Bhavesh Haribhai Mundiya Vs ITO (ITAT Rajkot)
Summary: ITAT Rajkot restored both the quantum assessment and the connected penalty proceeding to the Assessing Officer for fresh adjudication for AY 2013-14. The assessment had been reopened under Section 147 of the Income-tax Act on the basis of information alleging that the assessee was a beneficiary of accommodation entries aggregating to ₹4,30,77,687, which the AO treated as unexplained money under Section 69A. The assessee had not responded to the Section 148 notice or subsequent notices during assessment proceedings, and the CIT(A) later dismissed the appeal on the ground of delay without deciding the issues on merits. Before the Tribunal, the assessee explained that his failure to properly attend the proceedings was attributable to the death of his father and his father’s prolonged illness and sought one effective opportunity to contest the assessment. Considering these circumstances, the Tribunal held that the matter required examination on merits and restored all issues arising from the assessment order dated 18.05.2023 to the AO, directing reasonable and effective opportunity of hearing. The Tribunal did not decide the validity or merits of the ₹4.30 crore Section 69A addition. Since the connected Section 271(1)(c) penalty arose from the same assessment, it was also restored to the AO for reconsideration in accordance with the outcome of the quantum proceedings. Both appeals were accordingly allowed for statistical purposes.
The assessee, an individual, had filed his return of income for AY 2013-14 declaring total income of ₹1,98,090. During search proceedings under Section 132 in the cases of Jignesh Shah and Sanjay Shah, the Department obtained information alleging that they were engaged in providing accommodation entries, including entries relating to bogus long-term capital gains and contrived losses. Based on information available on the Insight portal, the AO formed the view that the assessee had received accommodation entries aggregating to ₹4,30,77,687. The assessment was consequently reopened under Sections 147/148, with notice under Section 148 being issued on 21.07.2022.
The assessee did not respond to the Section 148 notice and subsequently remained non-compliant with the notice under Section 142(1) dated 24.01.2023 and show-cause notice dated 24.03.2023. The AO therefore completed the assessment on the material available on record, treated ₹4,30,77,687 as unexplained money under Section 69A and determined total income at ₹4,32,75,777. Penalty proceedings under Section 271(1)(c) were also initiated.
The CIT(A) sustained the AO’s order. Before the Tribunal, however, the assessee submitted that the delay and earlier failure to effectively participate were neither intentional nor deliberate. He referred to the demise of his father and his father’s prolonged illness and requested an effective opportunity to place the necessary material before the AO and contest the issues arising from the assessment.
The Tribunal accepted that the circumstances warranted examination of the dispute on merits. Since the CIT(A) had dismissed the appeal on the ground of delay without adjudicating the issues raised by the assessee on merits, the Tribunal restored the matter to the AO. The AO was directed to examine all issues arising from the Section 147 assessment order dated 18.05.2023 afresh in accordance with law after providing a reasonable and effective opportunity of hearing. The assessee was simultaneously directed to cooperate and furnish the relevant documents and explanations. The quantum appeal was therefore allowed for statistical purposes.
ITA No. 765/RJT/2026 concerned the consequential penalty imposed by order dated 24.01.2024 under Section 271(1)(c). Since that penalty originated from the assessment proceedings that had themselves been restored for fresh adjudication, the Tribunal held that the penalty also required reconsideration in accordance with the outcome of the quantum proceedings. It therefore restored the penalty proceeding to the AO for fresh decision after giving the assessee a reasonable opportunity of hearing. Both appeals were ultimately allowed for statistical purposes.
FULL TEXT OF THE ITAT RAJKOT ORDER
Captioned both these appeals are preferred by the same assessee against separate orders of the Ld. Commissioner of Income-tax (Appeals) [hereinafter referred to as “Ld.CIT(A)”], dated 08.04.2026, arising out of separate proceedings for the same assessment year. ITA No. 865/Rjt/2026 is directed against the order of the Ld. CIT(A) dated 08.04.2026, arising from the assessment order dated 18.05.2023 passed under section 147 of the Income-tax Act, 1961 (“the Act”). ITA No. 765/Rjt/2026 is directed against the order of the Ld. CIT(A) dated 08.04.2026, arising from the penalty order dated 24.01.2024 passed under section 271(1)(c) of the Act. Since both the appeals pertain to the same assessee and are interconnected, they were heard together and are being disposed of by this common order for the sake of convenience.
2. We first take up ITA No. 865/Rjt/2026, being the quantum appeal as lead case.
3. Brief facts of the case are that the assessee is an individual who filed his return of income for the relevant assessment year declaring total income of Rs.1,98,090/- The case was subsequently selected for scrutiny. During the course of search proceedings conducted under section 132 of the Income-tax Act, 1961 (“the Act”) in the cases of Jignesh Shah and Sanjay Shah, the Department gathered information alleging that they were engaged in providing accommodation entries, including entries relating to bogus long-term capital gains and contrived losses. On the basis of information available on the Insight portal, the Assessing Officer (“AO”) formed a view that the assessee was a beneficiary of accommodation entries allegedly provided by Jignesh Shah and Sanjay Shah, aggregating to Rs.4,30,77,687/-. On the basis of the said information, the assessment was reopened under section 147 of the Act and notice under section 148 of the Act was issued on 21.07.2022. In response to the notice under section 148 of the Act, the assessee did not furnish any response. Thereafter, the AO issued notice under section 142(1) of the Act dated 24.01.2023 and a show-cause notice dated 24.03.2023. The assessee again remained non-compliant and did not furnish the requisite details or supporting documentary evidence. In the absence of any compliance from the assessee, the AO proceeded to complete the assessment on the basis of the information available on record. The amount of Rs.4,30,77,687/- was treated as unexplained money under section 69A of the Act and added to the total income of the assessee. Penalty proceedings under section 271(1)(c) of the Act were also initiated. Consequently, the assessment was completed determining the total income at Rs.4,32,75,777/-.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A) where it was dismissed by sustaining the order of the AO.
5. Still aggrieved by the order of the Ld. CIT(A) assessee is in appeal before this tribunal.
6. At the time of hearing the Ld. AR submitted that the assessee could not file the appeal before the Ld. CIT(A) within the prescribed time and that the delay was neither intentional nor deliberate. It was submitted that during the relevant period the assessee suffered the demise of his father and who was also facing prolonged illness, due to which he could not properly attend to the income-tax proceedings. It was further submitted that, on account of these circumstances, the assessee could not effectively participate in the assessment proceedings or place the necessary material before the Assessing Officer. The Ld. AR submitted that the assessee now intends to properly contest the issues arising in the assessment and requested that one effective opportunity be granted to the assessee to present his case before the Assessing Officer. It was accordingly prayed that the matter may be restored to the file of the Assessing Officer for fresh adjudication after providing adequate opportunity of hearing to the assessee.
7. On the other hand Ld. DR supported the order of authority below.
8. We have considered the submissions of the parties and perused the material available on record. Having regard to the facts and circumstances of the case, particularly the explanation furnished by the assessee regarding the death of his father and his prolonged illness, we are of the view that the matter requires examination on merits. The Ld. CIT(A) has dismissed the appeal on the ground of delay without adjudicating the issues raised by the assessee on merits. In the interest of justice, we deem it appropriate to restore the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine all the issues arising from the assessment order dated 18.05.2023 passed under section 147 of the Act and decide the same afresh in accordance with law, after providing reasonable and effective opportunity of being heard to the assessee. The assessee shall also cooperate in the proceedings and furnish all relevant documents and explanations in support of his case.
9. In view of the above direction, the appeal of the assessee is allowed for statistical purposes.
10. We now take up ITA No. 765/Rjt/2026, which is the connected penalty appeal arising from the penalty order dated 24.01.2024 passed under section 271(1)(c) of the Act. The said penalty has its genesis in the assessment proceedings arising from the assessment order dated 18.05.2023 passed under section 147 of the Act.
11. Since the quantum assessment itself has been restored to the file of the Assessing Officer for fresh adjudication, the consequential penalty proceedings also require reconsideration in accordance with the outcome of the quantum proceedings. Accordingly, the penalty order is also restored to the file of the Assessing Officer for deciding the same afresh in accordance with law, after giving reasonable opportunity of hearing to the assessee.
12. In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open court on this 23rd day of September, 2026.
