MUKESH KUMAR AGARWAL,SIKKIM, GANGTOK vs. I.T.O., WARD - 3(1), GANGTOK, GANGTOK

ITA 2630/KOL/2026Status: DisposedITAT Kolkata30 September 2026AY 2019-20207 pages
AI SummaryAllowed

What were the facts?

The assessee, Mukesh Kumar Agarwal, is appealing an order from the NFAC, Delhi, dated 15.06.2026, which upheld the Assessing Officer's (AO) order dated 30.12.2023. The AO denied the assessee exemption under Section 10(26AAA) of the Income Tax Act, 1961, solely because the assessee did not file a return of income under Section 139(1). The case was reopened under Section 147, with a notice under Section 148 issued on 23.03.2023. The assessee filed a return on 28.04.2023. The AO noted the assessee's business as M/s M K Enterprises, with a valid trade license since 2012. The AO accepted the total turnover of ₹6,50,96,481/-, gross profit of ₹63,54,027/-, and net profit of ₹26,85,052/-. The AO disallowed the exemption and added back the net profit to the assessee's income.

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to exemption under Section 10(26AAA) of the Income Tax Act, 1961, even if the return of income was not filed within the due dates specified under Section 139(1) or Section 148. The Tribunal reasoned that the AO cannot deny an exemption that is clearly applicable to the assessee under Section 10(26AAA). The residential status of the assessee was not disputed by the lower authorities. The Tribunal found that the AO had accepted the bank transactions as turnover and computed the business income, including the net profit of ₹26,85,052/-. The Tribunal emphasized that any class of income that is exempt under the Act cannot be brought to tax merely for the non-filing of an income tax return. The argument that Section 147 is beneficial to the revenue was deemed not applicable, as it is the AO's duty to make a correct assessment as per the Act's provisions. Consequently, the appeal filed by the assessee was allowed.

What were the issues?

1. Whether the reassessment proceedings initiated under Sections 147/148 of the Income Tax Act, 1961, were invalid, illegal, and without jurisdiction, rendering the assessment and appellate order liable to be quashed. 2. Whether the assessee is entitled to exemption under Section 10(26AAA) of the Income Tax Act, 1961, irrespective of whether a return of income was filed under Section 139(1) or Section 148 within the specified time. Assessee's Contentions: - The assessee argued that the exemption under Section 10(26AAA) cannot be denied merely for not filing the return of income under Section 139(1) or Section 148 within the due time. - Reliance was placed on the Supreme Court's decision in Doma T Bhutia vs. Union of India [2025] 178 taxmann.com 199 (SC) to support the claim that the income is exempt. Revenue's Contentions: - The revenue supported the orders of the lower authorities, arguing that the assessee had substantial transactions and did not file the return of income. - The revenue contended that making an addition under Section 147 is beneficial to the revenue and that both authorities were justified in not granting the exemption as per Section 80AC of the Act.

Which sections of the Income-tax Act were involved?

Section 10(26AAA),Section 139(1),Section 147,Section 148,Section 143(2),Section 80AC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH AT KOLKATA

Before: SHRI LAXMI PRASAD SAHU

For Appellant: Adv. प्रत्यर्थी के ओर से/

PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER:

This is an appeal filed by the assessee against the order passed by the NFAC, Delhi [hereinafter referred to as the ‘Ld. CIT(A)’] dated 15.06.2026 DIN & Order No: ITBA/NFAC/S/250/2026- 27/1089718762(1) u/s 250 of the Income Tax Act, 1962 [hereinafter referred to as the ‘Ac

The order continues below.

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