RAKESH BHARGAVA,HARYANA vs. DEPUTY COMMISSIONER OF INCOME TAX, HARYANA

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ITITA 25/DEL/2025Status: DisposedITAT Delhi27 July 2026AY 2023-248 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal addressed the issue of jurisdiction first. Regarding the notice under section 143(2) issued by the NFAC, the Tribunal held that the NFAC had concurrent jurisdiction, and the notice issued by it within the prescribed time was valid, citing the jurisdictional Delhi High Court's decision in T.K.S. Builders (P.) Ltd. v. ITO. Consequently, the modified ground 2 concerning the validity of the notice was dismissed. On the additional ground regarding the section 127 transfer order, the Tribunal held that since the transfer was between assessing officers within the same city (Gurgaon), no opportunity of being heard was required as per section 127(3) of the Act. Furthermore, it noted that all cases pertaining to NRIs in Haryana fall under the jurisdiction of International Taxation, Circle, Gurgaon, making the transfer order legally valid. This ground was also dismissed. Concerning grounds 3 to 5, relating to the cost of acquisition and the claim for deduction under section 54F, the Tribunal found that the additional evidence filed by the assessee had not been examined by the AO. To ensure natural justice, the Tribunal set aside this issue to the file of the AO with a direction to consider the additional evidence and adjudicate afresh. The AO was directed to provide three effective opportunities to the assessee. Grounds 3 to 5 were allowed for statistical purposes.

What were the facts?

The assessee, Mr. Rakesh Bhargava, a non-resident Indian, filed an appeal against the assessment order dated 28.08.2025, passed by the DCIT, International Taxation, Gurgaon, under section 143(3) r.w.s 144C(13) of the Income Tax Act, 1961. This order was passed pursuant to directions from the Dispute Resolution Panel (DRP) dated 17.07.2025 for Assessment Year 2023-24. The assessee challenged the denial of deduction under section 54 of the Act amounting to Rs. 1,51,61,754/-, the validity of the statutory notice under section 143(2), the adoption of an incorrect cost of acquisition for capital gains calculation, and the AO's non-conformity with DRP directions. The assessee also raised an additional ground regarding the validity of a transfer of jurisdiction order under section 127 without providing an opportunity of hearing.

What were the issues?

1. Whether the assessment order passed under section 143(3) r.w.s 144C(13) is bad in law and void ab initio due to the issuance of the statutory notice under section 143(2) dated 19.06.2024 by the NFAC and not by the jurisdictional ACIT, International Taxation, Gurgaon, for a non-resident assessee. - Assessee's contention: The notice under section 143(2) was not issued by the jurisdictional AO, making the assessment invalid. Relied on Kunshan Q Tech Microelectronics (India) (P.) Ltd. v. DCIT. - Revenue's contention: The NFAC had concurrent jurisdiction, and the notice issued by it within the prescribed time was valid. Relied on T.K.S. Builders (P.) Ltd. v. ITO (Delhi). 2. Whether the order passed under section 127 transferring jurisdiction from ITO Ward-3(1), Gurgaon to ACIT, International Taxation, Gurgaon, is bad in law for lack of an opportunity of hearing to the appellant prior to the transfer. - Assessee's contention: The transfer order was passed without providing an opportunity of hearing, rendering it and consequential proceedings invalid. - Revenue's contention: Not recorded. 3. Whether the AO/DRP erred in adopting an incorrect cost of acquisition for calculating capital gains instead of the value determined by a registered valuer, and in denying the claim of deduction under section 54/54F of the Act. - Assessee's contention: The AO wrongly substituted the cost of acquisition by adopting L&DO conversion rates instead of the valuation report and ignored additional evidence. Relied on section 55(1)(ac)(b)(1) and section 55A. - Revenue's contention: Relied on the order of AO and DRP.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 54,Section 143(2),Section 127,Section 55(1)(ac),Section 55A,Section 127(3),Section 54F,Section 234B,Section 234D,Section 270A,Section 274,Section 270A(9),Section 120(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI

Before: SH. VIKAS AWASTHY & SH. NAVEEN CHANDRA

For Appellant: Shri A. K. Batra, C.A
For Respondent: Dr. Shalini Verma, CIT-D.R
Hearing: 07.07.2026Pronounced: 27.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI BEFORE SH. VIKAS AWASTHY, JUDICIAL MEMBER AND SH. NAVEEN CHANDRA, ACCOUNTANT MEMBER IT(IT)A No. 25/Del/2025 (Assessment Year : 2023-24) Mr. Rakesh Bhargava Vs. DCIT Circle 122/54, Silver Oak Complex International Taxation DLF, Gurgaon Haryana-02 Gurgaon Haryana - 02 PAN No. ANSPB 4689 F (ASSESSEE) (RESPONDENT) Assessee by Shri A. K. Batra, C.A. Revenue by Dr. Shalini Verma, CIT-D.R. Date of hearing: 07.07.2026 Date of Pronouncement: 27.07.2026

ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :

The above captioned appeal is preferred by the assessee against the assessment order dated 28.08.2025, passed by Income Tax Department, Office of the ACIT/DCIT, International Taxation – Gurgaon (hereinafter referred to as ‘ld. AO), passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter ‘the Act’) in pursuance of directions of the ld. Dispute Resolution Panel-1, Delhi-3

IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT (in short ‘ld. DRP') dated 17.07.2025 pertaining to Assessment Year 2023-24.

2.

Assessee has raised following grounds of appeal : 1. That on the facts and under the circumstances of the case and in law, the Deputy Commissioner of Income Tax, Circle, International Taxation, Gurgaon has erred in completing the assessment u/s 143(3) r.w.s 144C(13) of the IT Act of the assessee and not in pursuance to the directions issued by "Dispute Resolution Panel" (DRP) vide para 10.3.2 of the directions and without correctly evaluating the additional evidences duly admitted by DRP i.e., SDMC order, house tax paid receipts as well as the sale deed on record for the allowability of deduction u/s 54 of the IT Act and denying the claim of deduction amounting to Rs.1,51,61,754/- u/s 54 of the IT Act, which is arbitrary, bad in law and void ab initio. 2. Regarding the Statutory notice u/s 143(2) issued beyond the prescribe time limit. The DRP observed that the technical grounds taken up by the assessee challenging jurisdiction is beyond legislative mandate of the panel and thereafter not having adjudicated upon. Now the ground of assessee is under: 2.1 On the facts and under the law the draft order passed u/s 144C (1) dated 22.02.2025 is bad in law and void ab-intio since initial mandatory notice u/s 143(2) dated 19.06.2024 was not issued, by the jurisdictional ACIT, International Taxation, Gurgaon having jurisdiction over the non-resident assessee. 3. That on the facts and under the circumstances of the case and law, the DRP/A.O erred in adopting the cost of acquisition of the property of Rs. 16,46,025/- for calculating the Capital Gain instead of Rs. 26,68,000/- as per the valuation report of the registered valuer ignoring the submissions of the assessee which is arbitrary and bad in law.. 4. The AO erred in passing the final assessment order dated 28.08.2025 under section 143(3) read with section 144C(13) of the Act by Ld. AO not in conformity with the directions of the Hon'ble Dispute Resolution Panel, Delhi ('Ld. DRP") by disregarding the binding directions and characterizing the DRP order as illegal, hence is liable to be quashed being in gross violation of the strict mandate of section 144C(13) of the Act. 5. That on the facts and under the circumstances of the case and in law, the AO has grossly erred in evaluating the claim of deduction u/s 54 of the IT Action account of the following. 5.1 In misinterpreting the contents mentioned in the sale deed as well as SDMC rectification assessment order.

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IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT 5.2 In raising the vague comments on the additional evidences while giving effect to the directions of the DRP as such comments not raised in the remand report on the additional evidences as per record. 5.3 In taking divergent view that construction up to plinth level by defining the plinth as foundation or base and holding vacant plot, being incomplete and inhabitant structure by observing that mere payment of house tax does not alter the fundamental character of property within meaning of section 54 of IT Act. 5.4 By ignoring the following vital documents, while framing the orders, which is a serious violation of procedure. i. SDMC rectification assessment order showing construction cost of property @ of Rs. 500 per sq. ft. for 624 sq. ft. as per covered area stated in Form D mentioning R.V. Rs. 39,270/- w.e.f 14.12.1998 ii. House tax paid receipts w.e.f 14.12.1998 till FY 2021-22 iii. Sale deed clearly mentioning Plinth area 58 Sq. meter, type of property residential as well as the value of land and cost of construction etc. 6. That on the facts and under the circumstances of the case, the Deputy Commissioner of Income Tax, Circle, International Taxation, Gurgaon has erred in passing the final assessment order pursuant to DRP directions based on incorrect facts and ignoring the facts in denying the deduction claimed amounting to Rs. 1,51,61,754/- u/s 54 of the IT Act, which is arbitrary, summarizes, conjectures and bad in law. 7. That on the facts and under the circumstances of the case and in law, the Ld. AO has erred by computing tax liability of Rs. 51,58,120/- incorrectly and levying consequently interest under section 234 B and 234 D of the IT Act. 8. On the facts and under the law, the ACIT International Taxation, Circle Gurgaon has wrongly initiated the penalty proceedings u/s 270A of the IT Act, since the Assessing Officer has failed to mention both in the assessment order as well as in the notice issued u/sec.274 r.w.s.270A of the Act as to under which limb/sub-clause of sec.270A(9) of the Act penalty proceedings are initiated and as such notice issued is invalid. 9. The assessee craves leave to add, amend, alter, delete, rescind, forgo or withdraw any of the above grounds of appeal either before or during the course of the proceedings before the Hon'ble Income Tax Appellate Tribunal in the interest of the natural justice. The aforesaid grounds are mutually exclusive and without prejudice to each other.” 3. The assessee has modified its ground 2 of the appeal as under: On the facts and circumstances of the case and in law, appellant is non- resident and notice u/s 143(2) dated 19.06.2024 was issued by the

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IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT Assessment Unit, NFAC Income Tax Department was not having valid authority by law. In the absence of valid notice issued u/s 143(2) by the jurisdictional AO International Taxation Circle, Gurugram in whose jurisdiction the return of income was filed in the status of non-resident Indian. The assessment made u/s 143(3) r.w.s 144C(13) of the IT Act is invalid and liable to be quashed.

4.

The assessee filed an application for admission of additional ground as follows: 1. That order passed under section 127 of the IT Act dated 15.01.2025 by the Pr. Commissioner of Income Tax, Faridabad transferring jurisdiction over the appellant from ward 3(1), Gurgaon to ACIT International Taxation, Circle Gurgaon, CIT Delhi charge is bad in law for lack of opportunity of hearing given to the appellant prior to the transfer of jurisdiction. The impugned order of transfer and all the consequential proceedings pursuant thereto is without jurisdiction and in valid.

5.

The assessee has submitted that the assessee is a non-resident Indian whose jurisdiction lies with the ITO Ward-3(1) Gurgaon. The notice u/s 143(2) dated 19.06.2024 was issued by NFAC. It is submitted that valid jurisdiction lies with ACIT, Intt. Tax. Circle, Gurgaon and no notice u/s 143(2) was issued by ACIT Intt. Tax. Circle, Gurgaon. Subsequently, the jurisdiction of the case was transferred by the Pr. CIT, Faridabad, vide order u/s 127 dated 15.01.2025 from ITO Ward- 3(1) Gurgaon to ACIT, Intt. Tax. Circle, Gurgaon, CIT-Delhi charge without giving the assessee an opportunity of hearing. The assessee challenged vehemently on two counts: that the order u/s 127 was passed without according opportunity, and assessment was made by

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IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT ACIT, Intt. Tax. Circle, Gurgaon without issuing any notice u/s 143(2) within prescribed time limit and hence the all consequential proceedings are rendered invalid. The ld AR relied on Kunshan Q Tech Microelectronics (India) (P.) Ltd. v. DCIT [2026] 183 taxmann.com 96. 6. We are of the view that the NFAC had concurrent jurisdiction, hence the notice u/s 143(2) issued by it, within prescribed time, was valid. The decision of FAO v JAO has been settled in favour of Revenue by the hon’ble jurisdictional Delhi High Court in the case of T.K.S. Builders (P.) Ltd. v. ITO [2024] 167 taxmann.com 759 (Delhi). 7. The additional ground that order u/s 127 was passed without giving any opportunity is not admitted, in accordance with the judgement of National Thermal Power Co. Ltd. v. CIT (1998) 97 Taxmann 358/229 ITR 383 (SC) as no evidence is on record of the fact that no opportunity was accorded to the assessee. 8. In any case, the transfer of jurisdiction was effected within the same city, i.e., Gurgaon: from ITO, Ward-3(1), Gurgaon to the DCIT, International Taxation, Circle, Gurgaon, under the charge of CIT (International Taxation), Delhi. In terms of section 127(3) of the Income-tax Act, no opportunity of being heard is required to be afforded to the assessee where the transfer is made between Assessing

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IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT Officers situated in the same city, locality or place. Accordingly, the contention of the assessee regarding infringement of section 127 of the Act, is devoid of merit and is rejected. Seen from another perspective, all cases pertaining to Non-Resident Indians (NRIs) falling within the State of Haryana, under the provisions of section 120(3) of the Act, are under the jurisdiction of the International Taxation, Circle, Gurgaon. The order dated 15.01.2025 passed u/s 127 of the Income-tax Act, 1961 by the PCIT, Faridabad, transferring jurisdiction over the assessee from ITO, Ward-3(1), Gurgaon to the DCIT, International Taxation, Circle, Gurgaon, under the charge of CIT (International Taxation), Delhi, is therefore legally valid. Thus, following the judgement of National Thermal Power Co. Ltd. v. CIT (1998) 97 Taxmann 358/229 ITR 383 (SC) the modified ground 2 and additional ground is accordingly dismissed. 9. With respect to ground no. 3 to 5 regarding the issue of addition of Rs. 34,22,624/-on account of Capital Gains, the ld AR submitted that the assessee is non-resident and had claimed exemption u/s 54F(1) in respect of the LTCG for Rs 1,51,61,754/ in his ITR. The ld AR submitted that the assessee claimed the cost of acquisition of property of Rs. 23,68,050/- acquired prior to 01.04.2001 & same was valued at Rs. 26,68,000/- as on 01.04.2001 by registered Govt. valuer by

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IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT adopting Fair Market Value, as per section 55(1)(ac) b(1) whereas the AO determined the cost of acquisition of his own by applying L&DO conversion rate from leasehold land to freehold land as per circle rate without reference to valuation officer u/s 55A. The ld AR stated that the DRP upheld the action of the AO to accept the conversion land rates. The ld AR argued that AO/DRP wrongly substituted the cost of acquisition value by adopting L & DO rates and treated it as circle rate. Since the stamp duty, circle rate for the said area was notified in the year 2007. 10. The ld AR submitted that the assessee had filed an application dated 20.03.2025 in the office of the DRP for admission of additional evidences which were not filed before the AO such as copy of rectification assessment order passed by Dy. Assessor & Collector SDMC, Najafgarh Zone, Delhi & copy of House Tax payment receipts. The ld AR stated that these documents were not before the AO as there was a very short time allowed to the assessee. 11. Per contra, the ld DR relied on the order of AO and the DRP. 12. We have heard the rival submissions and perused the materials on record. We find that the additional evidences filed by the assessee has not been examined by the AO. It would be in natural justice that the assessee gets an opportunity to explain its case before the AO in

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IT(IT)A No. 25/DEL/2025 [A.Ys 2023-24] Rakesh Bhargava vs. DCIT light of the additional evidences. We according set aside the issue of claim of deduction u/s 54F to the file of the AO with the direction to consider the additional evidences and adjudicate on the issue afresh. The AO is directed to afford three effective opportunities to the assessee to present the evidences/materials/documents. The assessee is likewise directed to avail the opportunities and present its case before the AO. The ground nos. 3 to 5 are allowed for statistical purposes. 13. In the result, the appeal IT(IT)A No. 25/DEL/2025 is allowed for statistical purposes. Order pronounced in the open court on 27.07.2026

Sd/- Sd/- (VIKAS AWASTHY) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 27.07.2026 Priti Yadav, Sr. Ps* Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRARITAT NEW DELHI

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