SATPAL SETHI, BILASPUR,BILASPUR vs. INCOME TAX OFFICER 2(1), BILASPUR

ITA 539/RPR/2026Status: DisposedITAT Panaji06 October 2026AY 2018-1910 pages
AI SummaryAllowed

What were the facts?

The assessee, Satpal Sethi, filed an appeal before the ITAT, Raipur Bench, challenging the order of the CIT(Appeals)/NFAC for Assessment Year 2018-19. The assessee had also filed additional grounds of appeal. During the proceedings, the assessee did not press the first additional ground of appeal. The second additional ground of appeal challenged the validity of additions made in the assessment order, alleging non-compliance with Section 144B of the Income Tax Act, 1961, specifically the lack of a show cause notice for proposed variations prejudicial to the assessee. The assessment order had made an addition of Rs. 52,96,834/- towards disallowance of cost of acquisition/construction. The Assessing Officer (AO) had treated the stamp duty value of a flat at Rs. 11,68,99,000/- as income from unexplained sources under Section 69 of the Act, instead of invoking Section 56(2)(x).

What did the Tribunal hold?

The Tribunal held that the assessment order was not in accordance with the mandatory procedure laid down under Section 144B of the Act. It was noted that the AO had not issued any show cause notice to the assessee before making the addition of Rs. 52,96,834/- towards the disallowance of the cost of acquisition/construction. This failure to issue a show cause notice for variations prejudicial to the assessee's interest violated the principles of natural justice and the binding dictates of Section 144B. The Tribunal relied on the provisions of Section 144B, which mandates that a show cause notice must be issued when variations prejudicial to the assessee are proposed. The Tribunal also referred to judicial pronouncements, including the Bombay High Court's decision in Piramal Enterprises Ltd. Vs. Addl/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, which held that assessments not made in accordance with Section 144B are non-est. Consequently, the assessment order was declared non-est, rendering subsequent proceedings invalid. The appeal of the assessee was allowed.

What were the issues?

1. Whether the reassessment order passed by the AO is illegal and void ab initio because no addition was made on the issues forming part of the reasons for reopening, on the basis of which notice u/s. 148 was issued? (Assessee's contention: Yes, the basis for reopening was unsustainable. Revenue's contention: Not recorded). 2. Whether the Ld. CIT(A)/NFAC erred in upholding the disallowance when the AO had not issued any show cause notice challenging the point on which the valuation report was rejected, thereby violating principles of natural justice and the mandate of faceless assessment u/s. 144B? (Assessee's contention: Yes, a show cause notice for proposed variations prejudicial to the assessee is mandatory under Section 144B, and none was issued for the disallowance of Rs. 52,96,834/-. Revenue's contention: The Sr. DR conceded that no show cause notice was issued before making the addition regarding the cost of acquisition/construction).

Which sections of the Income-tax Act were involved?

Section 144B,Section 148,Section 56(2)(x),Section 69,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH “DB”, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI AVDHESH KUMAR MISHRA

For Appellant: Shri Vinod Kumar Khatri, CA
For Respondent: Shri Piyush Tripathi, Sr. DR
Hearing: 09.09.2026Pronounced: 06.10.2026

PER PARTHA SARATHI CHAUDHURY, JM: The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, NFAC dated 17.04.2026 for the assessment year 2018-19 as per the grounds of appeal on record.

2.

That along with the Grounds of appeal, the assessee had filed additional grounds of appeal which reads as follows: “Additional Ground of Appeal:

Ground No 1 "The reassessment order passed by the A.O is illegal, ab initio void inasmuch as no addition was made by the A.O o

The order continues below.

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