Arvind Murji Bhanushali Vs ITO (ITAT Mumbai)
Reopening Challenge Cannot Be Dismissed Without Reasons: ₹2.94 Crore Property Addition Sent Back to CIT(A)
An assessee challenging a reassessment must receive a reasoned decision on the jurisdictional grounds raised in appeal. In Arvind Murji Bhanushali v. ITO, the Mumbai Tribunal found that the Commissioner (Appeals) had dismissed objections to the reopening without examining the relevant facts, statutory provisions or Supreme Court decision cited by the assessee. The Tribunal set aside the appellate order and sent the entire appeal back for a fresh decision.
The order does not quash the reassessment or delete the ₹2,94,28,000 addition. Both the validity of the reopening and the source of the property investment remain open before the Commissioner (Appeals).
Property Purchase Led to Reassessment
Bhanushali filed his original return for assessment year 2013–14 on 30 March 2015, declaring income of ₹4,91,200. After proceedings under section 148A, the Assessing Officer issued a notice under section 148 on 27 July 2022. Bhanushali responded with a return on 3 May 2023, declaring the same income as before.
The enquiry concerned an immovable property purchased for ₹5.24 crore. Asked to explain the purchase, Bhanushali identified ₹81.99 lakh from the sale of agricultural land, ₹4.04 crore in unsecured loans, and ₹38.28 lakh from his own sources.
The Assessing Officer accepted the agricultural land sale proceeds and ₹1.48 crore of loans received from 30 parties. He did not accept the balance ₹2.56 crore of claimed loans or the ₹38.28 lakh attributed to own sources. Together, those amounts produced an addition of ₹2,94,28,000 under section 69, with section 115BBE applied. Assessed income consequently rose to ₹2,99,19,200.
Bhanushali appealed against both the reassessment’s validity and the addition. The Commissioner (Appeals) rejected his legal and factual grounds. Before the Tribunal, Bhanushali argued that his objections to the reopening, including a plea based on the Supreme Court’s decision in Union of India v. Ashish Agarwal, had not been properly adjudicated.
The Record Also Showed Missed Opportunities
The Tribunal did not overlook the assessee’s conduct during the first appeal. The Commissioner (Appeals)’s order recorded that Bhanushali had not responded to the last two hearing notices, which fixed hearings on 14 October 2025 and 20 November 2025.
It also recorded that he had uploaded certain documents and an application to admit additional evidence, but had not furnished additional evidence with that application. During remand proceedings, he had not supplied further evidence when the Assessing Officer gave him an opportunity. The Revenue relied on these facts to argue that sufficient chances had already been provided and that the appellate order should stand.
Those shortcomings mattered to the progress of the appeal. They did not, however, answer the Tribunal’s central concern: the Commissioner (Appeals) had still been required to address the specific legal grounds challenging the authority to reopen the assessment.
Jurisdictional Grounds Needed a Speaking Order
Before the Commissioner (Appeals), Bhanushali had questioned the jurisdiction assumed under sections 147 and 148, the order passed under section 148A(d), and the approval for issuing the section 148 notice. He had also relied on Ashish Agarwal.
The Tribunal found no reasoned examination of those objections in the appellate order. Instead, the legal grounds had been dismissed principally for want of material and on the observation that no serious defect in the reopening had been identified at the assessment stage. The order did not analyse the relevant facts, applicable provisions and judicial precedent to decide the objections on their merits.
Because those grounds went to the root of the reassessment jurisdiction, the Tribunal held that they required a reasoned finding. It restored the appeal to the Commissioner (Appeals), directing that authority to consider each ground, including the Ashish Agarwal plea, and pass a speaking order after giving Bhanushali a reasonable opportunity of hearing.
What Happens in the Fresh Appeal
On remand, Bhanushali may raise the legal and factual grounds available to him and file submissions and evidence to the extent permissible in law. The Commissioner (Appeals) must decide the jurisdictional objections as well as the grounds concerning the ₹2.94 crore addition.
The Tribunal also directed Bhanushali to cooperate, respond to notices and avoid unnecessary adjournments. It expressed no opinion on whether the reopening is valid, whether Ashish Agarwal assists him, or whether the disputed loans and own funds have been proved. All issues were left open. His Tribunal appeal was therefore allowed for statistical purposes, signifying a fresh hearing rather than final relief on the assessment.
Author’s Comments
The practical point in this ruling is the difference between an assessee’s failure to furnish evidence and an appellate authority’s duty to decide a pleaded jurisdictional challenge with reasons. Missing hearings and incomplete supporting material can affect the factual case. They do not supply a reasoned answer to a contention that the reassessment notice or approval was legally defective.
Equally, the remand gives Bhanushali no finding in his favour on the source of the investment. To obtain relief on the ₹2.94 crore addition, he must address the ₹2.56 crore of disputed loans and ₹38.28 lakh of claimed own sources with admissible evidence. The Commissioner (Appeals) must then decide both the legal objections and the investment issue in a fresh, reasoned order.
Cases Discussed
- Union of India v. Ashish Agarwal (Supreme Court) — relied upon by the assessee in challenging the validity of the reassessment proceedings. The Tribunal found that the CIT(A) had not adjudicated the plea through a reasoned finding and specifically directed reconsideration of this authority on remand.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by the assessee is directed against the order dated 03.12.2025 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘Ld. CIT(A)’], under section 250 of the Income-tax Act, 1961 (‘the Act’) for the assessment year 2013-14, arising out of the assessment order dated 29.05.2023 passed under section 147 read with section 144B of the Act.
2. The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in issuing notices under 148 dated 27.07.2022 read with section 147 as the same is wholly without jurisdiction and is bad in law.
2. On the facts and circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer of making addition on account of unexplained investment at Rs.2,94,28,000/- under section 69 of the Income Tax Act, 1961 read with invoking section 115BB without appreciating that, the Assessing Officer failed to give information of the loan parties for whom he was not satisfied.
3. On the facts and circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in not giving credit of Rs.3,00,000/- (Rs.1,51,00,000 – Rs.1,48,00,000) that the Assessing Officer was satisfied about during the remand proceedings.
4. Your Appellant craves leave to add to, amend, alter, modify, and/or delete any of the above grounds of appeal at or before final disposal of appeal.”
3. Brief facts of the case are that the assessee, an individual, filed his original return of income for the year under consideration on 30.03.2015 declaring total income of Rs.4,91,200/-. The case was reopened and, pursuant to the proceedings under section 148A of the Act, notice under section 148 was issued on 27.07.2022. In response thereto, the assessee filed return of income on 03.05.2023 declaring the same income. The Assessing Officer noticed that the assessee had purchased an immovable property for a consideration of Rs.5,24,00,000/- and called upon him to explain the source thereof. The assessee explained the source as sale proceeds of agricultural land of Rs.81,99,000/-, unsecured loans of Rs.4,04,00,000/- and own sources of Rs.38,28,000/-. The Assessing Officer accepted the source to the extent of the sale proceeds of agricultural land and loans aggregating to Rs.1,48,00,000/- received from 30 parties. However, the balance loans of Rs.2,56,00,000/- and the amount stated to be from own sources were not accepted. Consequently, an addition of Rs.2,94,28,000/- was made under section 69 read with section 115BBE of the Act and the total income was assessed at Rs.2,99,19,200/-.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), challenging both the validity of the reopening and the addition on merits. The Ld. CIT(A), however, dismissed the legal grounds as well as the grounds on merits, without any meaning full discussion. Aggrieved, the assessee is in appeal before the Tribunal.
5. The learned Authorised Representative submitted that the reassessment proceedings are invalid and that the case of the assessee is covered by the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal. He further submitted that the legal grounds raised by the assessee have not been properly adjudicated by the Ld. CIT(A). It was, therefore, prayed that assessment be quashed.
6. The learned Departmental Representative supported the order passed by the Ld. CIT(A). He submitted that sufficient opportunities were afforded to the assessee during the appellate as well as the remand proceedings, but the assessee did not furnish the requisite evidence. He accordingly contended that no interference with the impugned order is called for.
7. We have heard the rival submissions and perused the material available on record. The Ld. CIT(A), in paragraph 5.1 of the impugned order, has recorded the details of the hearing notices issued during the appellate proceedings. The said paragraph shows that there was no response to the notices fixing the hearing on 14.10.2025 and 20.11.2025, being the last two opportunities granted to the assessee. The Ld. CIT(A), in paragraph 5.2, has further noted that the assessee had uploaded certain documents and an application seeking admission of additional evidence, but no additional evidence was furnished with the said application. The impugned order also records that, during the remand proceedings, the assessee did not furnish any further evidence in response to the opportunity provided by the Assessing Officer.
8. At the same time, the assessee had specifically raised legal grounds before the Ld. CIT(A) challenging the jurisdiction assumed under sections 147 and 148 of the Act, the order passed under section 148A(d), and the approval for issuance of notice under section 148. The assessee has also relied upon the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal. We find that the impugned order does not deal with the aforesaid legal grounds by examining the relevant facts, the statutory provisions and the judicial precedent relied upon by the assessee. The legal grounds were dismissed principally for want of material and on the observation that no serious lacuna in the reopening proceedings had been pointed out at the assessment stage. Thus, the legal grounds, which go to the root of the jurisdiction, have not been adjudicated by a reasoned finding on their merits.
9. Having regard to the entirety of the facts and in the interest of justice, we consider it appropriate to set aside the impugned order and restore the appeal to the file of the Ld. CIT(A) for fresh adjudication in accordance with law. The assessee shall be at liberty to raise all legal and factual grounds available to him and to file such submissions and evidence as may be permissible in law. The Ld. CIT(A) shall consider each ground, including the plea based on the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal, and pass a speaking order after granting reasonable opportunity of being heard to the assessee. The assessee is also directed to cooperate in the proceedings and respond to the notices without seeking unnecessary adjournments. We make it clear that we have not expressed any opinion on the merits of any ground raised by the assessee and all issues are left open. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
10. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 23/09/2026.
