MAHENDRA NAIQUE GAUNEKAR,PANAJI V. THE PRINCIPAL COMMISSIONER OF INCOME TAX, PANAJI

ITA 71/PAN/2024

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The case involves appeals by Mahendra Purshottam Naik Gaunekar and Sonali Mahendra Naik Gaunekar against the revision orders passed by the Principal Commissioner of Income Tax, Panaji, under section 263 of the Income Tax Act. The original assessments for the assessment year 2016-17 were reopened, and notices under sections 142(1) and 143(2) were issued to the assessees, leading to disputes over the valuation of property sold and the consequent capital gains tax. The Tribunal considered the procedural validity of the notices and the substantive issues regarding the reassessment of capital gains under section 50C of the Act. The Tribunal's decision emphasized the importance of thorough documentation and compliance with procedural requirements in tax assessments.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 847575 (ITAT-PANAJI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Panaji
• Assessment Year: 2016-2017
• Appeal Filed On: 20-03-2024
• Other Referred Cases: Inderkumar Bachani (HUF) vs ITO, Paul John Delicious Cashew Co vs ITO, Classic Flour & Food Processing Pvt Ltd vs CIT, West Life Development Ltd vs Pr.CIT, Krishan Kumar Saraf vs CIT, Steel Strips Ltd vs ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATISH.M
• Assessee Lawyers: RAHUL SARDA
• Keywords: Set aside; Reassessment proceedings; Sale consideration of property below Jantri Value; Cost of acquisition; Period of limitation; Reopening of assessment; Capital Gains; Validity of assessment; Time period of passing order; Revision of order; Value adopted by valuation officer
• Section: 147; 142(1); 263; 50C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI G D PADMAHSHALI ACCOUNTANT MEMBER I T A. Nos.71&72/PAN/2024 (A.Y.2016-17 ) 1.Mahendra Purshottam Naik,Gaunekar, Shivoham Ribeiro Enclave, Altinho,Panaji-403001, Goa. (PAN .No.ABDPN5971F) 2..Sonali Mahendra Naik,Gaunekar, Shivoham Ribeiro Enclave, Altinho,Panaji-403001, Goa. (PAN .No.AEXPG6959D) VS The Principal Commissioner of Income Tax, Aaykar Bhavan, EDC complex, Patto Plaza, Panjim-403001, Goa. (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) Assessee by Shri.Rahul Sarda.AR Revenue by Shri.Satish.M.CIT DR सुनवाई की तारीख/Date of Hearing: 19.01.2026 घोषणा की तारीख/Date of Pronouncement: 24.03.2026 ORDER PER BENCH: These are the two appeals filed by the different assessees against the separate orders of the Pr. Commissioner of Income Tax (Pr.CIT) Panaji passed u/s 263 of the Act. The assesse has raised the original grounds of appeal in Printed from counselvise.com 2 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. Form.No.36 challenging the revision order passed by the Pr.CIT set aside the order passed by the assessing officer. Subsequently in the hearing proceedings, the assessee has filed revised additional ground of appeal and as under: “The impugned order dated 19.02. 2024 passed by the CIT U/s 263 of the Act is bad in law as the assessment order dated 29.09.2021 passed by the AO, which is sought to be revised by the CIT, itself is illegal, without jurisdiction, a nullity in the eyes of law, and non est. And invalid order (viz. the assessment order) cannot give birth to legally valid proceedings and hence, impugned order under u/s 263 of the act which attempts to revise a non est order, itself is erroneous, bad in law, contrary to the provisions of law and is liable to be quashed and set aside” 2. Since the issues involved in these appeals are identical and inter connected, hence are clubbed, heard and a consolidated order is passed. For the sake of convenience, we shall take ITA No. 71/PAN/2024 for the A.Y 2016-17 as a lead case and facts narrated therein. 3. The brief facts of the case are that, the assessee has filed the return of income for the A.Y.2016 17 on 4-8 2016 disclosing a total income of Rs.5,75,17,590/- Subsequently the case was reopened by issue of Notice U/sec148 of the Act. The assessee is governed by the provisions of section 5A of the Act. Whereas the assessee along with the wife has jointly sold immovable property i.e Land to M/s Ozone Leisure and Resorts Pvt Ltd vide seven Printed from counselvise.com 3 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. sale deeds in the F.Y.2015-16 for a sale consideration of Rs.22,78,08,488/- and where as the revised guideline value as per registering authorities/SRO is Rs.28,64,75,000/- on which stamp duty is paid. The Assessing Officer (A.O) has issued notice u/sec 142(1) of the Act to explain, clarify and submit the details. Since there was no compliance, the A.O has issued Show cause notice dated 7.09.2021 U/sec144 of the Act for making addition of differential amount of guideline value as per SRO and sale consideration as per registered sale deeds which works out to Rs.2,93,33,256/- as capital gains on account of transfer of property as per the provisions of section50C of the Act. The assessee has filed the response challenging the reopening of assessment and issue of notice u/sec143(2) and u/sec142(1) of the Act and requested to permit the assessee to file detailed submissions before 18.09.2021. Further the assessee has filed letter a dated 14.09.2021 requesting the disputed issue of valuation of the land be referred to the District Valuation Officer(DVO) and the assessing officer has accepted the assessee request and the matter was referred to the DVO. 4.In the course of proceedings, the assessee has filed letter dated 26.09.2021 mentioning that the reassessment proceedings initiated is bad in law and also repeated the disputed issue of contesting the procedural part of assessment. The A.O. considering the information on record has dealt on the provisions of section 147 of the Act Printed from counselvise.com 4 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. and reasons for reopening of the case and relied on the judicial decisions. The A.O observes that, in spite of providing several opportunities to explain the differential amount of capital gains and there was no proper compliance. Hence the A.O invoked provisions of section 50C of the Act and also observed that the DVO report is pending and subject to the same and due to limitation of time to complete the assessment has computed the capital gains u/sec 50C of the Act (being 50% share) of Rs.2,93,33,256/- and assessed the total income of Rs.8,68,50,850/- and passed the order u/sec147r.w.s144Bof the Act dated 29.09.2021. 5. Subsequently, the Pr. CIT on perusal of the records and information found that the order passed by the AO under section 147 r.w.s 144B of the Act is erroneous and prejudicial to the interest of the revenue and issued revision notice U/sec 263 of the Act. The Pr.CIT is of the view that the Assessing officer(A.O) has allowed (50% share Rs,8,23,15,744/-) i.e Rs,4,11,57,872/- indexed cost of acquisition and also allowed (50% share of Rs.2,94,05,790/- i.e 1,47,02,895/- towards indexed cost of improvement without obtaining the documentary evidence from the assessee and the A.O. has not made enquiries regarding these two disputed issues. In compliance to the notice u/sec263 of the Act, the Ld.AR of the assessee has appeared and filed objections against proposed revision of the assessment order passed u/sec147r.w.s144Bof the Act Printed from counselvise.com 5 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. vide letter dated 31-01-2024 on two aspects (i) the assessment order passed by theNational E-assessement centre is bad in law and void ab initio and the assessee has challenged the legality of assessment order before the Tribunal and is pending for disposal before the ITAT and hence the question of revising the said order u/sec263 of the Act does not arise and (ii) further the Ld.AR supported the action of the assessing officer calling the information on the claims of the assessee and applied his mind and allowed the deduction and there before the order passed by the A.O is not erroneous nor prejudicial to the interest of the revenue. Whereas the Pr.CIT was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the AO to inquire into the claim of deduction towards indexed cost of acquisition and index cost of improvement and to obtain necessary evidences. Finally the Pr.CIT set-aside the order u/sec147 r.w.s 144B of the Act and has passed order u/s 263 of the Act dated19.02.2024. Aggrieved by the order of the Pr.CIT, the assessee has filed an appeal before the Hon’ble Tribunal. 6. At the time of hearing, the Ld. AR made submissions restricting to the revised additional ground of appeal only. The Ld.AR contentions are that the Pr. CIT has erred in revising the assessment order passed u/sec147 r.w.s 144B of the Act, which itself is illegal and without jurisdiction Printed from counselvise.com 6 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. and no nest in the eyes of law. The Ld.AR emphasized that the assessee is challenging the reopening of assessment and issue of notice u/sec 143(2) and u/sec142(1) of the Act. The said notices were issued to the assessee without communicating the reasons for reopening of the assessment and therefore the A.O order is illegal and the same is challenged by the assessee. Further such illegal order/ invalid order cannot be subjected to revisionary proceedings by the Pr.CIT. The Ld.AR arguments consist of two fold (i) The assessment order passed u/sec147 r.w.s 144B of the Act without fallowing due process of law i.e the A.O. should have provided reasons recorded for reopening of assessment and disposed off before assuming the jurisdiction and proceedings of the assessment and (ii) Notice issued u/sec143(2) of the Act is time barred and was issued after completion of six months from the end of the financial year in which the return of income was filed. The Ld.AR substantiated the elaborate submissions with the factual paper books-1,2,3,& 4 and with compilation of judicial decisions, circulars and notes and prayed for allowing the appeal. 7. Per Contra, the Ld. DR submitted that the assessee cannot raise the issue of illegally of the assessment order in the revisionary proceedings. The revision proceedings are for the benefit of revenue in cases, where the order passed by the A.O is erroneous and prejudicial to the interest of the revenue. The twin conditions are satisfied in Printed from counselvise.com 7 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. the assessee case as the A.O has not verified the evidences of indexed cost of acquisition and indexed cost of improvement and no enquiry is conducted but allowed the deduction. Further Ld.DR made submissions on validity of re assessment order i.e on the disposal objections, jurisdiction and issue of notice u/sec143(2) of the Act within the extended period of limitation due to Covid Pandemic 2019 and substantiated the submissions with the judicial decisions, circulars, submissions and supported the order of the Pr.CIT. 8. We heard the rival submissions and perused the material on record. The Ld.AR envisaged that the order passed by the Pr.CIT is bad in law. The assessee has raised original grounds of appeal in the Form.no.36/appeal memo challenging the order passed by the Pr.CIT set aside the order passed by the assessing officer u/sec147 r.w.s 144B of the Act as the twin conditions of revision proceedings are not satisfied that the asseement order passed by the A.O is (i) not erroneous and (ii) nor prejudicial to the interest of the revenue. Subsequently, in the hearing proceedings before the Honble Tribunal , the assessee has raised revised additional ground of appeal as under: “The impugned order dated 19.02. 2024 passed by the CIT U/s 263 of the Act is bad in law as the assessment order dated 29.09.2021 passed by the AO, which is sought to be revised by the CIT, itself is illegal, without jurisdiction, a Printed from counselvise.com 8 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. nullity in the eyes of law, and non est. And invalid order (viz. the assessment order) cannot give birth to legally valid proceedings and hence, impugned order under u/s 263 of the act which attempts to revise a non est order, itself is erroneous, bad in law, contrary to the provisions of law and is liable to be quashed and set aside”. At this point, we considered it appropriate to mention that the Ld.AR of the assesse has made submissions, arguments and relied on the judicial decisions and material papers referred in the hearing proceedings strictly restricting to only Revised Additional Ground of appeal only. 9. The Ld.AR vehemently submitted that the Pr. CIT has erred in revising the assessment order passed u/sec147 r.w.s 144B of the Act, which itself is illegal and without jurisdiction and nonest in the eyes of law. The Ld.AR emphasized that the assessee is challenging the reopening of assessment and issue of notice u/sec 143(2) and u/sec142(1) of the Act. The said notices were issued to the assessee without communicating the reasons for reopening of the assessment and therefore the A.O order is illegal and the same is challenged by the assessee. Further such illegal order/ invalid order cannot be subjected to revisionary proceedings by the Pr.CIT.The Ld.AR arguments consist of two fold (i) The assessment order passed u/sec147 r.w.s 144B of the Act without fallowing due process of law i.e the A.O. should have provided Printed from counselvise.com 9 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. reasons recorded for reopening of assessment and disposed off before assuming the jurisdiction and proceedings of the assessment and (ii) Notice issued u/sec143(2) of the Act is time barred and was issued after completion of six months from the end of the financial year in which the return of income was filed. Whereas the Ld.DR raised objections that the assessee cannot challenge the assessment order passed u/sec147 r.w.s 144B of the Act in the revision proceedings u/sec263 of the Act. We at the first instance on facts deal “whether the assessee can challenge the illegality of assessment order in the revision proceedings u/sec263 of the Act. 10. The Ld.AR submitted that the assessee is entitled to raise the ground of appeal on illegality of the order passed by the assessing officer in the revision proceedings as it is a legal ground can be raised any time in the adjudicating proceedings. The Ld.DR objections as per there submissions dated 3.12.2025 that the assessee has not raised objections on issue of notice u/sec143(2) dated 2.08.2021 in the assessment proceedings and such contentions cannot be raised for the first time before the tribunal and further notice was issued in Covid 19 pandemic and validity period falls within the extended limitation period and relied Honble Supreme court decision and hence notice issued is valid in law. Similarly, the revenue has fallowed due process in furnishing of reasons for reopening of assessment and disposal of Printed from counselvise.com 10 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. objections as per ratio of Honble Supremecourt Decision of “GKN Drive Shaft(India) Ltd Vs ITO (259 ITR 19)(SC). The Ld.DR refered to the timelines as per the assessment details in the tabular form in the subsequent submissions filed. On considering the submissions of the parties, it is clear that the revenue has objected the claims with evidences on procedural aspects of issue of notice and furnishing of reasons and disposal of objections. Whereas the Ld.AR relied on cantena judicial decisions on the facts and laws as referred in the legal compilations on raising the disputed issue of illegality of assessment order in the revision proceedings and issue of notice u/sec143(2) of the Act and providing of reasons and disposal of objections. Prima facie the moot question before us at this stage is “whether the assessee can raise the illegality of the order passed by the assessing officer in the revision proceedings”. the Ld.AR has demonstrated with facts and evidences supporting the claim and judicial decisions. 11. We find the assessee has relied on the fallowing case laws that the assessee can challenge the validity of the orginal assessment order which is sought to be revised by the CIT u/sec263 of the Act and If such original assessment order is non-est and without jurisdiction and then the subsequent proceedings u/sec263 of the Act are not valid. “(i) InderkumarBachani(HUF)VsITO(2006)99 ITD 621(Lucw)’ Printed from counselvise.com 11 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. (ii) Paul John Delicious Cashew Co Vs ITO(2005)94 ITD 131Cochin. (iii )Classic Flour &Food Processing Pvt ltd Vs CIT.ITA,No.765-766 dated 5.04.2007-ITAT kolkata (iv) West Life Development Ltd Vs Pr.CIT(2016) 49 ITR (T) 406 Mum. (v)Krishan kumar Saraf Vs CIT(ITA.No.5462/Del/2011 dated 24.09.2015. (vi)Steel strips ltd. Vs ACIT(1995)53 ITD 553(Chandigarh). Upon considering the submissions of the Ld.AR and objections of the revenue that the case laws relied by the assessee are distinguishable on facts. We find that the assessee is entitled to challenge the illegality of the order in the revisionary proceedings, but the fact remains that the Ld.AR could not demonstrate that in the above case laws relied that the assessee having filed the appeal with the higher forums on illegality of assessment order and the same is pending, can the assessee once again reiterate the validity of assessment order grounds in the revisionary proceedings. And also there are settled issues that, were the assesse files the return of income u/sec139(10) of the Act and the return of income is invalid/non-est and the same cannot be revised u/sec263 of the Act. Similarly , in the case, were a jurdictional authority has already passed a order that the assessment order was passed on non existing company which had amalgamated with other company at the time of assessment would tantamount to invalid and non-est and such order cannot subject to the Printed from counselvise.com 12 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. jurisdiction under 263 of the Act . Further the matters with respect to validity of issue of notice u/sec143(2) of the Act and furnishing of reasons and disposal objections by the assessing officer has not attained the finality in the case of the assessee and are pending with the appellate authorities. 12.In the present case, the assessee in the revisionary proceedings u/sec263 of the Act has filed objections against proposed revision of the assessment order passed u/sec147r.w.s144Bof the Act vide letter dated 31-01-2024 on two aspects(i)the assessment order passed by theNational E-assessement centre is bad in law and void ab initio and the assessee has challenged the legality of assessment order before the Tribunal and is pending for disposal before the ITAT and supported the submissions with appeal memo filed and raised a plea that in view of pending of adjudication of the issue regarding the validity of original assessment is pending before the ITAT, the question of revising the said order u/sec263 of the Act does not arise. Subsequently the Honble Income Tax tribunal considering the ex parte order passed by the NFAC/CIT(A) dated 4.12.2025 originating from the assessment order passed u/sec147 r.w.s144Bof the Act and the assessee in addition to other grounds of appeal has challenged validity of assessment on account of issue of notice u/sec143(2) of the Act and the A.O. should have provided reasons recorded for reopening of assessment Printed from counselvise.com 13 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. and disposed off before assuming the jurisdiction and proceedings of the assessment. The Honble Tribunal considering the non adjudication by the CIT(A) on the factual and legal issues and the material evidences filed by the assessee has setaside the order and restored to the issues to the file of the CIT(A) with the directions vide order dated 2-07-2025.Whereas subsequent to the passing of ITAT order, the assessee vide letter dated 25-08-2025 has filed the application for admission of additional grounds of appeal with the ITAT panaji registry and the assessee also filed revised additional ground of appeal in the hearing proceedings referred in the above paragraphs. We considering the overall facts, circumstances and submissions are of the view , that since the matter is pending disposal before the appellate authorities on restoration from the Honble Tribunal due to non- adjudication of grounds of appeal and ex parte order of the CIT(A) and has not attained finality and same is pending disposal and further subsequent to the passing of the Honble Tribunal order, the assessee has raised additional grounds of appeal praying for the same relief as is pending before the CIT(A) as dealt above. Accordingly, we are not inclined to interfere with the revision order and dismiss the ground of appeal of the assessee. ITA No.72/PAN/2024 (A.Y.2016-17) 13. As the facts and circumstances in this appeal is identical to ITA No 71/PAN/2024 for the A.Y 2016-17 Printed from counselvise.com 14 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. (except variance in figures) and the decision rendered in above paragraph 7to12 would apply mutatis mutandis for this appeal also. Accordingly, the ground of appeal is dismissed. 14. In the result, the two appeals filed by the assessees are dismissed. Order pronounced in the open court on 24.03.2026. Sd/- Sd/- (GD PADMAHSHALI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Panaji Dated: 24/03/2026 Copy of the Order forwarded to: 1. The Appellant, 2. The Respondent 3. The Pr. CIT 4. CIT 5. DR, ITAT, 6. Guard file. //True Copy// BY ORDER, (Asstt. Registrar)ITAT, Panaji Date Initial 1. Draft dictated on PS Printed from counselvise.com 15 ITA. No.71&72/PAN/2024 Shri Mahendra Purushottam NaikGaunekar. Smt Sonali Mahendra Naik Gaunekar. 2. Draft placed before author PS 3. Draft proposed & placed before the second member PS 4. Draft discussed/approved by Second Member. PS 5. Approved Draft comes to the Sr.PS/PS PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Dictation Pad is enclosed Printed from counselvise.com "