VIVEK HANWANTMALJI SURANA HUF,MUMBAI vs. INCOME TAX OFFICER - WARD 23(3)(6), MUMBAI, PIRAMAL CHAMBER, MUMBAI

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ITA 4104/MUM/2025Status: DisposedITAT Mumbai14 October 2026AY 2013-1411 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal admitted the additional ground of appeal challenging the jurisdiction of the NFAC, as it was a purely legal ground. The Tribunal noted that the assessment order was passed by the NFAC on March 28, 2022. It referred to Notification No. 18/2022, dated March 29, 2022, which introduced the 'e-Assessment of Income Escaping Assessment Scheme, 2022', applicable with effect from March 29, 2022. The Tribunal observed that Section 151A of the Income Tax Act, 1961, empowers the Central Government to make a scheme for assessment/reassessment to enhance efficiency, transparency, and accountability. Based on the conjoint reading of Section 151A and Notification 18/2022, the Tribunal concluded that the NFAC had no jurisdiction to pass an assessment order prior to March 29, 2022. The assessment order could only be validly passed after this date. The Tribunal cited several decisions from the Kolkata, Cuttack, and Patna benches of the ITAT, which held that assessment orders passed by the NFAC prior to March 29, 2022, were bad in law and without jurisdiction. Applying this ratio to the present case, the Tribunal held that the assessment framed by the NFAC on March 28, 2022, was bad in law and without jurisdiction and was therefore quashed. Consequently, the additional ground raised by the assessee was allowed. Since the legal issue was decided, the grounds on merits were rendered academic and not adjudicated.

What were the facts?

The assessee, Vivek Hanwantmalji Surana HUF, filed an appeal against the order of the NFAC, Delhi, for Assessment Year 2013-14. The original assessment proceedings were initiated by the jurisdictional Assessing Officer (AO) by issuing a notice under Section 148A on March 30, 2021. The assessee filed a return on April 9, 2021. Subsequently, the AO issued a notice under Section 143(2) on November 8, 2021. Notices under Section 142(1) were then issued by the National Faceless Assessment Centre (NFAC). A show cause notice was issued by the NFAC on March 24, 2022, with a three-day response period. The NFAC passed the assessment order under Section 147 read with Section 144B on March 28, 2022, making additions and treating income as unexplained cash credit. The amount in dispute regarding LTCG is Rs. 2,68,82,444/-, and Rs. 2,75,44,500/- as unexplained cash credit.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 were valid, considering the AO erred in initiating them and failed to consider that reassessment cannot be made solely for enquiry, on information from the investigation wing, or based on suspicion rather than belief. (Section 147) 2. Whether the assessment order passed under Section 147 read with Section 144B was against the principles of natural justice. (Section 147, Section 144B) 3. Whether the disallowance of Long Term Capital Gains (LTCG) of Rs. 2,68,82,444/- under Section 10(38) as penny stock transactions was justified. (Section 10(38)) 4. Whether the addition of Rs. 2,75,44,500/- as unexplained cash credit under Section 68 and the application of Section 115BBE were correct. (Section 68, Section 115BBE) 5. Whether the charging of interest under Sections 234B and 234D was correct. (Section 234B, Section 234D) 6. Whether penalty proceedings under Section 271(1)(c) were validly initiated. (Section 271(1)(c)) 7. Whether the assessment order passed by the NFAC was bad in law and void for want of jurisdiction, being contrary to Section 151A read with Notification 18 of 2022. (Section 151A, Section 143(3), Section 147, Section 144B) Assessee's Contentions: The reassessment proceedings were invalid. The assessment order was passed without jurisdiction by the NFAC as it was dated prior to the effective date of Notification 18/2022, which empowered the NFAC under Section 151A. Reliance was placed on Supreme Court decisions in Jute Corporation of India Ltd. and National Thermal Power Co. Ltd. for admitting the additional ground. The assessment order was also bad in law for want of jurisdiction and contrary to Section 151A. The NFAC had no jurisdiction to pass the order before March 29, 2022. The assessment order dated March 28, 2022, was therefore void. Reliance was placed on various ITAT decisions from Kolkata, Cuttack, and Patna benches. Revenue's Contentions: The Ld. DR strongly supported the order of the Assessing Officer. No specific arguments were recorded for the revenue on the additional ground regarding jurisdiction.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 10(38),Section 68,Section 115BBE,Section 234B,Section 234D,Section 271(1)(c),Section 148A,Section 143(2),Section 142(1),Section 151A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: CHALLA NAGENDRA PRASAD & SHRI MAKARAND VASANT MAHADEOKAR

Pronounced: 14/10/2026

PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 29.08.2024 for the assessment year 2013-14.

2.

The assessee has raised the following grounds of appeal:

“1. On the facts and circumstances of the case and in law the Ld. AO erred in initiating the reassessment proceeding under section 147. 2. On the facts and circumstances of the case and in law the Ld. AO failed to consider that reassessment proceeding cannot be initiated. a) No reassessment can be made just to make an enquiry or verification b) Reassessment proceeding cannot be initiate merely on the information received from investigation wing c) Reassessment proceeding cannot be initiated when the LD AO have reason to suspect and not reason to believe 3. On the facts and circumstances of case and law the Ld. AO erred in passing the assessment order under section 147 r.w.s.144B of income tax Act which is passed against the principal of natural justice. 4. On the facts and circumstances of the case the Ld. AO erred in disallowing the LTCG of Rs. 2,68,82,444/- under section 10(38) of the act on the sale of the shares of Luminire Technologies Limited treating the same as penny stock transaction. 5. On the facts and circumstances of the case the Ld. AO erred in treating the amount of Rs.2,75,44,500/- as unexplained cash credit under section 68 of the act and applying the provision of Section 115BBE of the act. 6. The Ld. AO erred in charging the interest under section 234B for Rs.9,180,23,786/- and 234D of Rs 14485/- of the Income Tax Act 1961 7. The Ld. AO erred in initiating Penalty proceeding under section and 271(1)(c) of the Income Tax Act 1961.” 3. The Ld. Counsel for the assessee further submitted that the assessee had also filed an additional ground challenging the validity of the assessment order passed u/s. 143(3) r.w.s. 147 r.w.s. 144B of the Act by the National Faceless Assessment Centre (NFAC) as bad in law for want of jurisdiction. The Ld. Counsel submitted that since the assessee is challenging the very validity of the assessment order passed by the NFAC, the ground is purely legal ground and hence, the same may be admitted for adjudication. Reliance is placed on the decision of the Hon’ble Supreme Court in the cases of Jute Corporation of India Ltd. v. Commissioner of Income Tax, (1991) 187 ITR 688 (SC) and National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC).

4.

Heard rival contentions and perused the additional ground raised by the assessee which is as under:

“1. On the facts and circumstances of the case and in law, the Assessment order passed by the National Faceless Assessment Centre (NFAC) as affirmed by the Ld. CIT (A) is bad in law and void for want of jurisdiction, since the same is contrary to the extant law and in particular section 151A of the Income Tax Act read with notification 18 of 2022. 2. On the facts and circumstances of the case and in law, the assessment order framed u/s 143(3) r.w.s. 147 and section 144B of the I.T. Act, 1961 is bad in law and void and it is prayed that the same be quashed.” 5. On perusal of the ground raised by the assessee, we noticed that the assessee is challenging the very validity of the assessment order passed by the Assessing Officer through the NFAC as bad in law for want of jurisdiction. The ground raised by the assessee is purely legal and, therefore, following the 3 decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT, (1998) 229 ITR 383 (SC), the said additional ground is admitted for adjudication.

6.

Coming to the merits of the additional ground, the Ld. Counsel for the assessee submitted that the notice u/s. 148A of the Act was issued by the Income Tax Officer, Ward-23(3)(6), Mumbai, who was the jurisdictional Assessing Officer, on 30.03.2021. The Ld. Counsel submitted that in response to the said notice, the assessee filed its return of income on 09.04.2021. Thereafter, a notice u/s. 143(2) of the Act was issued by the jurisdictional Assessing Officer, Ward 23(3)(6) on 08.11.2021 and a copy of the said notice is enclosed at pages 1 to 10 of the paper book. The Ld. Counsel submitted that subsequently, notices u/s. 142(1) of the Act were issued by the NFAC on different dates, in response to which the assessee submitted replies along with all supporting documents. The Ld. Counsel submitted that a show cause notice was issued by the NFAC on 24.03.2022, allowing only three days for the assessee to respond to the said notice and the assessee submitted its reply on 23.06.2022.

7.

The Ld. Counsel submitted that the NFAC passed an order u/s. 147 r.w.s. 144B of the Act on 28.03.2022 making an addition of ₹2,68,82,444/- by denying exemption claimed u/s. 10(38) of the Act and treating the same as unexplained cash credit u/s. 68 of the Act read with the provisions of section 115BBE of the Act.

8.

The Ld. Counsel further submitted that the provision of section 151A of the I.T. Act, 1961 state that "The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of assessment, reassessment or re- computation under section 147 or issuance of notice under section 148 [or conducting of enquiries or issuance of show- cause notice or passing of order under section 148A] or sanction for issue of such notice under section 151, so as to impart greater efficiency, transparency and accountability by;

a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible;

(b) optimising utilisation of the resources through economies of scale and functional specialisation;

(c) introducing a team-based assessment, reassessment, re- computation or issuance or sanction of notice with dynamic jurisdiction."

9.

The Ld. Counsel further submitted that, such scheme was made applicable by CBDT vide notification no. 18/2022 related to "e-Assessment of Income Escaping Assessment Scheme, 2022” applicable with effect from “29.03.2022”. A copy of said notification is enclosed herewith for your ready reference and records at page no. 11.

10.

Ld. Counsel submitted that on a conjoint reading of section 151A of the I. T. Act, 1961 with notification no. 18/2022 dated 29/03/2022 it is evident that, NFAC had no jurisdiction to pass the assessment order prior to 29.03.2022. It is only by virtue of notification no. 18/2022 dated 29.03.2022 that the NFAC was empowered to pass a re-assessment order. Thus, NFAC could pass the reassessment order u/s 147 of the I.T. Act, 1961 only after 29/03/2022. As such, any order passed by NFAC before 29/03/2022 is without jurisdiction and therefore void and bad in law.

11.

Applying the said principles to the case of the assessee, since the order was passed by the NFAC vide dated 28/03/2022, the same is without jurisdiction and therefore, the said order is liable to be quashed. The appellant also relies on the following decisions: A. Nand Kumar Choudhary Rengalapali Camp vs. ITO (ITA: 420/CTK/2025) B. Kalawati Enterprises Pvt Ltd., Patna vs. DCIT, NFAC (ITA: 358/PAT/2025) Nabiul Industrial Metal Pvt. Ltd. vs. ITO (ITA: 1328/KOL/2024) C. D. MD Mahimud SK vs. ITO (ITA: 2229 & 2230/KOL/2024)

12.

On the other hand, the Ld. DR strongly supported the order of the Assessing Officer.

13.

Heard rival contentions and perused the orders of the authorities below. Undisputedly, in this case, the assessee filed its return of income on 09.04.2021, in response to the notice dated 30.03.2021 issued u/s. 148A of the Act by the jurisdictional Assessing Officer. A notice u/s. 142(1) of the Act was also issued by the jurisdictional Assessing Officer on 08.11.2021, calling for various details, as is evident from pages 1 to 10 of the paper book. Subsequently, notices u/s. 142(1) of the Act were issued by the NFAC. A show cause notice was issued by the NFAC on 24.03.2022, giving the assessee three days to submit its reply. Upon submission of the reply by the assessee on 26.03.2022, the assessment was completed by the NFAC on 28.03.2022 u/s. 143(3) r.w.s. 144B of the Act.

14.

We observed that vide Notification No. 18/2022 dated 29.03.2022, the CBDT introduced the e-Assessment of Escaping Assessment Scheme, 2022, applicable w.e.f. 29.03.2022. The provisions of section 151A of the Act state that the Central Government may make a scheme, by notification in the Official Gazette, for the purposes of assessment, reassessment or recomputation u/s. 147 of the Act, or issuance of notice u/s. 148 of the Act, and sanction for the issuance of such notice u/s. 151 of the Act, so as to impart greater efficiency, transparency and accountability by eliminating the interface between the Income Tax Authority and the assessee or any other person to the extent technologically feasible; optimizing the utilization of resources through economies of scale and functional specialization; and introducing a scheme for assessment, reassessment, recomputation, or issuance of sanction for notice with dynamic jurisdiction.

15.

On reading the provisions of section 151A of the Act and the notification issued by the CBDT dated 29.03.2022, it can be safely concluded that the NFAC had no jurisdiction to pass the assessment order prior to 29.03.2022. It is only by virtue of Notification No. 18/2022 dated 29.03.2022 that the NFAC was empowered to pass a reassessment order and such an order could validly be passed after 29.03.2022.

16.

We further observed that an identical issue came up for consideration before the Coordinate Bench of the Calcutta Tribunal in the case of Nabuil Industrial Metal Pvt. Ltd. v. ITO in ITA No. 1328/Kol/2024 dated 15.10.2024, wherein the Tribunal held that the assumption of jurisdiction by the NFAC prior to 29.03.2022 for passing the assessment order was without jurisdiction. A similar view was taken by the Kolkata Bench in the case of MD Mahimud SK v. ITO in ITA Nos. 2230 and 2229/Kol/2024 dated 04.03.2025. Following the order of the Kolkata Bench, the Cuttack Bench of the Tribunal, in the case of Nand Kumar Choudhury, Rengalapali Camp v. ITO in ITA No. 420/CTK/2025 dated 22.09.2025 held that an assessment order completed by the NFAC on 28.03.2022, being prior to the date of the notification was bad in law and, consequently, quashed the same.

17.

In the present case, the assessment was also framed by the NFAC on 28.03.2022 which is prior to 29.03.2022 and the ratio of the aforesaid decisions applies to the facts of the assessee’s case. We further observed that a similar view was taken by the Patna Bench of the Tribunal in the case of Kalawati Enterprises Pvt. Ltd. v. DCIT in ITA No.358/PAT/2025 dated 16.01.2026.

18.

The facts being identical, respectfully following the aforesaid decisions, we hold that the assessment framed by the NFAC on 28.03.2022 in the case of the assessee for the assessment year 2013-14 is bad in law and without jurisdiction, and the same is hereby quashed. The additional ground raised by the assessee is allowed.

19.

Since we have allowed the additional ground on the legal issue, we are not adjudicating the grounds on merits, as they would be academic in nature at this stage.

20.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 14/10/2026

Sd/- Sd/- MAKARAND VASANT MAHADEOKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 14/10/2026 Prabhat Copy to: VIVEK HANWANTMALJI SURANA HUF, SHOP NO. 24, 2ND FLOOR, NANA SHANKER SETH SMRUTI BUILDING, 1 380/382 JAGNATH SHANKER SETH ROAD, THAKURDWAR CHIRZA BAZAR., MUMBAI-400002, MAHARASHTRA INCOME TAX OFFICER - WARD 23(3)(6), MUMBAI, 2 ROOM NO. 616, PIRAMAL CHAMBER, LOWER PAREL, LALBAUG, MUMBAI-400012, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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