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Facts
The assessee's case was reopened under Section 147/148 for an unexplained painting import. The AO added the amount, but the PCIT initiated revision proceedings, alleging the AO failed to verify another import of Rs. 40,45,500 which was not part of the original reasons for reopening.
Held
The Tribunal held that while the AO could add issues for which satisfaction was recorded, they also had a duty to examine other issues that came to their notice during proceedings. The AO's failure to verify the second import was considered erroneous and prejudicial to revenue.
Key Issues
Whether the PCIT's order under Section 263 was justified when the AO failed to verify an import that was not part of the original reasons for reopening, but came to notice during assessment proceedings.
Sections Cited
263, 147, 144B, 148, 139(1), 148A(d), 148, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
Assessee by Shri Abhinav Vijh, Adv., Shri Sumit Lalchandani, Adv. and Shri Shivam Yadav, Adv. Department by Shri Mahesh Kumar, CIT-DR Date of Hearing 11.09.2025 Date of Pronouncement 05.12.2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the Assessee against the order of the Ld. Principal Commissioner of Income Tax, Delhi-12, (‘the PCIT’ in short) dated 28.01.2025 passed u/s 263 of the Income Tax Act, 1961 directing the revision of the assessment order dated 27.03.2023 passed u/s 147 r.w.s. 144B of the Act for Assessment Year 2018-19.
Brief facts of the case are that the assessee has filed his return of income on 29.10.2018 declaring total income of Rs.30,72,200/-. The case of the assessee was reopened in terms of the order passed u/s 148 of the Act wherein the AO has recorded Del/2025 Harsh Vardhan Singh vs. PCIT its satisfaction that income of Rs.11,32,525/- being the cost of painting purchased on 01.04.2017 which was not explained. Based on such information, order passed u/s 148A(d) dated 30.03.2022 was passed and notice u/s 148 was issued on the same day. In response to notice u/s 148, return of income was filed by the assessee declaring same income as was declared in the return filed u/s 139(1) of the Act. Thereafter, the AO proceeded to make verification of the source of the purchase of paintings of Rs.11,33,275/- and being unsatisfied with the replies filed by the assessee, made the addition on this amount and, accordingly, the total income was assessed at Rs.41,39,725/-. Thereafter, Ld. PCIT in terms of the show cause notice issued on 11.10.2024 alleged that the assessee has made one more import of painting worth of Rs. 40,45,500/-, however, no query whatsoever was made by the AO for this import, therefore, the reassessment order is erroneous as well as prejudicial to the interest of the Revenue and, accordingly, direct the AO to pass fresh order after making necessary verification of all the imports made by the assessee.
Aggrieved by the said order, assessee is in appeal before the Tribunal.
Heard both the parties and perused the material available on record. The main contention of the ld. AR is that the case of the assessee was reopened for making verification of the source of import of paintings worth of Rs. 11,32,525/- and the source of other import of Rs. 40,45,500/- was never the part of the reasons recorded for reopening the assessment. Ld. AO thus submits that the AO had not made any query with respect to the other imports, and therefore, the order cannot be said to be erroneous and prejudicial to the interest of revenue by observing that no verification of the other imports was made by the AO. He submits that during the course of proceedings before the Ld. PCIT, the assessee has filed all the explanations including the sources of the imports made by the assessee. However, it is an admitted position Del/2025 Harsh Vardhan Singh vs. PCIT that the Ld. AO has not make any verification with respect to the import of painting of Rs.40,45,500/- since it was not the part of the reasons recorded.
As per our opinion, once the assessment order is reopened u/s 148 of the Act and addition is made with respect to the issue for which the satisfaction of escapement of income was recorded in the reasons recorded for reopening the assessment, it is settled proposition that in such situation, the AO can make further enquiry, examination and verification on issues which are issues for which no satisfaction was recorded. In the instant case, the AO has failed to make any enquiry with respect to the other imports appearing in the books of accounts including the import of Rs.40,45,500/- of paintings during the year. The Explanation-3 to the erstwhile section 147 was applicable for the year under appeal wherein it is provided that “the Assessing Officer made assessed and reassessed income in respect of any issue which is escaped assessment, such issues come to his notice, and subsequently in the course of this section, notwithstanding that the reasons for such issue have not been concluded in the reasons recorded u/s 148, sub-section 2 of the Act.”
Here it is relevant to state that in the instant case, the AO has made the addition on account of issue for which the satisfaction was recorded for reopening the assessment, therefore, the Assessing Officer has every jurisdiction to examine and verifying all the other issues come before him during the proceedings and in the instant case the AO has failed to do so. Therefore, the Ld. PCIT on verification of the facts found that there was one more import of painting of Rs. 40,45,500/-, source of which were not enquired by the AO and accordingly, the Ld. PCIT reached to the conclusion that non verification of source of the such import make the reassessment order as erroneous and prejudicial to the interest of the Revenue.
Del/2025 Harsh Vardhan Singh vs. PCIT 7. As has been observed above, the assessee himself accepted that the AO has not made verification of the second import of Rs.4045,500/- since, it was not part of the reasons recorded. As has been held hereinabove, that once the AO has made the additions on issues for which the satisfaction of escapement of income was recorded and the proceedings were initiated u/s 148 of the Act, it is the duty of the AO to make necessary verification of the other issues which came to his notice subsequently. Under these circumstances, we agree with the revisions order passed by Ld. PCIT that AO should have examined the source of other imports made and, accordingly, we find no error in the order of Ld. PCIT holding the reassessment order as erroneous and prejudicial to the interest of Revenue. Accordingly, all the grounds of appeal raised by the assessee are dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 05.12.2025.