Samyak Towers (P) Ltd. Vs ITO (ITAT Kolkata)
CIT(A) Cannot Decide Incorrect Grounds While Ignoring Jurisdictional Challenge to Reopening: ITAT Restores Appeal for Speaking Order
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal has set aside an appellate order where the CIT(A) failed to adjudicate the assessee’s jurisdictional grounds challenging the reopening of assessment and instead proceeded on grounds that did not correctly correspond with those actually raised by the assessee. The Tribunal restored the entire appeal to the CIT(A), directing him to decide all the grounds on merits through a reasoned and speaking order after granting the assessee a reasonable opportunity of hearing.
Facts of the case
The assessee-company filed its original return of income on 25 September 2013, declaring a total income of merely ₹1,227. The return was processed under Section 143(1).
The assessment was subsequently reopened by issuing a notice under Section 148 on 16 March 2021. In response, the assessee filed its return on 9 October 2021, once again declaring income of ₹1,227.
The Assessing Officer completed the reassessment under Sections 143(3) read with 147 on 28 March 2022, assessing total income at ₹5,01,227 after adding ₹5 lakh as unexplained cash credit.
The addition arose from information that the assessee had allegedly received an accommodation entry from M/s Capable Dealers Pvt. Ltd., an entity stated by the Investigation Wing to be engaged in providing accommodation entries.
The assessee contended that the amount represented genuine sale proceeds received through banking channels and was supported by its balance sheet, profit and loss account and bank statements.
Grounds raised before the CIT(A)
The assessee challenged both the validity of the reopening and the addition on merits.
The jurisdictional objections included the contentions that:
- the notice under Section 148 was illegal and barred by limitation;
- the reassessment was completed without following the prescribed statutory procedure;
- the proceedings were invalid in the absence of a notice under Section 148A(a);
- the reassessment violated Section 151A and the applicable faceless reassessment scheme;
- the required statutory approval had not been properly obtained; and
- the Assessing Officer lacked jurisdiction to complete the reassessment.
The assessee also disputed the addition of ₹5 lakh on merits, contending that it was based upon an incorrect assumption regarding the sale of shares or investment in shares.
Before the Tribunal, the assessee raised an additional ground specifically contending that the assessment under Sections 147 and 144B violated Section 151A read with the CBDT Notification dated 29 March 2022.
Mismatch in the grounds recorded by CIT(A)
The Tribunal noticed a serious discrepancy between the grounds actually raised by the assessee and those recorded and adjudicated by the CIT(A).
The assessee’s written submissions referred to six grounds. The principal grounds challenged the reopening, the procedure followed under Section 147 and the jurisdiction of the Assessing Officer. However, the CIT(A)’s order referred to only four grounds.
More significantly, the CIT(A) recorded the grounds as relating to:
- the addition of ₹5 lakh as unaccounted money taxable under Section 115BBE;
- imposition of penalty under Section 271(1)(c); and
- two general grounds.
The Tribunal observed that the grounds recorded by the CIT(A) did not correspond with the grounds appearing in the assessee’s written submissions. In particular, the assessee’s challenges to the legality of the reopening were not adjudicated.
Decision of the CIT(A)
The CIT(A) confirmed the ₹5-lakh addition by relying upon the decisions in PCIT v. N.R. Portfolio Pvt. Ltd. and PCIT v. NRA Iron & Steel Pvt. Ltd.
He held that transactions routed through banking channels, supported by PAN or income-tax returns, would not by themselves prove genuineness where the transaction involved a shell company. The appeal was accordingly dismissed.
However, the order contained no decision on the limitation, jurisdiction, Section 148 procedure, approval or Section 151A objections. There was also no discussion of Grounds 2 and 3 as understood from the assessee’s actual appeal and written submissions.
ITAT’s findings
The Tribunal held that the first appellate order clearly showed that the grounds challenging the reopening had not been adjudicated.
The CIT(A) was required to consider and decide every substantive ground raised by the assessee. Since the jurisdictional issues had been left undecided and certain grounds were not even mentioned in the appellate order, the matter required reconsideration.
In the interest of justice and fair play, the Tribunal set aside the CIT(A)’s order and restored the appeal to him with directions to:
- examine every ground raised by the assessee;
- adjudicate the grounds on merits;
- pass a reasoned and speaking order;
- provide the assessee a reasonable opportunity of hearing;
- follow Rule 46A where additional evidence is produced; and
- provide the Assessing Officer an opportunity wherever required.
The assessee was also directed to cooperate and not seek unnecessary adjournments.
The appeal was partly allowed for statistical purposes.
Author’s comments
The decision is important because the appellate jurisdiction of the CIT(A) extends not merely to confirming or deleting an addition but to deciding the precise grounds placed before him. Under Section 250(6), the appellate order must state the points for determination, the decision on each point and the reasons supporting that decision.
A jurisdictional ground challenging the validity of reassessment goes to the root of the proceedings. It should ordinarily be decided before examining the addition on merits because, if the reopening itself is invalid, the consequential reassessment cannot survive.
The apparent reference in the CIT(A)’s order to a penalty under Section 271(1)(c), when the assessee’s real grounds concerned reopening and jurisdiction, indicates a serious lack of alignment between the appeal filed and the order passed. Faceless appellate proceedings do not dilute the statutory obligation to identify and adjudicate the correct grounds.
However, the Tribunal has not quashed the reassessment and has not deleted the ₹5-lakh addition. It has also not accepted the assessee’s objections under Sections 148A or 151A on merits. All these issues remain open and must now be decided by the CIT(A).
The ruling is ultimately a reminder that an appellate order cannot be treated as complete merely because it decides the quantum addition. Every jurisdictional ground must receive a clear finding supported by reasons.
Cases Discussed
- PCIT v. N.R. Portfolio Pvt. Ltd. — The CIT(A) relied upon the decision concerning accommodation-entry/share transactions and shell-company issues. No independently verified TaxGuru publication for this specific case was located, and therefore no TaxGuru link has been inserted.
- PCIT v. NRA Iron & Steel Pvt. Ltd. — The CIT(A) relied upon the Supreme Court decision concerning the evidentiary requirements relating to share capital/share premium and the genuineness of transactions. TaxGuru has a publication concerning the Supreme Court’s review decision in NRA Iron & Steel Pvt. Ltd.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the assessee is against the order dated 21.05.2025 of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2013-14.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1) That on the facts and in the circumstances of the case, the action of the Ld. CIT(A) to uphold the action of the AO to issue notice u/s 148 of the Act is illegal and bad in law and barred by limitation.
2) That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to uphold the action of the AO in having framed assessment u/s 147 without correctly following the procedure laid down in the Act and in the absence of issue of notice u/s 148A(a) the proceedings are illegal and bad in law.
3) That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to uphold the action of the AO to have issued notice u/s 148 of the Act without jurisdiction and in violation of section 151A of the Act and also without taking proper approval, therefore, illegal and bad in law.
4) That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to uphold the action of the AO in making addition of Rs.5,00,000/- as unaccounted money on sale of shares /investment in shares is based upon incorrect notion and the addition is arbitrary, excessive, illegal and bad in law.
5) That the order passed by the A.O. and upheld by the CIT(A) was arbitrary, excessive and illegal.
6) That the above grounds of appeal will be argued in detail at the time of hearing and the appellant crave leave to submit additional grounds of appeal, if any, and/or alter, verify, modify or rectify any grounds of appeal at or before the time of hearing.”
2.1 The assessee has also raised additional ground of appeal which is as under:
“1) That on the facts and in the circumstances of the case the action of the AO in having framed assessment u/s 147 / 144B of the I.T Act 1961 is without jurisdiction and in violation of section 151A read with CBDT Notification dated 29.03.2022 and therefore illegal and bad in law.”
3. Brief facts of the case are that the assessee had filed the return of income on 25.09.2013 u/s 139(1) of the Act showing total income of ₹1,227/-, which was processed u/s 143(1) of the Act. The assessment was reopened by issuance of notice u/s 148 of the Act dated 16.03.2021 and in response to which the assessee filed the return on 09.10.2021 declaring income of ₹1,227/-. The assessment was framed u/s 143(3)/147 vide order dated 28.03.2022 at the total income of ₹5,01,227/- by making addition of ₹5 Lakh as unexplained cash credit. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) and raised six grounds of appeal as mentioned in the written submission filed before him and extracted in the appeal order although in Form No. 35 only 4 grounds are mentioned. However, the Ld. CIT(A) on page 2 has mentioned only four grounds of appeal. Our attention was drawn to page 2 and 3 of the appeal order, and on page 3 in the written submission the assessee has mentioned that it is aggrieved with the addition made as well as the legality of the order and had preferred the appeal by taking altogether six grounds of appeal out of which ground nos. 4, 5, and 6 are general in nature and the remaining grounds are taken up in seriatim. Ground nos. 1 and 2 relate to the legality of the order passed u/s 147 of the Act and notice issued u/s 148 of the Act, while the Ld. CIT(A) on page 2 has mentioned ground no. 1 as relating to addition of ₹ 5 Lakh as unaccounted money under the provision of section 115BBE of the Act being bad in law. Ground no. 2 is mentioned as relating to imposition of penalty u/s 271(1)(c) of the Act for concealment of income and ground nos. 3 and 4 are general in nature, as mentioned in page 2 of the appellate order. Thus, the grounds raised by the assessee as mentioned in the In the written submissions filed before the Ld. CIT(A), do not appear to have been adjudicated.
4. Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that the additional grounds raised by the assessee had not been adjudicated and requested that the matter may be remanded to the Ld. CIT(A) for disposal of the grounds of appeal raised.
5. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be confirmed.
6. 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). The Ld. CIT(A) dismissed the appeal of the assessee as per his findings as under:
“6. Decision: I have considered the facts of the case, written submission and case laws relied upon by the appellant as against the observations and findings of the AO in the assessment order. The submissions and contentions of the appellant are discussed and decided as under:
6.1 Ground No.1: In this ground the appellant has challenged the addition worth Rs.5,00,000/- on account of unexplained cash deposits. The case was reopen u/s 148 of the Income Tax Act on the ground that the appellant had received the accommodation entry from M/s Capable Dealers Pvt Ltd. The appellant has shown sale to this party, but the Investigation Wing at Kolkata during the enquiry has found that this company M/s Capable Dealers Pvt Ltd is providing only accommodation entry.
6.1.1 Now before me in the appellate proceedings, the appellant has filed written submission. The appellant has stated that the sales money received is genuine and is routed through bank. The appellant has also filed the balance sheet, the P&L account and the bank statements in this regard. Reliance is placed here on the judgement of Delhi HC in the case of PCIT vs NR Portfolio, in which Hon. Delhi HC has confirmed the addition of the department in the case of shell company on identical issues. This decision has been confirmed by Hon. SC. Reliance is also placed upon the decision of Hon. SC in the case of PCIT vs NRA Iron and Steel, where Hon. SC held that mere transaction through cheque and PAN and Income Tax Return will not explain the genuineness of the transaction of the shell company. Hence relying upon these decisions, the addition of the AO is confirmed and appeal of the appellant is dismissed.
6.3 Ground No.4: This ground is general in nature and do not require to be adjudicated.
7. The appeal of the appellant is Dismissed.”
7. Thus, a perusal of the order of the Ld. CIT(Appeals) shows that it is evident that the ground relating to the reopening of the assessment have not been adjudicated by the Ld. CIT(A). There is no mention of Ground Nos. 2 and 3. Therefore, after examining the facts of the case and the law and in the interest of justice and fair play, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the appeal before him for disposal of the grounds of appeal taken by the assessee on merit by passing a speaking order. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments and rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided to the Ld. AO, if required. Accordingly, the grounds taken by the assessee in the appeal are partly allowed for statistical purposes.
8. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 10th September, 2026.
