ACIT Vs DS Systems Private Limited (ITAT Guwahati)
Reassessment Notice Held Invalid & Loose Sheets Treated as Dumb Documents – Protective Addition U/s 69C Deleted – ITAT Guwahati
ITAT dismissed Revenue’s appeal and upheld CIT(A)’s order deleting protective addition of ₹3.25 crore u/s 69C alleged as unexplained cash payment. Tribunal noted that the reassessment notice issued on 29.06.2021 was invalid as AO failed to follow amended sec.148 procedure and CBDT Instruction No.1/2022 pursuant to Ashish Agarwal ruling, thereby vitiating the entire reassessment.
On merits also, the addition based on loose sheets marked “DSS-05” was unsustainable since they were treated as “dumb documents” lacking corroborative evidence, and substantive addition in the case of M/s BMG Informatics Pvt Ltd had already been deleted. As Revenue did not challenge the core legal finding of invalid notice, the appeal itself was held infructuous and dismissed.
FULL TEXT OF THE ORDER OF ITAT GUWAHATI
This is an appeal filed by the revenue against the order passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals), Central NER, Guwahati [hereafter “the Ld. CIT(A)] dated 18.07.2025, DIN & order No. ITBA/APL/S/250/2025-26/1078645797(1) on the following grounds of appeal:
“Ground 1. Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition of Rs. 3,25,93,500/-made by the Assessing Officer under section 69C of the Income-tax Act, 1961, as unexplained expenditure, being the cash payment made by ‘M/s DS Systems Pvt. Ltd.’ to ‘M/s BMG Informatics Pvt. Ltd.’ during Financial Year 2015-16, on a protective basis for the Assessment Year 2016-17.
Ground 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the fact that the Hon’ble ITAT’s judgement in the case of M/s BMG Informatics Pvt. Ltd. is based on the premise that document in question is a dumb document, whereas the documents under consideration in the case of M/s DS Systems Pvt. Ltd. is first party document found from his premises and comprising accounted as well as unaccounted entries on same page.
Ground 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CTT(A) erred in not appreciating that the earlier appeal in the case of M/s BMG Informatics was not filed on account of the document under consideration, being a third party recordings, and has no bearing on the facts of this case [DS SYSTEMS PRIVATE LIMITED], as in this case it is the same party recording the entries.
Ground 4. The appellate craves to leave to add, alter, modify OR 4 amend any of the grounds of appeal during the course of proceedings before the Hon’ble ITAT.”
2. Briefly stated the facts of the case are that the assessee filed return of income on 23.02.2017 declaring total income of Rs. 54,90,070/-. The return of income was processed u/s 143(1)(a) of the Act. During the year, assessee was engaged in supply/sale of items like computer laptops, UPS, Battery, power banks, laptop bags etc. After taking necessary approval from the competent authority u/s 151 of the Act, the case was selected for reassessment u/s 147 of the Act. Accordingly, notice u/s 148 of the Act was issued on 29.06.2021 which was served electronically. Thereafter, notice u/s 143(2) of the Act was issued on 15.02.2022, thereafter, the assessee asked for reason for selection of scrutiny u/s 147 of the Act which was provided to the assessee electronically. Thereafter, the DS System Pvt. Ltd. (assessee) submitted its objections for reopening of the case u/s 147 of the Act, the objections raised by the assessee were disposed of through speaking order which was served to the assessee. Thereafter, detailed questionnaire was issued to the assessee. During the course of reassessment proceedings, the assessee furnished reply time to time.
