MANOJ KUMAR AGARWAL, LOHIA ROAD, FARRUKHABAD vs. ASSISTANT COMMISSIONER OF INCOME TAX, ACIT, CIRCLE-4(1)(1), ALIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (SMC) BENCH, AGRA BEFORE: SUNIL KUMAR SINGH, JUDICIAL MEMBER AND BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No. 231/Agr/2025 Assessment Year: 2019-20 Manoj Kumar Agarwal, Vs. ACIT, Aayakar Bhawan, Prop. Shakti Automobiles 2/25, Marris Road, Aligarh-202001 Lohia Road,Farrukhabad-209625 PAN: AALPA7812P (Appellant) (Respondent) Assessee by Shri Swaran Singh, CA & Shri Shailesh Gupta, CA Department by Shri Anil Kumar, Sr (DR) Date of hearing 04.08.2026 Date of pronouncement 28.09.2026 ORDER PER: SUNIL KUMAR SINGH, J.M.

This appeal is directed against the impugned order dated 20.08.2024 passed in appeal No NFAC/2018-19/10337647 by the ld. Commissioner of Income Tax/NFAC (Delhi) [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2019-20, wherein ld CIT(A) has dismissed assessee’s appeal and upheld the additions made by the assessing officer. 2. At the outset, we notice that, according to registry’s report, the assessee filed this second appeal on 25.04.2025 against the impugned order dated 20.08.2024 by a delay of about 188 days. Ld AR has submitted

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that the assessee could not timely consult his legal representative causing delay in filing the appeal. The delay is not intentional and requested to condone the delay and admit the appeal for hearing on merits. It is settled legal position that the substantial justice cannot be denied on mere technicalities. In the interest of justice, we condone the delay caused in filing this appeal and admit the appeal for hearing. 3. The brief facts state that the appellant filed his return of income 31.10.2019 for A.Y. 2019-20, declaring total income of Rs. 37,12,120/-. The case was reopened u/s 147 of the Act by issuance of notice u/s 148 of the Act dated 25.03.2023. Assessee filed his return of income on 31.03.2023 in response to the notice us/ 148 of the Act, declaring the same income of Rs. 37,12,120/- as declared in the original return. Statutory notices u/s 143(2) and 142(1) of the Act were issued, seeking assessee to furnish the details of unsecured loan of Rs. 1,55,48,922/- taken from various parties/ family members and served upon the assessee, based on the available information with a further request to furnish copy of confirmation, ledger accounts of the lenders, relevant bank account statements and books of accounts extract and copy of ITR etc. to establish the identity, genuineness and credit worthiness of the lenders. Assessee submitted the required details before the assessing officer, who, after perusal of assessee’s P&L account, found that assessee did not deduct TDS on the interest expense

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of Rs. 61,93,870/-, motivation charge of Rs. 9,15,000/- , sales incentive to AF Rep. of Rs. 28,57,120/-, showroom rent of Rs. 3,52,840/- and tractor sales promotion charges of Rs. 4,37,723/-. Assessee was further asked to show cause as to why an amount of Rs. 41,26,966/- being 30% of Rs. 1,37,56,553/- be not disallowed and added to the total income u/s 40(a)(ia) of the Act. Assessee submitted his response against the show cause notice on 11.03.2024. The assessing officer, after verifying assessee’s submissions was satisfied in respect of all the above referred expenses except two- (i) that the assessee was the dealer of Escorts Tractors Ltd., the tractor agency had directly debited the interest of Rs. 4,01,443.78 to the account of assessee, however assessee failed to deduct TDS u/s 194A of the Act at the time of paying/ crediting this interest to the company, hence committing default u/s 40(a)(ia) of the Act, thus disallowed Rs. 1,20,432/- being 30% of Rs. 4,01,443/- (ii) The assessing officer further found that the assessee also failed to deduct TDS on the payment of tractor agency’s showroom rent of Rs. 3,52,840/-. Accordingly disallowed Rs. 1,05,852/- being 30% of the showroom rent of Rs. 3,52,840/-, vide assessment order dated 20.03.2024 passed u/s 147 of the Act. 4. Aggrieved, assessee preferred an appeal before ld CIT(A), who dismissed assessee’s appeal and upheld the aforesaid additions made by the assessing officer.

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M/s. Escorts Limited and allegedly treated the same as default under section 40(a)(ia) of the Income Tax Act, 1961, which is without appreciating and considering the correct facts of the case, therefore the disallowance made is unsustainable in law and deserves to be deleted. 10) That the Ld. CIT, NFAC DELHI has erred in law and on facts in sustaining the disallowance of Rs. 1,05,852/- arbitrarily made by the Ld. A.O. in the income of the appellant on account of Show Room Rent Expenses and allegedly treated the same as default under section 40(a)(ia) of the Income Tax Act, 1961, which is without appreciating and considering the correct facts of the case, therefore the Addition made is unsustainable in law and deserves to be deleted 11) That the Ld. CIT, NFAC DELHI has erred in law and on facts in sustaining the disallowance of Rs. 1,20,432/- arbitrarily made by the Ld. A.O. in the income of the appellant on account of interest paid to M/s. Escorts Limited and allegedly treated the same as default under section 40(a)(ia) of the Income Tax Act, 1961, without bringing any cogent material on record, therefore the disallowance made is unsustainable in law and deserves to be deleted. 12) That the L.d CIT, NFAC DELHI has erred in law and on facts in sustaining the disallowance of Rs. 1,05,852/-arbitrarily made by the Ld. A.O. in the income of the appellant on account of Show Room Rent Expenses and allegedly treated the same as default under section 40(a)(ia) of the Income Tax Act, 1961, without bringing any cogent material on record, therefore the Addition made is unsustainable in law and deserves to be deleted. 13) That the CIT, NFAC DELHI, National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining that the Ld. A.O. did not draw any adverse inference nor demanded any clarification for the disallowance of interest amounting to Rs. 1,20,432/- and Rent Expenses amounting to Rs. 1,05,852/- during the course of virtual hearing through Video Conferencing scheduled on 16.03.2024 at 3.00 p.m., therefore the disallowance/addition made by the Ld. A.O. is unsustainable in law and liable to be deleted. 14)That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the disallowance of Rs. 1,20,432/- and addition of Rs. 1,05,852/- arbitrarily made by the Ld. A.O. in the income of the appellant is based on conjectures and surmises and without proper basis, therefore the disallowance/addition made by the Ld. A.O. is unsustainable in law and liable to be deleted. 15) That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the impugned Assessment Order ignoring the fact that vague reasons have been recorded by the Ld. A.O. which have no live link with the reasons recorded therefore the assumption of jurisdiction by the Ld. A.O. in inititating the proceedings under section 147 of the Income Tax Act, 1961 for 8 the A.Y. 2019-20 is unsustainable in law and consequently the impugned assessment order is void ab-initio and liable to be quashed. 5 | P a g e

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16) That the Notice issued under section 148 of the Income Tax Act, 1961 for the Assessment Year 2019-20 is illegal, therefore the proceedings initiated under section 147 of the Income Tax Act, 1961 is unsustainable in law and liable to be dropped and the impugned Assessment Order is liable to be quashed. 17). That the Notice issued under section 143(2) of the Income Tax Act, 1961 for the Assessment Year 2019-20 is illegal, therefore the impugned Assessment Order is unsustainable in law and liable to be quashed. 18) That the Assessment Order passed by the Ld. A.O. is without Jurisdiction and therefore liable to be quashed. ….…………” 6. Perused the records. Heard ld AR for the appellant assessee and ld Sr DR for the respondent revenue. 7. At the very outset, ld representative for the assessee has pressed legal ground no.15 above and submitted that the assessing officer has made the impugned additions beyond the reasons recorded, hence the assumption of jurisdiction by Assessing Officer in initiating the reopening proceedings u/s 147 of the Act, are unsustainable and consequent assessment order is void ab initio. 8. Ld Sr DR has supported the impugned order. 9. In view of the legal ground raised by the assessee, we deem it just and appropriate to first adjudicate on the limited legal issue as to whether the impugned additions, not being based on the reasons recorded for the purpose of reopening, are sustainable under law?

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“Annexure 1. As per the office record, the assessee Shri Manoj Kumar Agrawal (PAN:AALPA7812P) has filed ITR for AY 2019-20 on 31.10.2019 at income of Rs. 37,12,120/-. As per the record/system, no regular assessment u/s 143(3) or action U/s 147 of I.T. Act, 1961 has been done for this Assessment Year. 2. In this case, the undersigned has certain information in his possession which is available in ITBA system (Income Tax Business Application software available for Income Tax Authorities) and Insight Portal. The information in this case has been identified by the Directorate of Income Tax (Systems), CBDT in accordance with the risk management strategy formulated by the Board as per the provisions clause (i) of Explanation 1 to Section 148 of the Income Tax Act, 1961. 3. The information contains inquiry report of DDIT, Investigation Unit, Aligarh in the case of Shri Manoj Agrawal regarding investigation of Election Affidavit. As per inquiry report you have taken unsecured loan of Rs.1,55,48,922/- from various parties/ family members and relatives however no supporting documents/evidences in the form of Bank accounts, ITRs, confirmation letter etc has been submitted to the investigation unit to prove the identity, genuineness and creditworthiness of the lenders/creditors. In the investigation, report it is recommended to verify the genuineness of the unsecured loan taken from various parties. 4. In view of the above, the above information suggests that the income chargeable to tax amounting to Rs. 1,55,48,922/- as detailed above has escaped assessment in your case for AY 2019-20.” 11. It is noticed that the para 3 of the aforesaid annexure discloses the ‘reasons recorded’ by the assessing officer before passing order u/s 148A(d) dated 25.03.2023 and before issuance of notice u/s 148 of the Act dated 25.03.2023. Based on the department’s inquiry report, from the election affidavit filed by the assessee, the reopening was initiated only for the verification of identity, genuineness and credit worthiness of the

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lenders/ creditors in respect of the unsecured loan of Rs. 1,55,48,922/-. However, the assessing officer, despite having failed to make any addition in respect of the aforestated unsecured loan, made additions only to the extent of non-deduction of TDS on payment of interest to his tractor agency and on payment to agency’s showroom rent. Admittedly, no addition has been made in respect of the said unsecured loan.

“4. It was the submission that the AO did not accept the response of the assessee and had reopened the assessment and completed the assessment. It was submission that in the assessment no addition has been made on account of the reasons recorded for the purpose of the reopening. It was submission that the addition has been made in respect of the source for the purchase of property. It was submission that the in view of the decision of the Hon'ble Supreme Court in the case of Jet Airways (1) Ltd., reported in (2011) 331 ITR 236 (Bom) and the decision of the Hon'ble Madras High Court in the case of Anand Cine Services (P) Ltd., reported in (2024) 8 NYPCTR 284 (Mad), wherein the Hon'ble Madras High Court has categorically held that section 147 of the Act enables the Assessing Officer to travel beyond the reasons for initiating reassessment proceedings provided such reassessment is also carried out on the grounds or reasons on which reassessment was initiated. On the other hand, if the ground on which reassessment was initiated was no longer available to the Assessing Officer, reassessment cannot be continued on the basis of the original notice u/s.148 of the Act and that a fresh notice is necessary. The AO having not made any addition on the basis of the reasons on which the reopening was done, the reopening is held to be bad in law and consequently quashed. Accordingly, the consequential assessment order also stands quashed.” 13. Ld AR has referred ATS Infrastructure Ltd. v. ACIT, (2024) 166 taxmann.com 61 (Del-H.C.), wherein Hon’ble Delhi High Court has held as under:

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“24. This clearly appeals to reason, since Section 147 of the Act embodies a power to assess, reassess as well also to recompute. Consequently, and once that power is validly invoked, the original assessment would cease to exist in the eyes of law. Undoubtedly, once an assessment already made comes to be reopened, the AO stands empowered statutorily to undertake an assessment afresh in respect of the entire income which may have escaped assessment. However, the only additional caveat which Ranbaxy Laboratories Ltd. enters is with respect to a situation where, in the course of reassessment, the AO ultimately comes to the conclusion that no additions or variations were warranted in respect of the heads or items of income which had formed the basis for initiation of action under Section 148 of the Act. It is in the aforesaid backdrop that the Court in Ranbaxy Laboratories Ltd. (supra) proceeded on facts to hold that since no additions had ultimately been made in respect of items such as club fees, gifts and presents, and which constituted the basis for initiation of reassessment, it would not be open to the AO to revise or modulate findings on any other head or items that may have been dealt with in the original assessment. 25. The position in law which emerges from the aforesaid discussion is that while it is true that the AO would have to establish that reassessment is warranted on account of information in its possession which appears to indicate that income chargeable to tax had escaped assessment, once the assessment itself is reopened it would not be confined to those subjects only. This would, however, be subject only to one additional rider and that being if, in the course of reassessment, the AO ultimately comes to conclude that no additions or modifications are warranted under those heads, it would not be entitled to make any additions in respect of other items forming part of the original return. 30. We thus, come to the conclusion that the enunciation with respect to the indelible connection between Section 148A(b) and Section 148 A(d) of the Act are clearly not impacted by Explanation 3. As we read Sections 147 and 148 of the Act, we come to the firm conclusion that the subject of validity of initiation of reassessment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened. 32. Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions.”

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reason for reopening was with respect to the verification of unsecured loan of R.s 1,55,48,922/-, whereas the disallowance in the instance case have been made u/s 40(a)(ia) of the Act, for non-deduction of TDS on the payment of interest expense and rent, and no addition has been made on account of unsecured loan. Hence, the impugned additions not emanating from the reason for reopening do not survive. Respectfully following the ratio of aforesaid decisions, we hold that the assumption of jurisdiction by ld assessing officer in reopening the case u/s 147 of the Act is bad in law. The consequent assessment order is quashed. The aforesaid legal point is accordingly determined in positive in favour of the appellant assessee and against the respondent revenue. Since we have quashed the reassessment order, the remaining factual/legal issues are not being adjudicated upon and are left open. The appeal is liable to be allowed.

Order pronounced in the Open Court on - 28.09.2026

Sd/- Sd/- (BRAJESH KUMAR SINGH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 28.09.2026

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*Aamir, PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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