The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upholds reopening of the assessment under Section 147 of Income Tax Act,1961, citing sufficient reasons for the reopening and compliance with the limitation period.
Harpreet Kaur Kaushik Manek,appellant-assessee,failed to file an income tax return for the relevant assessment year. Despite a system-generated letter issued on 04.08.2014 and subsequent notices under Sections 148 and 142(1) of the Act she did not respond adequately. The case was reopened under Section 147 after obtaining approval from the Principal Commissioner of Income Tax(PCIT) on 27.03.2018, and notices were served, including the reasons for reopening.
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Enquiries under Section 133(6) revealed transactions through the Multi Commodity Exchange with Kunvarji Finstock Pvt. Ltd., which the assessee did not disclose in any return. In her response, she acknowledged conducting the transactions through her proprietary concern, Phoenix Technologies, but failed to explain the source of margin money invested. A Profit and Loss account reflecting losses was submitted, but no return of income was filed under Sections 139 or 148.
After granting multiple opportunities, the Assessing Officer(AO) concluded that the margin money remained unexplained. Consequently, 8% of the total turnover, amounting to Rs. 43,75,089, was treated as unaccounted and unexplained investment under Section 68 of the Act.
Dissatisfied with the assessment order,the assessee filed an appeal before the Commissioner of Income Tax(Appeals)[CIT(A)] which was dismissed.The assessee had filed the appeal with a delay of 161 days, citing an injury in June 2023 as the reason for not filing the appeal on time. The Tribunal had accepted the affidavit and medical report, condoning the delay.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The assessee’s counsel argued that the reasons for reopening the assessment were vague and lacked specific details, such as the nature, dates, or parties involved in the alleged transactions. It was contended that the AO relied solely on external information without independent application of mind, amounting to borrowed satisfaction.
Reliance was placed on judgments from the Gujarat High Court in Surani Steel Tube Ltd. vs. ITO (2020) and Paresh Babubhai Bhalani vs. ITO (2023), as well as the Delhi High Court in Signature Hotels P. Ltd. vs. ITO (2012), asserting that the reopening was unjustified and barred by limitation.
The two member bench comprising Suchitra Kamble(Judicial Member) and Makarand Vasant Mahadeokar(Accountant Member) after hearing both parties and reviewing the material on record, held that the reasons for reopening were adequately detailed, citing specific transactions involving the National/Multi Commodity Exchange Contract and undisclosed sources of income.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
It further observed that the cited judgments from the Jurisdictional High Court were not relevant, as the case involved concrete transactions that warranted verification, especially given the absence of a filed return of income by the assessee. Therefore, the reopening was upheld as appropriate.
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