Case Law Details
P P Industries Vs ITO (ITAT Guwahati)
Foreign Remittance Addition Deleted Because Revenue Failed to Prove Unexplained Expenditure; ITAT Upholds Reassessment Notice Because Retrospective Section 147A Validates Jurisdiction; Addition Under Section 69C Quashed Because Foreign Remittances Were Recorded in Books; ITAT Deletes Income Addition Because Revenue Mixed Up Financial Records of Different PAN Holders.
The Income Tax Appellate Tribunal (ITAT), Guwahati partly allowed the appeal for Assessment Year (AY) 2019-20, arising from the order of the Commissioner of Income Tax (Appeals)-NFAC dated 20.11.2025.
The assessee, a partnership firm, challenged the validity of the reassessment proceedings as well as additions made by the Assessing Officer (AO). The assessee contended that the notice issued under Sections 148A(b), 148A(d), and 148 was invalid because it had been issued by the Jurisdictional Assessing Officer instead of through a faceless mechanism as required under Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022. The assessee also disputed additions relating to foreign remittances to China, alleged suppressed business income, and transactions attributed to another partnership firm having a different Permanent Account Number (PAN).
The AO had initiated reassessment proceedings after detecting foreign remittances amounting to ₹2,37,35,765 made through Union Bank of India. During the reassessment, the AO observed that the assessee was operating with three different PANs and consequently made an addition of ₹23,29,706 under Section 28 as suppressed business income and ₹2,37,35,765 under Section 69C read with Section 115BBE as unexplained foreign remittance expenditure. The total income was determined at ₹2,40,65,470.
The CIT(A) condoned a delay of one day in filing the appeal but upheld the assessment. The appellate authority observed that the assessee had failed to furnish income tax returns, computation of income, audited accounts, invoices, bills of entry, bank advices, or other documentary evidence to substantiate its claims regarding brought-forward losses or the foreign remittances. Accordingly, the additions made by the AO were confirmed.
Before the Tribunal, the assessee reiterated that three separate partnership firms existed with the same name but different PANs, different combinations of partners, and different profit-sharing ratios. It was argued that the financial details of these firms had been mixed up by the AO. The assessee also referred to the assessment order to contend that the foreign remittances related to another unit and that the remittances had been duly explained.
On the legal challenge to the reassessment notices, the Tribunal noted that Section 147A had been inserted by the Finance Act, 2026 with retrospective effect from 1 April 2021. The provision clarified that, notwithstanding Section 151A or any scheme framed thereunder, the Assessing Officer for the purposes of Sections 148 and 148A means an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to under Section 144B. In view of this retrospective amendment, the Tribunal dismissed the assessee’s challenge to the jurisdiction of the notices.
Regarding the addition under Section 69C, the Tribunal found that the reassessment had been initiated because of foreign remittances. During the hearing, the Department was asked how the foreign remittances justified an addition for unexplained expenditure when no details of the alleged purchases had been identified. The Department submitted that the assessee had failed to furnish details of machinery purchased and had produced different bills and invoices. However, the Tribunal observed that no material had been placed on record to establish what machinery had been purchased by the assessee or that the expenditure had been incurred from unexplained sources. It further noted that the foreign remittances had been made as reflected in the books of account and had not been shown to have originated from unexplained sources. Since the Department could not satisfactorily explain the discrepancy, the Tribunal held that the addition under Section 69C was not justified and deleted it.
FULL TEXT OF THE ORDER OF ITAT GUWAHATI
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)1 passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2019-20 dated 20.11.2025.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That the ld. Commissioner of Income Tax (Appeals), NFAC erred in facts as well as in law in not holding that Notice U/ s. 148A(b) dated 10.02.2023, Order U/ s. 148A(d) and Notice U/ s. 148 of the Income Tax Act, 1961 dated 31.03.2022 having been issued by the I.T.O., Ward 1(2), Guwahati, JAO instead of in a faceless manner through automated allocation, was in contravention of the provisions of Section 151A of the Act as well as the ‘e-Assessment of Income Escaping Assessment Scheme, 2022’ and therefore, was wholly illegal and without jurisdiction and therefore, liable to be quashed. Consequently. the assessment order dated 23.03.2024 passed U/ s. 147 r.w.s. 144B of the Act was also without jurisdiction and hence, liable to be quashed.
2. That neither the ld. Assessing Officer was justified in making the addition of U913897, being foreign remittances made to China, by treating it as Unexplained Expenditure U/ s. 69C of the Income Tax Act, 1961 and charging to tax U/ s. 115BBE of the Income Tax Act, 1961 despite giving categorical finding at Page No. 9 of the assessment order that no adverse inference had been drawn in respect of the said amount, nor the ld. Commissioner of Income Tax (Appeals), NFAC was justified in confirming the aforesaid addition.
3. The both the ld. Assessing Officer and the ld. Commissioner of Income Tax (Appeals), NFAC erred in facts as well as in law in making/ sustaining, the addition of f102868, which pertained to some other assessee having PAN AALFP3078J.
4. That the ld. Commissioner of Income Tax (Appeals), NFAC ought to have held that there was no legal bar on the existence of different partnership firms with the same name, and that since admittedly, all the three firms had separate PANs with different dates of incorporation, there was no question of the petitioner holding multiple PANs, and therefore, there was no question as to the inclusion of incomes of the other PANs in the Total Income of the petitioner.
5. That the petitioner craves leave to submit for production of additional evidence in support of the grounds of appeal at the time of hearing of the appeal in terms of Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.
6. That the appellant craves leave to add, amend, modify, rescind, supplement, re-frame OR alter any of the ground/ s of appeal stated above on OR before the hearing of the appeal.”
3. Brief facts of the case are that the assessee, a partnership firm, did not file its return of income u/s 139(1) of the Act for the AY 201920. The Assessing Officer (hereinafter referred to as Ld. ‘AO’) initiated proceedings u/s 147 r.w.s. 144B of the Act after detecting foreign remittances to China amounting to 237,35,765/- through Union Bank of India, which remained unverified. During the reassessment proceeding, the Ld. AO discovered that the assessee was operating with multiple PANs, namely AAWFP5485G, AALFP2626E, and AALFP3078J. Consequently, the Ld. AO made an addition of 23,29,706/- u/s 28 of the Act towards suppressed business income and 237,35,765/- u/s 69C r.w.s. 115BBE of the Act towards unexplained foreign remittance expenditure, determining the total income at 240,65,470/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who noted that the appeal was filed with a delay of one day, which was condoned by taking a liberal view. Regarding the additions, the Ld. CIT(A) observed that the assessee failed to provide any evidence, such as ITRs, computation of income or audited accounts to substantiate the existence of brought-forward losses for the addition u/s 28 of the Act, nor did the assessee produce any corroborative documents like invoices, bills of entry or bank advices to explain the nature, source, and purpose of the foreign remittances for the addition u/s 69C of the Act. Consequently, finding the assessee’s submissions entirely unsubstantiated and noting the lack of compliance during appellate proceedings, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined.
6. Ground No. 1 is relating to the notice being issued by the Jurisdictional Assessing Officer instead of Faceless Assessing Officer. In the Income Tax Act, 1961, a new section 147A has been inserted after section 147 by the Finance Act, 2026 (Act No. 4 of 2026) with retrospective effect from 01.04.2021 as under:
Assessing Officer for purposes of sections 148 and 148A.
147A. Notwithstanding anything contained in any judgment, order or decree of any court or in section 151A or in any scheme framed thereunder, for the removal of doubts, it is hereby clarified that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.
7. Hence, since section 147A of the Act has been inserted with retrospective effect and the law has been amended, Ground No. 1 of the appeal is hereby dismissed.
8. Regarding Ground No. 2, it was mentioned by the Ld. AR that there were three partnership firm having different profit-sharing ratio and the different combination of partners and the financial details of the three were mixed up by the Ld. AO. It was stated that no addition was made in the other cases. The assessee had duly explained the foreign remittance of Z37 Lakh. Our attention was also drawn to page 9 of the assessment order and it was stated that the return of income was filed and the transactions were relating to P P Industries, Unit-2. Our attention was also drawn to page 14 of the paper book. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
9. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). Apparently, there were three partnerships with the same name but with different PANs and different profit-sharing ratios which led to the mix up of the details. The case was reopened on account of foreign remittance and the addition was made u/s 69C of the Act. The Ld. DR was confronted as to how the foreign remittance made by the assessee could justify addition on account of unexplained purchases when the details of purchases made were not even mentioned. The Ld. DR stated that the assessee could not furnish the details of the machinery purchased and different bills/invoices were produced. It was conveyed to the Ld. DR that this would have called for addition on account of unexplained purchases in the case of the other concerns which could not explain the source of the purchases but in the case of the assessee foreign remittance was made as per the cash available in the books of account/bank and no material has been placed on file as to what machinery was purchased by the assessee in appeal for which unexplained expenditure was incurred so as to hold that the source of expenditure was unexplained. The Ld. DR could not satisfactorily explain this discrepancy.
10. We have considered the submissions made and are conscious of the fact that in view of the three partnership firms having the same name, the mix up in financial statement arose which led to the addition while in the case of the assessee since the case was reopened on account of foreign remittance made, which was made as per the books of account and the same has not been held to be out of unexplained sources, therefore, the addition u/s 69C of the Act was not called for. The addition is hereby deleted and the ground no. 2 of the appeal is allowed.
11. As regards Ground Nos. 3 & 4, since the transactions related to PAN AAWFP5485G only can be assessed in the hands of the assessee and the transactions mentioned at page 14. In para-6 a related to the PAN AALFP3078J , which is a separate partnership firm, there was no justification in the absence of any evidence to hold that the same related to the assessee and not to the firm having the same name but different PAN as well as different partners and therefore, are distantly different entity, the addition made in the hands of the assessee is not justified and the same is directed to be deleted. Hence, Ground Nos. 3 and 4 are allowed while Ground Nos. 5 and 6 are general in nature and do not require any separate adjudication.
12. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on 5th June, 2026.
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