PRAKASH KUNDANDAS BAJAJ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, NEW DELHI

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ITA 2797/DEL/2026Status: DisposedITAT Delhi16 July 2026AY 2020-215 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is a non-resident and an eligible assessee in terms of Section 144C of the Act. The Tribunal found that the CIT(A) had erred in rejecting the assessee's contention regarding the applicability of Section 144C. The Tribunal relied on the decision of the Hon'ble Delhi High Court in Principal Commissioner of Income-tax Vs. Sumitomo Corporation India (P.) Ltd., which held that the requirement of framing a draft assessment order under Section 144C is mandatory and not merely procedural. Failure to frame a draft order curtails the assessee's right to corrective measures and to challenge the decision, making the final assessment order invalid. The Tribunal also referred to the Bombay High Court's decision in International Air Transport Association Vs. DCIT, which emphasized that a draft assessment order is mandated for eligible assessees, including foreign companies, to allow them to approach the DRP. Consequently, the jurisdictional issue raised by the assessee was allowed. The other grounds raised by the assessee were rendered academic. The operative direction was to allow the appeal.

What were the facts?

The assessee, Shri Prakash Kundandas, a non-resident individual, filed his return of income for Assessment Year 2020-21. Following a search operation on ALM group of companies, which covered the assessee and associated entities, a notice under Section 147 of the Income-tax Act, 1961, was issued. The Assessing Officer made an addition of ₹37,08,000/- as unexplained commission income under Section 69A. The assessment order was passed by the Assistant Commissioner of Income Tax, Central Circle-8, Delhi, on 4 February 2025, under Section 147 read with Section 143(3). The assessee appealed to the CIT(A)-24, Delhi, who confirmed the assessment order. The assessee is now in appeal before the ITAT against the CIT(A)'s order dated 16 January 2026.

What were the issues?

1. Whether the assessment order passed under Section 147 read with Section 143(3) of the Income-tax Act, 1961, is bad in law for failure to follow the mandatory procedure under Section 144C of the Act, as the assessee is an eligible assessee (mixed question of law and fact, concerning Section 144C). Assessee's contentions: The assessee argued that as a non-resident and an eligible assessee, the Assessing Officer was mandatorily required to frame a draft assessment order under Section 144C before passing the final assessment order. Failure to do so curtails the assessee's right to challenge the proposed additions before the Dispute Resolution Panel (DRP) and renders the assessment invalid. The assessee relied on the Delhi High Court's decision in Principal Commissioner of Income-tax Vs. Sumitomo Corporation India (P.) Ltd. and the Bombay High Court's decision in International Air Transport Association Vs. DCIT. Revenue's contentions: The Revenue did not contradict the facts narrated by the assessee. The CIT(A) had rejected the assessee's contention by holding that since no reference was made to the TPO and there was a variation in income arising from incriminating material discovered during search, the assessee did not qualify as an eligible assessee under Section 144C.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 144C,Section 69A,Section 192CA(3),Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI

Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL

For Appellant: Shri Kirit Mehta, CA
For Respondent: Shri Tarun Sharda, Senior DR
Hearing: 13.07.2026Pronounced: 13.07.2026

2 ITA-2797/Del/2026

3 ITA-2797/Del/2026

4 ITA-2797/Del/2026

5 ITA-2797/Del/2026

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