SATBIR SAGWAL,KARNAL V. INCOME TAX OFFICER, WARD-4, KARNAL , KARNAL

ITA 1617/DEL/2024

AI Insights

The case revolves around the re-assessment of Satbir Sagwal for the Assessment Year 2011-12, where the Income Tax Department alleged that he had made an unexplained investment in property amounting to Rs. 78,00,000, which was not disclosed in his original tax returns. The Assessing Officer reopened the case under Section 148 of the Income Tax Act, 1961, based on information from the DDIT(Inv.), Karnal, which suggested that the property was purchased for Rs. 78,00,000 but was registered at a much lower value of Rs. 15,00,000. The Tribunal found that the reopening was based on incorrect facts, as the property was actually purchased by three individuals, including the assessee, and the sale deed was not adequately considered by the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787321 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 09-04-2024
• Other Referred Cases: Kissan Fats Ltd. Anr V. Deputy Commissioner of Income Tax ITA No.407 & 409 /Chd/2023, Smt. Monika Rani vs. ITO, Sagar Enterprises vs. Asstt. CIT, Baba Kartar Singh Dukki Educational Trust vs. ITO, Shri Ram Mohan Rawat vs. ITO, Van Oord Dredging & Marine Contractors BV vs. Addl. Director of IT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Keywords: Set aside; Difference of opinion; Change of opinion; Additional evidence; Unexplained investment; Bogus purchase; Reopening of assessment; Assessment record; Competent authority; Reason to believe; Revision of order; Borrowed satisfaction; Bogus
• Section: 148; 143(3); 142(1); 263; 69; 133(6)

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SH. SUDHIR KUMAR, JUDICIAL MEMBER AND SH. BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.1617/Del/2024 Assessment Year: 2011-12 Satbir, Sagwal C/o Tej Mohan Singh H.No.527, Sector 10D Chandigarh 160011 Pan No. BDOPS3759N Vs Income Tax, Officer Ward-4 Karnal Haryana (APPELLANT) (RESPONDENT) Appellants by Sh.Tej Mohan Singh, Advocate Respondent by Sh.Manish Gupta, Sr, DR. Date of hearing: 13/10/2025 Date of Pronouncement: 19/11/2025 ORDER PER SUDHIR KUMAR, JM: This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as “Ld. NFAC”], vide order dated 20.02.2024 pertaining to A.Y. 2011-12 and arises out of the assessment order dated 14-12-2018 passed by the Assessing Officer under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’]. Printed from counselvise.com 2 2. The assessee raised the following grounds in appeal: 1. That the Ld. Commissioner of Income Таx (Appeals) has erred in law as well as on facts in upholding the initiation of proceedings under section 148 in as much as there was no escapement of income leading to a reason to belief and as such the re-opening is illegal, arbitrary and unjustified. 2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the initiation of proceedings under section 148 in as much as there has been no reason to believe that there was an escapement of income and the reasons recorded are based only on borrowed information and as such upholding of the assessment passed u/s 147 is illegal, arbitrary and unjustified. 3. That Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts upholding the initiation of proceedings u/s 148 despite the assessment having already been framed and completed twice over u/s 143(3) vide order dated 25.02.2014 and thereafter again under section 143(3) read with section 263 vide order dated 15.12.2016 which is only a change of opinion and as such upholding of the assessment passed u/s 147 is illegal, arbitrary and unjustified. 4. That Ld. Commissioner of Income Tax (Appeals) has erred in rejecting the application filed under Rule 46A of the Act for admission of additional evidence which evidence goes to the root of the matter and as such the order passed is arbitrary and unjustified. Printed from counselvise.com 3 5. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.78,00,000/- made on account of alleged unexplained investment in purchase of property treating the same to be income u/s 69 in utter disregard of the explanations rendered which is arbitrary and unjustified. 3. The brief facts of the case are that the assessee filed its return of income on 30-03-2012 declaring a total income of Rs. 1,66,230/- + Rs.1,23,000/-(Agriculture Income) which was processed vide order dated 21-07-2012 u/s 143(1) of the Act. The case of the assessee was selected into scrutiny under CASS. Accordingly notice u/s 143(2) of the Act dated 28-09-2012 was issued. A fresh notice u/s 142(1) was issued to the assessee. The Assessing Officer completed the assessment after making the addition of Rs.2,00,000/- as agreed by the ld.AR of the assessee for the A.Y.2011-12. Therefore, the assessment order was set aside under section 263 of the Act by the Principal Commissioner of Income Tax, Karnal vide order dated 11-02- 2016 and revised assessment was framed at income of Rs,1,08,67,030/-. Aggrieved the revised assessment order dated 15-12-2016 the assessee preferred the appeal, which is pending before the Ld. CIT(A), after remand from the Hon’ble ITAT. During the pendency of the aforesaid proceedings, notice u/s 148 of the Act dated 28-03-2018 was issued to the assessee. Printed from counselvise.com 4 The reason for re-opening was recorded by the Assessing officer was that the assessee had purchased immovable property from Sh. Ishwar Singh for Rs.78 Lacs, whereas the sale deed was executed for Rs. 15 Lacs during the F.Y.2011-12. Notice under section 148 of the Act was issued to the assessee on 26/28-03- 2018 after taking the approval from the Pr. Commissioner of Income Tax. The reasons for re-opening of the assessment by the Assessing officer as under: This assessee is an individual and has filed income tax return for the A.Y. 2011-12 on 30.03.2012 declaring income at Rs. 1,66,230/-. Further, the case of assessee was selected under scrutiny through CASS and assessment u/s 143(3) was completed vide order dated 25.02.2014 at an assessed income of Rs.3,66,230/-. Later on the said assessment order was revised by worthy Pr. CIT, Karnal u/s 263 being prejudicial to the interest of revenue, by passing an order dated 11.02.2016 to make fresh assessment. Consequently, the assessment was made u/s 143(3) r.w.s. 263 vide order dated 15.12.2016, enhancing the earlier assessed income of Rs.3,66,230/- to Rs. 1,08,67,030/-- 2. Further, a information has been received from the O/o DDIT(Inv.), Karnal vide letter No. 1576 dated 29.01.2018 in the case of above mentioned assessee. As per the information, Sh. Satbir Singh S/o Maan Singh had purchased immovable property from Sh. Ishwar Chandar S/o Chaman Lal H.No. 19, Randhir Colony for Rs.78 Lacs (as per agreement to sell), Printed from counselvise.com 5 whereas the sale deed was executed for Rs.15 Lacs during the F.Y. 2010-11. 3. On further analysis of the information it is seen that the assessee has submitted before the court that he had made payment of Rs. 78 Lacs for the purchase of said property, however, the sale deed was executed at circle rate for Rs.15 Lacs. Case being worth investigating, necessary approval u/s 133(6) of the I.T. Act, 1961 was obtained from the Competent Authority and query letter dated 08.03.2018 was issued to the assessee to furnish source of investment made in the purchase of property at Rs.78 Lacs. But the assessee has failed to file any reply to the letter issued. 4. Perusal of the assessment record and reply filed by the assessee showed that the aforesaid information was not available during the assessment proceedings on both occasions and has escaped assessment. Therefore, I have reason to believe that unexplained investment of Rs.78 Lacs has escaped assessment within the meaning of Section 147 of the 1.T. Act, 1961 for A.Y. 2011-12. 5. The assessee had purchased immovable property of Rs.78 Lacs during the F.Y. 2010-11. However, the assessee has neither disclosed any such transactions during the assessment proceedings u/s 143(3) nor during the proceedings u/s 263 of the Act. So it is clear that the escapement of income on the part of assessee, as he has failed to disclose all true material facts and information. Since in this case 4 years from the end of the Printed from counselvise.com 6 relevant assessment year has expired & assessee failed to disclose truly all material facts necessary for his assessment for the year under consideration. Therefore, I have reason to believe that income for the year under consideration has escaped assessment. I have carefully considered the assessment records containing the submission made by the assessee during the assessment proceedings and have noted that the assessee has not disclosed any details of purchase of property of Rs.78 Lacs. In view of the above facts & circumstances, this is a case of non-disclosure of material facts on part of assessee & thus, remains un-examined during the course of assessment proceedings on both occasions. Hence, the provisions of Explanation 1 of section 147 of the Act are applicable in this case. Therefore, this case is not being a case of change of opinion by the AO. Therefore, notice u/s 148 of the Act is required to be issued to assess the escaped income of Rs.78,00,000/- as well as any other income which comes to the notice during assessment proceedings. Notice u/s 148 is to be issued to the assessee for A.Y. 2012-13. 4. According to the Assessing Officer the assessee had purchased the immovable property for Rs.78,00,000/- and did not disclose in the ITR. The Assessing officer completed the assessment under section 143(3) read with section 147 of the Act at Rs.1,86,67,030/- after making the addition of Rs. 78,00,000/-. Aggrieved the order from the Assessing Officer, the Printed from counselvise.com 7 assessee preferred the appeal before the Ld. CIT(A), who vide his order dated 20-02-2024 dismissed the appeal, against which the assessee is in appeal before the tribunal. Ld. CIT(A) has observed in his order as under: “6.4 After due consideration of the material on record, the ground-wise discussion and decision in this appeal is as under. 7. Ground No.1 to 5 are on single issue of validity of proceedings w/s.147 of the Act. Therefore, these grounds are decided together clear from the record that in various proceedings prior to initiation of assessment proceedings uis.147, assessee had not disclosed true and correct facts regarding his total investments in the property. It is clear from the record that the fact of assessee investing total of Rs. 78 lakh in the property but registering it at Rs. 15 lakh was not on record. After completion of the assessment vide order dated 15.12.2016 passed us. 143(3) r. w.s. 263 of the Act, AO received information from the Investigation Wing/Section of Income-tax Department that assessee had purchased an Immovable property for Rs. 78 lakh and it was registered at only Rs. 15 lakh. Assessee has not brought anything on record to demonstrate that he had declared the said transaction before Assessing Officer or any other Income-tax Authority. Therefore, assessee's contentions in his written submission are found to be irrelevant because through that submission assessee is mainly harping on the arguments that there was no reason to believe that income has escaped assessment, that there was change of opinion and there was borrowed satisfaction in the Printed from counselvise.com 8 form of information received from Investigation Wing. It is networthy that AO did not mechanically initiate proceedings proceedings u/s. 147. Prior to initiating such proceedings, assessee was given opportunity by way of letter/notice u/s.133(6). However, assessee did not comply with that notice. Moreover, as per the facts on record, this issue of investment in House Property was never examined. Therefore, assessee's contention that AO sought to reopen the assessment on borrowed information is incorrect. All the judicial pronouncements relied upon by the assessee are on the issue of change of opinion. The facts in assessee's case are different from the facts in those cases. In view of these facts, Ground No. 1 to 5 are dismissed 7.1 Regarding Ground No.6, which is the only direct ground on the issue of addition of Rs. 78 lakh made by AO u/s. 69, the so called additional documents have already been held to be inadmissible. As per the other facts on record, it is seen that the assessee purchased a property at House No. 19, Randhir Colony, Kamal, Haryana, from one Shri Ishwar Chand, son of Chamanlal. The property was registered with Deputy/Joint Registrar, Karnal on 28.03.2011. The sale consideration mentioned in the registered deed was Rs. 15 lakh. As per the registered deed, there was only one seller, i.e. Ishwar Chand and there was only one buyer, i.e. Satbir Sagwal. As per the certificate of registration, the Deputy/Joint Registrar certified that on 28.03.2011 for the purpose of registering the sale deed, the presenter of the deed (seller) and the buyer presented themselves before him with the deed and it was registered and the presenter and the buyer put their signatures and thumb Printed from counselvise.com 9 impressions before him (Deputy/Joint Registrar). As per that certificate, signatures of Ishwar Chand and Satbir Sagwal only stand recorded along with their thumb impressions. On that very same page, photos/pictures of the seller and Shri Satbir Sagwal are available. However, nowhere in the document, the signatures, thumb impressions and photo/picture of two other buyers (Shri Lalit Mohan and Shri Shyam Sundar) are available. Thus, as per the primary document evidencing asessee’s investment in the property, there was only one seller and only one buyer and the document is from Govt. Record. Regarding the assessee paying additional 63 lakh to the seller, it is needless to point out here that assessee admits it. The admission is represented by the assessee’s claim made in written submission received on 27.09.2023, wherein for the first time, claim was made that there were three purchasers, i.e. satbir Sagwal, Lalit Mohan and Shyam Sundar. However, as already pointed out above in this appeal order, no independent evidence exists to demonstrate that the amount of Rs.63 lakh paid to Shri Ishwar Chand was paid by those two other persons. On the other hand, AO had in possession documented evidence that assessee had made payment of Rs.78 lakh for the said property but the deed was registered at the Stamp Duty valuation of Rs.15 lakh. In view of these clear facts, the objection raised through Ground No.6 is found to be without merit. As a result, Ground No.6 is dismissed.” 5. Ld. AR of the assessee submitted that the case of assessee was reopened, mechanical manner without any application of mind, and without recorded the correct reasons. The approval Printed from counselvise.com 10 was also provided in a mechanical manner. He further submitted that the Assessing Officer has relied upon the agreement, wherein the sale consideration has been stated at Rs. 15,00,000/-. The agreement has been entered into the seller and the three purchasers namely Sh. Satbir Sawal the assessee, Sh. Lalit Mohan and Sh. Shyam Sunder but the Assessing Officer treated the assessee to be the sole purchaser, re-opened the case. He further submitted that assessment of the assessee was already completed u/s 143(3) of the Act and even revised assessment was framed after invocation of Section 263 of the Act by the Principal Commissioner of Income Tax. The assessee has filed all the details of the banks accounts, when the original assessment was framed. Thus, the case was re-opened on the change of opinion. Ld. AR of the assessee also submitted that reasons recorded were not provided to the assessee. Ld. AR further submitted that the additional evidence filed by the assessee was not accepted by the Ld.CIT(A), and appeal was dismissed. He further submitted that the co-purchasers namely S. Lalit Mohan and Sh. Shyam Sunder has admitted in their affidavits that they have paid the consideration to the seller in cash. Reliance has placed the case of Kissan Fats Ltd. Anr V. Deputy Commissioner of Income Tax ITA No.407 & 409 /Chd/2023 in this case the Co-ordinate bench held as under :- Printed from counselvise.com 11 8. Now, it is to be seen as to whether in such a scenario, the re-assessment proceedings are liable to be quashed as void, as contended by the assessee. 8.1 In this regard, under similar circumstances, in Smt. Monika Rani vs. ITO, Vide 2020, passed for asst yr 2010-11 in ITA No. 582/Chd/2019. it was observed that from the reasons recorded, it was clear that the AO had issued the notice under s 148 of the Act for the reason that the assessee had not filed her return of income Financial Year 2009-10: that further the said reasons given by the AO for re-and that the assessee had purchased a property for Rs. 1.49.02.500 during opening the assessment were not correct, since the assessee had filed the return assessee's compilation: that the assessee had also shown investment in of income on 30th March, 2011.the copy of which had been placed in the agricultural land amounting to Rs. 52.20.000 in her balance sheet as on 31st March, 2010, copy of which had been placed in the assessee's compilation: that both the reasons given by the AO were, thus, wrong: that the AO had thus, reopened the assessment on the basis of wrong facts and therefore, the re-opening was not valid and it was being quashed 8.2 The Tribunal followed the decisions cited as under: (i) Sagar Enterprises vs. Asstt. CIT (supra) (ii) Baba Kartar Singh Dukki Educational Trust vs. ITO (2016) 158 ITR 965 (Chd) (Trib), rendered by the Chandigarh 'SMC' Bench of the Tribunal, Printed from counselvise.com 12 (iii) Shri Ram Mohan Rawat vs. ITO (supra) in (ITA No. 1014/jp/2018, order dt. 10th Oct., 2019) passed by the Jaipur Bench of the Tribunal (iv) Van Oord Dredging & Marine Contractors BV vs. Addl. Director of IT, order dt. 28th Feb., 2018, passed by the Mumbai Bench of the Tribunal in ITA Nos. 495 & 496/Mum/2016. 8.3 Similarly, in Sagar Enterprises (supra), it has been held as follows: \"that it was apparent that the fact of non-filing of the return for the asst. yr. 1991-92 had weighed with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income. However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which fact would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover the ITO had stated that the payment which was stated to be undisclosed income relevant for the asst. yr. 1991-92 could have been made during the financial year 1990-91 relevant to the asst. yr. 1991-92 and hence, \"to cover up that probability, protective addition was made in the asst. yr. 1992-93.\" The first appellate authority decided the appeal for the asst. yr. 1992-93 on Jan.. Printed from counselvise.com 13 1996, and the reason had been recorded thereafter on 18th Aug., 1997. The notice of reassessment was not valid and was liable to be quashed.\" 8.4 Where AO processed under s. 143(1) returns of income filed by assessee for asst. basis that assessee had not filed returns for years preceding to asst. yr. 2004-05 yrs, 2001-02 to 2003-04 and subsequently he reopened said assessments on sole and therefore, its income having escaped assessment, reopening of assessment was on basis of suspicion and non- existent and incorrect facts and it was invalid\" 8.5 Further, in Ram Mohan Rawat ( supra), it has been held as follows: \"Thus the reasons recorded by the AO for formation of belief that income assessable to tax has escaped assessment are based on two counts. One, the assessee has made bogus purchases and the second that the purchases are not verifiable as the assessee has not filed the return of income. Thus the formation of belief is based on these two factual aspects that the assessee has made bogus purchases which are not verifiable as assessee has not filed the return of income. The reason for non verifiableness of the purchases made by the assessee due to non filing of the return of income as stated by the AO is absolutely incorrect and wrong and contrary to the record when the assessee has filed the return of income electronically on 29th Oct., 2007. This fact was also subsequently accepted by the AO that the assessee filed the return of income under s. 139(1). The second aspect of the Printed from counselvise.com 14 reasons that the assessee has made bogus purchases is also not based on any enquiry or verification of record by the AO but this is simply reproduction of information received from the Investigation Wing. The said information is also incomplete as regards the details of the purchases and the parties from whom such purchases were made by the assessee. Thus the reasons recorded by the AO manifest that there is no application of mind and the averments as recorded in the reasons are very vague and general and rather inconsistent with the facts available on record so far as the filing of return of income by the assessee. The formation of belief on such incorrect and vague reasons would lead the reopening of the assessment as invalid.\" 8.6 Then, in Van Oord Dredging and Marine Contractors BV (supra), it has been held as under: \"In asst. yr. 2005-06, the AO has reopened the assessment on incorrect facts and further the AO has failed to demonstrate that there was failure on the part of ht assessee to disclose fully and truly all material facts during the course of original assessment proceedings. Hence the reopening of assessment of asst. yr. 2005-06 is liable to be quashed on these two grounds also. Accordingly we set aside the order passed by learned CIT(A) on this issue and hold that the reopening of assessments of both the years are not in accordance with the law and accordingly quash the assessment orders passed for both the years under consideration.\" Printed from counselvise.com 15 9. No decision contrary to the above case laws has been cited before us, nor has any of the above decisions been shown to have been reversed by higher authorities. 10. Therefore, respectfully following the ratios of the above discussed decisions, we hold that the re-opening of the completed assessment in the present case was not valid. The plea of the Department, that the recording of wrong facts by the AO in the reasons was an inadvertent mistake, is of no avail and it does not validate the reasons recorded by the AO. It is trite that the reasons recorded are to be read as they are, and the reasons recorded in the present case, read as they are, are factually incorrect reasons which could not have led the AO to arrive at a valid satisfaction that income for the year under consideration had escaped assessment. Accordingly, the initiation of the re-assessment proceedings through the incorrect reasons recorded and the entire re-assessment proceedings, culminating in the order under appeal are quashed as void ab initio. 11. Since the re-assessment proceedings stand quashed, as above, nothing further survives for adjudication. Ordered accordingly. 12. In the result, the appeal is allowed. 6. Ld. Departmental Representative has relied on the order of the learned lower authorities and submitted that assessee has neither disclosed the purchased immovable property during the Printed from counselvise.com 16 assessment proceedings, u/s 143(3) nor during the proceedings u/s 263 of the Act. The assessee has failed to disclose all true material facts and information. The case of the assessee was re- opened on the correct facts. 7. We have heard the parties and perused the material available on record. It is to be seen as to whether the re-assessment proceedings are liable to be quashed as void, as contended by the assessee. It was clear that the AO had issued the notice under section 148 of the Act for the reason that the assessee had made the payment of Rs.78,00,000/- for the purchase of immovable property, however the sale deed was executed at circle rate for Rs.15 lacs and this transaction has neither disclosed during the assessment proceedings u/s 143(3) nor during the proceedings u/s 263 of the Act. As per the sale deed the property was purchased by three buyers, and the AO considering the sole owner of the assessee recorded the reason on the wrong fact. The agreement to sale on which basis the sale deed was executed was also in the favour of the three persons. . The case of the assessee was reopened for A.Y, 2011- 12 and the notice under section 148 of the Act was issued for the A.Y. 2012-13. Thus the AO had re-opened the assessment on the basis of wrong facts and therefore, the reopening is not valid. Printed from counselvise.com 17 8. The approval was also granted in a mechanical manner without considering the sale deed, executed in the favour of the assesse, and two other persons, because in the sale deed the property was purchased by the three persons. The possession was handed over to the purchasers not the assessee only. It is true that the assessee had purchased the immovable property from Sh. Ishwar Singh with two other purchasers namely Sh. Lalit Mohan and Shyam Sunder and this fact has not mentioned in the reasons for re-opening by the AO. 9. Ld. DR submitted that as per the sale deed, there was only one seller, i.e. Ishwer Chand and there was only one buyer i.e. Satbir Sagwal. As per the sale deed the seller and buyer presented themselves before the authority for the registration purpose and their thumb impression/signature and photo are available on the said deed, which shows that the property was purchased in the name of the assessee only. This argument has no force, because as per sale deed three persons purchased the property and the possession was handed over to the buyers. The Ld. CIT(A), without accepted the additional evidence dismissed the appeal. The ld. AO has reopened the assessment on incorrect facts. Therefore, respectfully following the ratio of the above discussed decisions, we hold that the re-opening of the completed assessment in the present case was not valid. Hence the reopening of assessment for A.Y.2011-12 is liable to Printed from counselvise.com 18 be quashed on these grounds. The plea of the Department, that the recording of wrong Assessment Year in the reasons of re- opening by Assessing Officer was an inadvertent mistake in not tenable. There, we quashed the re-assessment proceedings. The grounds raised by the assessee are allowed. Because we, quashed the re-assessment proceedings therefore nothing further survives for adjudication. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 19.11.2025. Sd/- Sd/- (BRAJESH KUMAR SINGH) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Neha, Sr. PS Date:-19.11.2025 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(Appeals) ` 5.DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "