Quashed Reassessment Under Sections 147/143(3) and Deleted Section 69A Addition – ITAT

Aditya Multipack Solutions Private Limited Vs ITO ( ITAT Ahmedabad)

Ahmedabad ITAT: Reopening Based Solely on Borrowed Satisfaction from Investigation Wing Is Invalid; Third-Party Search Cases Must Follow Section 153C

The Ahmedabad ITAT allowed the assessee’s appeal and quashed the reassessment, holding that an Assessing Officer cannot reopen an assessment merely by reproducing information received from the Investigation Wing without any independent application of mind. Where the information emanates from a search conducted on third parties, the Revenue must follow the specific procedure prescribed under Section 153C and cannot bypass it by invoking Section 147.

The reassessment was initiated on the allegation that the assessee had received bogus accommodation entries of ₹2.01 crore from concerns controlled by Shri Jignesh Shah and Shri Sanjay Shah, based solely on information received from the Investigation Wing. The assessee consistently denied the transactions, sought copies of the material relied upon and requested particulars of the alleged accommodation entries, but no such material was furnished by the Assessing Officer.

The Tribunal found that the recorded reasons merely reproduced the Investigation Wing’s information and contained no independent analysis or satisfaction demonstrating that income had escaped assessment. Since the information originated from a search on third parties, the Assessing Officer ought to have proceeded under Section 153C after complying with the statutory requirements instead of resorting to Section 147.

The Tribunal further observed that no independent enquiry was conducted, no seized material or statements were supplied to the assessee, and no evidence was brought on record to establish that the assessee had actually received the alleged accommodation entries. The addition under Section 69A was therefore founded merely on unverified information.

Holding that the assumption of jurisdiction under Section 147 itself was invalid, the Tribunal quashed the reassessment. It also observed that even on merits, the Revenue had failed to produce any prima facie evidence, including the particulars of the assessee’s bank account in which the alleged deposits were said to have been credited. Consequently, the addition of ₹2.01 crore under Section 69A also could not survive. The assessee’s appeal was allowed

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal has been filed by the assessee against the order dated 14.01.2026 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as Id. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the Act’ in short) for Assessment Year 2015-16.

2. The assessee has raised following grounds of appeal:-

“I. JURISDICTION INVALID REOPENING UNDER SECTION 147

The reassessment proceedings are bad in law and liable to be quashed because:

• • The reopening is based on borrowed satisfaction, without independent verification.
  • There is absence of “reason to believe”, as mandated under Section 147.
  • The AO has acted mechanically on external information.
  • If the very basis of reopening (reason to believe) is invalid, the entire reassessment collapses. “Sublato fundament° cadit opus”

(When the foundation is removed, the structure falls)

II. NON-COMPLIANCE WITH SECTION 153C – FATAL JURISDICTIONAL DEFECT

• • The alleged material originates from search under Section 132 conducted on third parties.
  • As per law, such cases must be dealt with under Section 153C. which requires:

– Recording of satisfaction,

– Identification of incriminating material belonging to the assessee,

– Proper transfer of such material.

• • The AO has bypassed this mandatory procedure and resorted to Section 147, which is impermissible.
  • When the Act provides a specific mechanism (Section 153C), general provisions (Section 147) cannot be used as a substitute.
  • “Expressio unius est exclusio alterius”
    (Express mention of one thing excludes others)

III. REOPENING BASED SOLELY ON THIRD-PARTY MATERIAL – INVALID

• • The reopening lacks independent corroboration.
  • Reliance solely on third-party statements/material is legally unsustainable.
  • Reopening cannot be based on unverified, borrowed information without nexus.
  • Mere allegation without proof of involvement cannot justify adverse inference. “Actus non facit reum nisi mens sit rea”

(The act does not make a person guilty unless the mind is also guilty)

IV. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE

• • Opportunity provided was illusory:

– SCN issued: 25.03.2022

– Time allowed: —1 day i.e. 26.03.2022

– Order passed: 28.03.2022

• • This violates fundamental principles of fairness.
  • Providing extremely short time makes compliance impossible. vitiating proceedings. “Lex non cogit ad impossibilia”

(The law does not compel the impossible)

• • No person should be condemned without a fair opportunity of being heard. “Audi) alteram partem”

(Hear the other side)

V. VIOLATION OF SECTION 144B (FACELESS ASSESSMENT SCHEME)

• • Mandatory procedure under Section 144B not followed:

– No meaningful opportunity,

– No proper consideration of reply,

– Order passed mechanically

VI. ADDITION UNDER SECTION 69A LEGALLY UNSUSTAINABLE

• • The addition of ?2,00,69,550/- is arbitrary and unjustified because:

– No proof of ownership of alleged money.

– No evidence of actual receipt,

– No nexus between assessee and alleged transactions.

– Burden of proof wrongly shifted to assessee.

– The AO must prove unexplained money; assessee is not required to disprove vague allegations. “Ei incumbit probatio qui dicit, non qui negat” (The burden of proof lies on the one who asserts, not on the one who denies)

VII. DENIAL OF CROSS-EXAMINATION

• • AO relied on statements of alleged entry operators.
  • No opportunity for cross-examination was provided.
  • Unverified statements without cross-examination have no evidentiary value. “Testis unus, testis nullus” (One witness is no witness)

VIIL. INVALID ORDER OF CIT(A) NON-SPEAKING ORDER
EX- PARTE

• • CIT(A) failed to adjudicate:

– Jurisdictional issues,

– Legal grounds,

–  Merits.

– An ex-parte order without reasoning is legally unsustainable. “Quod non apparat non est” (What is not apparent does not exist).”

3. The brief facts of the case are that the assessee is a Private Limited Company engaged in the business of trading in fabrics. It filed its return of income for the assessment year under consideration on 28.09.2015 declaring total income of Rs.72,170/-. The return was processed u/s 143(1) of the Act and no scrutiny assessment u/s 143(3) was framed. Subsequently, the assessment was reopened by issuance of notice u/s 148 dated 31.03.2021 on the basis of information allegedly received from the Investigation Wing that the assessee had obtained bogus accommodation entries aggregating to Rs.2,00,69,550/-from concerns controlled by Shri Jignesh Shah and Shri Sanjay Shah.

3.1 The assessee filed its return in response to notice u/s 148 and also sought the reasons recorded for reopening. The assessee specifically informed the Assessing Officer that no such transactions existed in its books of account and requested the Assessing Officer to furnish complete particulars of the alleged accommodation entries, the basis thereof, and the material relied upon. The Assessing Officer did not furnish any details establishing the alleged transactions nor supplied the material relied upon. During the reassessment proceedings, the Assessing Officer ultimately made an addition of Rs.2,00,69,550/- u/s 69A of the Act treating the same as unexplained money.

4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal.

5. Aggrieved by the order of the Ld. CIT(A) , the assessee is in further appeal before this Tribunal.

6. Before us, the Ld. AR challenged the validity of the reassessment proceedings on the ground that the reasons recorded are based entirely on information received from the Investigation Wing without any independent application of mind by the Assessing Officer. The Ld. AR also submitted that the alleged information emanated from a search conducted in the cases of third parties and, therefore, the Revenue ought to have proceeded u/s 153C of the Act after complying with the mandatory statutory requirements and not under section 147. It was further contended that the assessee had specifically denied having received any accommodation entries and had requested the Assessing Officer to furnish the details and material relied upon; however, no seized material, statement, or other evidence connecting the assessee with the alleged transactions was ever furnished. The Ld. AR thus submitted that the reopening is founded on borrowed satisfaction and the consequential addition u/s 69A has been made without any independent enquiry or corroborative evidence, rendering the reassessment liable to be quashed.

7. The Ld. DR, on the other hand, supported the orders of the authorities below and submitted that the information received from the Investigation Wing constituted tangible material sufficient for reopening the assessment.

8. We have heard the rival submissions and carefully perused the material available on record.

8.1 The reasons recorded by the Assessing Officer read as under:

“Bogus accommodation entries amounting to Rs.2,00,69,550/- from bogus concern of Shr. Jignesh Shah and Sanjay Shah during the financial year 2014-15.”

A bare reading of the above reasons demonstrates that except reproducing the information allegedly received from the Investigation Wing, no independent analysis has been made by the Assessing Officer. The assessment was reopened on the basis of information received from the Investigation Wing alleging that the assessee had received accommodation entries from certain entities. The reasons recorded merely reproduce the said information and do not indicate any independent application of mind by the Assessing Officer. Except for the information received, no material has been referred to in the reasons to form an independent belief that income had escaped assessment. We further find that the information relied upon by the Assessing Officer admittedly arose from a search conducted in the case of third parties. If the Revenue intended to proceed against the assessee on the basis of such search material, it was required to follow the procedure prescribed u/s 153C of the Act. The Assessing Officer, however, invoked the provisions of section 147 without following the statutory procedure.

8.2 We also find that the assessee had specifically denied having entered into any such transactions and requested the Assessing Officer to furnish the details vide letter dated 19.01.2022 in reply to notice u/s 142(1) of the Act, however, no such material was supplied. No independent enquiry was conducted and no evidence has been brought on record to establish that the assessee had actually received the alleged accommodation entries. The addition has thus been made merely on the basis of unverified information.

8.3 We further examined the assessment order. The said part of the assessment order reads as under:-

“Notices u/s 142(1) dated 16-11-2021 along with questionnaire and a reminder letter dated 14-12-2021 were issued to the assessee, with a request to file a Return of Income in response to notice u/s 148. The assessee company filed its Return of income on22-11-2021 and furnished its reply on 22-11-2021. The notice u/s 143(2) was issued to the assessee on 18.02.2022

In the submissions made on 19-01-2022 and 02-03-2022 by the assessee company stating that, there are no transactions in our books as regards accommodation entries amounting to Rs. 2,00,69,550/- from the above mentioned bogus concern of Jignesh S Shah and Sanjay Shah, without providing any details with regards to the nature of receipts received through his HDFC bank account to the extent of Rs. 2,00,69,550/-(which was opted to have been made as accommodation entries) The assessee chose to contest the basis of reopening citing various case laws which are not related to the case of the assessee. Further the assessee cannot question the authenticity of the notice issued by the department and the copy of the approval accorded by the competent authority u/s 151 is an internal document of the department

The assessee without substantiating the nature of receipts received, is contesting the re-opening after having filed a return of income in response to notice u/s 148 goes to prove that there is no proof /evidence in support of the claim of expenses with the assessee.

The assessee’s submissions were perused. For the reasons cited supra income amounting to Rs. 2,00,69,550/- is added to the income returned as un-explained money and brought to tax. Further, penalty proceedings u/s 274 r.w.s. 271(1)(c) for concealment of income is initiated separately in the hands of the assessee.

The Income of the assessee is computed as follows:

8.4 In view of these facts, we are of the considered view that the assumption of jurisdiction u/s 147 of the Act is not sustainable. Consequently, the reassessment order passed u/s 143(3) r.w.s. 147 of the Act is quashed. Since the reassessment itself has been held to be invalid, the addition made u/s 69A does not survive. Even on the merits of the case, we find that the Revenue did not produce any prima facie material to show the particulars of bank account of the assessee in which the impugned deposits were credited.

8.5 The remaining grounds are rendered academic and no specific adjudication is required.

9. In the result, the appeal of the assessee is allowed.

The order pronounced in the open Court on 06.08.2026