Reassessment Quashed as AO Used Section 147 Instead of Mandatory Section 153C

Viru Textile Mills Pvt. Ltd. Vs ITO (ITAT Ahmedabad)

Where reopening is based solely on incriminating material seized during search on a third party, the Revenue must proceed under section 153C and cannot bypass the special search assessment code by invoking sections 147/148.

Summary: In Viru Textile Mills Pvt. Ltd. Vs ITO, the ITAT Ahmedabad considered reassessment proceedings initiated under Sections 147/148 for AYs 2016-17 and 2017-18 based on material seized during a search conducted on the Sanjay Tibrewal Group. The assessee challenged the reopening on multiple legal and factual grounds, including that the Assessing Officer should have proceeded under Section 153C instead of Sections 147/148 because the alleged incriminating material belonged to a third-party search case. The Tribunal relied on the Gujarat High Court decision in Paras Chandreshbhai Koticha and held that where reassessment is based solely on search material seized from a third party, proceedings must be initiated under Section 153C after recording the mandatory satisfaction note. Since no satisfaction note was recorded and no independent post-search material existed, the Tribunal held that the Assessing Officer could not bypass Section 153C and invoke Sections 147/148. Accordingly, the reassessment orders passed under Section 147 read with Section 144B for both assessment years were held to be without jurisdiction, void ab initio, and quashed. Other legal and factual issues were treated as academic after quashing the reassessment proceedings.

Issue: Whether reassessment under sections 147/148 was valid when the only basis for reopening was material seized during a search conducted on Shri Sanjay Govindram Agrawal (Sanjay Tibrewal Group), i.e., a third party.

Facts: The assessments for AYs 2016-17 and 2017-18 were reopened on the basis of Excel sheets and bank statements seized during search proceedings under section 132 in the case of Sanjay Tibrewal Group. Based on this information, the Assessing Officer alleged that the assessee was a beneficiary of accommodation entries and made additions under sections 68 and 69C.

Tribunal’s Findings: The Tribunal held that where the sole foundation of reopening is material found during search on another person, the special provisions of section 153C constitute a complete code and override the general provisions of sections 147/148. Section 153C begins with a non obstante clause and mandates that the Assessing Officer of the searched person must record a satisfaction note that the seized material belongs or pertains to the other person before transmitting it to the jurisdictional Assessing Officer.

In the present case, the Revenue failed to establish that any such satisfaction note had been recorded. Further, there was no independent post-search material apart from the seized documents. Therefore, the jurisdictional conditions of section 153C were not satisfied, and reassessment under sections 147/148 was held to be without jurisdiction.

The Tribunal followed its earlier decision in the assessee’s own cases and the Gujarat High Court judgment in Paras Chandreshbhai Koticha v. ITO, which held that when the basis of reopening is exclusively third-party search material, recourse to section 147 is impermissible.

Borrowed Satisfaction: The Tribunal rejected the assessee’s separate contention that the Assessing Officer acted solely on borrowed satisfaction. It observed that under the amended reassessment regime, information from the Insight Portal can validly trigger proceedings. Since the Assessing Officer issued notice under section 148A(b), furnished transaction details, considered the assessee’s reply, and passed an order under section 148A(d), there was sufficient independent application of mind.

Held: Reassessment under sections 147/148 based solely on material seized during search on a third party is invalid. In such cases, the only permissible route is section 153C. The reassessment orders for both years were quashed.

Cases Relied Upon:

1. Paras Chandreshbhai Koticha v. ITO

2. Union of India v. Rajeev Bansal

3. Union of India v. Ashish Agarwal

4. Tirupati Construction Co. v. ITO

5. Shyam Sunder Khandelwal v. ACIT

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

These two appeals filed by the assessee pertain to the Assessment Years (AYs) 2016-17 and 2017-18 against the separate orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], of even date 29/03/2025, passed u/s.250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. Since common facts and issues are involved in both the captioned appeals, these were heard together and are being disposed of by this consolidated order. Assessee’s appeal in ITA No.1220/Ahd/2025 for AY 2016-17 is taken as a lead case for the purpose of narration of facts.

ITA No.1220/Ahd/2025 – for AY 2016-17

2. The assessee, in this appeal has raised the following grounds of appeals:

“1. THAT CIT(A) has partly allowed the appeal after considering the submission of the assessee but without going through the documents submitted during the assessment u/s 148A and u/s 148, ground of appeal along with the certain details as attached to the form 35, documents reply and submitted by the assessee during the assessment proceedings. The assessee has filled the written submission which was also not considered by the CIT(A).

2 THAT the CIT(A) has ignored the fact that Assessee has submitted all necessary the documents before the AO during the assessment proceeding and appeal in written submission related to the transactions. The assessee has submitted the documents such as a copy of ledger accounts, a copy of invoices, Copy of LR copy. Confirmation etc. Moreover, AO/CIT(A) has simply relied upon the investigation report only and does not gone through the various documents submitted by the assessee, which are collaborated with the books of accounts and the bank statement submitted by the assessee. THAT the CIT(A) has ignore the fact that all documents were already submitted before the AO during the assessment proceeding u/s 148A and U/s 148 as specified here in above as facts of the case. Therefore, these documents cannot be treated as Additional documents.

the CIT(A) has observed that the Assessee has not submitted the documents before the AO during the assessment proceeding, and now, after 18 months, the assessee has submitted the documents such as a copy of ledger accounts, a copy of invoices, and the assessee has submitted the documents the said documents which are after thought and therefore cannot be accepted as the assessee has specified in the Form 35 column no 12 as “No” and hence the same cannot be accepted as additional documents. Moreover, the CIT(A) has ignore the fact that these documents were already submitted before the AO during the assessment proceeding u/s 148A and U/s 148. The copy of the Assessment orders are attached herewith alongwith the form 36 THAT The assessee has submitted the details of the transactions and credit shown in the books of account in the account of the parties to whom the goods were sold is clearly indicated in the reply which was reproduced in the order u/s 148A(d). The CIT(A) has ignored the said fact and without considering the same has passed the order by dismissing the appeal. The above clearly indicate that the assessee has submitted all these documents before the AO during the assessment proceedings and therefore, the allegation of the CIT(A) that the details were not submitted before the AO is totally against the facts of the case, which shows that CIT(A) has followed a very casual approach will deciding the issue. Therefore, CIT(A) should be set-a-side and addition made should be deleted.

Technical Issues:

3. THAT the AO/CIT(A) has not followed the procedure as prescribed in Section 148A, Judgement of the Supreme Court and the CBDT circular in this regard.

4 THAT the AO/CIT(A) has not followed the procedure as prescribed in Section 153C.

5 THAT AO has providing information in parts even after direction from the Honourable Supreme Court in the case of Ashish Agarwal and hence the notice issued u/s 148A(b) and/or order passed under section 148A(d) are in violation of the Honourable Supreme Court and hence to be deleted.

6. THAT AO has not carried out any inquiry before the issue of the notice u/s 148/148A and has borrowed the reason from the investigation report and information uploaded on the insight portal.

7. THAT no information was provided by the AO which was specifically requested by the assessee during the assessment and or before the CIT(A)

8. THAT notice u/s 148 dated 19.04.2021 issued is without the approval of the Competent/Specified Authority as specified in the Act. Since, in the present case, the authority approval is not the competent authority, the notice issued under section 148 is void ab initio and illegal. Therefore, the same should have to be withdrawn. The notice was issued by range 4(1) Ahmedabad, who is not having any authority to give the approval u/s 151, Therefore, the said notice is to be treated as void ab initio.

9. Failed to provide the final assessment order in the case of Sanjay Govindram Agarwal and Others to demonstrate how the said amount was treated in his assessment as the same income cannot be taxed in two hands.

10. THAT the department has not provided the opportunity of the cross-verification of the person on whose statement the AO has relied upon, and considered that the assessee is one of the beneficiaries of the amount. Simply relying on the statement of the person (mainly when there is no direct evidence available that the transaction was carried out by the assessee simply receiving the amount in the bank account does not mean that the assessee is the beneficiary of the amount) cannot be reason to make addition unless and until there is another evidence which collaborate with the statements. Therefore, without giving an opportunity of cross-examination, no order can be passed against the assessee, and hence the order passed should be set aside.

On facts of the case:

11. THAT the addition of Rs. 96,12,050/- made u/s 68 of the Income Tax Act, 1961 is against the law as the assessee has duly explained the credit entries booked in the accounts and produce the relevant evidence in this regard to explain the source of the receipt of these entries. It is an accepted fact that the assessee has provided all the details and explained the transaction, stating that the said amount received by the assessee is against the sale made to various persons. In support of the same, the assessee has submitted the following documents i.e. (i) Copy of ledger account, (ii) Copy of invoice. (iii) Copy of the LR copy as proof of delivery of goods, (iv) Copy of Confirmation from the parties to whom goods were sold. Therefore, the assessee has explained the transaction properly and disclosed the transactions recorded in the books of the assessee. Hence, the addition made u/s 68 of Rs. 96,12,050/-, should have to be deleted.

12. THAT it is also an accepted fact that no cash trail (as alleged by the AO) was found through which it can be proved that the assessee has given cash in lieu of the cheque/deposits in the books of the assessee. Hence, the addition made u/s 68 of Rs. 96,12,050/-, should have to be deleted.

13. THAT AO has never made any objection on the facts that the assessee has already disclosed the above amount under the Sales Head and shown as income in the profit and loss account. Ignoring the said fact, AO has again added the said amount in the income is leading to double taxation. In this regard, AO has also not followed the various judgements quoted by the AO has passed the order. Since, the addition is against the principle of double taxation of the same income. Therefore, it should have to be deleted.

14. At the time of reason to believe and search carried out by the department, it was critically stated that these banking transactions were belong to the employee/person related to Shri Sanjay Agarwal and they have given the statement on oath and accepted that the bank account was operated and run by them. It is very surprising that after the search and statement taken during the search (on which the AO has relied upon), now at the time of assessment, AO concluded that the firm does not exist, specifically when the PAN is linked and verified. If the firm is not in existence, then how was the bank account opened by the banks through which the amount was transferred, and the assessment of the person done by the department in the past? It is also an accepted fact that the income of the persons who have given the statements was assessed by the department regularly. Therefore, the contention of the department that the party is not in existence cannot be accepted and therefore, the addition made should have to be deleted.

15. The assessee during the assessment proceedings has stated that the assessee has not carried out any business transaction with the said parties ie. Sanjay Tibrewal and Group. The bank transactions (ie. amount received by the assessee in its bank account) are on behalf of the parties with whom the assessee has carried out the sale transactions for which the details were already provided to the AO along with the confirmation, and once again attached herewith for your ready reference. Therefore, whether the various firm (Sanjay Tibrewal and Group) exists or not does not make any difference, since the assessee has not carried out any business transaction with Sanjay Tibrewal and Group, but the parties who have purchased the goods might have dealt with them. The said fact is also confirmed from the account confirmations submitted by sales parties and attached herewith in support of the same. Therefore, the whole addition is made on the assumption and presumption and hence to be deleted.

16. THAT the AO has not considered the sales invoice, LR copy, Ledger Copy and other relevant papers to establish that the assessee has sold the goods to the various parties from whom he has received the payment in the bank account (through Sanjay Tibrewal and Group). The AO has even has not discussed the various reply including show cause reply in the assessment order. Therefore, the order passed by the AO is without considering the various reply of the Assessee.

17. THAT AO has tried to establish that the bank statement is only conclusive evidence and acceptable to consider the genuineness of the transaction. The said opinion can be an opinion of the officer, but it cannot be acceptable in the eyes of the law. The documents which are in the control of the assessee such as LR copy, bank receipts, parties’ confirmation and ledger accounts, are totally ignored by the AO, while making the addition in the present case. Therefore, since the Assessee has established the genuineness of the transaction by giving all the relevant details along with the name and address of the parties, the addition should be deleted.

18. That AO has formed his opinion from the initial stage of the proceedings and prepared his mind before starting the assessment to treat the amount as income, without going through the relevant details. Therefore, the assessment is based on his presumption and theory. That the Ld A.O. has not justified in applying his own theory that the assessee has taken accommodation entries without any concrete evidence of such transactions, and ignoring the fact that the said transactions are duly recorded in the books, is without applying his own mind. That the AO has ignored the explanations and documents submitted by the assessee and giving all relevant information and passed the order u/s 147 of Income Tax Act, 1961.

19. From the above details, it is very much clear that there is a deposit transaction of Rs 96.12,050/- (including Rs. 6,00,000/- which was cheque bounced) in the account of the assessee from Sanjay Tibrewal and Group which were received on behalf of sales parties. Ignoring the said fact, without applying the mind AO has just passed the Assessment order and made the addition of Rs. 96,12,050/- (In spite of ignoring the above facts as discussed). Therefore, the AO has passed the order without verifying the details or applying his mind, which is mechanical. Hence, the addition made should have been. deleted.

20. That on the facts and circumstances of the case and in law, the learned, assessing officer has failed to understand the true nature of transactions (deposits) and based on his own theory treated them as unexplained cash credit and treated as accommodation entries.

21. That the AO has accepted that the amount is duly accounted in the books and credited to the respective parties to whom the sales were made, and hence the amount is already included in the income of the Assessee Company. Therefore, there is no transaction, which is unaccounted in the books of the assessee and therefore, the addition made by the AO should have been deleted.

22 THAT the AO/CIT(A) has made an addition of Rs. 13,00,000/- u/s 37(1) as unexplained expenditure of the Income Tax Act, 1961, the amount which was credited in the bank statement (payment made/cheque bounced) of the assessee in spite the assessee has never claimed any expenditure in the profit and loss account. The CIT(A) has allowed the given the direction to AO to delete the addition of RS. 12,00,000/ after verifying that the cheque was bounced but failed to given direction from which addition it is to be removed. Being CIT(A) himself got satisfy that the cheque was bounced as statement was already provided by the assessee during the appeal. Therefore, the whole addition of Rs. 13,00,000/- should have to be deleted.

Technical Ground:

23. That Addition u/s 68 of the Income Tax Act, 1961 is to be made if certain conditions were not fulfilled. The AO has made the addition irrespective of the fact that the said transactions were duly recorded in the books of account and explained by the assessee. Therefore, the same should have to be deleted. Since as per AO, these receipts for Rs. 96,12,050/- is not accounted in the books of accounts, the prime condition u/s 68 is not satisfied i.e. when the entry is not credited in accounts no addition can be made u/s 68. Therefore, addition u/s 68 by the AO is to be deleted.

24. That Addition u/s 37(1) of the Income Tax Act, 1961 is to be made if certain expenditure which were claimed by the assessee but were not explained or prof were produced then the same will be disallowed. The AO has disallowed Rs. 13,00,000/- and made the addition irrespective of the fact that the said amount was never claimed as an expenses in the books of account as Rs. 7,00,000/- were paid on behalf of sales party and debited to the party ledger where as Rs. 6, 00,000/- is the reversal of the cheque deposited by the party. Therefore, the same should have to be deleted as the assessee has not claimed any expenses against the same.

25. That on the facts and circumstances of the case and in law, the learned AG has passed order u/s 147 r.w. 144B of the Income Tax Act, 1961, which is Bad in Law and against the principles of natural justice.

26. That the learned AO has erred in not considering the actual facts and circumstances of the case and also not considering/appreciating the evidence, supporting details and documents submitted by the appellant. His act is based on presumption, assumption, surmises, conjectures and suspicions.

27. That the Id. assessing officer grossly erred in deliberately ignoring several reasonable, plausible submissions which had a material bearing on the impugned case and ignoring the same was unjustified, bad in law, is in utter violation of the principle of natural justice and ought to have been considered. No consideration is unjustified, bad in law and the entire approach deserves to be deprecated.

28. That on the facts and in the circumstances of the case, the Id. Assessing Officer grossly erred in creating an illegal demand of Rs. 69,18,360/-against the assessee-appellant.

29, That on the facts and in the circumstances of the case, the Id. The assessing Officer grossly erred in charging interest u/s 234A/2348/234C/234 of the Income Tax Act.

30. That on the facts and in the circumstances of the case, the Id. Assessing Officer grossly erred in the issue of penalty notice u/s 271(1)(c) of the Income Tax Act.

31. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing

ASSESSEE HAS RESERVE THE RIGHT TO ADD/DELETE ANY OTHER GROUND OR ARGUMENT RELEVANT TO THE CASE AT ANY TIME DURING THE PROCEEDINGS.”

3. A perusal of the above grounds of appeal reveals that the assessee has raised as many as 30 Grounds of appeal both on merits and legal/jurisdictional issues. The Ld. Counsel for the assessee has mainly rests his arguments on legal issues, which we discuss here under.

Issue No. 1: Whether the assessment order passed u/s 147/148 of the Act is bad in law as the proper course for the AO was to proceed u/s 153C of the Act:

4. The Ld. Counsel submitted that the entire basis for reopening the assessment for the assessment years under consideration was the incriminating material (Excel sheets/bank statements) seized during the course of the search conducted under Section 132 of the Act at the premises of Shri Sanjay Govindram Agrawal (Sanjay Tibrewal Group). It was argued that when incriminating material pertaining to a “person other than the searched person” is found during a search, the statute provides a special and exclusive code under Section 153C of the Act. Therefore, the AO having jurisdiction over the assessee was legally precluded from invoking the general provisions of Sections 147/148 of the Act. The Learned Counsel, in this respect has heavily relied upon the recent decision of the Hon’ble Jurisdictional High Court of Gujarat in a batch of writ petitions, with the lead case being Paras Chandreshbhai Koticha vs. Income-tax Officer 182 taxmann.com 204 (Gujarat). In the said case also, the reopening of the assessment was done in case of another assessee/s on the basis of same search action carried out in the case of Shri Sanjay Govindram Agrawal (Sanjay Tibrewal Group), wherein the Hon’ble Jurisdictional Gujarat High Court has held that the reopening of the assessment and the consequential assessment order passed u/s 147 of the Act was bad in law as the proper course for the AO was to proceed u/s 153C of the Act. The Co-ordinate Bench of the Tribunal in the own cases of the assessee vide consolidated order dated 24.04.2025 (supra) with the lead case in ITA No.1243/Ahd/2025 after duly deliberating upon the legal position in the facts and circumstances of the case has decided this issue in favour of the assessee. The relevant part of the order of the Tribunal dated 24.04.2025 (supra), for the sake of ready reference, is reproduced as under:

“ Applicability of Section 153C vis-à-vis Sections 147/148 of the Act :

38. The Ld. Counsel for the assessee has raised another Jurisdictional Ground, contending that the reopening of the assessment under sections 147/148 of the Act is bad in law and void ab initio because the Assessing Officer (AO) bypassed the mandatory provisions of Section 153C of the Act.

39. The Ld. Counsel submitted that the entire basis for reopening the assessment was the incriminating material (Excel sheets/bank statements) seized during the course of the search conducted under Section 132 of the Act at the premises of Shri Sanjay Govindram Agrawal (Sanjay Tibrewal Group). It was argued that when incriminating material pertaining to a “person other than the searched person” is found during a search, the statute provides a special and exclusive code under Section 153C of the Act. Therefore, the AO having jurisdiction over the assessee was legally precluded from invoking the general provisions of Sections 147/148 of the Act. The Ld. Counsel relied heavily on the recent judgment of the Hon’ble Jurisdictional High Court of Gujarat in a batch of writ petitions, the lead case being Paras Chandreshbhai Koticha vs. Income-tax Officer 182 taxmann.com 204 (Gujarat). He in this respect has also relied upon the decision of the Hon’ble Rajasthan High Court in the case of “Tirupati Construction Vs. ITO” (2024) 165 Taxmann.com 176 (Rajasthan), and another decision of Hon’ble Rajasthan High Court in the case of “Shyam Sunder Khandelwal Vs. Asstt. CIT”, 161 Taxmann.com 255.

40. Per contra, the Ld. DR vehemently opposed the submissions of the assessee and supported the orders of the lower authorities. The Ld. DR argued that Sections 147/148 and Section 153C operate in their respective spheres, and the AO is not completely barred from invoking Section 148 if he possesses information suggesting that income has escaped assessment, even if that information stems from a search operation on a third party.

41. We have given our thoughtful consideration to the rival submissions and carefully perused the judicial precedents cited before us. The core issue for our adjudication is whether the Assessing Officer is mandatorily supposed to follow the procedure laid down under the special provisions of Section 153C of the Act or can invoke the general reassessment provisions of Sections 147/148 of the Act which is based solely on the material seized during a search on a third party.

42. This exact legal controversy has been conclusively put to rest by the Hon’ble Jurisdictional High Court of Gujarat in the recent case of “Paras Chandreshbhai Koticha vs. ITO” (supra). The Hon’ble High Court, after conducting a detailed analysis of the interplay between the special search provisions (Sections 153A/153C) and the general reassessment provisions (Sections 147/148) in light of the Hon’ble Supreme Court’s ruling in Abhisar Buildwell, laid down strict jurisdictional guardrails.

43. The Hon’ble High Court classified the cases before them based on the source and nature of the material used by the Assessing Officer to invoke Sections 147/148 of the Act:

• • Group A Cases (Navratna Group): In these cases, during the search, an Excel sheet was found. However, the subsequent reopening under Section 148 was not based merely on that seized Excel sheet. The searched entity (Navratna Group) subsequently approached the Income Tax Settlement Commission (ITSC) and made a categorical, post-search admission regarding the receipt of “on-money” in cash, submitting a reconciled list of purchasers. The Hon’ble High Court upheld the reopening in Group A cases, holding that this subsequent admission before the ITSC constituted “independent, post-search material.” Since the AO relied on this independent material and not just the raw seized documents, the invocation of Sections 147/148 was held to be justified.
  • Group B Cases (K-Star Group) & Group C Cases (Flamingo / Sanjay Govindram Agarwal): In these groups, the reassessment under Sections 147/148 was initiated solely on the basis of the incriminating material found during the search of the third parties. The Hon’ble High Court noted that the Assessing Officer of the searched entity had merely supplied the material to the jurisdictional AO of the assessees without recording the statutorily mandated “satisfaction note” under Section 153C. Crucially, the Hon’ble Court found that there was absolutely no independent material or post-search information gathered from any other source. Consequently, the Hon’ble High Court quashed the reassessment proceedings for Groups B and C, holding that the jurisdictional AO cannot bypass Section 153C and invoke Sections 147/148 in the absence of a satisfaction note and without independent material.

44. The Hon’ble Gujarat High Court held that Sections 153A and 153C begin with non-obstante clauses and constitute a special code that overrides the general provisions of Sections 147/148. The Hon’ble High Court ruled that when incriminating material pertaining to a “third/other person” is found during a search, the statute obliges the Assessing Officer of the searched person to record a “satisfaction note” stating that the seized documents belong/pertain to the other person, before transmitting them to the jurisdictional AO of that other person. The Hon’ble High Court held in unequivocal terms:

“In the absence of any satisfaction note recorded by the Assessing Officer of the searched person, the jurisdictional Assessing Officer of the other person cannot assume jurisdiction under Section 153C of the Act solely on the basis of material sent to him… In other words, the ‘other person’ cannot be subjected to assessment/reassessment under Section 153C on the material received by him sans a satisfaction note; hence, such an approach would be illegal, without jurisdiction, and liable to be quashed.”

45. Applying these precise categorizations and findings to the facts of the present assessee (Viru Textile Mills Pvt. Ltd.), we find that the assessee’s case is squarely covered by the ratio laid down for the Group C It is a matter of record that the solitary basis for issuing the impugned notice under Section 148 of the Act to the present assessee was the information derived from the search conducted under Section 132 of the Act on Shri Sanjay Govindram Agrawal (Sanjay Tibrewal Group). Notably, Shri Sanjay Govindram Agrawal is the exact same searched entity that was the subject matter of the Group C petitions before the Hon’ble Gujarat High Court.

46. The Assessing Officer in the present case formed his “reason to believe” exclusively from the investigation report and the bank statements seized during the search on the Sanjay Tibrewal Group. The Revenue has completely failed to bring any material on record to show that the Assessing Officer of the searched person ever recorded the mandatorily required “satisfaction note” before transmitting the information to the AO of the present assessee.

47. Furthermore, unlike the Group A cases before the High Court, the Revenue has not demonstrated the existence of any independent, post-search material (such as a separate admission by the searched party before a Settlement Commission or an independent inquiry) outside of the raw search material. The entire edifice of the reopening rests solely on the documents and statements obtained during the search of the third party.

48. Therefore, the special provisions of Section 153C of the Act, which contain a non-obstante clause overriding Sections 147/148, are strictly attracted to the facts of this case. The Assessing Officer was legally barred from bypassing Section 153C and resorting to the general provisions of Sections 147/148 of the Act. The assumption of jurisdiction under Section 147/148 on the exclusive basis of third-party search material, without the mandated satisfaction note and without any independent post-search material, is fatally flawed.

49. Respectfully following the binding judgment of the Hon’ble Jurisdictional High Court of Gujarat in the case of “Paras Chandreshbhai Koticha” (supra), we hold that the impugned reassessment proceedings initiated under Sections 147/148 of the Act are without jurisdiction, void ab initio, and are hereby quashed.”

5. The facts and circumstances being exactly identical for the year under consideration also, the findings given by the Co-ordinate Bench of the Tribunal vide consolidated order dated 24.04.2025 (supra) will mutatis mutandis apply to the present issue. This issue is, accordingly, decided in favour of the assessee and against the Revenue. The impugned assessment order passed u/s 147 of the Act is, accordingly, held as bad in law and the same is hereby quashed.

Issue No.2: Whether because of the order 148A(d) of the Act being barred by limitation; the impugned Assessment Order is void:

6. The next legal issue raised by the assessee before us, hitting at the very validity of the assessment order passed by the AO, is whether the outer time-limit/ surviving period as conceptualized by the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal 167 com 70 (SC) nullifies/rescinds the internal limitation prescribed under section 148A(d) of the Act (i.e., within one month from the end of the month in which the reply is received).

7. The learned counsel for the Assessee has tabulated the chronology of the events in the present case, as under: –

S. No.	Event	Date
1	Original notice issued u/s.148 of the Act	19.04.2021
2	Reason for reopening of the Assessment Proceedings	14.10.2021
3	TOLA has extended the date upto	30.06.2021
4	Remaining survival days as per SC judgement till 30.06.2021 to pass and issue the notice u/s 148A(d) and 148	72 Days
5	Date of issue of New Notice u/s 148(b) received after SC Judgement in Ashish Agarwal	25.05.2022
6	As per notice u/s 148A(b) the date by which the reply to be submitted by the Assessee	15.06.2022
7	Reply date extended on the request of the assessee	22.06.2022
8	Date of reply filled by the assessee to the notice issued u/s 148A(b).	22.06.2022
9	Any further adjournment was asked by the assessee.	NO
10	Date of further notice issued after the reply of the assessee or provided any additional details which were not provided by the AO in the initial notice issued u/s 148A(b).	05.07.2022
11	Date on which the assessee has replied to the subsequent notice issued. Copy of reply attached herewith.	11.07.2022
12	Date of the end of the survival period (u/s 149) after receipt of the reply u/s 148A(c) i.e. 20.06.2022	02.09.2022
13	Last date as per section 148A(d) after receipt of the reply u/s 148A(c) i.e. within one month from the end of the month in which the reply was received under section 148A(c) i.e. 22.06.2022	31.07.2022
14	Date of which the order and section 148A(d) is passed by the AO and notice u/s 148 was issued (under New regime)	17.08.2022

8. The learned counsel has further submitted that it has been fairly admitted by the Ld. DR, after calling for the comments of the Assessing Officer, that the subsequent notice issued by the AO on 05.07.2022 did not have any relevancy. Neither the assessee had sought any extension of time after furnishing its reply on 22.06.2022 nor the subsequent notice/information supplied was related to the assessment year under consideration. He therefore, has submitted that the time started running for passing order u/s 148A(d) of the Act and for issuing notice u/s 148 of the Act by the AO on 22.06.2022 i.e. from the date of filing of reply by the Assessee, which fact has also not been disputed by the Ld. DR. Hence, as calculated and agreed upon in the preceding paragraphs, the “surviving period” available to the Assessing Officer to issue the notice under section 148 under the new regime was 72 days from the date of receipt of the assessee’s reply. Calculating 72 days from 22.06.2022, the outer limit available with the Assessing Officer to complete the proceedings under section 148A(d) and to issue the consequential notice under section 148 of the Act expired on 02.09.2022.

9. The contention of the Ld. Counsel for the assessee is that under section 148A(d) of the Act, the Assessing Officer is mandatorily required to pass the order “within one month from the end of the month in which the reply referred to in clause (c) is received by him”. The reply having been received on 22.06.2022, the end of the month is 30.06.2022, and one month therefrom expires on 31.07.2022. The assessee submits that the order under section 148A(d) passed on 02.09.2022 is therefore barred by limitation. The Ld. Counsel for the Assessee in this respect has also relied upon the CBDT vide Instruction No. 01/2022, dated 11^th May, 2022. The relevant part of the said instruction is reproduced as under:

“Instruction No. 01/2022

F. No 279/Misc./M-51/2022-ITJ
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
ITJ Section

New Delhi, Dated: 11th May, 2022

Subject: Implementation of the judgment of the Hon’ble Supreme Court dated 04.05.2022 (2022 SCC Online SC 543) (Union of India v. Ashish Agarwal) – Instruction regarding

1. Hon’ble Supreme Court, vide its judgment dated 04.05.2022 (2022 SCC Online SC 543), in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on 1 April, 2021 and ending with 30th June 2021, within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 2020 (hereinafter referred to as “TOLA”) and various notifications issued thereunder (these reassessment notices hereinafter referred to as “extended reassessment notices”).

2. These extended reassessment notices were issued by the Assessing Officers under the provision of section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) following the procedure prescribed under various sections pertaining to reassessment namely sections 147 to 151. as they existed prior to their amendment by the Finance Act, 2021 (hereinafter referred to as “old law”). With effect from 1 April 2021, the old law has been substituted with new sections 147-151 (hereinafter referred to as the “new law”).

3. Hon’ble Supreme Court has held that these extended reassessment notices issued under the old law shall be deemed to be the show cause notices issued under clause (b) of section 148A of the new law and has directed Assessing Officers to follow the procedure with respect to such notices. It has also held that all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available. Hon’ble Supreme Court has passed this order in exercise of its power under Article 142 of the Constitution of India.

4. The implementation of the judgment of Hon’ble Supreme Court is required to be done in a uniform manner. Accordingly, in exercise of its power under section 119 of the Act, Central Board of Direct Taxes (hereinafter referred to as “the Board”) directs that the following may be taken into consideration while implementing this judgment.

5.0 Scope of the judgment:

5.1Taking into account the decision of the Hon’ble Supreme Court in various paragraphs. it is clarified that the judgment applies to all cases where extended reassessment notices have been issued. This is irrespective of the fact whether such notices have been challenged or not.

6.0 Operation of the new section 149 of the Act to identify cases where fresh notice under section 148 of the Act can be issued:

6.1 With respect of operation of new section 149 of the Act, the following may be seen:

• • Hon’ble Supreme Court has held that the new law shall operate and all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available.
  • Sub-section (1) of new section 149 of the Act as amended by the Finance Act.2021 (before its amendment by the Finance Act, 2022) reads as under:-

149. (1) No notice under section 148 shall be issued for the relevant assessment year-

a. if three years have elapsed from the end of the relevant assessment year unless the case falls under clause (b)

b. if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year

Provided that no notice under section 148 shall be issued at one time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act. 2021.

…………

……

8.0 Procedure required to be followed by the Assessing Officers to comply with the Supreme Court judgment:

8.1 The procedure required to be followed by the Jurisdictional Assessing Officer/Assessing Officer, in compliance with the order of the Hon’ble Supreme Court, is as under:

• • The extended reassessment notices are deemed to be show cause notices under clause (b) of section 148A of the Act in accordance with the judgment of Hon’ble Supreme Court. Therefore, all requirement of new law prior to that show cause notice shall be deemed to have been complied with.
  • The Assessing Officer shall exclude cases as per clarification in paragraph 7.1 above. Within 30 days i.e. by 2nd June 2022, the Assessing Officer shall provide to the assesseès, in remaining cases, the information and material relied upon for issuance of extended reassessment notices.
  • The assessee has two weeks to reply as to why a notice under section 148 of the Act should not be issued, on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year. The time period of two weeks shall be counted from the date of last communication of information and material by the Assessing Officer to the assessee.
  • In view of the observation of Hon’ble Supreme Court that all the defences of the new law are available to the assessee, if assessee makes a request by making an application that more time be given to him to file reply to the show cause notice, then such a request shall be considered by the Assessing Officer on merit and time may be extended by the Assessing Officer as provided in clause (b) of new section 148A of the Act.

• • After receiving the reply, the Assessing Officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148 of the Act. The Assessing Officer is required to pass an order under clause (d) of section 148A of the Act to that effect, with the prior approval of the specified authority of the new law. This order is required to be passed within one month from the end of the month in which the reply is received by him from the assessee. In case no such reply is furnished by the assessee, then the order is required to be passed within one month from the end of the month in which time or extended time allowed to furnish a reply expires.
  • If it is a fit case to issue a notice under section 148 of the Act, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new law. The copy of the order passed under clause (d) of section 148A of the Act shall also be served with the notice u/s 148.
  • If it is not a fit case to issue a notice under section 148 of the Act. the order passed under clause (d) of section 148A to that effect shall be served on the assessee.

Tanay Sharma

DCIT(OSD), ITJ-1”

(Emphasis supplied by us)

10. The Ld. Counsel for the Assessee, therefore, has submitted that even the CBDT has also clarified that all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available. He has submitted that it has also been specifically clarified that the AO has to follow the timeline as laid down u/s 148A(d) of the Act and that the order u/s 148A(d) of the Act has to be passed within one month from the end of the month in which the reply is received by him from the assessee. The Ld. Counsel has further submitted that the above instructions of the CBDT are binding upon the Assessing Officer.

11. The Ld. DR, on the other hand, has submitted that as per the law laid down by the hon’ble Supreme Court in the case of Rajeev Bansal (supra), the AO was left with the surviving period of 72 days from the date of furnishing the reply by the assessee on 22.06.2022 which was upto 02.09.2022; whereas the AO has passed the order u/s 148A(d) of the Act and issued notice u/s 148 of the Act on 17.08.2022 itself, therefore, the AO has acted well within the limitation period prescribed.

12. It is pertinent to mention here that the identical issue has been raised by the assessee in its other bunch of appeals i.e. ITA NO. 1243/Ahd/2025; 1244/Ahd/2025 & 1222/Ahd/2025 for Assessment Years 2013-14, 2014­15 & 2020-21 respectively, decided by the Co-Ordinate Ahmedabad Bench of the Tribunal vide consolidated order dated 24.04.2025 with lead case taken in ITA 1243/Ahd/2025. However, since the Members constituting the present Bench are not having a unanimous view on this issue and since, we have already quashed the impugned assessment order while adjudicating the first issue as discussed hereinabove, any divergent findings given on the above issue will not have any direct bearing on the final decision of the case and at this stage, this issue is rendered academic in nature and is kept open to be decided at appropriate stage/forum, if need be.

Issue No.3:Whether the assessment order is bad in law as the Reopening of the assessment was done on the basis of borrowed Satisfaction of the Assessing Officer:

13. This issue has also been dealt with by the Co-ordinate Bench of the Tribunal in the consolidated order dated 24.04.2025 (supra) in the own cases of the assessee for earlier assessment years and the issue has been decided against the assessee. The relevant part of the order of the Co­ordinate Bench of the Tribunal, for the sake of ready reference, is reproduced as under:

“ Reopening on the basis of borrowed Satisfaction of the Assessing Officer:

50 . The Ld. Counsel for the assessee has also challenged the assumption of jurisdiction under section 147 of the Act, contending that the Assessing Officer formed the belief merely on the “borrowed satisfaction” from the Investigation Wing, without carrying out any independent inquiry. The Ld. Counsel contended that the Assessing Officer simply borrowed the reasons from the investigation report and the information uploaded on the Insight Portal regarding the search conducted under section 132 of the Act in the case of Shri Sanjay Govindram Agrawal (alias Sanjay Tibrewal).

51. We have examined this contention in light of the amended provisions of Section 148/148A of the Act. Under the new reassessment regime, the Assessing Officer is empowered to issue a notice if there is “information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment.” As per the statutory framework, information flagged on the Insight Portal based on the risk management strategy, which in this case originated from search and investigation reports. The record demonstrates that the Assessing Officer did not act blindly. Upon receiving the specific flagged information that the assessee was a beneficiary of alleged accommodation entries, the Assessing Officer issued a notice under section 148A(b) of the Act, provided the transaction details to the assessee, and called for an explanation. After considering the assessee’s reply, the Assessing Officer passed a detailed order under section 148A(d). Since the Assessing Officer followed the statutory procedure and applied his mind to the specific information and the assessee’s reply before issuing the notice under section 148, the charge of acting on mere “borrowed satisfaction” without independent application of mind cannot be sustained. Therefore, this legal ground raised by the assessee is dismissed.”

14. The facts and the issue involved being identical, respectfully following the above findings of the Co-ordinate Bench of the Tribunal, this issue is, accordingly, decided against the assessee and in favour of the Revenue.

Issue No.4: Whether the assessment order is bad in law as the AO has not followed the direction of the Hon’ble Supreme Court as given in the case of Union of India vs. Ashish Agarwal (Supra) and provided the information in parts and the same being incorrect information also :

15. The Learned Counsel of the assessee has invited our attention to the relevant part of the reply of the assessee dated 22.06.2022 to the notice issued by the AO u/s 148A(b) of the Act wherein the assessee had pointed out to the AO that he had not supplied the full and correct information justifying the reopening of the assessment. Our attention has been invited to page 2 para 3 of the reply whereby the assessee has pointed out that the AO has not supplied the detailed enquiry report based on which he was satisfied that the income of the assessee has escaped assessment. Further, vide clause (ii) the assessee has pointed out, “No evidence were given to demonstrate that the assessee has understated the income or has claimed excessive loss, deduction, allowances or relief in nature.” Further, the Learned Counsel has pointed out to point no.6 at page 4 of the reply whereby the AO has been requested to provide the additional evidence based on which reason for reopening of the case has been formed. Further, in clause (v) page of the reply, the assessee has pointed out that the AO has failed to provide the final order in the case of searched person Shri Sanjay Govindram Agarwal and how the amount in question was treated in his assessment. The Learned Counsel for the assessee has also stated that it was pointed out to the AO that the AO has not provided the complete details of the transactions upon which he has relied upon to form the belief that the income of the assessee has escaped assessment. The Learned Counsel has also referred to the letter of the Assessing Officer dated 05.07.2022, the contents of which are reproduced as under:

“ Sir/Madam/ M/s,

Subject: Subsequent proceedings with reference to section 148A(b) in consequence to Hon’ble SC Order dated 04.05.2022- Letter

In this connection as per your reply dated 20.06.2022 you have requested to provide further information. As per the letter dated 23.05.2022 information was provided to you amounting to Rs.4077548/- in which excel sheet was attached i.e. radhe corp. and information amounting to Rs.5156668/- was also provided in excel sheet i.e. tiberwal transaction, but due to spelling mismatch only information of Rs 2825749/- was filtered. You hereby given complete information of Rs.51,56,668/- with a request to reply by 11.07.2022, through e-filing portal only. Your response would be considered for passing order under Section 148A(d) in your case.”

16. The Learned Counsel has thereafter referred to the letter of the assessee dated 11.07.2022 whereby it was informed to the Assessing Officer that the information provided by him vide his letter dated 05.07.2022 was not relevant to the case of the assessee for the assessment year under consideration.

17. The Learned Counsel, therefore, has submitted that the AO did not supply the full and correct information within the stipulated period alongwith notice u/s 148A(b) of the Act as directed by the Hon’ble Supreme Court in the case of Union of India vs. Ashish Agrawal (supra). He, therefore, has submitted that the subsequent proceedings as well as the assessment order passed by the AO u/s 147 of the Act was bad in law.

18. The Learned DR was requested to give his comments upon the aforesaid contentions of the assessee whereby he admitted that the subsequent information sent by the AO vide letter dated 05.07.2022 was not relevant for the case of the assessee for assessment year under consideration. A report in this respect was called upon from the AO to the Learned DR. The Learned DR has furnished the report /letter of the AO bearing No. AHD/ITO/W-4(1)(1)/Report/ITAT/VTPL/201617&2017-18/2025-26, dated 15.07.2025 wherein the AO has stated that the relevant date for counting of the surviving period to issue notice u/s 148 of the Income Tax Act was the date of the reply of the assessee dated 22.06.2022. Thus, it is an admitted fact on the file that the information supplied by the AO subsequent to the reply dated 22.06.2022 was not relevant for the case of the assessee. Further, the AO vide letter dated 05.07.2022 has admitted that the information supplied with the notice u/s 148A(b) of the Act was incomplete. The Learned Counsel in the above facts and circumstances has submitted that the information supplied being incomplete and some of the information being incorrect, the AO, thus, has failed to comply with the directions given by the Supreme Court in the case of “Ashish Agrawal (supra)” and, thus, the assessment order passed u/s 147 of the Act is bad in law.

19. Since, we have already quashed the assessment order in view of our findings given above on issue No.1 holding that the assessment order passed u/s 147 of the Act is bad in law as the proper course for the AO was to proceed u/s 153C of the Act, therefore, at this stage, no findings are given on this issue and this issue is kept open, to be adjudicated at appropriate stage/forum, if need be.

20. Since, the jurisdictional legal issue No.1 has been decided in favour of the assessee and the assessment order passed by the AO u/s 147 of the Act since held as bad in law and thereby quashed, therefore, any findings on the merits of the case will be rendered academic in nature. Therefore, no findings is given at this stage on merits of the case.

21. In the result, the impugned assessment order dated 30.05.2023 passed u/s 147 r.w.s. 144B of the Act is hereby quashed. The appeal of the assessee stands allowed.

ITA Nos. 1221/Ahd/2025 for A.Y. 2017-18

2. The assessee in this appeal has taken the following grounds of Appeal:

“1. THAT CIT(A) has Dismissed the appeal after considering the submission of the assessee but without going through the documents submitted during the assessment u/s 148A and u/s 148, ground of appeal along with the certain details as attached to the form 35, documents reply and submitted by the assessee during the assessment proceedings. The assessee has filled the written submission which was also not considered by the CIT(A).

2. THAT the CIT(A) has ignored the fact that Assessee has submitted all necessary the documents before the AO during the assessment proceeding and appeal in written submission related to the transactions. The assessee has submitted the documents such as a copy of ledger accounts, a copy of invoices, Copy of LR copy, Confirmation etc. Moreover, AO/CIT(A) has simply relied upon the investigation report only and does not gone through the various documents submitted by the assessee, which are collaborated with the books of accounts and the bank statement submitted by the assessee. THAT the CIT(A) has ignore the fact that all documents were already submitted before the AO during the assessment proceeding u/s 148A and U/s 148 as specified here in above as facts of the case. Therefore, these documents cannot be treated as Additional documents.

the CIT(A) has observed that the Assessee has not submitted the documents before the AO during the assessment proceeding, and now, after 18 months, the assessee has submitted the documents such as a copy of ledger accounts, a copy of invoices, and the assessee has submitted the documents the said documents which are after thought and therefore cannot be accepted as the assessee has specified in the Form 35 colume no 12 as “No” and hence the same cannot be accepted as additional documents. Moreover, the CIT(A) has ignore the fact that these documents were already submitted before the AO during the assessment proceeding u/s 148A and U/s 148. The copy of the Assesment orders are attached herewith alongwith the form 36

THAT The assessee has submitted the details of the transactions and credit shows in the books of account in the account of the parties to whom the goods were sold is clearly indicated in the reply which was reproduced in the order u/s 148A(d). The CTT(A) has ignored the said fact and without considering the same has passed the order by dismissing the appeal. The above clearly indicate that the assessee has submitted all these documents before the AO during the assessment proceedings and therefore, the allegation of the CIT(A) that the details were not submitted before the AO is totally against the facts of the case, which shows that CTT(A) has followed a very casual approach will deciding the issue. Therefore, CIT(A) should be set-a-side and addition made should be deleted.

Technical Issues:

3. THAT the AO/CIT(A) has not followed the procedure as prescribed in Section 148A, Judgement of the Supreme Court and the CBDT circular in this regard.

4. THAT the AO/CIT(A) has not followed the procedure as prescribed in Section 153C.

5. THAT AO has providing information in parts even after direction from the Honourable Supreme Court in the case of Ashish Agarwal and hence the notice issued u/s 148A(b) and/or order passed under section 148A(d) are in violation of the Honourable Supreme Court and hence to be deleted.

6. THAT AO has not carried out any inquiry before the issue of the notice u/s 148/148A and has borrowed the reason from the investigation report and information uploaded on the insight portal.

7. THAT no information was provided by the AO which was specifically requested by the assessee during the assessment and or before the CIT(A).

8. THAT notice u/s 148 dated 19.04.2021 issued is without the approval of the Competent/Specified Authority as specified in the Act. Since, in the present case, the authority approval is not the competent authority, the notice issued under section 148 is void ab initio and illegal. Therefore, the same should have to be withdrawn. The notice was issued by range 4(1) Ahmedabad, who is not having any authority to give the approval u/s 151, Therefore, the said notice is to be treated as void ab initio.

9. Failed to provide the final assessment order in the case of Sanjay Govindram Agarwal and Others to demonstrate how the said amount was treated in his assessment as the same income cannot be taxed in two hands.

10. THAT the department has not provided the opportunity of the cross-verification of the person on whose statement the AO has relied upon, and considered that the assessee is one of the beneficiaries of the amount. Simply relying on the statement of the person (mainly when there is no direct evidence available that the transaction was carried out by the assessee simply receiving the amount in the bank account does not mean that the assessee is the beneficiary of the amount) cannot be reason o make addition unless and until there is another evidence which collaborate with the statements. Therefore, without giving an opportunity of cross-examination, no order can be passed against the assessee, and hence the order passed should be set aside.

On facts of the case:

11. THAT the addition of Rs. 33,69,062/- made u/s 68 of the Income Tax Act, 1961 is against the law as the assessee has duly explained the credit entries booked in the accounts and produce the relevant evidence in this regard to explain the source of the receipt of these entries. It is an accepted fact that the assessee has provided all the details and explained the transaction, stating that the said amount received by the assessee is against the sale made to various persons. In support of the same, the assessee has submitted the following documents ie. (i) Copy of ledger account, (ii) Copy of invoice. (iii) Copy of the LR copy as proof of delivery of goods, (iv) Copy of Confirmation from the parties to whom goods were sold. Therefore, the assessee has explained the transaction properly and disclosed the transactions recorded in the books of the assessee. Hence, the addition made u/s 68 of Rs. 33,69,062/-, should have to be deleted.

12. THAT it is also accepted fact that no cash trail (as alleged by the AO) was found through which it can be proved that the assessee has given cash in lieu of the cheque/deposits in the books of the assessee. Hence, the addition made u/s 68 of Rs. 33,69,062/-, should have to be deleted.

13. THAT AO has never made any objection on the facts that the assessee has already disclosed the above amount under the Sales Head and shown as income in the profit and loss account. Ignoring the said fact, AO has again added the said amount in the income is leading to double taxation. In this regard, AO has also not followed the various judgements quoted by the AO has passed the order. Since, the addition is against the principle of double taxation of the same income, Therefore, it should have to be deleted.

14. At the time of reason to believe and search carried out by the department, it was critically stated that these banking transactions were belong to the employee/person related to Shri Sanjay Agarwal and they have given the statement on oath and accepted that the bank account was operated and run by them. It is very surprising that after the search and statement taken during the search (on which the AO has relied upon), now at the time of assessment, AO concluded that the firm does not exist, specifically when the PAN is linked and verified. If the firm is not in existence, then how was the bank account opened by the banks through which the amount was transferred, and the assessment of the person done by the department in the past? It is also an accepted fact that the income of the persons who have given the statements was assessed by the department regularly. Therefore, the contention of the department that the party is not in existence cannot be accepted and therefore, the addition made should have to be deleted.

15. The assessee during the assessment proceedings has stated that the assessee has not carried out any business transaction with the said parties ie. Sanjay Tibrewal and Group. The bank transactions (i.e. amount received by the assessee in its bank account) are on behalf of the parties with whom the assessee has carried out the sale transactions for which the details were already provided to the AO along with the confirmation, and once again attached herewith for your ready reference. Therefore, whether the various firm (Sanjay Tibrewal and Group) exists or not does not make any difference, since the assessee has not carried out any business transaction with Sanjay Tibrewal and Group, but the parties who have purchased the goods might have dealt with them. The said fact is also confirmed from the account confirmations submitted by sales parties and attached herewith in support of the same. Therefore, the whole addition is made on the assumption and presumption and hence to be deleted.

16. THAT the AO has not considered the sales invoice, LR copy, Ledger Copy and other relevant papers to establish that the assessee has sold the goods to the various parties from whom he has received the payment in the bank account (through Sanjay Tibrewal and Group). The AO has even has not discussed the various reply including show cause reply in the assessment order. Therefore, the order passed by the AO is without considering the various reply of the Assessee.

17. THAT AO has tried to establish that the bank statement is only conclusive evidence and acceptable to consider the genuineness of the transaction. The said opinion can be an opinion of the officer, but it cannot be acceptable in the eyes of the law. The documents which are in the control of the assessee such as LR copy, bank receipts, parties’ confirmation and ledger accounts, are totally ignored by the AO, while making the addition in the present case. Therefore, since the Assessee has established the genuineness of the transaction by giving all the relevant details along with the name and address of the parties, the addition should be deleted.

18. That AO has formed his opinion from the initial stage of the proceedings and prepared his mind before starting the assessment to treat the amount as income, without going through the relevant details. Therefore, the assessment is based on his presumption and theory. That the Ld A.O. has not justified in applying his own theory that the assessee has taken accommodation entries without any concrete evidence of such transactions, and ignoring the fact that the said transactions are duly recorded in the books, is without applying his own mind. That the AO has ignored the explanations and documents submitted by the assessee and giving all relevant information and passed the order u/s 147 of Income Tax Act, 1961.

19. From the above details, it is very much clear that there is a deposit transaction of Rs. 33,69.062/- in the account of the assessee from Sanjay Tibrewal and Group which were received on behalf of sales parties. Ignoring the said fact, without applying the mind AO has just passed the Assessment order and made the addition of Rs. 33,69,062/- (In spite of ignoring the above facts as discussed). Therefore, the AO has passed the order without verifying the details or applying his mind, which is mechanical. Hence, the addition made should have been deleted.

20. That on the facts and circumstances of the case and in law, the learned, assessing officer has failed to understand the true nature of transactions (deposits) and based on his own theory treated them as unexplained cash credit and treated as accommodation entries.

21. That the AO has accepted that the amount is duly accounted in the books and credited to the respective parties to whom the sales were made, and hence the amount is already included in the income of the Assessee Company. Therefore, there is no transaction, which is unaccounted in the books of the assessee and therefore, the addition made by the AO should have been deleted.

22 THAT the AO/CIT(A) has made Addition of Rs. 67,381/- i.c. 2 percent commission charged by the accommodation entry provider under 69C unexplained expenditure of the Income Tax Act. The AO without any basis and details has considered Rs. 67,381 i.e. 2% as commission charged by the accommodation entry provider and added under section 69C as unexplained expenditure. The AO also failed to appreciate that the AO has never raised this point in any of the notices or show cause notice. Therefore, any addition which was not proposed in the show cause notice cannot be added as income as it does not provide any opportunity to the assessee to explain the transaction and hence the addition is against the principle of natural justice. The AO has not even provided any details against the same how he has derived the 2% commission and/or the details who has paid the same. There is no such expense is debited by the assessee in the books of accounts and therefore, in lack of evidence the addition of Rs. 67,381/-should have been deleted.

Technical Ground:

23. That Addition u/s 68 of the Income Tax Act, 1961 is to be made if certain conditions were not fulfilled. The AO has made the addition irrespective of the fact that the said transactions were duly recorded in the books of account and explained by the assessee. Therefore, the same should have to be deleted. Since as per AO, these receipts for Rs. 33,69,062/- is not accounted in the books of accounts, the prime condition u/s 68 is not satisfied i.e. when the entry is not credited in accounts no addition can be made u/s 68. Therefore, addition u/s 68 by the AO is to be deleted.

24. THAT the AO has suo motto added the 2% commission of Rs. 67381/- u/s 69C as unexplained expenditure on the accommodation entries of Rs. 33,69,062, which is without any basis and purely on his assumption, the same should have been deleted. The prime condition to made the addition u/s 69C is the AO has to provide some evidence to prove that the assessee has incurred some expenditure against which he failed to prove the source of the same. In the present case the assessee has neither claimed any expenditure as expenses nor AO has provided any evidence to prove that the assessee has incurred such expenditure and hence the addition made u/s 69C to be deleted.

26. That on the facts and circumstances of the case and in law, the learned AO has passed order u/s 147 r.w. 144B of the Income Tax Act, 1961, which is Bad in Law and against the principles of natural justice.

27. That the learned AO has erred in not considering the actual facts and circumstances of the case and also not considering/appreciating the evidence, supporting details and documents submitted by the appellant. His act is based on presumption, assumption, surmises, conjectures and suspicions.

28. That the Id. assessing officer grossly erred in deliberately ignoring several reasonable, plausible submissions which had a material bearing on the impugned case and ignoring the same was unjustified, bad in law, is in utter violation of the principle of natural justice and ought to have been considered. No consideration is unjustified, bad in law and the entire approach deserves to be deprecated.

29. That on the facts and in the circumstances of the case, the Id. Assessing Officer grossly erred in creating an illegal demand of Rs. 46,45,410/- against the assessee-appellant.

30. That on the facts and in the circumstances of the case, the Id. The assessing Officer grossly erred in charging interest u/s 234A/2348/234C/234 of the Income Tax Act.

31, That on the facts and in the circumstances of the case, the Id. Assessing Officer grossly erred in the issue of penalty notice u/s 271AAC(1) of the Income Tax Act.

31. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.

ASSESSEE HAS RESERVE THE RIGHT TO ADD/DELETE ANY OTHER GROUND OR ARGUMENT RELEVANT TO THE CASE AT ANY TIME DURING THE PROCEEDINGS.”

23. Both the Learned representative of the parties have stated that the facts and the issues involved in this appeal are exactly identical to that have been discussed above in assessee’s appeal for A.Y. 2016-17 ITA No.1220/Ahd/2025. Even the chronology of dates and events is identical. Our findings given above will mutatis mutandis apply to this appeal also. In view of this, the assessment order dated 27.05.2023 for A.Y. 2017-18 is also hereby quashed.

24. In the result, both the appeals of the assessee stand allowed.

Order pronounced in the Open Court on 18/05/2026.