Assessee Must Provide CBI Status Report for Re-adjudication of LOC Scam Undisclosed Income Additions

By | October 14, 2026
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Assessee Must Provide CBI Status Report for Re-adjudication of LOC Scam Undisclosed Income Additions

Issue

Whether the Assessing Officer was justified in framing reassessments and whether the matter should be remanded for de novo adjudication after the assessee failed to fully comply with earlier directions to furnish periodic status reports on CBI/Civil Court proceedings concerning the LOC scam additions under Section 68.

Facts

  • The assessee’s assessment for Assessment Years 1991-92 to 1993-94 was reopened based on information received from the Central Bureau of Investigation (CBI) regarding involvement in the Letter of Credit (LOC) scam.
  • The Assessing Officer (AO) made additions to the assessee’s income under the head ‘income from undisclosed sources’ under Section 68 on account of the LOC scam involvement.
  • In 2017, the Income Tax Appellate Tribunal (ITAT) set aside the assessments for de novo adjudication and directed the assessee to periodically submit status reports regarding the pending CBI and Civil Court proceedings.
  • The assessee failed to fully comply with the Tribunal’s directions to provide the required status updates during the fresh assessment proceedings.

Decision

  • Justification of Assessment: In favor of Revenue. The Assessing Officer was justified in framing the assessment given the assessee’s non-compliance with the Tribunal’s previous directions.
  • Remand for De Novo Adjudication: Matter Remanded. The assessee is directed to file a comprehensive status report with the Assessing Officer regarding the prosecution launched by the CBI.
  • Fresh Assessment Directions: The Assessing Officer is directed to re-frame the assessment in accordance with the law after taking into account the CBI status report, material available on record, and any additional evidence furnished by the assessee.

Key Takeaways

  • Compliance with Tribunal Directions: Taxpayers must strictly follow conditional remands set by appellate authorities, such as submitting periodic legal/court status reports.
  • Impact of CBI Proceedings on Taxability: Additions arising from financial scams investigated by enforcement agencies require updated status inputs from court/CBI proceedings to reach a final, lawful tax determination.
  • De Novo Assessment Safeguards: On remand, the Assessing Officer must evaluate all fresh material, judicial status updates, and evidence produced before framing a final order.
IN THE ITAT GAUHATI BENCH ‘DB’
Md. Jiauddin Ahmed
v.
ITO
Yogesh Kumar U.S., Judicial Member
and Laxmi Prasad Sahu, Accountant Member
IT Appeal Nos.150, 151 & 152 (GTY) of 2019
[Assessment years 1991-92, 1992-93 and 1993-94]
SEPTEMBER  16, 2026
S.P. Bhati, FCA for the Appellant. P.S. Thuingaleng, CIT DR for the Respondent.
ORDER
Yogesh Kumar U.S., Judicial Member. – The captioned Appeals are filed by the Assessee against the orders of the Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short) dated 28.03.2019 passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) pertaining to the Assessment Years 1991-92, 1992-93 & 1993-94.
2. Since the above Appeals are filed by the single Assessee, having identical issues to be decided, the captioned Appeals are heard together and decided in this common order.
3. Brief facts of the case are that, the case of the Assessee was reopened based on the information received by the CBI that the Assessee was found to be one of the prime accused named in the charge sheet filed by the CBI for his involvement in swindling of the public money through fraudulent means. The original assessment was completed u/s 144/147 of the Act on 31.03.2003 by determining the total income of the Assessee at Rs.46,700/-, Rs.16,62,406/- and Rs.18,64,960/- for the assessment years 1991-92, 1992-93 and 1993-94 respectively. Aggrieved by the Assessment Orders dated 31.03.2003, Assessee preferred the three Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders dated 07.12.2006, dismissed the Appeals filed by the Assessee.
4. As against the orders of the Ld. CIT(A) dated 07.12.2006, Assessee preferred three Appeals before the Tribunal and the Coordinate Bench of the Tribunal vide Order dated 29.08.2007, directed the Assessing Officer to decide the case on merits after supplying the ‘reasons for reopening’ the case to the Assessee. After adjudicating the issues involved, the Assessing Officer found that the Assessee was involved in LOC Scam and received pecuniary benefits by becoming part of it. Accordingly, made the addition vide Assessment order dated 26.08.2008 passed u/s 143(3)/147/254 of the Act. Aggrieved by the Assessment Orders dated 26.08.2008, Assessee preferred Appeals before the Ld. CIT(A) and the Ld. CIT(A) vide Order dated 31.08.2010, dismissed the Appeals filed by the Assessee. Thereafter, Assessee challenged the orders of the Ld. CIT(A) dated 31.08.2010 before the Co-ordinate Bench of the Tribunal in Jaimuddin Ahmed v. ITO [IT Appeal Nos. 143, 144 & 145 (Gau) 2010, dated 15-5-2015] and the Co-ordinate Bench of the Tribunal vide Order dated 15.05.2015, remanded the matter to the file of the Assessing Officer with a direction to ‘re-examine and decide the issue afresh in accordance with law, particularly decision to be arrived at by the Civil Court’.
5. Thereafter, the Department preferred three Miscellaneous Applications No.01,02 & 03/Gau/2016 with a prayer to rectify the error apparent from the record in the order of the Tribunal dated 15.05.2015. The Co-ordinate Bench vide Order dated 07.06.2016 allowed the Miscellaneous Application filed by the Revenue by issuing direction to the Assessee to furnish status report of the proceedings before the Civil Court and also to cooperate with the assessment proceedings. Further directed the Assessing Officer to ascertain the proceedings pending before the Civil Court and also directed to pass the Assessment Order within the limitation contemplated u/s 153(3) of the Act.
6. Pursuant to the order passed in M.A Nos.01, 02 & 03/Gau/2010, dated 07.06.2017, fresh Assessment Orders were passed on 28.11.2018 u/s 143(3)/ 147/254 of the Act by making an addition of Rs.16,702/- for the A.Y. 1991-92, Rs.15,98,406/- for A.Y. 1992-93 and Rs.18,26,957/- for A.Y. 1993-94 on account of income from LOC scam. Aggrieved by the Assessment Orders dated 28.11.2018 passed u/s 143(3)/147/254 of the Act, Assessee preferred three Appeals before the Ld. CIT(A). The Ld. CIT(A) vide Order dated 28.03.2019, dismissed the Appeals filed by the Assessee. As against the order of the Ld. CIT(A) dated 28.03.2019, Assessee preferred three Appeals by the raising common Grounds of Appeal. For the sake convenience, Grounds of Appeal in ITA No.150/Gau/2019, for the A.Y. 1991-92 is reproduced as under:-
“1. For that the assessment order passed by the Assessing Officer and upheld by the CIT(Appeals) is in violation of direction issued by Hon’ble ITAT and hence liable to be annulled.
2. For that the assessment passed by the Ld. Assessing Officer on 28/11/2018 is beyond the period of limitation as prescribed u/s 153 of the I.T. Act, 1961 and hence liable to be annulled. Original order of setting aside the assessment was passed by Hon’ble Tribunal on 15.05.2015 time limit for passing fresh order consequent upon said order having expired on 31.03.2017. Time limit cannot be treated as having extended by Tribunal in M.A. Appeal disposed of on 07.06.2017.
3. For that the ld. Assessing Officer is not justified in making addition of Rs.16,702/- under the head income from undisclosed sources which has been made simply on the basis of suspicion & surmises.
4. The Appellant craves the leave to take Additional Grounds and/ or amend the above grounds of appeal at the time of hearing of Appeal.
7. The Learned Counsel for the Assessee at the outset addressing on Ground No.1 & 2 submitted that the assessments passed by the Assessing Officer dated 28.11.2018 are beyond the period of limitation as prescribe u/s 153 of the Act and hence liable to be annulled. The Learned Counsel for the Assessee further submitted that the Co-ordinate Bench of the Tribunal in Jaimuddin Ahmed (supra), remand the matter to the file of the Assessing Officer. However, subsequently on account of filing Miscellaneous Application filed by the Revenue in M.A. Nos.01,02 & 03/Gau/2016 vide Order dated 07.06.2017, modified the order of the Tribunal dated 15.05.2015. The Learned Counsel for the Assessee further submitted that the said original order of the Tribunal on the main Appeal in Jaimuddin Ahmed (supra) shall be taken into consideration for calculation of limitation period as prescribed u/s 153 of the Act and the Assessing Officer committed error in taking into consideration of the order passed in M.A. Nos.01, 02 & 03/Gau/2010; i.e., 07.06.2017, which is contrary to the settled position of law and contrary to provisions of Section 153 of the Act. Thus, submitted that the impugned Assessment Orders dated 28.11.2018 are barred by limitation and deserves to be quashed.
8. Per contra, the Ld. DR vehemently submitted that the original order of the Tribunal dated 15.05.2015 in Jaimuddin Ahmed (supra) has been modified by giving fresh directions to the Assessing Officer in the order of the Tribunal M.A. Nos.01, 02 & 03/Gau/2010 vide Order dated 07.06.2017 wherein the Co-ordinate Bench apart from issuing fresh directions, put a condition to the Assessing Officer to adjudicate the issue and pass the Assessment Orders in compliance with provisions of Section 153(3) of the Act. Therefore, the date of disposal of the M.As. has to be considered for calculation of limitation to pass the Assessment Orders as per Section 153(3) of the Act. Thus, sought for dismissal of Ground No.1 & 2 of the Assessee.
9. We have heard the parties and perused the material available on record. The Co-ordinate Bench of the Tribunal while deciding the Appeals filed by the Assessee in Jaimuddin Ahmed (supra), vide Order dated 15.05.2015, remitted the issue to the file of the Assessing Officer for re-examination and deciding afresh in accordance with law based on the decisions to be arrived by the CBI Court (wrongly written as Civil Court). The Revenue preferred M.A. Nos.01, 02 & 03/Gau/2016, against the Order dated 15.05.2016, the Co-ordinate Bench of the Tribunal vide Order dated 07.06.2017, allowed the M.A. filed by the Assessee by issuing following fresh directions:-
1) The Assessee should furnish the status report of the proceedings before the Civil Court to the Ld. Assessing Officer periodically and parallel co-operate with the assessment proceedings before the income tax authorities.
2) The Ld. Assessing Officer should also take efforts to ascertain the pendency of proceedings before the Civil Court which decision would also have a bearing on determination of total income in Assessee’s case.
We set aside the assessment to the file of the Ld. Assessing Officer for de novo adjudication in accordance with the provisions of Section 153(3) of the Act by following the aforesaid directions.
10. Pursuant to the order passed in M.A. Nos.01, 02 & 03/Gau/2016 dated 07.06.2017, Assessing Officer passed Assessment Orders on 28.11.2018. After disposal of the Appeals by the Tribunal in Jaimuddin Ahmed (supra) when the Assessee took the file for framing the Assessment, Assessee contended before the Assessing Officer that the Assessing Officer shall not pass the assessments till the disposal of the Criminal Case pending before the CBI Court, which compelled the Revenue to move three M.As. No.01, 02 & 03/Gau/2016, wherein the Co-ordinate Bench of the Tribunal directed the Assessee to furnish status report of the proceedings before the Civil Court/ CBI Court to the Assessing Officer periodically and to cooperate with the Assessment proceedings and also directed that the Assessing Officer to make efforts to ascertain the pendency of proceedings before the Civil Court i.e., prosecution launched by the CBI against the Assessee and further directed to frame the assessment in compliance with provisions of Section 153(3) of the Act. Pursuant to the direction made in the M.A. dated 07.06.2017, the Ld. Assessing Officer passed the Assessment order on 28.11.2018.
11. It is the specific contention of the Ld. AR that once an error apparent from the record in the order of the Tribunal passed in the Appeal is rectified in Miscellaneous Application the said rectification will be incorporated in the main order of the Tribunal passed in the Appeal, therefore, for the purpose of calculation of the limitation u/s 153 of the Act shall be the date of the order made in main Appeals and not the date of the final order passed in the Miscellaneous Applications. It is pertinent to note that in the initial order passed by the Tribunal in Jaimuddin Ahmed (supra) was on 15.05.2016, wherein it has been directed to the Assessing Officer to pass the Assessment Order in accordance with law “particularly the decisions to be arrived by the Civil Court”. Pursuant to the order dated 15.05.2015 passed in the main Appeals, when the Assessing Officer took the case for framing the assessment as stated earlier, the Assessee himself contended that the Assessing Officer cannot frame the assessment until the order of the Civil Court i.e., prosecution launched by the CBI is concluded. Therefore, the Revenue preferred M.A. Nos.01,02 & 03/Gau/2010. After lapse of nearly two years from the date of order made in ITA, the Co-ordinate Bench of Tribunal on 07.06.2017, decided the above M.As., wherein directed the Assessing Officer to complete the assessment by taking into consideration of the status report of the prosecution launched by the CBI and also directed to comply with the provisions of Section 153(3) of the Act.
12. As per the provisions of Section 153(3) of the Act as applicable for the year under consideration, the fresh assessment in pursuance of an order u/s 254 of the Act, setting aside or cancelling an assessment may be made at any time before the expiry of nine months from the end of financial year in which the order u/s 254 of the Act is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or as the case may be. For the sake of ready reference, the provisions of Section 153 of the Act is reproduced as under:-
“Time limit for completion of assessment, reassessment and recomputaiton.
153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable: [Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as it for the words “twenty-one months”, the words “eighteen months” had been substituted:
Provided further that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as it for the words “twenty-one months”, the words “twelve-months” had been substituted.
(2) No order of assessment, reassessment or recomputaiton shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served:
[Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words “nine months”, the words “twelve months” had been substituted.
(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in pursuance of an order under section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of nine months from the end of the financial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner:”
13. As per Section 153(3) of the Act, the limitation will start from the date after order passed u/s 254 of the Act by the Officers maintained thereon. The provisions of Section 254 of the Act not only empowers the Tribunal to pass order u/s 254(1) of the Act in the Appeals (ITA) filed by the parties but also empowers the Tribunal to rectify any error apparent from the record u/s 254(2) of the Act in Miscellaneous Application. Therefore, in the present case, as the direction has been issued by the Tribunal while disposing the M.A. which was there in the main Appeal, the limitation for passing the assessment orders in setting aside proceedings requires to be counted from the date of passing the order u/s 254(2) of the Act in M.A. and not date of disposal of main Appeals.
14. In the present case, the order passed by the Tribunal in M.A. was on 07.06.2017. The nine months from the end of the Financial Year in which the order u/s 254 of the Act is received/ passed expires on 31.12.2018 and the assessment has been passed on 28.11.2018 itself, therefore, the passing of the Assessment Order is well within the limitation prescribed u/s 153(2) of the Act.
15. Further, it is noteworthy to mention that the order in M.A has been passed after the expiry of two years from the date of order of the Tribunal passed in the main Appeal. Therefore, the Assessing Officer will be able to complete the assessment within the time stipulated u/s 153(3) of the Act. The Assessee cannot be compelled to put do the impossible task and the law does not compel impossibility as per the famous Latine maxim lex non cogit ad impossibilia, which means the law does not compel the impossibility.
16. As stated earlier, the provisions of Section 153(3) of the Act mandates that for calculating the period of limitation pursuant to the order passed u/s 254 of the Act may be at any time before the expiry of 9 months from the end of Financial Year in which the order u/s 254 of the Act is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be. The order passed u/s 254 of the Act includes the Order passed u/s 254(1) (Appeals) and 254(2) (Miscellaneous Application) as well. Thus, for the sake of limitation set out in Section 153(3) of the Act, the Ld. Assessing Officer has rightly taken the date of disposal of Miscellaneous Application dated 07.06.2017 and rightly passed the assessment order which is well within the limitation period prescribed thereon. In view of the same, we find no merit in the Ground No.1 & 2 of the Assessee. Accordingly, Ground No.1 & 2 of the Assessee in all the captioned Appeals are dismissed.
17. In Ground No.3, Assessee contended that Assessing Officer has not justified in making addition under the head ‘income from undisclosed sources’ which has been made only on the basis of suspicion & surmises. The Learned Counsel for the Assessee submitted that there is no cogent evidence to make the impugned addition in the hands of the Assessee. Further, the order of the Assessing Officer is cryptic and without basis of any material. Accordingly, sought for deletion of the addition by allowing Ground No.3 of the Assessee.
18. Per contra, the Ld. DR submitted that the Co-ordinate Bench of the Tribunal while disposing the Miscellaneous Application Nos.01, 02 & 03/Gau/2010, dated 07.06.2017, directed the Assessee to file status report of the proceedings of the CBI Court to the Ld. Assessing Officer periodically and to cooperate with the assessment proceedings. However, the Assessee has not complied with the said direction issued by the Tribunal, which compelled the Assessing Officer to pass the assessment orders as time barring period was approaching. Thus, relying on the orders of the Assessing Officer as well as the Ld. CIT(A), sought for dismissal of the Ground No.3 of the Assessee.
19. We have heard the parties and perused the material available on record. The Co-ordinate Bench of the Tribunal while disposing the M.A Nos.01,02 & 03/Gau/2016, vide Order dated 07.06.2017, directed the Assessee to furnish status report periodically of the proceedings in the prosecution launched by the CBI Court. As admitted by the Ld. AR in the Court, Assessee has not fully complied with the said directions and not provided the status report to the Assessing Officer periodically. The Assessee should have complied with the direction passed by the Tribunal, on the failure in the part of the Assessee, the Assessing Officer had no other option but to frame the assessment. Be that as may, considering the above facts and circumstances, we direct the Assessee to file detailed status report to the Assessing Officer regarding the prosecution launched by the CBI at the earliest and the Assessing Officer is directed to frame the assessment in accordance with law after taken into account of the status report, material available on record and also the documents if any produced by the Assessee and frame the assessment in accordance with law. If Assessee failed to comply with the above direction, the Assessing Officer is at liberty to draw adverse interference while passing the Assessment and Assessing Officer is at liberty to pass the Assessment Order in accordance with law. Accordingly, Ground No.3 of the Assessee is partly allowed for statistical purposes.
20. Ground No.4 being general in nature, requires no adjudication.
21. In the result, Appeals of the Assessee in ITA Nos.150, 151 & 152/Gty/2019 are partly allowed for statistical purposes.