RAJNIBHAI BHOGILAL DESAI,KHEDA V. THE ITO, WARD-5, NADIAD

ITA 533/AHD/2025

AI Insights

The case involves Rajnibhai Bhogilal Desai, the appellant, contesting the reassessment order passed by the Income Tax Officer (ITO) under sections 143(3) read with section 147 of the Income Tax Act, 1961, for the Assessment Year 2002-03. The reassessment was based on data from a seized laptop during a search operation in 2008, which allegedly contained unaccounted financial transactions related to the appellant. The CIT(A) initially quashed the reassessment, but this was overturned by the Gujarat High Court, leading to a fresh reassessment. The appellant challenged the additions made by the ITO, claiming they were based on incorrect facts and lacked proper legal procedure, particularly under section 153C concerning search assessments. The Tribunal found that the appellant was denied an effective opportunity of hearing and that the issues raised required a detailed examination of facts and evidence, thus necessitating a de novo hearing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793560 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 11-03-2025
• Other Referred Cases: CIT v. B.N. Bhattacharjee, Estate of Late Tukojirao Holkar v. CWT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Reasonable cause; Reassessment proceedings; Corroborative evidences; Unexplained expenditure; Document seized; Documents seized; Principle of natural justice
• Section: 148; 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: DR. BRR Kumar, Vice President And Shri Siddhartha Nautiyal, Judicial Member Rajnibhai Bhogilal Desai 17, Nairobi Colony, College Road, Nadiyad Kheda, 387001, Gujarat PAN: ABVPD0086F (Appellant) Vs The ITO Ward-5, Nadiad (Respondent) Assessee Represented: Shri Vartik Choksi, A.R. Revenue Represented: Shri R P Rastogi, CIT-DR Date of hearing : 18-09-2025 Date of pronouncement : 23-09-2025 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 13.12.2023 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2002-03. ITA No: 533/Ahd/2025 Assessment Year: 2002-03 Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 2 2. The assessee has raised the following Grounds of Appeal: 1. In the facts and the circumstances of the case, the Ld. CIT(A) ought to have quashed the assessment being void ab initio, illegal, without jurisdiction and not following the principle of natural justice. 2. In the facts and the circumstances of the case, the reasons recorded u/s 148 are invalid as they are based on incorrect facts. 3. In the facts and the circumstances of the case, the reassessment order cannot sustain as the addition made in the reassessment order is not based upon reasons recorded. 4. In the facts and circumstances of the case, the reassessment order is invalid and bad in law. 5. In law and in the facts and circumstances of the case of the appellant, the Ld. CIT(A) has erred in confirming the addition of Rs. 59,32,051/- on account of undisclosed income when no such income has been earned by the appellant. 5.1. Without prejudice to the above, the Ld. CIT(A) has erred in confirming the addition of opening balance. 6. In law and in the facts and circumstances of the case of the appellant, the Ld. CIT(A) has erred in confirming the addition of Rs. 52,16,180/- on account of undisclosed income when no such income has been earned by the appellant. 3. The brief facts of the case are that the assessee is an individual whose case was reopened under section 147 of the Income Tax Act, 1961 (Act) based on information found during a search conducted on 03.04.2008 in the case of Shri Rameshbhai B. Shah and his group. During the search, a Lenovo laptop was seized containing soft data of 65 entities, one of which was found to be in the name of the assessee, Rajnibhai B. Desai, as per tally software. The data showed books of account and financial transactions not disclosed in the assessee’s regular return of income. Based on this Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 3 information, a notice under section 148 of the Act was issued on 30.03.2009, and in response, the assessee filed return of income on 16.10.2009 declaring income of Rs. 65,250/-. The Assessing Officer completed the reassessment under section 143(3) read with section 147 of the Act and computed the total income at Rs. 1,12,13,481/- by making two major additions: Rs. 59,32,051/- as undisclosed capital based on the seized trial balance and Rs. 52,16,180/- as unexplained cash expenditure. The AO observed that the assessee failed to disclose this capital and cash expenditure in the regular books of account, and the assessee could not furnish any supporting evidence to reconcile or explain these amounts. Accordingly, the additions were made based on the seized data showing unaccounted transactions. 4. In appeal before Ld. CIT(A), initially, the CIT(A), Ahmedabad quashed the reassessment proceedings and annulled the assessment order. However, the matter was carried in appeal by the Department before ITAT. Although the ITAT upheld the CIT(A)'s order, the Hon’ble Gujarat High Court later, vide its order dated 20- 21 July, 2016, set aside the Tribunal's decision to the extent that it permitted the Assessing Officer to pass a fresh assessment after disposing of the assessee’s objections. Following the High Court’s direction, the AO provided an opportunity to the assessee, disposed of the objections vide order dated 02.06.2017, and thereafter passed a reassessment order. Aggrieved, the assessee filed an appeal before the CIT(A), Vadodara. However, despite issuance of multiple notices over a span of several years, the assessee did not file any written submissions or respond to the hearings. The Ld. Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 4 CIT(A), relying on various judicial precedents, including CIT v. B.N. Bhattacharjee and Estate of Late Tukojirao Holkar v. CWT, held that merely filing an appeal without pursuing it does not serve the purpose of adjudication. Due to complete non-compliance and lack of prosecution, the CIT(A) dismissed the appeal in default. Without prejudice, the CIT(A) also decided the matter on merits based on material available on record. He upheld the AO’s addition of Rs.59,32,051/- as undisclosed capital, Rs.19,18,893/- as unexplained cash receipt, and Rs.32,97,287/- as unexplained expenditure. The CIT(A) held that the assessee failed to explain the entries in the seized cash book and did not offer any evidence to justify either the opening capital or the inflow and outflow of cash. In the result, the appeal filed by the assessee before the CIT(A) was dismissed both for default and on merits. 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Condonation of delay: 6. At the outset, we note that there is a delay of 376 days in filing of the present appeal before us. In this regard, the assessee has submitted that the delay was neither deliberate nor intentional but was due to circumstances beyond his control. It was submitted that at the time of filing the appeal before the Ld. CIT(A), the assessee was being represented by a different consultant who subsequently failed to comply with the notices issued under section 250 of the Act during the appellate proceedings. The assessee has contended that the said consultant did not inform him about the Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 5 notices received nor forwarded them, as they were being sent to the consultant’s registered email address and not to the assessee directly. The assessee became aware of the ex parte order passed by the Ld. CIT(A) only much later, when his accountant was verifying records on the e-filing portal and noticed the appellate order. Upon coming to know of the same, the assessee immediately engaged a new consultant and took necessary steps to file the present appeal. It was submitted before us that the assessee had no malafide intention and was unaware of the notices issued and proceedings conducted before the Ld. CIT(A). The assessee has also pointed out that he had duly complied with all notices and proceedings during the assessment and reassessment stages, and the default in the appellate stage was solely due to the lapse on part of the erstwhile consultant. In support of the prayer for condonation, reliance has been placed on various judicial pronouncements, which have held that delay should be condoned in a liberal manner where the cause is bona fide and not deliberate, and especially where the party seeking condonation should not suffer for the fault of their representative. Considering the facts of the case and the explanation offered, and keeping in view the principles laid down in the cited decisions, we are of the view that the reasons given by the assessee constitute a reasonable and sufficient cause for the delay in filing of the appeal. Accordingly, we condone the delay of 376 days in the interest of substantial justice, and admit the appeal for adjudication on merits. On Merits: Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 6 7. Before us, the counsel for the assessee submitted that the reassessment proceedings initiated by the Assessing Officer are fundamentally defective, as they were carried out in complete disregard of the applicable legal framework governing search assessments under Section 153C of the Act. It was pointed out that the Assessing Officer failed to follow the prescribed procedures under this provision, such as the mandatory transfer of seized material to the jurisdictional Assessing Officer of the third party and the issuance of proper notice. As a result, the entire reassessment is vitiated in law and the notice itself is invalid. On this ground alone, the impugned assessment deserves to be quashed. On the merits of the case, the counsel for the assessee contended that the additions made by the Assessing Officer are solely based on data and documents seized from the premises of third parties, without any corroborative evidence linking such material to the assessee. Further, the additions are based on loose sheets and Tally data found in a laptop belonging to another person. The assessee submitted that there is no direct or independent evidence showing that the data pertains to him, nor was any inquiry made to establish its authenticity. It was submitted that entries in a third party’s books, without anything further, cannot be a valid basis for making additions in the hands of the assessee. Further, the assessee has pointed out certain discrepancies in the seized documents that clearly show the accounts were not properly maintained and could not be relied upon. The counsel for the assessee also submitted that additions have been made on the basis of assumptions, and in some cases, amounts already considered elsewhere have been taxed again, Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 7 resulting in double taxation. It was further submitted that the appellant was not given an opportunity to cross-examine the person from whose premises the material was seized, which violates the principles of natural justice. In view of these submissions, the counsel for the assessee submitted that the assessee has a strong case on merits and accordingly, in the interest of justice, he may be granted one more opportunity of hearing so that the matter may be adjudicated fairly and on the basis of proper evidence. 8. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders. 9. We have heard the rival contentions and perused the material on record. In view of the foregoing and considering the submissions made by the assessee, we are of the opinion that the assessee was denied effective opportunity of hearing before the Ld. CIT(A) due to non-communication of notices by the erstwhile consultant, which constitutes a reasonable cause for non-compliance. We also find that the issues involved in the present appeal are fact-intensive and require proper appreciation of evidences and explanations to be furnished by the assessee. Further, the assessee has raised serious legal and factual contentions regarding the validity of reassessment proceedings as well as the merits of the additions made, which deserve to be adjudicated in accordance with law after affording a proper opportunity of hearing. Accordingly, in the interest of justice and fair play, we set aside the impugned order passed by the Ld. Printed from counselvise.com I.T.A No. 533/Ahd/2025 A.Y. 2002-03 Rajnibhai Bhogilal Desai vs. ITO 8 CIT(A) and restore the matter to his file for de novo adjudication. The Ld. CIT(A) is directed to afford adequate opportunity to the assessee to present his case and to decide the appeal afresh on merits by passing a speaking and reasoned order in accordance with law. The assessee is also directed to extend full cooperation in the proceedings before the Ld. CIT(A) and ensure timely compliance. We also make it clear that in case there is any further non-compliance on the part of the assessee to cause appearance before Ld. CIT(A), then Ld. CIT(A) would be at liberty to pass appropriate orders in the light of material available on record. 10. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 23 -09-2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 23/09/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद Printed from counselvise.com "