BHARAT GUPTA,NEW DELHI V. ITO,WARD-72(4), NEW DELHI

ITA 1764/DEL/2023

AI Insights

The case involves Bharat Gupta, the appellant, contesting the reassessment of his income for the assessment year 2011-12 by the Income Tax Officer (ITO), Ward 72(4), New Delhi. The reassessment was initiated based on information regarding suspicious trading activities in shares of M/s DMC Education Ltd, which were alleged to have facilitated the introduction of unaccounted income. The primary legal contention was the failure of the ITO to provide reasons for the reassessment to the assessee, despite multiple requests. The Tribunal's decision hinged on the procedural requirement of supplying these reasons, which was not adhered to, leading to the quashing of the reassessment order.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 838340 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2023
• Other Referred Cases: PCIT vs. Jagat Talkies Distributors, CIT vs. Trend Electronics, CIT vs. Videsh Sanchar Nigam Limited, PCIT vs. V. Ramaiah
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Assessee Lawyers: K. SAMPATH; V. RAJA KUMAR
• Keywords: Reassessment proceedings; Income from undisclosed sources; Reason to believe
• Section: 147; 148

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘A’ : NEW DELHI) BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SMT. RENU JAUHRI, HON’BLE ACCOUNTANT MEMBER ITA No. 1764/Del/2023 Asstt. Year : 2011-12 BHARAT GUPTA, VS. ITO, WARD-72(4) 215, 2ND FLOOR, GULMOHAR NEW DELHI ENCLAVE, NEW DELHI – 110 049 (PAN: AIUPG6533C) (Appellant) (Respondent) Appellant by : Sh. K. Sampath, Adv., Sh. V. Rajakumar, Adv. Respondent by : Sh. Ajay Kumar Arora, Sr. DR Date of Hearing 28.01.2026 Date of Pronouncement 20.02.2026 ORDER PER MAHAVIR SINGH, VP: This appeal by the assessee is arising from the order of the National Faceless Appeal Centre (NFAC), Delhi in appeal No. CIT(A), Delhi-21/10202/2018-19 dated 09.5.2023. Assessment was framed by the AO u/s. 143(3)/147 of the Income Tax Act, 1961 dated 31.12.2018 relating to assessment year 2011-12. 2. The first issue in this appeal of the assessee is as regards to the order of the CIT(A) confirming the action of the AO in assuming jurisdiction u/s. 147 read with section 148 of the Act without providing reasons recorded. For this, assessee has raised the following ground no. 1: “1. On the facts and in the circumstances of the case and in law the NFAC, Delhi erred in confirming the action of the Assessing Officer – (i)…….. Printed from counselvise.com 2 | P a g e (ii) concluding assessment u/s. 147/143(3) of the Act without providing reasons recorded by the AO leading to belief of escapement of income……..” 3. We have heard the rival contentions and going through the facts and circumstances of the case. We noted that the assessee filed his return of income on 29.3.2012 declaring an income of Rs. 2,17,100/-. AO noted that the information was received from ADIT(Inv), Unit-1(3), Mumbai vide office letter No. ADIT(Inv.)/Unit-1(3)/Diss./DMC EDU/2017-18/5 dated 21.3.2018. AO further noted that as per the information, it was gathered that M/s DMC Education Ltd/ (Script name DMC Education) is a Penny stock listed on BSE with Script Code (517973) and trading in the script is highly suspicious. He further noted that this company has been used to facilities introduction of unaccounted income of members of beneficiaries in the form of Exempt Capital Gain or Short Term Capital Loss in their books of account. 4. In view of the above information the ITO, Ward 32(2) issued notice u/s. 148 of the Act dated 31.3.2018. In response to this notice u/s. 148 of the Act, the assessee vide letter dated 27.4.2018 responded that he has filed return of income for the relevant assessment year 2011-12 on 29.3.2012 in Ward 24(2), New Delhi vide acknowledgement no. 369550600290312. The assessee requested the AO to provide reasons for reopening of the assessment as recorded within the meaning of Section 147 read with section 148 of the Act. The assessee again filed his return of income vide acknowledgement no. 372401970021118 dated 2.11.2018 declaring the same income as declared originally for a sum of Rs. 2,17,100/- in response to notice u/s. 148 of the Act. 5. The case was again reopened by issuing another notice u/s. 148 of the Act by the ITO, Ward 72(4) New Delhi vide dated 31.3.2018. AO noted the fact that the assessee has requested for a copy of reasons for reopening, but the same was not provided to the assessee as claimed in grounds of appeal. Even this plea was taken before the CIT(A) and CIT(A) has not adjudicated the this jurisdictional Printed from counselvise.com 3 | P a g e ground of appeal with proper reasoning. Now before us, Ld. Counsel for the assessee stated that non-supply of reasons recorded vitiates the assessment proceedings. The Ld. Counsel for the assessee relied upon the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Jagat Talkies Distributors (2017) 398 ITR 13 (Del). He particularly drew our attention towards the following paras of the aforesaid decision:- “The decisions of the Bombay High Court in CIT vs. Trend Electronics (supra) and CIT vs. Videsh Sanchar Nigam Limited [2012] 340 ITR 66 (Bom); Manu/MH/1805/2011 support the case of the assessee. In the last mentioned decision, the Bombay High Court held as under (page 459 of 379 ITR): It is axiomatic that power to reopen a completed assessment under the Act is an exceptional power and whenever the Revenue seeks to exercise such power, they must strictly comply with the pre-requisite conditions, viz., reopening of reasons to indicate that the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment which would warrant the reopening of an assessment. These recorded reasons as laid down by the apex court must be furnished to the assessee when sought for so as to enable the assessee to object to the same before the Assessing Officer. Thus, in the absence of reasons being furnished, when sought for would make an order passed on reassessment bad in law. The recording of reasons (which has been done in this case) and furnishing of the same has to be strictly complied with as it is a jurisdictional issue. This requirement is very salutary as it not only ensures reopening notices are not lightly issued. Besides in case the same have been issued on some misunderstanding/ misconception, the assessee is given an opportunity to point out Printed from counselvise.com 4 | P a g e that the reasons to believe as recorded in the reasons do not warrant reopening before the reassessment proceedings are commenced. The Assessing Officer disposes of these objections and if satisfied with the objections, then the impugned reopening notice under section 148 of the Act is dropped/ withdrawn otherwise it is proceeded with further. In issues such as this, i.e., where the jurisdictional issue is involved the same must be strictly complied with by the authority concerned and no question of knowledge being attributed on the basis of implication can arise. We also do not appreciate the stand of the Revenue, that the respondent-assessee had asked for reasons recorded only once and therefore, seeking to justify non-furnishing of reasons. We expect the State to act more responsibly.” Conclusion The court respectfully concurs with the above view of the Bombay High Court and holds that in the present case the Income Tax Appellate Tribunal was right in coming to the conclusion that on account of failure by the Assessing Officer to furnish reasons for reopening of the assessment under section 148 of the Act to the assessee, the reassessment proceedings stood vitiated in law.……” 6. In view of above, Ld. Counsel for the assessee stated that Hon’ble Delhi High Court following the case of Hon’ble Bombay High Court in the case of CIT v Videsh Sanchar Nigam Limited (supra) has considered and adjudicated the issue that failure by the revenue to furnish reasons for reopening of the assessment u/s. 148 of the Act, the reassessment proceedings gets vitiated and is liable to be quashed. Printed from counselvise.com 5 | P a g e 6.1 Ld. Counsel for the assessee also relied upon another decision of the Hon’ble Karnataka High Court in the case of PCIT vs. V. Ramaiah [2019] 103 taxmann.com 201 (Kar.) wherein, the Hon’ble Karnataka High Court has clearly laid down as under:- “7. The Tribunal has clearly noted in its order after looking into the record of the case that the reasons which were placed before the learned Tribunal itself only for the first time were never communicated to the assessee during the contemporary period. Mere participation of the assessee or Authorized Representative in the reassessment proceedings does not amount to the assessee being made aware or known of the reasons for such reopening. The reasons now quoted by the learned Tribunal in the impugned order clearly indicates that they are purportedly detailed reasons and had the assessing authority given the said reasons before hand, the assessee could have raised objections before the assessing authority and the assessee could have rebutted the material on the basis of which the impugned reassessment proceedings were undertaken by the assessing authority. The assessee in the present case twice made a request to the assessing authority, but despite the specific requests, the assessing authority did not comply with the said request and supplied the reasons to the assessee. That casts a doubt even on fact of the recording of the reasons in the contemporary period by the assessing authority. The fact that such reasons are supplied before the learned Tribunal only for the first time was enough for by the learned Tribunal to hold that in view of the decision of the Hon'ble Supreme Court, the assessing authority lacked the jurisdiction in invoking the reassessment proceedings Printed from counselvise.com 6 | P a g e and therefore, the impugned reassessment order deserves to be quashed. 8. The decision relied upon by the learned counsel for the Revenue is distinguishable on facts. The order which was to be passed by assessing authority as preliminary objection of assessee, once the assessee has raised the objection to such reassessment proceedings, the meeting of such objections in the main reassessment order, could be procedural aspect of the matter, but the recording of the reasons before the initiation of the reassessment proceedings and communication thereof to the assessee is sine qua non, as held by Hon'ble Supreme Court and that goes to the root of the matter and confers or deprives the assessing authority of the jurisdiction to undertake such reassessment proceedings, as the case may be. 9. In the present case, admittedly, such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, the Tribunal in our opinion was perfectly justified in quashing such reassessment order.” 7. We noted that Hon’ble Karnataka High Court in the case of PCIT v V. Ramaiah has considered the arguments of the revenue and rejected the arguments that the assessee has raised the prima facie objection before the AO regarding non- communication of reasons recorded and Hon’ble High Court on this point, adjudicated that such reasons if any, were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings, the assessment proceedings have to be quashed. Printed from counselvise.com 7 | P a g e 8. In view of above fact in the present case that reasons were asked by the assessee and this fact is noted by the AO and as contended by the Ld. Counsel for the assessee now before us is that reasons were not supplied, which are not contradicted by the Ld. Sr. DR, therefore, respectfully following the aforesaid precedents, we quash the reassessment proceedings and allow the appeal of the assessee on this jurisdictional issue. 9. As regards issue of merits are concerned, since we have already quashed the assessment on the jurisdictional issue, the issues on merits became academic. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 20.02.2026. Sd/- Sd/- (RENU JAUHRI) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT Date: 20.02.2026 SRBhatnaggar Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Bench Printed from counselvise.com "