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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
ORDER
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is against order dated 20.08.2024 of Learned Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 (hereinafter referred as “the Act”) arising out of Order dated 29.03.2022 of the Learned Assessing Officer/National Faceless Assessment Centre (NFAC), Delhi under Sections 147 r.w.s. 148B of the Act for assessment year 2014-15.
Brief facts of the case are that assessee filed his return of income declaring income of Rs.6,46,010/-. The case was reopened on information that the assessee had purchased immovable property for a consideration of Rs.40,23,000/-. During verification, assessee failed to provide the source of investments. After recording reasons and obtaining necessary approval of the Competent Authority, notice under Section 148 dated 31.3.2021 was issued. The assessee claimed that he has e-file return of income in response to the notice under Section 148 on 25.01.2022. No cognizance of this return was taken being filed after a period of 10 months from the due date as per notice. Penalty proceedings under Section 271F of the Act for non-filing of ITR In response to notice under Section 148 of the Act on 31.03.2021 by the prescribed period initiated separately. Notice under Section 142(1) of the Act dated 04.12.2021 was issued to the assessee for providing the source of investment made in the purchase of immoveable property along with documentary evidence. The assessee filed reply stating that the impugned property was purchased by the HUF of the Karta i.e. with Shri Deepak Kumar Gupta under PAN AAHHD5470J. Copy of ITR-V e-filed by the HFU was enclosed. Copy of bank account was also filed. Show-cause-notice dated 22.03.2022 was issued to the assessee proposing addition. Reply to show-cause-notice was filed by the assessee. On completion of assessment proceeding, Ld. AO vide order dated 29.03.2022 made addition of Rs.40,23,000/- as per section 69 of the Act and separate penalty proceedings under Section 271(1)(c) and 271F of the Act were initiated.
3. Against order dated 29.03.2022 of Ld. AO, the appellant/assessee preferred appeal before the Ld. CIT(A) which was partly allowed vide order dated 20.08.2024. 4. Being aggrieved, the appellant/assessee preferred present appeal with following Grounds of Appeal:
1. That the Ld. CIT(A) NFAC has grossly erred both on facts and in law in confirming the addition of Rs. 40,23,000/- made by A.O (NFAC) u/s 69 of the I.T Act for so called unexplained investment in the purchase of immovable property.
2. That the source of deposits (credit entries) in Bank Account from where the payment towards purchase of property has been made is fully explained and proved. Ld. A.O as well as Ld. CIT(A) has wrongly and arbitrarily held that the appellant failed to explain the source of the entries in the HUF Bank Account.
3. That if the source of deposit in HUF Bank Account is proved and explained, it won't matter whether the payment is made from Individual Bank Account or HUF Bank Account. Ld. CIT(A) has factually as well as legally erred in dismissing the appeal and in confirming the addition of Rs. 40,23,000/- made by A.O(NFAC).
4. That under the facts and circumstance of the case the addition of Rs. 40,23,000/- deserves to be deleted.
5. That the appellant craves leave to add, alter, amend, delete any of the grounds of appeal before or at the time of hearing of appeal.”
5. Appellant/assessee through application dated 17.02.2025, prayed for admission of following additional grounds: “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned reassessment order passed by Ld. AO u/s. 147/144B without assuming jurisdiction as per law and without complying with mandatory conditions u/s 147 to 151 as envisaged under the Income Tax Act, 1961 and without obtaining valid approval/sanction u/s 151 of the Act.
2. That in any case and in view of the matter, action of Ld. CIT(A) in not quashing the impugned reassessment order passed by Ld. AO u/s. 147/144B, is bad in law and against the facts and circumstances of the case and not sustainable on various legal and factual grounds.
That having regard to the facts and circumstances of the case, assumption of jurisdiction in passing the impugned reassessment order by Ld. AO vide order dated 29.03.2022 is illegal, bad in law and void-ab- initio as the same has been passed without issuing the mandatory and statutory notice u/s. 143(2) upon the assessee and that too in accordance with law.”
6. Appellant/assessee through application dated 16.05.2025, prayed for filing of additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963.
Learned Authorized Representative for the appellant/assessee submitted that the appellant/assessee filed ITR electronically on 25.01.2022, copy of which is available at page 1 of the paper books. Reassessment order dated 29.03.2022 was illegal as notice under Section 143(2) of the Act was not issued. Copies of screen shot downloaded from portal of the assessee are at pages 72 & 73 of the paper books. Certified copy of order sheet entries is at Annexure B of reply under RTI Act dated 24.02.3025. Reliance was placed on Order dated 30.07.2025 in in favour of the assessee.
Learned Authorized Representative for the Revenue relied on order of Ld. AO. 9. From examination of record in light of aforesaid rival contentions, it is crystal clear that additional ground of appeal
no.3 mentions that reassessment order dated 29.03.2022 is illegal as it was based without issuing mandatory notice under Section 143(2) of the Act of the assessee. Order dated 29.03.2022 of Ld. AO does not refer to issuance of notice under Section 143(2) of the Act to the assessee. 9.1 A Co-ordinate Bench in titled as “Anil Agarwal, HUF Vs. ITO” in order dated 30.07.2025 has held as under: “2. The assessee also filed the following additional ground in the petition for admission of additional ground under Rule 11 of the Income Tax Appellate Tribunal Rules: 1. “That having regard to facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned re-assessment order and that too without issuing the mandatory notice u/s 143(2) within the statutory time and in accordance with law.”
3. The Ld. Counsel for the assessee submits that the ground raised by the assessee is purely legal and does not require fresh facts to be investigated and goes to the root of the matter and therefore prayed that the additional ground be admitted in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. vs. CIT 229 ITR 383.
4. Heard rival contentions. The additional ground raised by the assessee goes to the root of the very validity of the assessment framed by the Assessing Officer u/s 144B r.w.s. 147 of the Act and is a purely legal ground and thus the same is admitted for adjudication.
The Ld. Counsel for the assessee submitted that assessee has filed return on 28.10.2021 in response to notice issued u/s 148 dated 30.03.2021. However, the Assessing Officer did not issue notice u/s 143(2) of the Act. Ld. Counsel invited our attention to 21 to 22 of the PB which contains the notice issued u/s 148 dated 30.03.2021 and a copy of return filed on 28.10.2021 in response to the notice issued u/s 148 of the Act. Therefore, the Ld. Counsel submitted that non issuance of notice u/s 143(2) makes the impugned assessment order as bad in law. Reliance is placed on the following decisions in support of his contentions:
1. 1. CIT vs. Laxman Das Khandewal 417 ITR 325 (SC); 2. Rajender Kumar Sehgal vs. ITO 414 ITR 286 (Del.); 3. PCIT vs. Paramount Biotech Industries Ltd. 398 ITR 701 (Del); 4. PCIT vs. Jai Shiv Shankar Trading P. Ltd. 388 ITR 448 (Del.); 5. CIT vs. Rajiv Sharma 336 ITR 678 (All.); 6. PCIT vs. Staunch Marketing Pvt. Ltd. 404 ITR 299 (Del).
6. On the other hand, the Ld. DR submitted that the assessee did not file return within the time specified in the notice issued u/s 148 of the Act and therefore the Assessing Officer treated the return as invalid return and since the return was treated as invalid the Assessing Officer need not issue notice u/s 143(2) before completion of assessment.
7. In rebuttal the Ld. Counsel for the assessee submitted that the Hon’ble Jurisdictional High Court in the case of PCIT vs. Staunch Marketing Pvt. Ltd. (supra) held that even in ex parte assessment when once return is filed by the assessee in response to notice issued u/s 148 of the Act issuance of notice u/s 143(2) is mandatory even though the assessee failed to furnish return u/s 139 of the Act. Ld. Counsel submits that the Hon’ble High Court held that once return is filed in response to notice u/s 148 of the Act even ex parte assessment cannot be made without issue of notice u/s 143(2) of the Act.
8. Heard rival contentions, perused the orders of the authorities below and the case laws relied on by the assessee. In this case, the assessee filed return on 28.10.2021 in response to notice issued u/s 148 of the Act dated 30.03.2021. The Assessing Officer completed the assessment on 30.03.2022 u/s 144 r.w.s. 147 of the Act determining the income of the assessee at Rs.84,32,240/-. While computing the income the Assessing Officer started with the income declared by the assessee in the return of income of Rs.69,040/- declared by the assessee in the return in response to notice issued u/s 148 of the Act, whereby the Assessing Officer acted upon the return filed by the assessee. The Assessing Officer before completion of assessment u/s 144B r.w.s. 147 of the Act appears to have not issued any mandatory notice u/s 143(2) of the Act. The Revenue also could not show that the Assessing Officer had issued any notice u/s 143(2) of the Act for the assessment year under consideration. Therefore, the question now to be adjudicated this appeal is whether the assessment framed u/s 14B r.w.s. 147 of the Act is a valid assessment in the absence of issue of notice u/s 143(2) of the Act.
The Hon’ble Jurisdictional High Court in the case of PCIT vs. Staunch Marketing Pvt. Ltd. (supra) considered almost an identical situation examined “whether the Tribunal fell into error in holding that the assessment for the concerned year was not effective because of lack of notice u/s 143(2) of the Income Tax Act in the given facts of the case” the Hon’ble Jurisdictional High Court decline to answer the question on an appeal filed by the Revenue. The Hon’ble High Court further affirming the order of the Tribunal held as under: “14. In any event, factually the Assessee filed a return pursuant to notice issued u/s 148 of the Act, notwithstanding that it may not have filed a return in the first place u/s 139 of the Act for the assessment year in question. Once a return is filed notice u/s 143(2) of the Act to the assessee is mandatory prior to framing an assessment. The question of framing an assessment ex parte without even issuing a notice u/s 143(2) of the Act did not arise. The mandatory nature of that requirement is settled not only by the decision of the Supreme Court in the case of ACIT Vs. Hotel Blue Moon (supra) but also by a decision of this court in Commissioner of Income Tax-08 vs. Jai Shiv Shankar Traders Pvt. Ltd. (2016) 388 ITR 448 Del.
For all the aforementioned reasons, the question framed does not arise in the present appeal and is declined to be answered. In any event, the court does not find any substantial question of law arise from the impugned order. The appeal is, accordingly, dismissed.”
In all the case laws relied on by the Ld. Counsel for the assessee which are referred to above, it was held that assessment/reassessment finalized without issue of notice u/s 143(2) of the Act is not a valid assessment/reassessment. Thus, respectfully following the above decisions, we hold that the assessment framed by the AO u/s 144B r.w.s. 147 of the Act for the AY 2016-17 without issue of notice u/s 143(2) is bad in law and void ab initio and consequently the same is hereby quashed.
Since we have quashed the reassessment allowing the additional ground of appeal
filed by the assessee, all other grounds are not adjudicated as they become only academic at this stage.
12. In the result, appeal of the Assessee is partly allowed as indicated above.”
10. In view of above material facts, following judicial precedents, additional ground of appeal
no.3 raised by the assessee which goes to the root of the matter being purely legal ground is admitted. The reassessment order dated 29.03.2022 passed by the Ld. AO without issuing statutory notice under Section 143(2) of the Act is declared as illegal. Additional ground no.3 is allowed. The other additional grounds of appeal nos. 1 and 2 and grounds of appeal nos. 1 to 5 being academic in nature are left open.