked into such facts and had very conveniently restore the matter to the file of Ld. AO following the provisions of section 251(1) of the Act. Under such 10 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur circumstances, the order of Ld. CIT(A) is bad in law and liable to the set aside and the plea of assessee on legal contentions are requested to be adjudicated, thereby the order of Ld. AO being framed on the foundation of an illegal notice issued u/s 148 of the Act, qualifies to struck down. 7. Per contra, Dr. Priyanka Patel, Ld. Sr. DR representing the revenue vehemently supported the orders of revenue authorities. 8. We have considered the rival submissions, perused the material available on record. Admittedly, in the present case, the assessee could not furnish the necessary information / evidenced before the Ld. AO having genuine reason that the director of the company had infected with Covid-19 and was under isolation in accordance with government guidelines, and therefore, such taxation compliances before the Ld. AO could not be fulfilled. In view of such circumstances, Ld. CIT(A) has observed that there are sufficient reasons beyond the control of appellant by which the assessee was prevented and accordingly failed to make necessary compliances before Ld. AO. Ld. CIT(A) also observed that on account of non-compliance by the assessee the Ld. AO had rightly completed the assessment following the provisions of section 144 on best judgment assessment. Ld. CIT(A) further elaborated his powers to set aside the assessment which is culminated in the manner provided u/s 144 on best judgment basis and, therefore, the entire 11 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur proceeding are set aside to the file of Ld. AO for fresh adjudication. Herein, we may observe that since the assessee had Bonafide reasons to not appear and comply before the Ld. AO, for that reason only the assessment was completed u/s 144 of the Act, Ld. CIT(A), therefore, had rightly invoked his powers available u/s 251(1) of the Act and had granted one more opportunity to the assessee to represent its case before the Ld. AO or otherwise Ld. CIT(A) have the option to seek a report from Ld. AO to make further inquiries, but in the interest of justice it was deem fit by the Ld. CIT(A) to restore the matter back to Ld. AO, which is a plausible course of action opted by the Ld. CIT(A). Considering the aforesaid observations, since the assessee has been provided with further opportunity to represent its case, the principle of natural justice has been duly adhered to and there would be no prejudice to the assessee. Regarding, the issues of legal contentions raised by the assessee, which were not adjudicated by the Ld. CIT(A), the assessee would be at liberty to raise all such contentions before the Ld. AO, which the Ld. AO would adjudicate in accordance with the mandate of law. 9. In backdrop of the aforesaid facts, circumstances and the observations, we do not find any infirmity in the order of Ld. CIT(A) to interfere with. Consequently, we uphold the order of Ld. CIT(A). 12 ITA No. 316/RPR/2025 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur 10. In result, the appeal of the assessee is dismissed, in terms of our aforesaid observations. Order pronounced in the open court on 14/07/2025. Sd/- (PARTHA SARATHI CHAUDHURY) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर / Raipur; िदनांक Dated 14/07/2025 Vaibhav Shrivastav आदेशकी Ůितिलिप अŤेिषत / Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर / ITAT, Raipur 1. अपीलाथŎ/ The Appellant- Malani Holdings Private Limited, Raipur 2. ŮȑथŎ/ The Respondent- ITO, Ward-4(1), Raipur 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // सȑािपत Ůित True copy // "
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