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Facts
The assessee filed an income tax return declaring income. The assessee was a co-owner of a property and entered into a development agreement. The AO initiated reassessment proceedings and made an addition on account of capital gain. The CIT(A) confirmed the addition. The assessee appealed to the ITAT.
Held
The Tribunal held that the notice issued under section 148 was barred by limitation. The AO did not have possession of any document or evidence related to any 'asset' which would indicate escaped assessment. The addition made by the AO was therefore not sustainable.
Key Issues
Whether the reassessment proceedings and the consequent notice under Section 148 were barred by limitation and whether the addition made by the AO was sustainable on facts and in law.
Sections Cited
147, 148, 148A, 149, 45(5A), 48, 2(47), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
1. The appeal filed by the assessee is against the order dated 10.07.2025 of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi (hereinafter referred to as ‘The CIT’) u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of assessment order dated 11.05.2023 of
P a g e | Shyam Gopal (AY: 2013-14) Ld. AO/National Assessment Centre (hereinafter referred to as ‘the Ld. AO’) u/s 147 r.w.s 144B of the Act for AY: 2013-14.
Brief facts of the case are that the assessee filed income tax return on 30.09.2013 declaring income of Rs.20.29,640/-. The assessee is co-owner of property i.e. land measuring 5,176.08 Sq. Meters in Subhas Nagar, New Delhi. The assessee along with co-owner entered into collaboration and development agreement dated 07.08.2002 with the developer M/s Kailash Nath Finance & Investment Pvt. Ltd., 55% of the developed area to be the share of the assessee and the co-owners and 45% to be the share of the developer. In furtherance of the agreement, a registered General Power of Attorney was executed by all co-owners on 22-01-2003 with Sub-Registrar-1, New Delhi. The execution of the agreement and the registered Attorney established the transfer of rights in the property on 22-01-2003 read with the agreement dated 07-08-2002, relevant to AY 2003-04. The developer handed over the possession of the developed multiplex to the assessee vide letter dated 09.01.2012, which relates to AY 2012-13. Then on 08.03.2015 M/s Kailash Nath Finance & Investments Pvt. Ltd. sold major part out of its share i.e. 45% of built-up area to Shri Prahlad Dass Mittal for a consideration of P a g e | Shyam Gopal (AY: 2013-14) Rs. 11,00,00,000/-. On the basis of this information, the AO alleged that Sh.
Shyam Gopal & Others were required to pay capital gain arose out of collaboration agreement on receipt of possession of the developed area i.e. their 55% share in multiplex complex in F.Y. 2012-13 and made the addition of Rs. 5,48, 10,952/- in the hands of the assessee.
On completion of proceedings the ld. AO vide order dated 11.05.2023 made addition of Rs.5,48,10,952/-.
Against the order dated 11.05.2023 of ld. AO the assessee preferred appeal before the Ld. CIT(A) which was dismissed vide order dated 10.07.2025.
Being aggrieved the appellant assessee preferred present appeal on following grounds:
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre ("CIT(A), NFAC") is bad both in the eyes of law and on facts.
2. (i) On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the reassessment order passed by the AO despite the fact that the notice issued under section 148 is itself is invalid, illegal, non-est and liable to be quashed as the same has P a g e | Shyam Gopal (AY: 2013-14)
been issued beyond the statutory time limit prescribed under the Act. (ii) That the notice issued by the AO under section 148 is barred by limitation and liable to be set aside in view of the limitation period prescribed by the Hon'ble Supreme Court in the case of Union of India & Ors vs. Rajeev Bansal [2024] 469 ITR 46.
3. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred in confirming the action of the AO despite the fact that show-cause notice issued under Section 148A (b) of the Act, order passed under Section 148A(d), notice issued under section 148 and consequent reassessment order passed by AO under Section 147 of the Act are illegal and void-ab- initio as the same have been issued and passed without following the statutory conditions and procedures prescribed under the Income Tax Act.
4. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on the facts and the law in confirming the reopening of the reassessment proceedings despite the fact that notice under section 148 of the Act has been issued without there being any books of accounts, evidence or other documents in the possession of AO related to any asset or expenditure or entry which shows that income chargeable to tax has escaped assessment.
5. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the action of AO despite the fact that the order under Section 147 read with section 144B of the Act has been passed ignoring the first proviso to section 148 which provides that notice under section 148 shall not be issued unless there is "information" [as defined under Explanation 1 to section 148] with the assessing officer
P a g e | Shyam Gopal (AY: 2013-14) which suggests that income chargeable to tax in the case of assessee for the relevant assessment year has escaped assessment.
6. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the action of the AO in reopening of the reassessment proceedings, despite the fact that the same has been made by the AO on the basis of borrowed satisfaction without independent application of his mind.
7. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the action of the AO, despite the fact that reassessment order under section 147 is illegal and liable to be quashed since the order under Section 148A(d) and notice under section 148 by the AO have been issued and passed without obtaining valid statutory prior approval from the specified authority as provided under section 151 of the Act.
8. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the reopening of the reassessment proceedings despite the fact that the notice under section 148(b) of the Act. order passed under section 148(d) of the Act and notice under section 148 of the Act are invalid and illegal as the same are contrary to the amended provision of Section 151A read with Section 144B of the Act as well as e-Assessment of Income Escaping Assessment Scheme, 2022.
On the facts and circumstances of the case, the learned CIT (A), NFAC has erred both on facts and in law in confirming the action of the AO despite the fact that the notice under section 148 has been issued without there being valid Document Identification Number (DIN) quoted on the body and P a g e | Shyam Gopal (AY: 2013-14) the same is in violation of the CBDT Circular No. 19/2019 dated 14.08.2019. 10. (i) On the facts and circumstances of the case the Learned CIT(A), NFAC has erred both on facts and in law in confirming the addition of Rs.5,48,10,952/ made by the AO on account of capital gain invoking the provisions of section 45(5A) of the Income Tax Act. ii) That the abovesaid addition has been confirmed despite the fact that provisions of section 45(5A) was introduced by Finance Act, 2017 w.e.f 1- 4-2018 and is applicable prospectively. Therefore, it does not apply to assessment year under consideration. iii) That the abovesaid addition has been confirmed rejecting the detailed submission and explanations along with evidences brought on record by the assessee in support of his contention that capital gain is not chargeable to tax in the impugned assessment year.
11. On the facts and circumstances of the case, the Learned CIT(A), NFAC has erred both on facts and in law in rejecting the contention of the assessee that no such addition has been made in the case of other co-owners of the property in their assessment completed under section 147 of the Act.
12. Without prejudice to the above, the learned CIT(A), NFAC has erred both on fact and in law, in confirming the action of the AO computing the capital gain without providing the benefit of indexed cost of acquisition as per the provisions of section 48 of the Income Tax Act.
13. Without prejudice to the above, the learned CIT(A), NFAC has erred both on fact and in law, in confirming the action of the AO in computing the tax demand in the computation sheet treating the addition under the head "Income from other sources" as against the income under the head 'capital gain' assessed by him in the assessment order.
P a g e | Shyam Gopal (AY: 2013-14) 14. The appellant craves leave to add, amend or alter any of the grounds of appeal.”
Ld. Authorized Representative for assessee regarding ground of appeal
No. 2 submitted that Assessment u/s 147 is invalid since the Notice u/s 148 is barred by limitation as the same has been issued beyond the surviving period in view of Rajeev Bansal judgement. The assessment has been reopened consequent to notice u/s 148 of the Act issued on 28.06.2021. Thereafter, following the Hon'ble Supreme Court judgement in the case of Union of India & Ors. Versus Ashish Agarwal - [2022] 444 ITR
1. (SC) - Dated:- May 4, 2022, original notice issued u/s 148 on 28.06.2021 was deemed to be issued u/s 148A(b) of the Act. Thereafter, notice u/s 148 was issued on 20.07.2022. This notice is beyond the surviving period as has been held by the Hon'ble Supreme Court judgement in the case of Union of India & Ors.
Versus Rajeev Bansal - [2024] 469 ITR 46 (SC) - Dated:- October 3, 2024 at Case law compilation page no. 16 -72. (Relevant page 50-52, Para 107-113).
The relevant para is as under-
“112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal
P a g e | Shyam Gopal (AY: 2013-14) fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June
2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18
June 2022, the assessing officer will have sixty-one days from 18 June
2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.”
7. The tabular representation in the case of the assessee is as follows:
P a g e | Shyam Gopal (AY: 2013-14)
7. The ld. AR relied upon the following judgments which is reproduced as under:
• Toyota Boshoku Corporation Versus ACIT, Circle-3(1)(1), International Taxation, New Delhi - No.- - Dated:- September 30, 2025
P a g e | Shyam Gopal (AY: 2013-14) • Mukesh Versus ITO Ward-43 (1) Delhi - No.- - Dated:- September 26, 2025 • Sushil Kumar Shreeram Overseas Versus ACIT Circle-22 (2), Delhi - No.- - Dated:-May 4, 2025 • Varun Goel Versus DCIT Circle Intl. Taxation 1 (3) (1) New Delhi - No.- - Dated:-April 16, 2025
The Ld. Authorized Representative in appellant assessee regarding ground of appeal No. 4 submitted that reassessment proceedings are barred by limitation, bad in law and liable to be quashed as there is no "asset" in possession of the AO which reveal that the income chargeable to tax has escaped assessment. It is first submitted that in ground no. 4, the assessee has raised the objection that the assessment reopened for the AY 2013-14 is barred by limitation since this assessment has been reopened after a period of three years. As per the amended provisions of Section 149(1) applicable from 1st April 2021, an assessment after 1st April 2021, can be reopened after three years only when the AO has information in his possession, which reveal that the income chargeable to tax represented in the form of an asset which has escaped assessment amounts to or is likely to amount to 50,00,000 rupees or more for that year. This Section at that relevant time read as under-
P a g e | Shyam Gopal (AY: 2013-14) "149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Explanation.—For the purposes of clause (b) of this sub-section,
"asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account”
The reopening of the assessment is otherwise barred by limitation in view of the provisions of section 149(1)(b) as AO does not have in his possession any document or evidence related to any "asset" which reveal that P a g e | Shyam Gopal (AY: 2013-14) the income chargeable to tax has escaped assessment. In this case the allegation is on accrual of the capital gain income which does not fall within the meaning of the "asset" and hence the assessment could not be reopened after a period of 3 years from the end of the relevant AY in view of the provisions of section 149(1)(b). This issue is covered by the following judgments: - • DELHI HIGH COURT - Smart Chip Private Limited Versus Assistant Commissioner Of Income Tax, Central Circle - 25 - [2025] 476 ITR 389 - Dated:- April 23, 2025 at CLC Page 133- 143 (Relevant Page 135-137, Para 6-10 & Page 142-143, Para 16-20).
“17. It is clear from the above that there is no allegation that the income which has escaped assessment was represented in the form of an asset. .... The AO does not have the possession any books of account, other documents or evidence, which reveals that the petitioner's income that is represented in the form of an asset has escaped assessment.”
P a g e | Shyam Gopal (AY: 2013-14) • The above judgement has been followed by the Hon'ble ITAT
DELHI in the case of ACIT, Central Circle-19, Delhi Versus
M/s. JKM Infra Projects Ltd. And (ViceVersa) - No.- ITA No.
3031/Del/2025, CO 132/Del/2025 - Dated:- September 30, 2025 at CLC Page 144-158 (Relevant Page 156, Para 8-9). Relevant para is as under:
“8. It is relevant to note that the term "asset" as defined in the 4th proviso to section 153A and in Explanation to section 149(1)(b) as it stood at the relevant point of time for the year under consideration were one and the same. ......
.....But the second condition prescribed thereon that such escaped income should be represented in the form of an asset is not satisfied herein as disallowance of expenditure cannot be construed as being represented in the form of an asset."
• DELHI HIGH COURT - Ratnagiri Gas And Power Private Limited Versus Assistant Commissioner Of Income Tax Circle 19 (1), Delhi & Ors. - No.- W. P. (C) 221/2023 - Dated:- May 2, 2025 at CLC Page 159-170 (Relevant Page 166-168, Para 25-29).
P a g e | Shyam Gopal (AY: 2013-14) “27. If we now examine the reasons for re-opening of the assessment as set out in the order passed under Section 148A (d) of the Act, we find that there is no evidence to support that the income, which has allegedly escaped assessment is represented in the form of an asset."
• DELHI HIGH COURT - ATS Township Pvt. Ltd. Versus
Assistant Commissioner Of Income Tax Circle 1(1) Delhi & Ors
- No. - W. P. (C) 13790/2024 - Dated:- December 11, 2024 at CLC Page 171-178 (Relevant Page 172, Para 3 & Page 177, Para
14).
“14. It is material to note that in this case, there is no reference of an asset representing income escaping assessment...
In view of the above, the petition is allowed and the impugned notices issued under Section 148A.
(b) and 148 of the Act, are set aside. The impugned order passed under Section 148A (d) of the Act is also set aside."
P a g e | Shyam Gopal (AY: 2013-14) 9. Therefore, in view of what has been stated above and the judicial precedents relied upon, no notice u/s 148 can be issued after 3 years when the AO does not have in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset has escaped assessment. Accordingly, no addition on account of capital gain can be sustained.
Even otherwise, no event has taken place in AY 2013-14 so as to attract capital gain in that year and hence, addition made in the AY 2013-14 is invalid and therefore the assessment order is liable to be quashed
The assessment order is otherwise untenable as the addition has been made by the AO on the allegation that capital gain has arisen during the year ignoring the fact that there is no event which has happened by which it can be legally alleged that there is transfer during the relevant AY within the meaning of section 2(47) of the Act so as to attract liability of capital gain.
In this regard, it may be relevant to refer to the following facts stated by the AO himself in Page 6, Para 6.7.1: -
Particulars Date Relevant AY Collaboration Agreement 07.08.2002 2003-04 Handing over the possession by the 09.01.2012 2012-13
P a g e | Shyam Gopal (AY: 2013-14) developer to the assessee Fire Safety Certificate 27.06.2012 2013-14 Meter of electricity installed 20.05.2013 2014-15 Completion Certificate issued by the 18.09.2015 2016-17 Delhi Municipal Corporation
On-going through the above facts, it is evident that there is no legal basis for assuming that transfer has taken place during the AY 2013-14 so as to attract the liability towards capital gain.
• In case the transfer is being assumed on the basis of the Collaboration Agreement dated 07.09.2002 then that will be AY
2003-04. • In case transfer is being assumed on the basis of handing over of the possession dated 09.01.2012, then that will be AY 2012-13. • In case the transfer is being assumed on the basis of completion certificate by Delhi Municipal Corporation dated 18.09.2015 then that will be AY 2016-17.
The entire basis of the AO and CIT(A) is on Fire Safety Certificate dated 27.06.2012 which by no stretch of any legal implication can be assumed to be a transfer so as to attract liability of the capital gain.
P a g e | Shyam Gopal (AY: 2013-14)
15. The allegation of the AO that the rental income has been shown in this assessment year can also not be the basis since it is an admission by the AO that the possession was given on 09.01.2012, then obviously, the rent will start thereafter and assessee has rightly shown the rent in the subsequent year and that will not mean that the transfer has taken place in the year when the rental income has started. This, even on facts, the addition is not sustainable.
Therefore, in view of what has been stated above, the addition made in the assessment order is invalid and the same is liable to be deleted.
Ld. Departmental Representative relied the order of ld. CIT(A).
From examination on record in light of aforesaid rival contention it is crystal clear that ld. CIT(A) vide order dated 10.07.2024 confirmed addition of Rs.5,48,10,954/- made by the Ld. AO vide order dated 11.05.2023 u/s 45(5A) of the Act for AY: 2013-14.The assessee was reopened consequent to notice u/s 148 of the Act dated 28.06.2021 page No. 25 at paper book. The key facts are as under:
P a g e | Shyam Gopal (AY: 2013-14)
Hon’ble High Court of Delhi in the case of Ram Balram Buildhome Pvt. Ltd. Versus Income Tax Officer and ANR., (2025) 477 ITR 133 dated 30.01.2025 has held as under:
P a g e | Shyam Gopal (AY: 2013-14) “69. As noted above, by virtue of TOLA, the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A.
(d) of the Act. Thus, the AO was required to pass an order under Section 148A (d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A (d) of the Act. This period expired on 12.07.2022.
In view of the above material facts and well settled legal position the notice u/s 148 dated 20.07.2022 at page No. 111 to 113 is barred by limitation. Therefore, ground of appeal No. 2 is allowed. The ground of appeal No. 3 to 14 are left open.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 03.02.2026