Ashok Kumar Jain Vs ITO (ITAT Patna)
Valid Reopening Does Not Cure Denial of Evidence: ITAT Orders Fresh Assessments of Alleged Cash Purchases
Reopening Upheld, Assessments Restored
The Patna Tribunal upheld reassessment proceedings initiated on information concerning alleged unaccounted purchases from a searched supplier. However, it set aside the resulting assessments because the assessee had not received the evidence and statements relied upon, or an adequate opportunity to rebut them.
The decision draws a distinction between material sufficient to justify reopening and the procedural requirements for sustaining an addition. Although the jurisdictional challenge failed, the additions under section 69C required fresh adjudication after compliance with the principles of natural justice.
Supplier’s Search Leads to Purchaser’s Reassessment
A search conducted on 16 October 2017 in the case of Laxmi Remote India Pvt. Ltd. revealed alleged large-scale unaccounted cash sales. According to the assessment records, the supplier maintained transactions in two software systems.
The Revenue’s case was that unaccounted transactions appeared in IVMS software, while transactions disclosed to government agencies were recorded in ERP software. The IVMS data allegedly identified the assessee as a purchaser involved in substantial cash transactions over several years.
The Assessing Officer also referred to statements of the supplier’s director, Vijaya Kumar Sachdeva, recorded under section 132(4), and its general manager, Pawan Kumar Midha. These statements reportedly acknowledged suppression of sales and manipulation of sales records.
Based on the investigation information, the Assessing Officer initiated proceedings under section 147 and treated the alleged undisclosed purchases as unexplained expenditure under section 69C.
Substantial Additions Across Five Years
The disputed additions were ₹1,69,53,826 for assessment year 2014–15, ₹1,98,10,566 for 2015–16, ₹1,95,39,113 for 2016–17, ₹1,63,45,272 for 2017–18, and ₹57,19,174 for 2018–19.
The Commissioner (Appeals), through the National Faceless Appeal Centre, upheld these additions. The assessee challenged the appellate orders before the Tribunal.
There were delays in filing the appeals, ranging from 115 to 164 days. After considering the affidavits and condonation petitions, the Tribunal condoned the delays and admitted the appeals for adjudication. The order does not elaborate on the explanations underlying that condonation.
Assessee Challenges Jurisdiction and Evidence
The assessee argued that the Assessing Officer should have proceeded under section 153C, rather than section 147, because the information arose from a search in another person’s case.
He also contended that the reopening lacked a live link with income escaping assessment and that the additions were based on conjecture. According to him, his purchases had been made by cheque.
A further objection concerned the withholding of material evidence. The assessee submitted that the sworn statements and other documents relied upon had not been supplied, and that an opportunity for cross-examination had not been afforded.
The Revenue defended the reopening as based on investigation information and supported the Commissioner (Appeals)’s confirmation of the additions.
Tribunal Finds Sufficient Basis for Section 147
The Tribunal held that the supplier’s software records and statements provided sufficient material information for the Assessing Officer to conclude that income chargeable to tax had escaped assessment.
It therefore upheld the validity of proceedings under section 147.
The Tribunal also rejected the argument that section 153C necessarily applied. On the facts recorded, documents or assets belonging or pertaining to the assessee had not been seized. Consequently, it considered the case outside the express ambit of section 153C and upheld recourse to section 147.
This conclusion concerned the jurisdiction to initiate proceedings. It did not amount to a final finding that the alleged cash purchases were established or that their amounts were correctly assessed.
Failure to Permit Rebuttal Requires Fresh Assessment
On merits, the Tribunal found that the assessee had not been supplied the material evidence or given a sufficient opportunity to rebut it.
Although this objection had been raised before the Commissioner (Appeals), no specific finding addressed the non-supply of sworn statements, other evidence or the cross-examination grievance. The Tribunal also criticised the appellate authority’s description of the matter as a clear case of accommodation entries without reference to supporting material.
Accordingly, all five assessments were set aside for de novo assessments. The Assessing Officer was directed to supply all available materials, information, evidence and statements for the assessee’s explanation and rebuttal.
The assessee was directed to comply with hearing notices. All appeals were partly allowed for statistical purposes; the additions were not finally deleted on merits.
Author’s Comments
The ruling illustrates that reopening and final assessment involve distinct questions. Information from a supplier’s search may justify examination of a purchaser’s affairs, but an addition must follow a fair opportunity to address the evidence.
Equally, the assessee’s assertion that purchases were made by cheque was not accepted as conclusive. That explanation remains subject to verification.
The section 153C conclusion should also remain confined to the recorded facts. The practical significance is the Tribunal’s insistence that evidence relied upon must be disclosed and meaningfully open to rebuttal, even where initiation of reassessment is otherwise valid.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT PATNA
These are the appeals preferred by the assessee against the separate orders of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the “Ld. CIT(A)”] passed u/s 250 of the Act in Appeal No. NFAC/2013-14/10072600, NFAC/2014-15/10072973, NFAC/2015-16/10055744 and NFAC/2016-17/10058197 dated 01.08.2025 for the AYs 2014-15 to 2017-18 respectively and in Appeal No. NFAC/2017-18/10089791 dated 10.07.2025 for AY 18-19. As these appeals involve common issues, they are disposed off by this common order for the sake of convenience.
2. At the outset, there is a delay of 115 days in the filing of appeal for AY 14-15 to AY 16-17, 164 days for AY 17-18 and 146 for AY 18-19. The appellant has filed affidavit and condonation petition seeking condonation of the delay. Considering the explanation given in the affidavit for the delay, we condone the delay in the filing of these appeals, and the appeals are taken up for adjudication.
3. The brief facts on record is that the AO based on information received through the Investigation wing, with reference to search conducted in the case of M/s Laxmi Remote India Pvt Ltd (LRIPL), that the said entity has made undisclosed sales to various parties, including the appellant herein, for substantial amounts for various years, initiated proceedings under sec. 147 of the Income tax Act. Subsequently, noting that the assessee had made cash purchases from the said entity, and which was not disclosed in the return of the assessee, the Assessing Officer proceeded to make the impugned additions under sec. 69C, to the total income for the subject years as under:
AY 2014-15 Rs.1,69,53,826/
AY 2015-16 Rs 1,98,10,566/-
AY 2016-17 Rs.1,95,39,113/-
AY 2017-18 Rs 1,63,45,272
AY 2018-19 Rs. 57,19,174/-
4. Subsequently, the impugned additions have been upheld by the Ld CIT(A) vide orders referred supra. Aggrieved, the above appeals are filed before us.
5. The Ld AR contended that the impugned additions are without any basis and have been upheld by the Ld CIT(A) in a mechanical manner without application of mind. It was contended that the AO ought to have initiated proceedings under sec. 153C and not under sec. 147, and that the proceedings under sec. 147 is also not valid as there is no live link to establish escapement of income. It was also contended that the assessee was not provided with the material evidence relied on by the Assessing officer in making the impugned additions, and thus violates the principles of natural justice. The Ld AR relied on various decisions in this regard. It was further argued that all the purchases were made in cheque by the appellant and that the impugned addition was based on mere conjecture and liable to be deleted.
6. On the other hand, the DR argued that the initiation of proceedings was valid and based on information received from the Investigation wing. It was also argued that the Ld CIT(A) has confirmed the addition giving reasons and thus pleaded to uphold the order of the Ld CIT (A).
7. We have considered the rival submissions, and also perused the records. From the assessment order it is seen that that a search was conducted in the case of Laxmi Remote India Pvt Ltd on 16-10-2017. The search operation revealed that the said entity had engaged in large scale unaccounted cash sales and such transactions were recorded in its IVMS software, and those transactions disclosed to the government agencies were recorded in ERP software, and that the assessee is one of the parties with whom substantial cash sales have been made by the said company (LRIPL) for all these years, as per its IVMS data. The Assessing officer also refers to the statements given by Vijaya Kumar Sachdeva, director of the said company, under sec. 132(4) conceding to modus operandi in suppression of sales; and also by Pawan Kumar Midha, general manager of the company, who admitted to manipulation in the recording of sales for the purpose of sales suppression. Based on these, the Assessing officer made the impugned additions under sec. 69C of the IT Act. Thus, we find that the Assessing officer had sufficient basis and material information to come to the conclusion that income chargeable to tax has escaped assessment in the assessee’s case, and hence, we uphold the validity of the proceedings initiated under sec. 147 of the Act. Besides, we note that the Assessing officer has rightly initiated proceedings under sec. 147, instead of sec. 153C as argued by the Ld AR, as this would not fall within the express ambit of sec. 153C, for the reason that the documents/assets belonging or pertaining to the assessee have not been seized. We further note that the assessee has not been provided with the material evidence and have not been offered the opportunity to rebut the said evidence. We note that the assessee has raised this plea before the Ld CIT (A) that he has not been provided with the sworn statements and other material evidence, and that opportunity of cross examination was not afforded. However, no specific finding has been given on this issue by the Ld CIT(A). Thus, we are convinced that the appellant has not been given sufficient opportunity to rebut the material evidence relied on by the Department. We further note that the Ld CIT(A) has remarked that it is a clear cut case of accommodation entry without reference to any material. In this factual matrix, we consider it fit, in the interest of justice, to set aside the impugned assessments for the AY 14-15 to AY 18-19, and restore to the file of the Assessing officer for de novo assessments after affording adequate opportunity of hearing in compliance to the principles of natural justice. The Assessing officer shall provide all the materials/information/evidence/statements available with him to the appellant for his rebuttal and explanation. The assessee shall comply to the hearing notices.
8. As a result, the impugned assessments for the AY 2014-15 to AY 2018-19 are set aside to the file of the assessing officer for framing of fresh assessments in compliance to the principles of natural justice.
9. In the result, all the appeals of the assessee are partly allowed for statistical purposes.
Order is pronounced in the open court on 8th October, 2026
