Shairul Impex v. ITO

Case snapshot

Sections / provisions: 147; 149; 69C

Questions before the Court / Tribunal

• Old-law reassessment limitation; bogus purchase is not an asset: The reported Tribunal decision applies the pre-amended reassessment limitation framework and treats an alleged bogus-purchase amount as a revenue item rather than an asset for the extended limitation test.

Material facts and background

The ld. AR reiterated the facts of the case through material available on

record, stating that the assessee is a partnership firm, had filed its return of income for AY 2014-15 on 25.09.2014, declaring a total income of Rs. 12,69,240/-. Further as per information available during the search and seizure action on Rajendra Jain Group, it is revealed that the assessee has obtained accommodation entries in the nature of bogus purchase from M/s Narayan Gems and M/s Nazar Impex Pvt. Ltd. amounting to Rs. 3,02,93,611/- during the relevant year. Such information prompted the revenue to form a belief that the income chargeable to tax has escaped in the present matter. Accordingly notice under section 148 was issued on 19.04.2021 after recording reasons along with prior approval of the sanctioning authority. Subsequently, the procedure of reopening was initiated, as per amended regime following the decision of Union 3

of India vs. Ashish Agarwal [2022] 138 taxmann.com 64 (SC). After following the entire proceedings, notice under section 148 dated 27.03.2022 was issued to the assessee. During the course of proceedings statutory notices under section 143(2) and 142(1) of the Act were issued along with questionnaire which were responded by the assessee. On deliberations, the ld. AO was not convinced with the submissions of assessee, therefore had added the entire amount of alleged bogus purchase to the income of the assessee. The issue then was carried before the ld. CIT(A), who had discussed the legal contentions raised by the assessee as well as the contentions on merits and have dismissed the appeal of assessee by confirming the addition made by ld. AO. 5.

Being aggrieved with the aforesaid decision of ld. CIT(A), the assessee

preferred the present appeal which is under consideration before us.

The first legal contention raised by ld. AR was that the assessee’s case was reopened following the provisions of section 149 of the Act. The ld. AR has submitted an comparison of section 149(1) and its application to the relevant AY and the amended provisions, the same is extracted as under: Income-Tax Act, 1961 - As Amended by Finance Act 2025 Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,(a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have

Income-Tax Act, 1961 Amended by Finance Act 2021 [Time limit for notice.

Appellant / assessee submissions

The ld. AR reiterated the facts of the case through material available on

The first legal contention raised by ld. AR was that the assessee’s case was reopened following the provisions of section 149 of the Act. The ld. AR has submitted an comparison of section 149(1) and its application to the relevant AY and the amended provisions, the same is extracted as under: Income-Tax Act, 1961 - As Amended by Finance Act 2025 Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,(a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have

The ld. AR further submitted that the identical issue has been came up

It is further submitted by the ld. AR that the subject matter of

disallowance in the present case was bogus purchase, which a profit and loss item and cannot be considered as an asset. To support this contention the ld. AR 9

Revenue / respondent submissions

Per contra, the ld. Sr. DR representing the revenue submitted that the ld.

Court / Tribunal analysis and reasoning

placed his reliance on the decision of Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. vs. ACIT [2024] 162 taxmann.com 225 (Bom.HC), wherein on the issue of deduction under section 80JJA it was held by the Hon’ble Court that the deduction under section 80JJA cannot represent escapement of income in the form of asset, therefore the notice issued by ld. AO has been held as invalid. The relevant findings of Hon’ble Court in Hexaware Technologies Ltd. (supra) are as under: “40. As regards issue no. 5, it is petitioner's case that the issues raised in the impugned initial notice and the impugned order pertain to correct claim of deduction/allowances or the expenditure incurred. There is also no allegation regarding income escaping tax on account of any undisclosed asset. In the impugned order, the Assessing Officer has restricted the escapement of income only with regard to Rs. 6,54,04,038/-on the claim of deduction under section 80JJAA of the Act and disallowance of excess claim of Forex loss of Rs. 6,90,80,180/-, On the Forex loss, respondent has prima facie accepted the contentions of petitioner that there was a Forex loss. Therefore, the same cannot be justified...

case of assessee in the present matter which is before the Finance Act, 2022 the alleged bogus purchase cannot constitute an asset to be treated as income that has escaped assessment, therefore the notice issued under section 148 in violation of provisions of section 149(1)(b) of the Act is liable to be quashed. 11.

AO as well as the ld. CIT(A) has rightly adjudicated the issues and have arrived at a logical conclusion based on credible information with the ld. AO, whereas the assessee was squarely failed to prove the genuineness of purchases recorded in the books, therefore the impugned decision was on a proper appreciation of the facts and cannot be held to be on surmises. It is submitted that the order of ld. CIT(A) deserves to be upheld. 12.

considered view that the pre-requisite conditions of section 149(1)(b) could not be complied by the ld. AO, while issuing the notice under section 148, such notice issued, thus, cannot be treated to be a valid notice and therefore the proceedings consequent to such notice would be also be treated as bad-in-law,

present case was an invalid notice in the eyes of law and consequential assessment is liable to be quashed, the quantum addition made in present case, therefore stands deleted. The other legal contention or controversies raised on merits are, thus, rendered as academic only, so are not adjudicated. 15.

Operative decision and relief

present case was an invalid notice in the eyes of law and consequential assessment is liable to be quashed, the quantum addition made in present case, therefore stands deleted. The other legal contention or controversies raised on merits are, thus, rendered as academic only, so are not adjudicated. 15.

Sd/(JUSTICE (RETD.) C.V. BHADANG) President Mumbai, Dated : 06-03-2026. *SK, Sr. PS

The Appellant The Respondent DR, ITAT, Mumbai Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai

Authorities and precedents appearing in the judgment

• India vs. Ashish Agarwal
• Madras High Court in the case of IDFC Ltd. vs. DCIT
• Hexaware Technologies Ltd. vs. ACIT
• Madras High Court in the case of IDFC Ltd. vs. DCIT (supra) has

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Old-law reassessment limitation; bogus purchase is not an asset. The operative result is classified as Quashed Or Set Aside. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Old-law reassessment limitation; bogus purchase is not an asset. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Reconstruct the reassessment timeline: original assessment, section 148A notice/reply, approval authority, notice date and the applicable section 149 limitation window.
• Preserve the complete response to section 148A(b), objections and proof of disposal; jurisdictional defects are often decided from the documentary chronology.
• Build a transaction-level evidence file: confirmations, bank trail, invoices, ledger, tax/GST records and counter-party material rather than relying on a generic explanation.
• Where the addition depends on a third-party statement or investigation report, record the request for the relied material and cross-examination at the earliest stage.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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