RAJESH KHANNA,YAMUNA NAGAR V. INCOME TAX OFFICER WARD 3, YAMUNA NAGAR, YAMUNA NAGAR

ITA 1558/CHANDI/2025

AI Insights

The case involves Shri Rajesh Khanna, the proprietor of M/s Neelkanth Plywood, who appealed against the reassessment orders for the Assessment Years 2017-18 and 2019-20. The reassessments were based on allegations of suppressed sales derived from a search operation on a related group, Shiv Kumar Plywood, which implicated the assessee's business in similar activities. The Income Tax Officer (ITO) made additions to the assessee's income based on these allegations, which were contested in the Tribunal. The Tribunal found that the materials used for reassessment were not adequately shared with the assessee, leading to a violation of natural justice.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840492 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 24-11-2025
• Other Referred Cases: ITA No.62/Chd/2024 & ors.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR LD. VIRTUAL
• Assessee Lawyers: DHRUV GOEL LD
• Keywords: Reassessment proceedings; Principle of natural justice
• Section: 147; 148; 142(1); 132

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHANDIGARH HYBRID HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकर अपील सं. / ITA No.1558/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2017-18) & 2. आयकर अपील सं. / ITA No.1559/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2019-20) Shri Rajesh Khanna C/o Rajiv Goel & Associates (CA) 179, Bank Road, Ambala City -133001 बनाम/ Vs. ITO Ward-3 Yamuna Nagar Haryana -135001 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. AGJPK-1206-H (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/Appellant by : Shri Dhruv Goel (CA) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) – Ld. Sr. DR (Virtual) सुनवाईकीतारीख/Date of Hearing : 19.02.2026 घोषणाकीतारीख /Date of Pronouncement : 24.02.2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. The assessee has preferred further appeals for Assessment Years (AY) 2017-18 & 2019-20. First, we take up appeal for AY 2017- 18 which arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 13-11-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 147 of the Act on Printed from counselvise.com 2 30-03-2022. The sole grievance of the assessee is confirmation of addition of undisclosed sales receipts for Rs.14.33 Lacs. The Ld. AR advanced arguments on merits and did not press for legal grounds qua issuance of reassessment notice by Jurisdictional AO (JAO). The Ld. AR sought quashing of reopening by referring to the decision of this Tribunal in assessee’s own case for AY 2018-19, ITA No.62/Chd/2024 & ors. order 19-08-2024. A copy of the same has been placed on record. The Ld. Sr. DR supported the findings of Ld. AO. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 2. The assessee filed return of income on 29-10-2017 declaring income of Rs.8.37 Lacs. The assessee is stated to be engaged in manufacturing of wooden articles like Plywood etc. in its proprietorship concern M/s Neelkanth Plywood. Pursuant to search action u/s 132 in the case of Shiv Kumar Plywood group of cases on 04-01-2019, a notice u/s 148 was issued by Ld. AO to the assessee. The search findings alleged that Shiv Shankar group was involved in large scale suppression of sale of plywood, sun mica and other related items. The assessee’s concern i.e., M/s Neelkanth Plywood allegedly issued suppressed bills and difference was taken in cash. M/s Neelkanth Plywood used to record only 47.38% of transaction in the regular book whereas the remaining component was unaccounted. Accordingly, the case of the assessee was reopened and a notice u/s 142(1) was issued on 02-07-2021 requiring the assessee to file requisite documents and submissions. The assessee sought copy of tangible Printed from counselvise.com 3 material related to information so obtained by Ld. AO and also demanded copy of statement recorded during search on M/s Shiv Shank Plywood group. The assessee sought inspection of the material relied upon by Ld. AO to reopen the case of the assessee. The screen shot of tally data was provided by Ld. AO to the assessee. The Ld. AO, after rejecting assessee’s various submissions, computed suppressed sales of Rs.114.65 Lacs and applied GP rate of 12.5% to make addition of Rs.14.33 Lacs. 3. During first appeal, the assessee assailed the assessment order on legal grounds as well as on merits by way of elaborate written submissions which have already been extracted in the impugned order. However, Ld. CIT(A) endorsed the findings of Ld. AO in the assessment order against which the assessee is in further appeal before us. 4. The assessment for AY 2019-20 met with similar fate wherein Ld. AO made estimated addition of Rs.17.20 Lacs which stood confirmed by Ld. CIT(A) on similar lines. Aggrieved as aforesaid, the assessee is in further appeals before us in both the years. 5. From the fact it clearly emerges that the whole basis of impugned addition is third-party data. By analyzing the same, allegation of suppression of sales have been leveled by Ld. AO against the assessee. The said data is stated to be retrieved from mobile phone of employee of that group. While objecting to reopening during assessment proceedings, the assessee requested Ld. AO to provide impounded tally data, statements of persons from whom the Printed from counselvise.com 4 data was allegedly found and statement of searched party which apparently has never been provided to the assessee. The same is clearly in violation of principles of natural justice and therefore the addition, made in this manner, could not be sustained in the hands of the assessee. In fact, on identical facts similar addition was made by Ld. AO in AY 2018-19 which reached up-to the level of Tribunal vide ITA No.62/Chd/2024 & ors. order dated 19-08-2024 wherein the bench concluded that reopening was bad-in-law and quashed the reassessment order. In para 27 of the order, it was held that the material relied upon by the department to reopen the case of the assessee was never confronted to the assessee. Therefore the reassessment proceeding stood vitiated for violation of principles of natural justice. Finally the assessment was quashed and estimated addition was deleted. We find that similar facts exist in present appeals. Respectfully following the earlier view of Tribunal, we quash the reassessment proceedings and delete the impugned additions, for both the years. The assessee succeeds in corresponding grounds of appeals. 6. Both the appeals stand partly allowed. Order pronounced on 24th February, 2026. -Sd- -Sd- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated:24.02.2026 Printed from counselvise.com 5 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "