INCOME TAX OFFICER, DELHI V. RAJ BHAGWAN BANSAL, DELHI

ITA 3778/DEL/2024

AI Insights

The case involves the Income Tax Officer (ITO) appealing against the decision of the Commissioner of Income Tax (Appeals), which had allowed the appeal of the assessee, Raj Bhagwan Bansal, and deleted the addition made to his income. The reassessment was initially based on information from the Investigation Wing about bogus bills from M/s Vaishnavi Trading Co. The Tribunal found that the reassessment was invalid due to the ITO lacking jurisdiction and the absence of a proper legal basis for reopening the assessment beyond the four-year period stipulated under section 147 of the Income Tax Act.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839178 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 20-08-2024
• Other Referred Cases: Marigold Merchandise (P.) Ltd. v. Assistant Commissioner of Income-tax, Dushyant Kumar Jain v. Deputy Commissioner of Income-Tax, Saroj Sangwan v. Income-tax Officer, Discovery Communications India vs. Addl. Commissioner of Income-tax, PCIT Vs. Vimal Gupta, Sapna Rastogi Vs. ITO, J. Mitra & Brothers vs. ACIT, Kelvin International vs. DCIT, Home Finders Housing Ltd. vs. ACIT, Abhishek Jain vs. ITO, S.S. Ahluwalia vs. ITO, Usha International Ltd vs. CIT, Dushyant Kumar Jain vs. Deputy Commissioner of Income-Tax, PCIT Vs. Vimal Gupta, Saroj Sangwan v. Income-tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R.R MAUR YA
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings; Question of law; Unexplained expenditure; Principle of natural justice; Accommodation entries; Borrowed satisfaction; Procedural lapse; Bogus
• Section: 147; 148; 143(3); 263; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELDI BENCH “B”: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3778/Del/2024 (ASSESSMENT YEAR 2012-13) Income Tax Officer, Room No.2609, 26th Floor, E-2 Block, Civic Centre, Delhi-110002. Vs. Raj Bhagwan Bansal, 2888 2nd Floor, Sirki Walan, Hauz Quazi, Delhi-110006 PAN-AFHPB3254M (Appellant) (Respondent) C.O. No.193/Del/2025 Arising out of ITA No.3778/Del/2024 (ASSESSMENT YEAR 2012-13) Raj Bhagwan Bansal, 2888 2nd Floor, Sirki Walan, Hauz Quazi, Delhi- 110006 PAN-AFHPB3254M Vs. Income Tax Officer, Room No.2609, 26th Floor, E-2 Block, Civic Centre, Delhi-110002. (Appellant) (Respondent) Assessee by Shri R.R. Maurya, Adv. and Shri Puskar Pandey, Adv. Department by Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 07.01.2026 Date of Pronouncement 18.02.2026 O R D E R PER MANISH AGARWAL, AM: This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [‘Ld. CIT(A)’ in short], in Appeal No. CIT(A), Delhi-16/10498/2019-20 dated 26.06.2024 Printed from counselvise.com 2 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal passed u/s 250 of the Income Tax Act, 1961 (‘the Act’ in short) for Assessment Year 2012-13. Assessee has also filed Cross Objections. 2. The brief facts of the case are that assessee is an individual and engaged in the Trading of Iron & Pipes. The return of income was originally filed on 30.09.2012 declaring total income at Rs. 5,00,920/- . The assessment was than completed u/s 143(3) the Act by making disallowance out of various expenses claimed, and accordingly the total income was computed at Rs. 5,49,505/-. Thereafter, the AO initiated Reassessment proceedings by issue of notice u/s 148 of the Act based on the information received from Investigation Wing that assessee had made purchases from one M/s Vaishnavi Trading Co. who had admitted that it was providing accommodation entries of bogus bills after charging commission. Based on the admission of Shri Rakesh Agarwal proprietor of M/s Vaishnav Vaishnavi Trading Company, the case of the assessee was reopened after recording the reasons and taking approval from the authorized authority and notice u/s 148 was issued on 29.03.2019. After considering the submissions made and the replies filed by the assessee, reassessment order was passed u/s 147/144 of the Act dated 21.12.2019 by making addition of Rs.2,12,91,192/- by holding the purchase of the said amount from M/s Vaishnavi Trading Company as unexplained expenditure u/s 69C of the Act. 3. Against the said order, the assessee preferred an appeal before the Ld. CIT(A) who after appreciating the submissions made by the assessee and the facts of the case, has allowed the appeal of the assessee by deleting the addition made, however, Ld. CIT(A) has not decided the issue of reopening of the assessment taken by the assessee. Printed from counselvise.com 3 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal 4. Aggrieved by the said order, the Revenue is in appeal before the Tribunal by taking following grounds of appeal: “1. The order passed by Ld. CIT(A) is bad in law as the Ld. CIT(A) has ignored the fact that despite of ample opportunities provided to the assessee during the assessment proceedings, the assessee has failed to provide the complete details/documents in support of his claim, except the copy of invoice of purchase. 2. The Ld. CIT(A) has deleted the addition relying upon the case of M/s Odeon Builders Pvt. Ltd. without appreciating that facts of the instant case are different/distinguishable since the AO has invoked provision of section 145(3) for rejecting the books of account and thus the claim that sales have been accepted is not correct. 3. The Ld. CIT(A) has erred in deleting the addition made by Assessing Officer without going into the facts of the case. 4. The appellant craves leave to modify/amend or add any one or more grounds of appeals.” 5. On the other hand, the assessee has also filed the Cross Objections which reads as under: “1. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in not quashing/annulling the reassessment order passed under section 147 of the Income-tax Act, 1961, inasmuch as the reassessment proceedings are barred by limitation in view of the first proviso to section 147. Neither in the reasons recorded by the Assessing Officer nor in the reassessment order is there any categorical finding that the appellant had failed to disclose fully and truly all material facts necessary for the assessment. In the absence of such a finding, no reassessment could legally be initiated after the expiry of four years from the end of the relevant assessment year, rendering the impugned reassessment order bad in law and liable to be cancelled. 2. That having regard to the facts and circumstances of the case, assumption of jurisdiction in initiating the proceedings u/s 147 and passing the impugned order u/s 143(3)/147 and that too without complying with mandatory conditions w/s 147 to 151 as envisaged under the Income Tax Act, 1961, is bad in law and against the facts and circumstances of the case. 3. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred, both on facts and in law, in not quashing the reassessment order passed under section 147 of the Income-tax Act, 1961, wherein the addition was made solely on the basis of a third-party statement. Printed from counselvise.com 4 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal The assessee was not afforded the opportunity to cross-examine the said person, despite the said statement forming the sole basis of the addition. Such denial of cross-examination amounts to a violation of the principles of natural justice and renders the reassessment proceedings bad in law and liable to be annulled.” 6. Since, in the cross objection filed, assessee has challenged the validity of the reopening of the case, therefore, the Cross Objection taken by the assessee are taken first. 7. In the Cross Objection Nos.1 and 2, the assessee has challenged the reopening of the completed assessment based on the borrowed satisfaction and without jurisdiction. 8. Before us, ld. AR for the assessee submits that case of the assessee was reopened after the expiry of four years from the end of the relevant Assessment Year and from the perusal of the reasons recorded as reproduced at Page-1 of the reassessment order and also placed in the PB filed at pages 166-167, it is observed that the AO has failed to record the satisfaction that it is the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. The Ld. AR submits that reopening is done solely based on the information received from Investigation Wing without making any independent analysis or verification and without recording the satisfaction that assessee has failed to disclose all the material facts necessary for assessment, therefore, the reassessment proceedings are based on borrowed satisfaction and lack of application of mind, and thus reassessment proceedings deserves to be hold as invalid. For this reliance is placed on the judgment of the Co-ordinate Bench of the ITAT, Delhi in the cased of Marigold Merchandise (P.) Ltd. v. Assistant Commissioner of Income-tax [2025] 180 txmann.com 867 (Delhi-Trib.). Printed from counselvise.com 5 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal 9. Ld. AR further submits that the assessment in the case has already been completed u/s 143(3) of the Act wherein the assessee was asked to file complete details of purchases made and vide letter dated 28.01.2015, the assessee has filed all the details, containing party wise details of purchases and sales and their Ledger account as appearing in the books of accounts of the assessee were also produced before the AO. The Ld. AR submits that once all the necessary details were filed with respect to the purchases during the course of original assessment proceedings which were examined by the AO and after considering the facts had accepted the same, reopening the completed assessment solely based on the information from the Investigation Wing is bad in law. He prayed that the notice issued u/s 148 of the Act is lack of proper satisfaction and thus, deserves to be held bad in law and consequent reassessment order passed deserves to be quashed. 10. The Ld. AR further submits that in the instant case, jurisdiction over the case of the assessee lies with the ITO, Ward 46(5), Delhi who also passed the assessment order u/s 143(3) of the Act earlier in assessee own case for impugned assessment year. It is further submitted that the case of the assessee was reopened by recording the satisfaction by the ITO, Ward-2(2), Ghaziabad and the statutory approval was obtained from the PCIT, Ghaziabad And not by ITO Ward 46(5), Delhi. The Ld. AR further drew our attention to letter dated 18.11.2019 by ITO, Ward 2(2), Ghaziabad through which case of the assessee stood transferred to Income Tax Officer, Ward- 46(5), New Delhi having jurisdiction over the assessee, the necessary copy of the said letter is placed in the paper book page 165 as obtained by the assessee from the AO under RTI Act. The Ld. AR submits that the notice in the case of the assessee u/s 148 has been issued by the Assessing Officer having no jurisdiction over the assessee and, therefore, the notice issued u/s 148 is invalid and void ab-initio. For this reliance is placed on the judgment of the Hon’ble Delhi High Court in the case Printed from counselvise.com 6 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal of Dushyant Kumar Jain v. Deputy Commissioner of Income-Tax reported in [2015] 381 ITR 428 (Del), and further the judgment of the Co-ordinate Bench of the ITAT Delhi in the case of Saroj Sangwan v. Income-tax Officer reported in [2024] 207 ITD 165 (Delhi-Trib.). He prayed accordingly. 11. On the other hand, Ld. Sr. DR vehemently supported the orders of the lower authorities and submits that certain fresh information was received from Investigation Wing after completion of the assessment u/s 143(3) in the case of the assessee and therefore, it is fresh material brought on record subsequent to the completion of the assessment and, therefore, the reopening of the assessment based on such material is valid. Regarding the jurisdiction, Ld. Sr. DR submits that the reopening was done by the Assessing Officer having jurisdiction and, therefore, this plea should not be accepted. He thus, prayed for confirmation of the reopening of the assessment. 12. Heard both the parties and perused the materials available on record. At the outset from the perusal of reasons recorded, it is observed that the satisfaction of escapement of income in the instant case was recorded by the ITO, Ward-2(2), Ghaziabad and neither the PAN is stated in the reasons recorded nor the fact that assessment has already been completed under section 143(3) has been brought on record. It is further observed that in the reasons recorded, it is evident that AO has recorded his satisfaction of escapement of income on the basis of information supplied by the Investigation Wing and no independent verification of the facts was carried out before reopening the assessment. It is also observed that the case of the assessee was finally transferred to the correct jurisdiction i.e. the 4ITO, Ward 46(5), New Delhi by ITO, Ward-2(2), Ghaziabad issued the notice u/s 148 to the Act. The Hon’ble Jurisdictional High Court in the case of Discovery Communications India Printed from counselvise.com 7 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal vs. Addl. Commissioner of Income-tax [2024] 168 taxmann.com 567 (Delhi) has held as under: “26. The existence of failure on the part of the assessee to disclose fully and truly should not only be integral to the reasons but it must also be spelt out in the reasons as to what was to be disclosed but had not been disclosed. The absence of such averments in the reasons renders the whole exercise nugatory. Such lapse on the part of the AO cannot be regarded as a mere procedural irregularity but is a defect which goes to the root of the matter. The purported reasons that prompted the AO to reassess and disallow the expenditure incurred on DAP and production and translation expenses only demonstrate a change of opinion on the part of the AO, which cannot form the basis of reopening the assessment. 27. In order to assume jurisdiction under Section 147, the stand of the AO was that DAP expenditure was allowed owing to a 'mistake', whereas, production and translation expenses were allowed without any verification. Even if, such an argument is to be accepted, the appropriate remedy in such a situation may lie under Section 263 of the Act. In CIT v. Usha International Ltd [2012] 25 taxmann.com 200/210 Taxman 188/348 ITR 485 (Delhi) [FB], the Court held as under: “……where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion.\" 28. Consequently, one of the essential ingredients for reopening the assessment beyond the period of four years has not been satisfied in the present case. Reassessment proceedings are therefore bad in law.” 13. It is further observed that in the present case, the notice u/s 148 of the Act was issued by the Assessing Officer having no jurisdiction over the assessee. Further there was no order passed u/s 127 of Act transferring the jurisdiction in the case of assessee by the principal CIT. The Hon’ble Delhi High Court in the case of Dushyant Kumar Jain (supra) has held that the Assessing Officer who had passed the original assessment order is competent to invoke the jurisdiction u/s 148 of the Act. The relevant observations of the Hon’ble Court are as under: “It is only the AO who has issued the original assessment order dated 13th April 2009 for AY 2007-08 under section 143(3) of the Act who is empowered to exercise powers under section 147/148 to re-open the assessment. This is Printed from counselvise.com 8 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal because he alone would be in a position to form reasons to believe that some income of that particular AY has escaped assessment.” 14. The jurisdictional high court in the case of PCIT Vs. Vimal Gupta reported in 2017 (10) TMI 1670 (Delhi) under identical circumstances held as under: 1. This is an appeal filed by the Revenue against an order dated 23rd December 2015 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 1211/Del/2010 for the Assessment Year (‘AY’) 2006-07. 2. Although other grounds have been pressed by the Revenue regarding the validity of the impugned order of the ITAT holding the assessment order passed under Section 148 of the Income Tax Act, 1961 (‘Act’) to be invalid, a threshold ground urged is that the ITAT erred in holding in the impugned order that the assessment made by the Additional Commissioner of Income Tax (‘ACIT’) Circle 34 (1) was without jurisdiction. It has been noticed that the matter was transferred to the said ACIT by the Income Tax Officer (‘ITO’) Ward 34 (4), New Delhi without an appropriate order having been issued under Section 127 of the Act. Further that the ACIT did not himself issue the notice under Section 148 of the Act. 3. The ITAT has in para 13 of the impugned order specifically adverted to the above aspect and correctly held that “The ACIT, Circle 34(1), New Delhi has admittedly not recorded that he had reasons to believe that income chargeable to tax of the Assessee has escaped assessment. He continued reassessment proceedings initiated by the ITO, Ward 34(4) of the Act without independently recording reasons for reopening or issuing a fresh notice u/s 148 of the Act.” Further the ITAT noted that “There is no order u/s 127 of the Act transferring the jurisdiction of the case from ITO, Ward 34(4) to ACIT, Ward 34(1). Thus this order of reassessment passed by the ACIT u/s 34(1) of the Act is without jurisdiction and hence is bad in law.” 4. In the present memorandum of appeal no attempt has been made by the Revenue to aver whether in fact there was an order under Section 127 of the Act transferring the case to the ACIT, Circle 34(1). That being the position, the impugned order of the ITAT cannot be faulted. In view of the above conclusion, there is no occasion to examine the other questions urged by the Revenue in this appeal. 5. No substantial question of law arises. The appeal is dismissed. Printed from counselvise.com 9 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal 15. The coordinate bench of Delhi Tribunal in the case of Sapna Rastogi Vs. ITO reported in 2024 (8) TMI 1517 (ITAT, Delhi) has held the reassessment order invalid when the wrong jurisdiction was assumed by issue of notice u/s 148 by the AO having no jurisdiction over the assessee. The relevant observations are as under: 5. We have given thoughtful consideration to the matter on record and the submissions. The assessee had filed a return of income on 07.07.2013 declaring the total income at Rs. 18,85,550/-. The assessee is an individual and, taking into consideration Instruction No. 01/2011 available at page 245 of the paper book, for non-corporate returns in case of non-metro cities (mofussil areas), the returns above Rs. 15 lakhs have to be assessed by the officers of the rank of Assistant Commissioners/Deputy Commissioners. The report which is filed by the AO dated 26.06.2024 and reproduced above categorically mentions the fact that it is only on 15.05.2024, the PAN of the assessee has been transferred to ACIT, Circle 1(1)(1), Meerut, from ITO, Ward 1(2)(5), Meerut, as per CBDT Instruction No. 05/2011 dated 31.01.2011 vide which jurisdiction of noncorporate returns above Rs. 15 lakhs lies with ACIT/DCIT and upto Rs. 15 lakhs lies with ITO. 5.1 Now, admittedly, the notice u/s 148 dated 30.03.2021, copy of which is placed at page 7 of the paper book, is issued by ITO, Ward-1(2)(5), Meerut. Thus, certainly, this Revenue Officer did not have the pecuniary jurisdiction as vested by the Board vide CBDT Instructions No. 01/2011 dated 31.03.2011. 5.2 In this context, the coordinate Bench order in the case of J. Mitra & Brothers vs. ACIT, ITA No. 3643/Del/2023 decided on 10.04.2024 has been relied by the ld. AR wherein the coordinate Bench, relying another decision in the case of Kelvin International vs. DCIT, ITA No. 5363/Del/2017, order dated 22.12.2023, has held that the exercise of jurisdiction of Revenue Officer who did not have the jurisdiction given by the CBDT Instructions cannot be sustained and the assessment order is vitiated. The Hon’ble Allahabad High Court in the case of PCIT-II, Lucknow vs. Mohd. Rizwan, Proprietor M/s M.R. Garments, in ITA No. 1000/2015, order dated 30.03.2017 has examined this aspect on the basis of numerous judicial pronouncements and while considering the question, if the notice u/s 148 of the Act, issued by an authority not having jurisdiction, would be valid by referring to section 292BB of the Act, has held that jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction, an assessee cannot confer upon any jurisdictional authority, some which he lack inherently. The Hon’ble Allahabad High Court has decided this issue against the Revenue holding that notice u/s 148 is not a procedural subject, but, a jurisdictional one as it is a condition precedent for initiation of proceedings. This judicial pronouncement squarely covers the issue in favour of the assessee. Printed from counselvise.com 10 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal 5.3 The judgments which the ld. DR has relied when taken into consideration, are not applicable to the facts and circumstances as the judgements in the cases of Home Finders Housing Ltd. (supra) and Sagar Developers (supra) are in the context of the non-disposal of the objections and the judgement in the cases of Abhishek Jain (supra) and S.S. Ahluwalia (supra) are primarily concerned with territorial jurisdiction in regard to which there may be instance of concurrent jurisdiction of the two assessing officers. However, the case before us concerns the pecuniary jurisdiction vested by the Board and if that is not complied, the invoking of jurisdiction is vitiated and, consequently, the assessment order is vitiated. The ground No. 1 with sub-grounds in regard to this issue are sustained. 6. In the result, the appeal of the assessee is allowed and the assessment order is quashed. 16. In the light of above facts and discussion, we are inclined to sustain the Cross Objection Nos.1 and 2 of the assessee and held that assumption of jurisdiction u/s 147 of the Act for reopening the completed assessment as invalid for want of jurisdiction and thus the consequential reassessment order passed is hereby quashed. 17. In the result, the Cross Objections filed by the assessee is allowed. 18. Since, we have already allowed the Cross Objections and quashed the reassessment order, the other appeal of the Revenue become infructuous. 19. In the final result appeal of the Revenue is dismissed and the Cross Objections filed by the assessee are allowed. Order is pronounced in the Open Court 18.02. 2026. Sd/- Sd/- (ANUBHAV SHARMA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:18.02.2026 *PK, Sr. Ps* Printed from counselvise.com 11 ITA No.3778/Del/2024 C.O. No.193/Del/2025 ITO vs. Raj Bhagwan Bansal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "