POONAM AGGARWAL,PAONTA SAHIB vs. INCOME TAX OFFICER NAHAN, NAHAN

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: HYBRID MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 327 /Chd/2026 िनधा�रण वष� / Assessment Year : 2016-17 Poonam Aggarwal बनाम The ITO Prop. M/s Maa Bala Sundari Nahan Traders Majra Paonta Sahib Sirmour -173021, Himachal Pradesh �ायी लेखा सं./PAN NO: ADXPA2690J अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Abhimanyu Jhamba, Advocate and Ms. Thonpinao Thangal, Advocate राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) सुनवाई की तारीख/Date of Hearing : 29/07/2026 उदघोषणा की तारीख/Date of Pronouncement : 03/08/2026 आदेश/Order PER LALIET KUMAR, J.M This is an appeal filed by the Assessee against the order of the Ld. CIT/NFAC, Delhi dt. 16/12/2025 for the Assessment Year 2016-17. 2. In the present appeal Assessee has raised the following grounds:

2 that taxation of the income in the hands of the Appellant/dealers would tantamount to double taxation of the same amount which is already taxed in the hands of M/s Asian Paints and which is impermissible in law. 6. That on the facts and circumstances of the case and in law, the National Faceless Appeal Centre/CIT(Appeals) has erred in not appreciating that legal fictions are created only for a definite purpose and cannot be extended beyond that legitimate field. 7. That on the facts and circumstances of the case and in law, the National Faceless Appeal Centre/CIT(Appeals) has erred in importing the provisions of section 28(iv) of the Act to the case of the Appellant and making impugned additions of Rs 3,71,367.

3.1 The Assessing Officer observed that information had been received from the office of ACIT, Circle-3(4), Mumbai that during the assessment proceedings of M/s Asian Paints Ltd., expenditure amounting to Rs.1,30,68,39,954/- incurred on tours of dealers had been disallowed under sections 37(1) and 40(a)(ia) of the Act. According to the information received, the assessee had allegedly derived a monetary benefit of Rs. 3,71,367/- which had not been disclosed in the return of income. On the basis of the said information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment and accordingly initiated proceedings under section 148 after following the procedure prescribed under section 148A.

3.2 During the reassessment proceedings, the assessee submitted that the reopening was founded entirely upon an audit objection raised in the case of M/s Asian Paints Ltd., which itself had subsequently been dropped by the Revenue Audit. It was further submitted that the alleged benefit had been computed merely by allocating the total expenditure equally amongst all dealers without there being any evidence that the assessee had actually received such benefit. The assessee also furnished documentary evidence, including the PAN/Passport particulars, to establish that she had not travelled outside India during the relevant previous year.

3.3 The Assessing Officer, however, rejected the explanation by holding that the dropping of the audit objection in the case of M/s Asian Paints Ltd. would not affect the taxability in the hands of the individual dealers. He further held that the benefit arose from the business relationship between the assessee and M/s Asian Paints Ltd. and was chargeable to tax under section 28(iv) of the Act. Consequently, an addition of Rs.3,71,367/- was made.

4 basis of an audit objection raised during the assessment proceedings of M/s Asian Paints Ltd. There was neither any independent enquiry conducted by the Assessing Officer nor any tangible material available with him to form an independent belief that income chargeable to tax had escaped assessment in the hands of the assessee. Thus, the reopening was founded entirely upon borrowed satisfaction. 6.1 The Ld. AR further submitted that the audit objection itself was never accepted by the Income-tax Department. On the contrary, the Department had opposed the audit objection and ultimately the Revenue Audit accepted the Department's stand and dropped the objection itself. Once the very foundation of the reassessment proceedings had disappeared, the consequential proceedings under section 148 could not survive. 6.2 It was further argued that the alleged benefit of Rs.3,71,367/- had been arrived at merely by proportionately distributing the expenditure incurred by M/s Asian Paints Ltd. amongst all its dealers. Such estimated allocation without any evidence of actual receipt could never constitute tangible material for reopening an assessment. 6.3 The Ld. AR further invited my attention to the assessment order itself wherein the Assessing Officer has admitted that the assessee had not travelled outside India during the relevant previous year. In support thereof, the assessee had produced the PAN/Passport details before the Assessing Officer. Once the Assessing Officer himself accepted that the assessee had not undertaken any foreign travel, the allegation that the assessee had received the benefit of foreign travel became wholly unsustainable. Despite recording such finding, the Assessing Officer proceeded to make the addition merely on presumptions and assumptions.

6.4 It was accordingly submitted that there existed no material whatsoever demonstrating escapement of income and, therefore, both the reopening and the consequential assessment deserved to be quashed.

5 7. Per contra, the Ld. CIT-DR relied upon the orders of the Assessing Officer and the Ld. CIT(A). It was submitted that the Assessing Officer had received credible information from the office of ACIT, Circle-3(4), Mumbai regarding the benefits extended by M/s Asian Paints Ltd. to its dealers and such information constituted sufficient basis for initiating proceedings under section 148.

7.1 The Ld. DR further contended that the dropping of the audit objection in the hands of M/s Asian Paints Ltd. would not automatically exonerate the individual beneficiaries from their independent tax liability. It was argued that the benefit arose from the business relationship between the assessee and M/s Asian Paints Ltd. and was, therefore, liable to be taxed in the hands of the assessee. The Ld. DR accordingly supported the orders passed by the authorities below. 8. I have heard the rival submissions and carefully perused the material available on record.

8.1 The undisputed facts emerging from the record reveal that the entire reassessment proceedings have been initiated solely on the basis of information received from the office of ACIT, Circle-3(4), Mumbai consequent to an audit objection raised during the assessment proceedings of M/s Asian Paints Ltd. No other material has been referred to either in the reasons recorded or in the assessment order for forming the belief that income chargeable to tax had escaped assessment in the hands of the assessee.

8.2 The record further reveals that the assessee had specifically brought to the notice of the Assessing Officer that the very audit objection forming the foundation of the reassessment proceedings had not been accepted by the Income-tax Department and had ultimately been dropped by the Revenue Audit itself. Thus, the very basis for the reassessment proceedings had ceased to exist. Despite this undisputed factual position, the Assessing Officer neither conducted any independent enquiry nor collected any material establishing escapement of income in the hands of the assessee.

6 8.3 More importantly, the assessee categorically demonstrated before the Assessing Officer that she had not travelled outside India during the relevant previous year and furnished the requisite documentary evidence in support thereof. Significantly, the Assessing Officer himself has acknowledged this factual position in the assessment order. Once the Assessing Officer himself records that the assessee had not undertaken any foreign travel, the very premise that the assessee had received the alleged foreign travel benefit is completely demolished. 8.4 In spite of such admitted factual position, the Assessing Officer proceeded to sustain the addition merely because an average amount had been allocated to various dealers on the basis of expenditure allegedly incurred by M/s Asian Paints Ltd. Such estimated allocation, unsupported by any evidence of actual receipt of benefit by the assessee, cannot constitute tangible material capable of giving rise to a bona fide belief that income chargeable to tax had escaped assessment.

8.5 It is well settled that the assumption of jurisdiction under section 147 must be founded upon independent application of mind and tangible material having a live nexus with the alleged escapement of income. Borrowed satisfaction, suspicion or generalized information cannot substitute the statutory requirement of "reason to believe". In the present case, except for the information mechanically received from another Assessing Officer, there is absolutely no document or evidence demonstrating escapement of income in the hands of the assessee. Rather, the material available on record establishes exactly the contrary, namely, that the assessee had not undertaken any foreign travel during the relevant year.

8.6 In these circumstances, I am of the considered opinion that the jurisdiction assumed by the Assessing Officer under sections 147/148 is without any legal foundation. Since the very initiation of reassessment proceedings is invalid, the consequential reassessment order cannot survive.

7 8.7 Accordingly, the notice issued under section 148, the order passed under section 148A(d) and the assessment framed under section 147 read with section 144B are hereby quashed. Consequently, the addition of Rs.3,71,367/- also stands deleted.

Order pronounced on 03/08/2026 Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकर आयु�/ CIT 3. आयकर आयु� (अपील)/ The CIT(A) 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH