R.G. INTERNATIONAL PRIVATE LIMITED,KARNAL V. THE INCOME TAX OFFICER, WARD-1, KARNAL, KARNAL

ITA 3420/DEL/2025

AI Insights

The case involves R.G. International Private Limited, which appealed against the orders of the Principal Commissioner of Income Tax, Rohtak, concerning reassessment orders for the Assessment Years 2014-15, 2015-16, and 2016-17. The primary contention was the invocation of revisional powers under section 263 of the Income Tax Act, 1961, by the PCIT, which the assessee argued was beyond the permissible scope and time limit. The Tribunal examined whether the reassessment orders were erroneous or prejudicial to the Revenue, ultimately finding that they were not, and thus the PCIT's revisional order was set aside.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840121 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Appeal Filed On: 24-05-2025
• Other Referred Cases: Commissioner of Income Tax, Chennai Vs. Mix Alagendran Finance Ltd, Commissioner of Income Tax Vs. Industrial Development Bank Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIKRANT KACKRIA
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Fair market value; Period of limitation; Assessment record; Bogus
• Section: 147; 148; 143(3); 263; 271(1)(c); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘E’: NEW DELHI BEFORE SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTNAT MEMBER ITA Nos.3419 to 3421/DEL/2025 [Assessment Years: 2014-15, 2015-16 & 2016-17] R.G. INTERNATIONAL PRIVATE LIMITED, 3 K M MILE STONE KARNAL KAITHAL ROAD , NISSING KARNAL 132024 , Haryana Vs Income Tax Officer, Ward-1, Karnal PAN-AAGCR0129J Appellant Respondent Appellant/Assessee by Shri Vikrant Kackria, Adv. Respondent/Revenue by None, Adjournment application rejected Date of Hearing 03.02.2026 Date of Pronouncement 25.02.2026 ORDER PER AMITABH SHUKLA, AM, These three appeals by the assessee are directed against the separate orders of learned Principal Commissioner of Income Tax, Rohtak, [hereinafter referred to as ‘ld. PCIT] dated 27.03.2025 arising out of assessment order dated 20.10.2022 and 21.10.2022 passed under section 147 r.w.s. 144B of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) for the Assessment Years 2014-15, 2015-16 and 2016-17, respectively. 2. The assessee has raised following grounds of appeal for AY 2014-15:- Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 2 of 11 “1. That the assessment order passed and various additions/ disallowances made are arbitrary and contrary to Law and Facts of the case. 2. That the Ld. Assessing Officer had acted unreasonable in contravention of the provisions of the Income Tax Act, 1961 while considering the explanation of the assessee. 3. The learned Principal Commissioner of Income Tax has erred in not considering the plea of the appellant that the proceedings could not be initiated under Section 263 of the Income Tax Act when all the required verifications were already done during the assessment proceedings and thus the proceedings could not have been initiated again on the same cause of action. The Principal Commissioner of Income Tax ought to have considered that when the Assessing Authority has already done complete scrutiny then it is not understood as to how on the same very aspect the proceedings can again be initiated by the department.” 3. All the above three appeals of the assessee are regarding invocation of revisionary authority under section by the ld. PCIT, Rohtak. The ld. Counsel for the assessee submitted that facts of all the three assessment years are identical and hence for the purposes of convenience, the three appeals were heard and are being adjudicated by this common order. 4. For the purposes of this order, we will consider the facts and figures in ITA No.3419/Del/2025. As per brief factual matrix of the case, return declaring income of Rs.60,68,160 was filed by the assessee for AY 2014-15 on 24.09.2014. Order under section 143(3) was passed on 26.08.2016, assessing total income at Rs.64,45,950/-. Subsequently, based upon the information received by the ld. AO, reassessment proceedings under section 147 were Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 3 of 11 initiated and consequently order under section 147 r.w.s. 144B was passed on 21.10.2022 determining total income at Rs.11,47,98,412/-. 5. Para-2.1 of the order of the PCIT, dated 27.03.2025 (supra) alludes that the notice under section 263 of the Act was issued by him deeming order under section 147 r.w.s. 144B of the Act dated 21.10.2022 as erroneous. He had concluded that the same was passed without proper enquiry or verifications. Para-2 of the impugned order further alludes that the issuance of the notice under section 263 of the Act was related to his following observations. “2. Upon examination of the assessment records for A.Y. 2014-15, it has been observed that:- i) the company assessee has shown following details in the Balance Sheet as on 31.03.2024 Particulars As on 31.03.2013 As on 31.03.2014 During the year Securities Premium Reserve Rs.97,12,500 4,17,85,000 3,20,72,500 As per provisions of section 56(2)(viib) of the Income Tax Act, 1961, where a company, not being a company in which the public are substantially interested, received, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds, the fair market value of the shares shall be chargeable to income tax under the head “Income from other sources”. In view of the above, it has been gathered that during the year under consideration, there is an increase of Rs. 3,20,72,500/- in the Securities Premium Reserve, which was required to be verified during the assessment proceedings, however, the Assessing Officer (AO) has failed to do so. The AO has neither raised any query nor verified the Securities Premium Reserve. Hence, the assessment order is passed without making proper inquiries or verification which should have been made. Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 4 of 11 ii) During the year under consideration, as per balance sheet as on 31.03.2014, assessee had unsecured long-term borrowing of Rs. 2594.81 lakh and Current Liabilities -Trade payable of Rs. 647.91 lakh as against the corresponding amount of Rs. nil as on 31.03.2013. As per Explanation 3 to section 147 of the Act, for the purposes of assessment or reassessment or re-computation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of the section 148. In view of the above, it is gathered that there was an increase of Rs. 2594.81 lakh in the unsecured long-term borrowing and Rs. 647.91 lakh in Trade payables as against the corresponding figure in the previous F.Y. as on 31.03.2013, the same should have been enquired and verified by the AO, however the AO has failed to do so……” 6. It is the case of the assessee that the item of enquiry which was deemed to have not been enquired into and thus giving rise to an order being ‘erroneous in so far as it was prejudicial to the interest of the Revenue’ was never the point of any enquiry for which proceedings under section 147 of the Act were initiated. The ld. Counsel has vehemently argued that its case was originally scrutinized by way of a complete scrutiny and that consequently order under section 143(3) dated 26.08.2016 was passed. The ld. Counsel has submitted that the impugned items being increase in security premium reserve, increase in unsecured loans and in other current liabilities were all examined by the ld. AO in the first round of proceedings. The ld. Counsel for the assessee argued that if at all, the Revenue held the view that the order under section 143(3) dated 26.08.2016 was ‘erroneous in so far as it was prejudicial to the interest of the Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 5 of 11 Revenue’, then it had time till 31.03.2019 to invoke revisionary powers under section 263. 7. The ld. Counsel submitted that as no defect or mistake was pointed in the order under section 147 r.w.s. 144B dated 21.10.2022 which could have brought the impugned order in the category of an order being ‘erroneous in so far as it was prejudicial to the interest of the Revenue’. It has been accordingly vehemently argued that the invocation of revisionary authority under section 263 by the ld. PCIT, Rohtak resulting in order under section 263 dated 27.03.2025 is barred by limitation. 8. We have considered the facts of the case in the light of arguments made by the ld. Counsel for the appellant assessee as well as material available on records. We have noted that the section 263 of the Income Tax Act, provides revisional powers in respect of order prejudicial to revenue which prescribing as under: “263(1) The Commissioner may call for and examine the record of may proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” Explanation 2. – For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 6 of 11 the opinion of the Principal ‘Chief Commissioner or Chief Commissioner of Principal] Commissioner or Commissioner; (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, or instruction issued by the Board under section 119; or direction (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 9. We have noted from page-4 and 5 of the impugned order under section 263 that the assessee had objected to exercise of revisionary authority making following submissions. “That in connection with revision proceedings under section 263 of the Income Tax Act, the assessee respectfully submits as under: That the assessee company in the present case filed the original income tax return declaring net income of Rs. 60,68,160/- on 24-09-2014. That the income tax assessment of the assessee was taken up for scrutiny and assessment framed under section 143(3) vide order dated 26-08- 2016 in which an addition of Rs 3,77,791/- was made in the returned income of Rs. 60,68,160/- and the income was assessed at Rs. 64.45,950/- . That it was a complete scrutiny case of the assessee in which each and every aspect having a material bearing on the income of the assessee was thoroughly scrutinized by issuing detailed questionnaire and raising queries which were duly responded by the assessee by producing all the required details and information as well as by producing the books of accounts, bills/ vouchers as asked for. That however, the case of the company was reopened by recording of reasons under section 148(2) and issue of notice under section 148 on 30-03-2021 on the basis of information that the assessee had entered into transactions of sale of rice of Rs.10,85,52,462/-with alleged certain non- genuine entities. That ultimately the reassessment order was passed under section 147 read with section 144B of the Income Tax Act vide Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 7 of 11 order dated 21-10-2022 by making an addition of Rs.10,83,52,462/- and the income was assessed at Rs.11,47,98,412/-. That the assessee have filed an appeal against the impugned assessment which is pending before the learned CIT (Appeals) NFAC. That now your goodself proposes to revise the order exercising the powers under section 263 on the ground that the A.O passed the reassessment order without making proper enquiries and verification on the following points: 1. Alleged increase in securities premium reserve for an amount of Rs. 416,87,87,500/-. 2. Increase in unsecured long term borrowing for an amount of Rs. 2594.81 lacs 3. Increase in current liabilities-trade payable of Rs. 647.91 lacs That first of all as per audited balance sheet the securities premium reserve have gone up from Rs. 97,12,500/- to Rs. 4,17,85,611/- and in this way there is increase of only 3,20,73,111/-instead of Rs. 416,87,87,500/- as mentioned in the notice. That it is brought to your kind notice that the case of the assessee was reopened by recording of reasons under section 148(2) and issue of notice under section 148 only for the purpose of bringing to tax the alleged income arising on account of sales transactions undertaken with so called non genuine entities amounting to Rs.10,83,52,462/-. That the mandate with the A.O. at the time of framing of reassessment was limited to examination of the above transactions of Rs.10,83,52,462/- as per the reasons recorded by the learned JAO. The learned A.O. had no authority to travel beyond the specific reasons recorded by the learned JAO under section 148(2). That as far as the question of non-making of proper enquiries/ verification viz a viz increase in securities premium reserves, unsecured long term borrowings and trade payable is concerned, it is brought to your kind notice that all these issues already stood thoroughly examined and verified in the original assessment order framed under section 143(3) vide order dated 26-08-2016 by calling for all the details pertaining to the above transactions. That a copy of the original assessment order framed under section 143(3) dated 26-08-2016 is hereby enclosed for your kind perusal. That the provisions of section 263 are attracted only on simultaneous fulfilment of the following twin conditions: Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 8 of 11 1. The order is erroneous and 2. It is prejudicial to the interest of the revenue That it is a settled position of law that the provisions of section 263 cannot be attracted without fulfilling the mandatory jurisdictional fact which is the above twin conditions. That however, in the present case neither the order passed dated 21-10- 2022 is erroneous nor it is prejudicial to the interest of the revenue keeping in view of the fact that no transactions of any was conducted by the assessee company during the year under assessment…. ……………………. ……………………. That since in the present case, the original assessment was framed under section 143(3) vide order dated 26-08-2016 and the revision proceedings now initiated proposes to touch the issues which were part of the original assessment proceedings and not a part of the reassessment proceedings finalized vide orders passed on 21-10-2022, the revisional proceedings have already become time barred since the period of two years would be counted from the end of financial year 2016-17 which ended on 31-03- 2019. That the assessee find support from the judgment of the Hon'ble Supreme Court of India in the case of Commissioner of Income Tax, Chenai Vs. Mix Alagendran Finance Lad (2007) 3 ITCD 177 (SC) in which the Hon'ble Apes Court dismissed the revenue by holding in no uncertain terms as under: 15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income Tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under Sub section (2) of Section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income Tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. That the assessee also find support from the latest judgment of the Hon'ble Supreme Court of India in the case of Commissioner of Income Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 9 of 11 Tax Vs. Industrial Development Bank Ltd 1 2023) 454 ITR 811 (SC) in which the Hon'ble Apex Court again dismissed the appeal of the revenue by following its earlier judgment in the case of Commissioner of Income Tax, Chenai Vs. M/s Alagendran Finance Ltd by holding as under: At the outset, it is required to be noted and it is not in dispute that, as such, the Commissioner exercised powers under section 2f3 of the Act with respect to the issues which were not covered in the re-assessment proceedings. Therefore, the issues before the Commissioner while exercising the powers under section 263 of the Act relate hack to the original Assessment Order and, therefore, the limitation would start from the original Assessment Order and not from the Re-assessment Order. We are fortified with our view by the decision of this Court in the case of Commissioner of Income Tax, Chennai V. Alagendran Finance Ltd. (2007] 110 TAXLOK.COMHT) 211 (SC) (2007) 7 SCC 215. As observed and held by this Court in the aforesaid decision, once an Order of Assessment is re-opened, the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of re-assessment is distinct and different, the entire proceedings of assessment would be deemed to have been re-opened. Meaning thereby, only in a case where the issues before the Commissioner at the time of exercising powers under section 263 of the Act relate to the subject matter of re-assessment, the limitation would start from the date of Re-assessment Order. However, if the subject matter of the re-assessment is distinct and different, in that case the relevant date for the purpose of determination of period of limitation for exercising powers under section 262 of the Act would he the date of the original Assessment Order. That in view of the above, it is hereby requested that the revision proceedings under section 263 in the case of the assessee may be dropped…….” 10. Upon careful consideration of the facts of the case discussed hereinabove and judicial precedents governing the matter, we are of the considered view that the ld. PCIT, Rohtak was not having valid jurisdictional authority to exercise his revisional authority under section 263 qua order under section 147 r.w.s. 144B dated 21.10.2022. The Revenue authorities acquire revisional authority only if there are demonstrative evidences to adduce that the Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 10 of 11 order which is deemed to be ‘erroneous in so far as it is prejudicial to the interest of the Revenue’ is indeed so. In the present case, nothing has been brought on records by the ld. PCIT to allude that the order dated 21.10.2022 was erroneous. As per facts on record, the ld. AO had initiated 147 proceedings to consider the allegation of indulgence of the assessee in bogus transactions qua two parties namely Parth International and Ridhy Siddhi Impex, page-31 of the impugned order clearly demonstrates that the ld. AO made an addition of Rs. 10,83,52,462/- making following observations:- “5.0 In view of the discussion made above and facts of the case it is established that amount of Rs. 10,83,52,462/- credited into the books of account of the assessee against the sales to M/s Parth International for Rs. 7,86,24,670 and Rs. 2,97,27,792/- to M/s Ridhi Sidhi impex into the books remains unexplained as the assessee failed to discharge its legal obligation to explain the nature and source of such credit, therefore, the amount of Rs. 10,83,52,462 is added to the income of the assessee u/s 68 of the Income Tax Act, chargeable to tax under the provisions of section 115BBE of the Act. Penalty proceedings u/s 271(1)(c) of the Act are hereby initiated separately for concealment of its income. 11. Thus, it is crystal clear that the order dated 21.10.2022 did not suffer from any infirmity to be branded as ‘erroneous in so far as it is prejudicial to the interest of the Revenue’. The argument of the ld. PCIT that AO ought to have enquired the transactions alluded by him as section 148 gives him an open permission to enquire into any aspect whether or not included in the reasons are not correct. The transactions referred by the ld. PCIT were already examined by the AO during original assessment proceedings and there was nothing under section 147 to allude that the same were clouded in any mystery. The power Printed from counselvise.com ITA No.3419/ to 3421/Del/2025 Page 11 of 11 given to the ld. AO under section 148 to enquire into any new matter primarily includes those issues which have not been considered and for which there is some information available with the AO. Accordingly, we are of the considered view that the order under section 263 dated 27.03.2025 is barred by limitation and hence the same is set-aside and quashed. The appeal of the assessee for AY 2014-15 in ITA No.3419/Del/2025 is therefore allowed. 12. The facts of the case of assessee’s appeal for Assessment Years 2015-16 in ITA No.3420/Del/2025 and for Assessment Years 2016-17 in ITA No.3421/Del/2025 being identical to those in appeal of the assessee for AY 2014-15 in ITA No.3419/Del/2025 arealso allowed by applying the principle of mutatis mutandis. 13. In the result, the appeals of the assessee are allowed. Order pronounced in the open court on 25th February, 2026. Sd/- Sd/- [RAJ KUMAR CHAUHAN] [AMITABH SHUKLA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25.02.2026 f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, Printed from counselvise.com "