RAJNI DUA,DELHI vs. ITO, WARD- 23(2), DELHI

PER SUDHIR PAREEK, JM:

The instant appeal has been preferred by the appellant against the order of the learned Commissioner of Income Tax (Appeals) Delhi [“Learned CIT(A)”, for short] dated 21.11.2025 passed u/s 250 of the Income Tax Act, 1961 (for short ‘the Act’) by which the appeal of the appellant was dismissed.

2 ITA No. 857/Del/2026 Rajni Dua 2. Facts of the case may be summarized as that the appellant company filed its return of income for AY 2005-06, on 31.10.2005 showing total income at Rs. 10,25,309/-. Subsequently, the Learned AO noticed that in the Profit & loss a/c for the year under consideration the appellant has debited trade discount of Rs. 1,69,94,870/- and cash discount of Rs. 17,00,110/- whereas in the ledger account of these two expenses, the amount of expenditure shown is of Rs.24,50,901/- and Rs. 12,98,786/- respectively. Accordingly, the appellant booked inflated expenditure amounting to Rs.1,45,43,969/- and Rs.4,01,324/- respectively. The Learned AO further noticed that an amount of Rs.1,66,397/- debited in the Profit & Loss account as bonus paid, has not been actually paid till the date of filing of return. On the basis of information as above, the Learned AO had reasons to believe that income to the extent of 1,51,11,690/- has escaped assessment and accordingly the assessment was reopened u/s 147 of the Act by issuing notice u/s.148 dated 22.3.2012, which was completed on 25.3.2013 assessing total income at Rs. 1,62,27,150/-, by adding of Rs.1,51,11,690/- on account of difference in trade discount, cash discount and of bonus not paid before the filing of return of income.

3 ITA No. 857/Del/2026 Rajni Dua 4. Reiterating the grounds of appeal, the Learned AR submitted that the assessment order dated 25.03.2013 was passed u/s 147/143(3) of the Act assessing therein the income at Rs.1,62,27,150/- for the assessment year 2005-06 deserved to be quashed only on this logic that the reassessment was initiated solely on the basis of audit party objection being inherently based on review/re-appraisal of same assessment records without their being any fresh tangible material unearthed subsequent to conclusion of original assessment being framed vide order dated 16th Aug., 2011 u/s 143(3)/154 of the Act assessing the income at Rs. 11,15,455/-.

4 ITA No. 857/Del/2026 Rajni Dua “5. Carlton overseas (P.) Ltd. (supra) emphasizes reliance by the revenue on a subsequent audit report, cannot be considered as tangible material. The relevant extracts of that decision are as follows:

"8. Ms. Prem Lata Bansal, learned counsel appearing for the Revenue has contended that audit party can on factual basis ask for reassessment and which has, therefore, been done in the present case. It is, however, admitted by her that a mere change of opinion does not permit action under section 147/148 of the Act.

“9. We find that the arguments on behalf of the petitioner are well founded and it must succeed. The Audit Report merely gives an opinion with regard to the non- availability of the deduction both under section 80-JA and under section 80HHC and that the deduction under section 80-IA was not deducted from the profits of the business while computing deduction under section 80HHC. Clearly, therefore, there was no new or fresh material before the Assessing Officer except the opinion of the revenue Audit Party.”

5 ITA No. 857/Del/2026 Rajni Dua 8. On the basis of above, there is materials substance in the argument advanced on behalf of the appellant and it is established that the Learned AO simply reopened the assessment on only and solely basis of the audit party objection and there was no any fresh tangible material before the Learned AO to reopen the same. In the reasons for re-opening, it is specifically mentioned that in the year under consideration the return of income was processed u/S 143(1) of the Act and scrutiny assessment u/s 143(3) of the Act was completed on 03-12-2007 and thereafter proceedings u/s 147 of the Act was initiated, on further verification of assessment records only and assessment opened solely on the audit objection and addition without there being any iota of fresh material for re-opening the assessment and it is also argued before us by the Learned AR that there is no any stipulation to the effect that there has been any failure on the part of appellant in disclosing fully and truly all materials facts necessary for the purpose of assessment. It is settled legal position that section 147 of the Act does not postulate conferment of power upon the Learned AO to initiate reassessment proceedings upon mere change of opinion and reassessment validly ordered should necessarily be based on tangible material which an Learned Assessing Officer comes by after the original assessment and necessarily, such material is outside the record. We find material substance in the submission advanced on behalf of appellant that where reassessment was initiated solely based on an audit party objection, without

6 ITA No. 857/Del/2026 Rajni Dua any new facts and on issues already examined in original assessment, such initiation is a mere change of opinion and thus invalid. On the basis of foregoing discussions, settled legal position and by respectfully following binding judicial pronouncement mentioned hereinbefore, there is no any hesitation to infer that the Learned AO manifestly erred in making addition of Rs. 1,51,11,690/- on merits of the case vide the impugned assessment order u/s 147/143(3) of the Act Dated 25th March, 2013 and the same deserves to be deleted.

Order is pronounced in the Open Court on 20.08.2026

Sd/- Sd/- (AMITABH SHUKLA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20.08.2026 *GP/Sr.PS* Copy forwarded to: 1. Appellant 1. Respondent 2. CIT(E) 3. CIT 4. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI