RAJKAMAL AGRO INDUSTRIES,DEESA V. ITO, WARD 1, PALANPUR, PALANPUR

ITA 1853/AHD/2025

AI Insights

The case involves Rajkamal Agro Industries, the appellant, contesting the reopening of their income tax assessment for the year 2015-16 by the Income Tax Officer (ITO), Ward-I Palanpur, based on audit objections. The primary issues were the alleged excess depreciation claimed on capital assets and the undervaluation of closing stock of hulled sesame seeds. The Tribunal noted that the AO had reopened the assessment without proper examination of the records and solely relied on the audit party's objections, which were not supported by independent verification or tangible evidence of income escapement.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 827750 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 30-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAMTA SINGH
• Assessee Lawyers: CHETAN AGARWAL
• Keywords: Capital asset; Depreciation; Reopening of assessment; Audit objection; Assessment record; Borrowed satisfaction
• Section: 147

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0013ायपीठ एस.एम.सी’, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD \u001aी संजय गग , \u0013ाियक सद क े सम!। Before Shri Sanjay Garg, Judicial Member आयकर अपील सं /ITA No.1853/Ahd/2025 िनधा \u000fरण वष\u000f /Assessment Year : 2015-16 Rajkamal Agro Industries Deesa Palanpur Highway At Rasna, Deesa – 385 535 (Gujarat) बनाम/ v/s. The ITO Ward-I Palanpur 385 001 \u0013थायी लेखा सं./PAN: AAIFR 7263 C (अपीलाथ$/ Appellant) (%& यथ$/ Respondent) Assessee by : Shri Chetan Agarwal, AR Revenue by : Smt. Mamta Singh, Sr.DR सुनवाई की तारीख/Date of Hearing : 08/01/2026 घोषणा की तारीख /Date of Pronouncement: 09/01/2026 आदेश/O R D E R The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 04/09/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2015-2016. 2. The assessee, in this appeal, has taken the following grounds of appeal: “1. The Ld. CIT(A) erred in law as well as on fact in upholding re-opening of assessment u/s 147 of the Act for which reasons were recorded solely on the basis of audit objection. 2. The Ld. CIT(A) erred in law as well as on fact in upholding re-opening of assessment u/s 147 of the Act based on invalid, insufficient and vague reasons Printed from counselvise.com ITA No.1853/Ahd/2025 Rajkamal Agro Industries vs. ITO Asst. Year : 2015-16 2 recorded for re-opening without independent application of mind and on borrowed satisfaction. 3. The Ld. CIT(A) erred in law as well as on fact in upholding an addition of Rs. 30,31,590/- made by Ld. AO being alleged under valuation of closing stock.” 3. At the outset, the Ld. Counsel for the assessee has raised the legal issue regarding the validity of reopening of the assessment. He, in this respect, has brought my attention to Page No.58 of the paper-book, which is a copy of the reasons recorded for reopening of the assessment u/s.147 of the Act. The reopening of the assessment has been made by the Assessing Officer (AO), in this case, on two issues. Firstly, that the assessee had received capital subsidy on investment, whereas the assessee has not reduced the said amount of subsidy from the cost of the machinery purchased and, therefore, the assessee had claimed excess depreciation on the capital assets. Secondly, the AO has analyzed the information on record and found that the assessee was engaged in manufacturing of certain products from sesame seeds. He noticed that the assessee during the year had purchased 92445.79 quintals of sesame seeds, which were totally consumed for manufacturing of finished goods. However, the finished products being ‘hulled sesame seeds’ were shown at 61367.15 quintals and ‘hulled rejection’ at 5435.58 quintals, with claim of shortage at 25643.06 quintals. The AO applied some formula and observed that the assessee had not properly disclosed the value of the closing stock. He worked out the value of the closing stock of hulled sesame seeds/finished products at Rs.1,19,39,599/- against the value shown by the assessee in the books of accounts at Rs.89,08,009/-. He, therefore, observed that the assessee undervalued the closing stock. He accordingly observed that the income of the assessee for the year under consideration has escaped assessment and reopened the assessment. Printed from counselvise.com ITA No.1853/Ahd/2025 Rajkamal Agro Industries vs. ITO Asst. Year : 2015-16 3 3.1. So far as the escapement of income on claim of excess depreciation is concerned, the Ld. Counsel for the assessee has invited my attention to Page No.49 of the paper-book to show that the aforesaid issue of excess claim of depreciation has not been examined by the AO himself, rather the AO has acted blindly on the basis of audit objections made by the audit party. The Ld. Counsel for the assessee has further submitted that the aforesaid audit objection was otherwise not tenable as the assessee did not receive any subsidy in the year under consideration. That the assessee had received the subsidy in Assessment Year 2009-10 and the amount of subsidy was, accordingly, reduced from the costs of assets. He has further shown that even in Column 4 of the Audit Memo itself, it has been written by the AO “Objection Not Accepted”. He has, thus, submitted that even the AO was not of the belief that the income of the assessee on this issue has escaped assessment as the said objection was not accepted by the AO. However, the AO subsequently reopened the assessment mentioning verbatim the same objection as his reasons for reopening of the assessment. The Ld. AR has further submitted that even during the reopened assessment proceedings, the AO has not made any addition on this issue. 3.2. So far as the second issue of undervaluation of the closing stock is concerned, the Ld. AR has invited my attention to Page No.54 of the paper- book, which is copy of the Audit Memo/Audit Objection, wherein, identical observations have been made by the audit party regarding undervaluation of the closing stock of the assessee which has been reproduced verbatim by the AO in the reasons recorded for reopening of the assessment. The Ld. AR submitted that reopening of the assessment, on this issue, has also been made by the AO without application of mind and merely on the basis of borrowed satisfaction, acting blindly on the objections of the audit party. The Ld. Printed from counselvise.com ITA No.1853/Ahd/2025 Rajkamal Agro Industries vs. ITO Asst. Year : 2015-16 4 Counsel has relied upon various case-laws to submit that reopening of the assessment cannot be made merely on the basis of audit objection, without application of mind, by the AO and without forming an independent belief regarding the escapement of income of the assessee for the assessment year under consideration. 4. The Ld. DR, on the other hand, has fairly admitted that no addition has been made by the AO in respect of the issue relating to excess claim of depreciation. She has also fairly admitted that the said capital subsidy was not received by the assessee in the year under consideration. Therefore, the reopening of the assessment on this issue by the AO without application of mind and even without consulting the assessment record, was bad in law. 5. So far as the issue of undervaluation of closing stock of finished goods/hulled sesame seeds is concerned, I note that the audit party has exceeded its jurisdiction in going into various details and thereby calculating by applying its own formula/method to value the closing stock of ‘hulled sesame seeds’. The AO, even without consulting the assessment records, reopened the assessment making observations of the audit party in the reasons recorded. This issue of valuation of the closing stock of hulled sesame seeds could have been examined by the AO, after going through the entire assessment records during the assessment carried out u/s.143(3) of the Act. Further, this was not an issue from which the AO could have formed the belief of escapement of income on the basis of some external information received by him from audit party or some other source. Moreover, the working has been made by the audit party by applying its own formula. It is not a case, where a belief has been formed by the AO of escapement of income on the basis of some tangible information coming into his knowledge. Printed from counselvise.com ITA No.1853/Ahd/2025 Rajkamal Agro Industries vs. ITO Asst. Year : 2015-16 5 It is a case of re-appreciation of the records which are already there before the AO and not any new fact or information coming to the knowledge of the AO of escapement of income, rather, in this case, the audit party has gone deep and even proceeded to calculate the valuation of the closing stock by applying some formula. It is mere a case of opinion of audit party, upon which the AO has acted blindly and without application of mind for reopening of the assessment. Under the circumstances, the reopening of the assessment, in this case, is held as bad in law and the consequent assessment framed u/s.147 of the Act is not sustainable and the same is hereby quashed. 5. In the result, the appeal of the assessee stands allowed. Order pronounced in the Open Court on 09/01/2026. Sd/- ( Sanjay Garg ) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 09/01/2026 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)- (NFAC), Delhi. 5. िवभागीय #ितिनिध , अिधकरण अपीलीय आयकर , अहमदाबाद /DR,ITAT, Ahmedabad. 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad Printed from counselvise.com "