SHAIVAL COMCON LLP,AHMEDABAD V. THE ITO, WARD-5(3)(1), AHMEDABAD

ITA 549/AHD/2025

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The case involves Shaival Comcon LLP appealing against the order of the Commissioner of Income Tax (Appeals), which upheld the reopening of their assessment under section 147 of the Income-tax Act, 1961. The reassessment was initiated due to the alleged non-filing of income tax returns and unexplained investments in immovable property amounting to Rs 4,50,00,000 during the assessment year 2017-18. The Tribunal found that the Assessing Officer's reasons for reopening the assessment were vague and lacked specific observations, leading to a mechanical and speculative approach rather than a concrete basis for belief. The Tribunal also noted that the assessee had indeed filed their return and the property transaction occurred in a subsequent financial year, which were crucial facts overlooked by the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717396 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 12-03-2025
• Other Referred Cases: Kartik Sureshchandra Gandhi v. ACIT [2023] 154 taxmann.com 193 (Bom)/[2023] 295 Taxman 442 (Bom)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALARKODI R.
• Assessee Lawyers: JIGNESH PARIKH
• Keywords: Set aside; Reassessment proceedings; Reopening of assessment; Assessment record
• Section: 147; 148; 144; 69

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.549/Ahd/2025 (Assessment Year: 2017-18) Shaival Comcon LLP, 803, Rembrandt Building, C G Road, Ahmedabad-380009 Vs. Income Tax Officer, Ward-5(3)(1), Ahmedabad [PAN No.ADCFS1488D] (Appellant) .. (Respondent) Appellant by : Shri Jignesh Parikh, AR Respondent by: Ms. Malarkodi R., Sr. DR Date of Hearing 09.07.2025 Date of Pronouncement 11.08.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 25.02.2025 passed for A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal: “1. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A), NFAC] has erred in law and on facts in upholding the reopening of assessment under section 147 of the Income-tax Act, 1961. 2. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A), NFAC] has erred in law and on facts in upholding the reopening of assessment under section 147 of the Income-tax Act, 1961, despite the reopening being based on incorrect facts to the extent it reflects that the appellant has not filed return of income and appellant has purchased immovable property for a consideration of Rs 4,50,00,000/-. 3. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A), NFAC] has erred in law and on facts in upholding the reopening of assessment under section 147 of the Income-tax Act, 1961, despite the reopening was without carrying out due inquiry. Printed from counselvise.com ITA No. 549/Ahd/2025 Shaival Comcom LLP vs. ITO Asst.Year –2017-18 - 2– 4. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A), NFAC] has erred in law and on facts in upholding the reopening of assessment under section 147 of the Income-tax Act, 1961 to the extent the approval is without application of mind. 5. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. The brief facts of the case are that for Assessment Year 2017-18, the Assessing Officer observed that the assessee had not filed its return of income despite having made substantial investments amounting to ₹4,50,00,000/- in the purchase of immovable property during the relevant financial year. The details of the property purchased by the assessee clearly showed that the assessee had made transactions relating to purchase of property situated at TP 3 FP No. 443/1, Mithakali, Ahmedabad. In view of the assessee’s failure to file the return voluntarily, the Assessing Officer issued a notice under Section 148 of the Income-tax Act, 1961 (Act) on 30.03.2021 to initiate reassessment proceedings. As there was no response to various notices issued by the Assessing Officer, the assessment was completed ex-parte u/s 144 of the Act, and the entire investment amount of ₹4,50,00,000/- was treated as unexplained income under Section 69 of the Act and brought to tax under Section 115BBE of the Act. The total income of the assessee was computed at ₹4,50,00,000/-, as against “nil” income previously declared by the assessee. 4. In appeal before CIT(Appeals), the assessee contended that it had, in fact, filed its return of income on 18.09.2017, declaring a minor loss, and further clarified that the amount in question represented an advance by the assessee against property purchase, recorded under \"Loans and Advances\" in its balance sheet. The assessee submitted that the property was actually acquired in the subsequent financial year by way of a registered sale deed dated 29.04.2017. During the appellate proceedings before CIT(Appeals), the Printed from counselvise.com ITA No. 549/Ahd/2025 Shaival Comcom LLP vs. ITO Asst.Year –2017-18 - 3– assessee submitted various supporting documents, including the sale deed, the agreement dated 24.06.2016, and a copy of the return of income filed by the assessee. After examining the assessment order, the grounds of appeal, the statement of facts, and the submissions made, CIT(Appeals) held that due to the assessment being completed ex-parte under section 144, these crucial aspects could not be verified by the AO. In view of the same, CIT(Appeals) set aside and remanded the matter to the AO for fresh consideration since it was essential for the AO examine the nature and source of the investment, verify all documentary evidence including the sale agreement and balance sheet entries, and assess the real income of the assessee accordingly. 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. The primary ground of challenge by the assessee is that the initiation of reassessment proceedings under section 147 of the Act was invalid and without proper application of mind by the Assessing Officer. On perusal of the assessment records and the reasons recorded for reopening the assessment, we are of the considered view that the Assessing Officer has stated in the “reasons to believe” that the assessee has “either not filed return of income or not disclosed the investment in property in the return of income filed.” Such a statement in our view is vague, uncertain, and clearly indicates non-application of mind at the stage of recording of “reasons to believe”. The Assessing Officer did not make a specific observation, which is a mandatory requirement for valid assumption of jurisdiction under section 147 of the Act, indicating non-application of mind and lack of analysis of complete facts by the Assessing Officer before initiating re-assessment proceedings. The use of the expression \"either...or\" reveals that the Assessing Officer was unsure of the facts and initiated proceedings in a speculative and mechanical manner, rather than on the basis of concrete material and belief. Further, in the appellate proceedings before CIT(Appeals), it has come to light that the assessee had indeed filed its return Printed from counselvise.com ITA No. 549/Ahd/2025 Shaival Comcom LLP vs. ITO Asst.Year –2017-18 - 4– of income for the relevant assessment year on 18.09.2017, disclosing all relevant particulars. This has been specifically noted by CIT(Appeals) at para 6.1 of CIT(Appeals) order. The assessee also clarified that it had not purchased any immovable property during the year under consideration but had merely advanced a sum of ₹5.75 crores towards purchase of property, which was reflected as “Loans and Advances” in the balance sheet. The actual purchase of the immovable property took place in the subsequent financial year, which is supported by the sale deed dated 29.04.2017 furnished during appellate proceedings before CIT(Appeals). These facts, crucial to the matter, were not verified or considered by the Assessing Officer before reopening or completing the assessment. In view of the above, we find merit in the argument of the assessee that the reassessment proceedings have been initiated without proper application of mind. The recording of vague and ambiguous reasons, coupled with the failure to consider that the return had been filed and the transaction in question pertained to a different assessment year, (which was also duly recorded in the books of account of the assessee) then the same, in our considered view renders the reopening bad in law. This position is further supported by the decision of the Hon’ble Bombay High Court in the case of Kartik Sureshchandra Gandhi v. ACIT [2023] 154 taxmann.com 193 (Bom)/[2023] 295 Taxman 442 (Bom), where the High Court held that reopening of assessment without application of mind, and merely proceeding in a mechanical manner, is not sustainable in law. In that case, the reassessment proceedings were quashed due to erroneous reference to section 149(1)(b) and mechanical sanctioning of approval by the PCIT without independent verification, and these principles squarely apply to the present facts as well. Accordingly, in light of the non- specific and mechanical recording of reasons to believe, non-verification of the return of income filed, and the failure to consider that the investment was not made in the relevant year, we hold that the reopening of assessment under Printed from counselvise.com ITA No. 549/Ahd/2025 Shaival Comcom LLP vs. ITO Asst.Year –2017-18 - 5– section 147 of the Act is invalid and liable to be quashed. The appeal of the assessee is therefore allowed, and the reassessment proceedings initiated under section 148 and completed under section 147 read with section 144 are hereby quashed. 6. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 11/08/2025 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 11/08/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 04.08.2025 (Dictated over dragon software) 2. Date on which the typed draft is placed before the Dictating Member 04.08.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 04.08.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 11.08.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 11.08.2025 7. Date on which the file goes to the Bench Clerk 11.08.2025 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 "