TEJA SINGH,AMBALA V. INCOME TAX OFFICER ,WARD-4, AMBALA CANTT, AMBALA

ITA 889/CHANDI/2025

AI Insights

The cases of Shri Teja Singh and Shri Baldev Singh involve appeals against the reopening of their income tax assessments for the Assessment Year 2007-08. Both cases were reopened beyond the four-year period allowed under the Income Tax Act, based on information that substantial cash deposits were made in their bank accounts, which were not examined during the original assessments. The Assessing Officer (AO) added these deposits as income from undisclosed sources. The assessees contested the reopening and the subsequent additions, arguing that the reopening was not justified as it did not meet the statutory requirements for extending the assessment period. The Tribunal agreed with the assessees, noting that the reopening was based on incorrect facts and lacked the necessary legal basis.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791900 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2025
• Other Referred Cases: Raymond Woollen Mills Ltd. (236 ITR 34), Duli Chand Singhania (269 ITR 192), Seshasayee Paper & Board Ltd. (148 Taxmann.com 432)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR LD.
• Assessee Lawyers: ROHIT GOEL LD
• Keywords: Capital asset; Income from undisclosed sources; Period of limitation; Reopening of assessment; Capital Gains; Reason to believe
• Section: 148; 143(3); 142(1); 139

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकर अपील सं. / ITA No.889/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2007-08) Shri Teja Singh C/o Rajiv Goel & Associates 179, Bank Road, Ambala Cantt. Ambala (Haryana)-133 001 बनाम/ Vs. Income Tax Officer Ward-4 Ambala Cantt. Haryana – 133 001 ̾थायी लेखा सं./जीआइआरसं./PAN/GIR No. BQZPS-3706-B (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) & 2. आयकर अपील सं. / ITA No.891/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2007-08) Shri Baldev Singh C/o Rajiv Goel & Associates 179, Bank Road, Ambala Cantt. Ambala (Haryana)-133 001 बनाम/ Vs. Income Tax Officer Ward-3 Ambala Cantt. Haryana – 133 001 ̾थायी लेखा सं./जीआइआरसं./PAN/GIR No. BRZPS-4850-H (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎ कीओरसे/ Appellant by : Shri Rohit Goel (CA) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) - Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 18-11-2025 घोषणाकीतारीख /Date of Pronouncement : 10-12-2025 Printed from counselvise.com 2 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by two assessees have identical facts. First, we take up appeal of Shri Teja Singh (ITA No.889/Chandi/2025) for Assessment Year (AY) 2007-08 which arises out of an order of learned Addl. / Joint Commissioner of Income Tax (Appeals) - 4, Mumbai [CIT(A)] dated 30-06-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 147 of the Act on 30-03- 2015. The assessee is aggrieved by confirmation of addition of cash deposits for Rs.32,75,333/- as made by Ld. AO in the assessment order. 2. The Ld. AR advanced legal arguments as well as arguments on merits and supported the case of the assessee. It has been argued that the case was reopened beyond four years without alleging any failure on the part of the assessee as mandated under the statute. The Ld. AR also argued that approval of appropriate authority to reopen the case of the assessee was obtained on wrong facts. The Ld. Sr. DR also advanced arguments and supported the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 3.1 The assessee filed his return of income on 29-07-2008 which was assessed in scrutiny assessment proceedings u/s 143(3) on 31-12- 2009. However, the case was reopened beyond 4 years on the basis of Printed from counselvise.com 3 AIR information that the assessee deposited cash of more than Rs.10 Lacs in its bank accounts and earned capital gains during the year. To verify the same, the case was reopened and notice u/s 148 was issued on 12-03-2014 after taking approval of appropriate authority i.e., Ld. Commissioner of Income Tax, Panchkula. 3.2 It transpired that the assessee deposited cash of Rs.32,75,333/- between 16-06-2006 to 04-07-2006 in his SB account as maintained with Union Bank of India. The cash was stated to be sourced out of agricultural produce as well as out of advances received by the assessee against sale of certain land. In support, agreement to sale and copy of bank account was furnished. The assessee was directed to corroborate the fact that the cash was deposited out of purported land advance. It was stated by the assessee that the sale deed was executed as per collectors’ rate and the difference between the actual sale price and sale deed price was received in cash. The Ld. AO rejected the claim on the ground that the assessee failed to file original agreement to sell and also could not produce the buyer for verification. Finally, the impugned cash deposits were added to assessee’s income as income from undisclosed sources. Aggrieved, the assessee preferred further appeal against the assessment order. 3.3 During appellate proceedings, the assessee assailed reopening on the ground that as per proviso to s.147, extended period of 6 years is applicable only in a case of a failure of the assessee to fully and truly disclose material facts in the return of income. This allegation was required to be made by Ld. AO at the time of recording the reasons Printed from counselvise.com 4 while reopening the case of the assessee but the same was not done. Reference was made to various case laws to support the same. The assessee also assailed impugned addition on merits. However, Ld. CIT(A) rejected the legal grounds by relying upon the decision of Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. (236 ITR 34) and also rejected merits of addition since the assessee could not substantiate its claim. Finally, the assessment was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 4. From the facts, it could be seen that the assessee’s return of income for this year was scrutinized u/s 143(3) vide order dated 31-12- 2009. During the course of assessment proceedings, notices were issued u/s 142(1) requiring the assessee to substantiate its return of income. The assessee duly responded to the same and after due consideration thereof, Ld. AO framed the assessment. The impugned bank account was duly disclosed by the assessee in its return of income. Subsequently, the case has been reopened beyond four years on the ground that the issue of deposit of cash of Rs.32,75,333/- was not looked into during the course of original assessment proceedings. The copy of reasons has been placed on Page No.5 of the paper-book. It has been observed by Ld. AO therein that during verification of AIR information, the assessee filed photocopy of 2 registries and the assessee was having 1/3rd share in the said transactions. The land was within municipal limits and thus capital assets u/s 2(14)(iii). In view of the same, the assessee earned capital gains which were not Printed from counselvise.com 5 considered during regular assessment proceedings u/s 143(3). Therefore, the aforesaid cash deposit remained unexplained. The reasons were recorded on 12-02-2014 and Ld. AO sought approval of appropriate authority to reopen the case of the assessee. In Column No. 7 of the approval form (placed on Page Nos.4 & 5), it has been mentioned by Ld. AO that the provisions of Sec. 147(b) of the Act are applicable to the case of the assessee and the assessment is proposed to be made for the first time. However, the actual fact is that the assessee was already assessed u/s 143(3) and the case of the assessee was covered under Explanation-2 clause (c) and not under clause (b) as mentioned / stated by Ld. AO in the approval form. The clause (b) is applicable only in a case where no assessment was made in assessee’s case earlier. In our considered opinion, the approval has been taken by Ld. AO on erroneous facts and these vital facts could have materially impacted the decision of approving authority while granting the approval to reopen the case of the assessee. Since the approval has been obtained on wrong facts, it could not be said that the reopening had valid approval of the appropriate authority. 5. It could further be seen that in the recorded reasons, it has nowhere been alleged by Ld. AO that assessee’s income has escaped assessment owing to the fact that there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for his assessment. Such an allegation is mandatory in terms of proviso to s.147 which provide that when an assessment has already been framed u/s 143(3), no action shall be taken after the Printed from counselvise.com 6 expiry of four years from the end of relevant assessment year unless any income chargeable to tax as escaped assessment by reason of the failure on the part of the assessee to make a return u/s 139 or in response to notice issued u/s 142(1) or s.148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In the absence of such an allegation as mandated under statute, the reopening could not be sustained in law as held by jurisdictional Punjab & Haryana High Court in the case of Duli Chand Singhania (269 ITR 192). In this decision, the Hon’ble Court has held that in order to assume jurisdiction u/s 147 in a case where assessment has been made u/s 143(3), certain conditions are required to be satisfied viz. (i) Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must also have reason to believe that such escapement occurred by reason of failure on part of assessee either (a) to make a return of income under section 139 or in response to notice issued under section 142(1) or section 148; or (b) to disclose fully and truly all material facts necessary for his assessment for that purpose. In case where the assessment has been made u/s 143(3) and action u/s 147 is sought to be taken after expiry of four years from end of relevant assessment year, it is necessary that condition no. (i) and either of conditions no. (ii)(a) or (ii)(b) must co-exist. This decision has been followed by Hon’ble High Court of Madras in the case of Seshasayee Paper & Board Ltd. (148 Taxmann.com 432) holding that the existence of ''jurisdictional fact'' is sine qua non for the exercise of power. If the Printed from counselvise.com 7 jurisdictional fact exists, only then the authority can proceed with the case and take an appropriate decision in accordance with law. It leaves no room for any doubt that to invoke the extended period, AO ought to have demonstrated the existence of any of the three circumstances set out in the proviso to s.147 of the Act. In this case, failure on the part of the assessee to fully and truly disclose all material particulars would constitute the \"jurisdictional fact\" for invoking extended period of limitation and failure to record the existence of the above jurisdictional fact while invoking the extended period under the proviso to s.147 of the Act, would vitiate the entire proceedings. These case laws duly support the legal arguments of Ld. AR. Respectfully following the same, we would hold that the jurisdictional requirement to reopen the case of the assessee was not fulfilled by Ld. AO in the present case. 6. Considering above position of law, we would hold that the impugned reopening of assessment stood vitiated in law and liable to be quashed on legal grounds alone. We order so. Consequently, delving into merits of the case has been rendered mere academic in nature. The assessee succeeds on legal grounds. The appeal stand allowed. ITA No.891/Chandi/2025 : Shri Baldev Singh 7. The case of this assessee has been reopened in similar background of facts. This assessee is one of the co-owner in sale of land. The original assessment stood completed u/s 143(3) on 31-12- 2009 and the case was sought to be reopened beyond four years to examine the source of cash deposited by the assessee in his bank Printed from counselvise.com 8 account. Notice u/s 148 was issued on 12-03-2014. In the assessment order, Ld. AO made addition of cash deposit for Rs.40 Lacs which has been confirmed by Ld. CIT(A) by rejecting legal grounds as well as grounds on merits. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 8. The perusal of recorded reasons as well as approval form as placed in the paper-book would establish that the same is identical as recorded in the case of Shri Teja Singh. In the recorded reasons, there is no allegation that there was failure on the part of the assessee to fully and truly disclose material facts in the return of income. The approval has been sought on erroneous facts. Therefore, our adjudication as above shall, mutatis mutandis, apply to this appeal also. The assessee succeeds on legal grounds. Consequently, delving into merits of the case has been rendered mere academic in nature. The appeal stand allowed. Conclusion 9. Both the appeals stand allowed. Order pronounced on 10th December, 2025. -Sd- -Sd- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10-12-2025 Printed from counselvise.com 9 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "