Chandrakant Mohanbhai Patel Vs ITO (ITAT Mumbai)
Summary: ITAT Mumbai quashed reassessment proceedings against Chandrakant Mohanbhai Patel for AY 2020-21, holding that where no addition was ultimately made on any issue forming the foundation of reopening under Sections 148A(b) and 148A(d), the Assessing Officer lacked jurisdiction to sustain reassessment solely by making an addition on an altogether unrelated issue. The reopening was based on information concerning cash deposits and withdrawals, turnover reported in GST returns, TDS information, depository transactions and information available through the Insight Portal. However, the AO made no addition on any of those matters and instead added ₹15 lakh under Section 68 in respect of an unsecured loan from M/s Vavya Enterprises, which had not figured in the Section 148A proceedings.
The Tribunal held that the principle laid down by the Bombay High Court in CIT v. Jet Airways (India) Ltd. continued to govern even after the reassessment framework was substituted by the Finance Act, 2021. According to the Tribunal, Section 148A strengthens the jurisdictional connection between the specific information disclosed to the assessee and the resulting reassessment; it does not enlarge the AO’s substantive jurisdiction to abandon that foundation and proceed exclusively on another issue. Once no addition survived on the original reopening issues, the jurisdictional substratum disappeared and an independent Section 68 addition could not sustain the reassessment.
The reassessment was therefore annulled and the assessee’s appeal was allowed, while the remaining grounds concerning Section 68, Rule 46A, Section 115BBE and penalties were left open as academic.
Cases Discussed
| Case | Treatment / Principle |
|---|---|
| National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC) | A pure question of law arising from facts already on record and going to the root of the assessment can be raised before the Tribunal even though it was not raised before the lower authorities. |
| CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.) | The AO must first assess or reassess the income forming the basis of reopening before jurisdiction can extend to “any other income”; if no addition is made on the foundational issue, reassessment cannot survive merely for additions on other issues. The Tribunal held that this ratio continues to apply under the post-Finance Act, 2021 reassessment regime. |
| Milan Agency v. ITO, ITA No. 5414/Mum/2024 | Coordinate Bench applied Jet Airways under the substituted reassessment provisions and held that where no addition is made on the issue for which reassessment was initiated, the AO lacks jurisdiction to make an addition on another issue. |
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 23.03.2026, passed by the learned, Commissioner of Income-Tax (Appeals) – National Faceless Appeal Centre, Delhi [in short, ‘the Ld. CIT(A)’], for Assessment Year (in short ‘A.Y’), 2020-21, raising the following grounds:-
“1. The Ld. CIT(A) fell in error of law in upholding the action of jurisdictional A.O. in issuing the impugned notice dated 04/03/2024 u/s.148 of the Act without appreciating that the approval granted by the specified authority u/s 151 of the Act is mechanical and without bearing a mandatory digital signature. Thus, the approval obtained u/s 151 is invalid and therefore the notice issued u/s 148 on the basis of such approval is void-ab-initio.
2. The Ld. CIT(A) further fell in error of law in upholding the assessment order dated 16/03/2026 passed by Ld. AO under section 143(3) r.w.s. 144B of the Act without appreciating that the notice issued under section 143(2) of the Act is in contravention of Circular issued by CBDT. Hence, notice issued under Section 143(2) is void ab initio and therefore, the assessment order dated 16/03/2026 passed in pursuance of above notice is also bad in law, and the same may be quashed.
3. The order passed by the Learned Commissioner of Income Tax (Appeals) u/s 250 confirming the assessment order passed u/s 147 r.w.s. 144B is contrary to law, facts and evidence on record and is liable to be set aside.
4. The Learned CIT(A) erred in confirming the addition of Rs.15,00,000/-made by the Assessing Officer u/s 68 treating the unsecured loan received from M/s Vavya Enterprises as unexplained cash credit, without appreciating the fact that provisions of section 68 is not at all applicable to the facts of present case. Hence, addition of Rs.15,00,000/- under section 68 of the Act is unjustified and the same may be deleted.
5. The Learned CIT(A) failed to appreciate that the Appellant had duly furnished all relevant documentary evidence such as ledger accounts, confirmation of accounts, income tax return of the lender and bank statement to prove the identity, capacity of the lender, genuineness of the transaction and the source of funds. Thus, the Appellant had duly discharged the primary onus cast upon him under section 68 of the Act. The Appellant therefore, prays that the addition of Rs.15,00,000/- under section 68 of the Act is unjustified and the same may be deleted.
6. The addition confirmed by the CIT(A) is based merely on assumptions and suspicion without bringing any adverse material on record, despite the transaction being routed through proper banking channels.
7. The Learned CIT(A) erred in rejecting the additional evidences filed during appellate proceedings under Rule 46A, which were crucial for determining the true nature of the loan transaction, thereby violating the principles of natural justice.
8. The authorities below failed to appreciate that loan of Rs.15,00,000 was received during the year and Rs.3,00,000 was repaid, resulting in an outstanding balance of Rs. 12,00,000, which was correctly reflected in the books of accounts and tax audit report.
9. The Learned AO erred in taxing the alleged addition under section 115BBE, which is not applicable in the case of genuine loan transactions recorded in the books of account.
10. The initiation of penalty proceedings u/s 270A and 271AAC(1) is unjustitied and consequential in nature and therefore liable to be deleted.”
2. Before us the Ld. Counsel of the assessee also filed additional grounds, which are reproduced as under:-
“1. The National Faceless Appeal Centre, Delhi (hereinafter referred to as ‘NFAC”) has failed to appreciate that the notice issued to reopen and the subsequent assessment order are bad in law and void ab initio as addition has been made on the issues raised in the reasons provided in the notice issued under section 148A(b) of the Act. Hence, the notice issued under section 148 of the Act and the assessment order passed under section 147 r.w.s. 144B of the Act are bad in law therefore, deserves to be quashed and set aside.
2. The NFAC is not justified in passing the impugned order dated 21.01.2026 without appreciating that the assessment order passed under section 147 r.w.s. 144B of the Act is unlawful as the Ld. A.O. lacked the jurisdiction to assess or reassess issues other than the issues in respect of which proceedings were initiated. Thus, the said assessment order passed making without making any additions as per the reasons for the initiation of those proceedings is arbitrary, unsustainable and therefore, bad in law.
3. The NFAC failed to appreciate that the assessment order under section 147 r.w.s. 144B of the Act is in contravention of the law laid down by the Hon’ble Bombay High Court in CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bombay) and hence, the said assessment order is illegal and is bad in law.”
3. We have considered the application seeking admission of the additional grounds. The additional grounds challenge the very assumption of jurisdiction under Sections 147 and 148 of the Income-tax Act, 1961( in short the Act) and raise a pure question of law arising from the facts already available on record. Their adjudication does not require any further investigation into disputed facts. It is now well settled that a pure legal ground, going to the root of the assessment and not requiring fresh investigation of facts, can be raised at any stage of the appellate proceedings. In this regard, we derive support from the judgment of the Hon’ble Supreme Court in National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), wherein it was held that the Tribunal possesses jurisdiction to entertain a question of law arising from the facts already on record, notwithstanding that such question was not raised before the lower authorities. Respectfully following the aforesaid binding precedent, we admit the additional grounds for adjudication.
4. The relevant facts, in brief, are that the assessment for the year under consideration was reopened under Section 147 of the Act. Prior to issuance of notice under Section 148, the Assessing Officer initiated proceedings under Section 148A by issuing a show-cause notice under Section 148A(b), wherein the assessee was called upon to explain certain items of information as available with the Department which, according to the Assessing Officer, suggested escapement of income. The information referred to in the notice comprised, inter alia, the following transactions:
Information Code |
Information Description |
Source |
Count |
Amount Description |
Amount (Rs.) / Lakhs (In Rs.) |
|---|---|---|---|---|---|
SFT-005 (W) |
Cash Withdrawals (including through bearers cheques) in current account |
HDFC BANK LIMITED |
1 |
Aggregate gross amount received from person in cash |
0 |
GSTR-1-A |
Total sales reported under GSTR-1 |
GSTN |
12 |
Total Turnover |
12,18,37,078 |
GSTR-3B-P |
Total sales reported under GSTR-3B |
GSTN |
12 |
Total Turnover |
12,61,06,561 |
ACD(P) |
Purchase value of securities (depository transactions) |
CDSL |
1 |
Aggregate Purchase Value |
0 |
TDS-194A |
TDS Statement – Interest other than interest on securities (Section 194A) |
GUJARAT COOPERATIVE MILK MARKETING FEDERATION LIMITED |
2 |
Amount paid or credited |
77,182 |
SFT-005 (D) |
Cash deposits (including through bearers cheques) in current account |
HDFC BANK LIMITED |
3 |
Aggregate gross amount received from person in cash |
1,71,47,350 |
TDS-194I(B) |
TDS Statement – Rent (Section 194I) |
GTL INFRASTRUCTURE LIMITED |
4 |
Amount paid or credited |
1,93,624 |
ACD(R) |
Sale or transfer value of securities (depository transactions) |
CDSL |
1 |
Aggregate Sale Value |
0 |
Information – Confidential
| Information Code | Information Description | Source | Count | Amount Description | Amount (Rs.) |
|---|---|---|---|---|---|
| – | – | – | – | – | – |
Information – Others
| Information Code | Information Description | Source | Count | Amount Description | Amount (Rs.) |
|---|---|---|---|---|---|
| – | – | – | – | – | – |
5. After considering the reply furnished by the assessee, the Assessing Officer passed an order under Section 148A(d), rejecting the explanation and holding that it was a fit case for issuance of notice under Section 148. Consequently, notice under Section 148 was issued and reassessment proceedings were undertaken. However, upon completion of reassessment under Section 147 read with Section 144B, the Assessing Officer did not make any addition whatsoever in respect of the issues forming the very basis of the notice issued under Section 148A(b) and the order passed under Section 148A(d). Instead, the Assessing Officer proceeded to examine an altogether different issue relating to an unsecured loan of Rs.15,00,000/- received by the assessee from M/s Vavya Enterprises and ultimately treated the same as an unexplained cash credit under Section 68 of the Act.
5.1 Thus, admittedly, none of the issues which constituted the foundation for formation of belief regarding escapement of income culminated into any addition in the reassessment order. The learned CIT(A), by the impugned order, upheld the reassessment as well as the addition made under Section 68.
5.2 The learned Authorised Representative submitted that the controversy involved in the present appeal stands squarely covered by the judgment of the Hon’ble jurisdictional Bombay High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.). He submitted that the Assessing Officer is empowered to assess “any other income” which comes to his notice during reassessment proceedings only after first assessing or reassessing the income which formed the basis for reopening.According to the learned Authorised Representative, once admittedly no addition has been made on the issues recorded in the notice under Section 148A(b), the Assessing Officer lost jurisdiction to make any independent addition on a completely different issue. The learned counsel further relied upon the decision of the Coordinate Bench of the Tribunal in Milan Agency v. ITO, ITA No. 5414/Mum/2024, wherein, following the judgment of the Hon’ble Bombay High Court in Jet Airways (India) Ltd. (supra), the reassessment proceedings were quashed on identical facts.
5.3 Per contra, the learned Departmental Representative supported the orders of the lower authorities and submitted that once reassessment proceedings were validly initiated, the Assessing Officer was competent to assess any income that came to his notice during the course of such proceedings.
6. We have carefully considered the rival submissions, perused the orders of the authorities below and examined the material available on record. We have also considered the statutory scheme governing reassessment as substituted by the Finance Act, 2021, together with the judicial precedents relied upon by the parties. Since the additional grounds challenge the very assumption of jurisdiction under Sections 147/148 of the Act, we deem it appropriate to adjudicate the said legal issue at the threshold. It is well settled that where the assumption of jurisdiction itself is found to be invalid, the Tribunal need not enter upon the merits of the additions made in the reassessment proceedings.
6.1 The Finance Act, 2021 has substituted the entire reassessment framework by introducing Section 148A and substantially amending Sections 147 to 151 of the Act. Under the substituted regime, before issuing a notice under Section 148, the Assessing Officer is statutorily obliged to identify the “information which suggests that income chargeable to tax has escaped assessment”, furnish such information to the assessee by issuing a notice under Section 148A(b), consider the reply filed by the assessee, and thereafter pass a reasoned order under Section 148A(d) determining whether it is a fit case for issuance of notice under Section 148. Thus, unlike the erstwhile provisions, the jurisdiction to reopen an assessment is no longer founded merely upon the uncommunicated subjective satisfaction of the Assessing Officer. The jurisdictional foundation now rests upon the specific information disclosed to the assessee, who is afforded a statutory opportunity to rebut the same before issuance of notice under Section 148. The legislative scheme, therefore, clearly manifests that the reassessment proceedings originate from and remain anchored to the information communicated under Section 148A(b). Consequently, the validity of the reassessment necessarily depends upon the survival of the very foundation on which jurisdiction was assumed.
6.2 In the present case, the notice issued under Section 148A(b), read with the order passed under Section 148A(d), reveals that the reassessment was proposed on account of the following information: (i) cash deposits in bank account; (ii) cash withdrawals; (iii) turnover reported in GST returns; (iv) TDS information; (v) depository transactions; and (vi) other information available through the Insight Portal. Significantly, the alleged unsecured loan of Rs.15,00,000 received from M/s. Vavya Enterprises, which ultimately formed the sole basis of addition under Section 68, does not find mention either in the notice issued under Section 148A(b) or in the order passed under Section 148A(d). Equally significant is the fact that while completing the reassessment under Section 147 read with Section 144B, the Assessing Officer has not made any addition whatsoever in respect of any of the issues forming the very basis of reopening. The only addition made is under Section 68 in respect of the unsecured loan received from M/s. Vavya Enterprises, which is admittedly an altogether distinct issue.
6.3 The issue is no longer res integra. The Hon’ble Bombay High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.) held that the expression “and also any other income” occurring in Section 147 cannot be read in isolation. The Hon’ble Court held that the Assessing Officer must first assess or reassess the income which formed the basis of the reasons recorded for reopening. It is only thereafter that he acquires jurisdiction to assess any other income which may come to his notice during the reassessment proceedings. The Hon’ble jurisdictional High Court further held that where the Assessing Officer ultimately does not assess the income which constituted the basis for reopening, the reassessment cannot be sustained merely for making additions on other issues discovered subsequently. In other words, the jurisdiction to assess “any other income” is merely incidental and supplemental to the jurisdiction validly exercised in respect of the income for which the assessment was reopened.
6.4 Although the present reassessment is governed by the substituted provisions introduced by the Finance Act, 2021, we are of the considered view that the ratio laid down in Jet Airways (India) Ltd. (supra) continues to hold the field. In fact, the substituted statutory framework reinforces, rather than dilutes, the principle laid down therein. Section 148A(b) mandates disclosure of the information suggesting escapement of income, while Section 148A(d) requires the Assessing Officer to record satisfaction with respect to such information before assuming jurisdiction under Section 148. Therefore, the jurisdiction itself is founded upon the specific information disclosed to the assessee. Where, ultimately, no addition is made on the very issue constituting the basis for assumption of jurisdiction, the substratum of the reassessment disappears. In such circumstances, permitting the Assessing Officer to sustain the reassessment solely for making an addition on an altogether unrelated issue would render the statutory safeguards introduced by Parliament under Section 148A wholly nugatory.
6.5 The Finance Act, 2021 has undoubtedly altered the procedural framework governing reassessment. However, the amendments merely strengthen the procedural safeguards available to the assessee by introducing a pre-notice enquiry under Section 148A. They do not enlarge the substantive jurisdiction of the Assessing Officer to assess issues wholly unconnected with the information forming the basis of reopening. Significantly, Parliament has not altered the substantive language of Section 147 in so far as it empowers the Assessing Officer to assess or reassess the escaped income and “also any other income” which comes to his notice during the course of reassessment proceedings. The expression “and also”, which formed the foundation of the interpretation adopted by the Hon’ble Bombay High Court in Jet Airways (India) Ltd. (supra), remains unchanged. It is a settled principle of statutory interpretation that where Parliament retains the same statutory language despite being aware of the judicial interpretation placed thereon, such interpretation must ordinarily be regarded as having received legislative approval.
6.6 Indeed, under the substituted regime, the jurisdictional foundation is even more clearly defined. Under the erstwhile provisions, the reassessment was founded upon the “reasons to believe” recorded by the Assessing Officer. Under the substituted provisions, the jurisdiction is founded upon the “information suggesting escapement of income” disclosed under Section 148A(b) and accepted in the order passed under Section 148A(d). Thus, although the form has changed, the jurisdictional foundation remains the same, namely, the existence of identified information indicating escapement of income. Consequently, where the Assessing Officer ultimately accepts, either expressly or by necessary implication, that no addition is warranted on the very issue forming the foundation of reopening, the reassessment loses its jurisdictional basis. Once the jurisdictional foundation fails, the consequential exercise of jurisdiction in respect of other independent issues cannot survive.
6.7 Any other interpretation would defeat the very object underlying the introduction of Section 148A. Parliament consciously introduced a pre-notice adjudicatory mechanism to ensure that reassessment proceedings are founded upon specific, tangible and disclosed information. If, after invoking jurisdiction on one set of information, the Assessing Officer is permitted to abandon that very foundation and sustain the reassessment solely on an altogether different issue discovered subsequently, the safeguards consciously incorporated by Parliament would become illusory. Such an interpretation would not only frustrate the legislative intent underlying the Finance Act, 2021 but would also permit reassessment proceedings to travel beyond the jurisdictional foundation on which they were initiated.
6.8 We also find that the Coordinate Bench of the Tribunal in Milan Agency v. ITO, ITA No. 5414/Mum/2024, after considering the substituted reassessment provisions and following the binding judgment of the Hon’ble Bombay High Court in Jet Airways (India) Ltd. (supra), held that where no addition is made on the issue for which the reassessment proceedings were initiated, the Assessing Officer lacks jurisdiction to make additions on any other issue. The relevant finding of the Tribunal is reproduced as under:-
“7. Before us, the ld. Counsel in respect of additional ground filed vehemently contended that no addition has been made on the issues raised in the reason provided in the notice issued u/s 148A(b) of the Act. He further made reliance on the decision of Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 336 (Bombay). The ld. Counsel also filed paper book comprising copies of details and submission filed before the lower authorities. He submitted that as per accounting standard, the assessee was following an exclusive system and accordingly VAT collection and VAT liability and payment was accounted separately and was not formed part of P&L A/c and the lower authorities has not disputed the details and documentary evidences furnished.
8. On the other hand Id. DR supported the order of lower authorities.
9 Heard both the sides and perused the material on record. The case of the assessee was reopened on the basis of information from the CGST Authorities that M/s. Germanium Trading Pvt. Ltd. and M/s. Cannonball Trading Pvt. Ltd. have issued bogus invoices and the assessee has received such bogus invoices. The assessee was asked to submit the detail in respect of bogus invoices of Rs. 1,07,68,326/- received from the above entities and was also asked to show cause and explain by such bogus invoices of Rs. 1,07,68,328/- shall not be treated as unexplained money u/s 69 of the Act. However, the AO has not made any discussion verification and examination of this issue in the assessment order. On the other hand, the AO has made addition of Rs. 2,84,16,279/-on account of recalculation of the net profit on the basis of party wise sale amount of Rs. 36,24,13,765/- furnished by the assessee and purchase amount of Rs. 32,77,88,333/- shown n the trading account of the assesscc. It is noticed that without any reason the AO has ignored the corresponding party wise purchase amount of Rs. 34,89,13,119/- to the party wise sale and also not considered the sale amount of Rs. 33,24,60,256/- shown in the trading account. The AO has also not controverted the relevant material submitted during the course of assessment proceedings that the VAT paid on purchases as well as VAT collected on sales was separately accounted and not passed through P&L account. In respect of additional ground of appeal on the validity of order passed u/s 147 r.w.s. 144B of the Act, we have perused the the decision of Hon’ble Jurisdictional High Court in the case of Jet Airways (1) Ltd., 331 ITR 236 (Bombay) 2010 wherein held that effect of section 147 is that the AO has to assess or reassess such income that has escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. Since in the case of the assessee the AO had not made addition on the issue of bogus invoices as alleged to be obtained from M/s. Cannonball Trading Pvt. Ltd. and M/s. Germanium Trading Pvt. Ltd. on the basis of which the case was reopened as escaped assessment therefore following the decision of Hon’ble Jurisdiction as discussed supra, the AO is not justified in making the other addition as discussed above in this order.”
6.9 Accordingly, respectfully following the binding decision of the Hon’ble jurisdictional High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.), whose ratio, in our considered opinion, continues to govern reassessment proceedings even under the substituted statutory regime, we hold that the reassessment framed in the present case is without jurisdiction and is liable to be quashed.
7. Since we have annulled the reassessment proceedings on the jurisdictional issue itself, adjudication of the remaining grounds relating to the addition under Section 68, rejection of additional evidence under Rule 46A, applicability of Section 115BBE, initiation of penalty proceedings and other grounds on merits would be merely academic. It is a settled proposition that once the assessment itself is held to be void, the Tribunal is not required to examine the merits of the additions. We, therefore, refrain from adjudicating the remaining grounds, leaving them open.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 30/06/2026.
