ITAT Quashes ₹1.08 Crore Reassessment As Invalid For Changing Status From Individual To AOP Without Due Process
Pranav B Prem
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment order involving an addition of ₹1.08 crore, holding that proceedings initiated against an individual cannot be lawfully concluded by assessing a different legal status, namely an Association of Persons (AOP), without following due process prescribed under law. The Tribunal held that such a jurisdictional defect goes to the root of the matter and renders the entire reassessment invalid in law.
The Bench comprising Anubhav Sharma, Judicial Member, and Naveen Chandra, Accountant Member, observed that reopening an assessment against an individual and thereafter completing it in the status of an AOP is impermissible. The reassessment order passed under Sections 144 read with 147 of the Income Tax Act, 1961 was held to be vitiated by a fundamental jurisdictional defect and liable to be quashed.
The appeal arose from reassessment proceedings for Assessment Year 2010–11 in the case of Late Shri Duleechanda. Based on information regarding cash deposits amounting to ₹1.08 crore in a savings bank account during the financial year 2009–10, the Assessing Officer initiated reassessment proceedings under Section 147 of the Act. The reasons to believe were recorded solely in the name of Late Shri Duleechanda in his individual capacity, and the reopening was accordingly initiated in the status of an individual.
However, while completing the reassessment under Sections 144 read with 147, the Assessing Officer passed the assessment order jointly in the names of Late Shri Duleechanda and Shri Dharmender Chaudhary, treating them as an Association of Persons. The entire addition of ₹1.08 crore was made in the hands of the AOP, even though no reopening proceedings had ever been initiated against Shri Dharmender Chaudhary.
Earlier, the National Faceless Appeal Centre (NFAC) had set aside the assessment and restored the matter to the Assessing Officer, prompting the assessee to approach the ITAT. The core legal issue before the Tribunal was whether a reassessment initiated against an individual could be validly concluded by assessing an AOP, particularly when no notice or reopening proceedings were initiated against the other alleged member of the AOP. Examining the record, the Tribunal noted several fatal defects in the reassessment proceedings.
The Tribunal observed that the reasons to believe under Section 147 were recorded only in the name of Late Shri Duleechanda as an individual. No notice under Section 148 was ever issued to Shri Dharmender Chaudhary, nor were any proceedings initiated against him. Despite this, the Assessing Officer framed the reassessment order in the status of an AOP by jointly naming both individuals.
Holding this approach to be wholly unsustainable, the Tribunal reiterated that jurisdiction assumed for reopening an assessment is both person-specific and status-specific. Once reassessment proceedings are initiated against a particular assessee in a particular status, the Assessing Officer cannot, at the stage of completing the assessment, change the status of the assessee or bring in another person without initiating fresh proceedings in accordance with law.
The assessee had also raised an additional legal ground before the Tribunal, contending that the assessment order passed jointly in the name of two persons as an AOP—when reopening was initiated only against one individual—was non est and void in the eyes of law. Accepting this contention, the Tribunal held that a pure question of law going to the root of jurisdiction can be raised at any stage of the proceedings.
The Tribunal relied on settled principles that an assessment made without proper jurisdiction is invalid and cannot be sustained. It noted that reopening in the name of an individual followed by assessment in the status of an AOP, without initiating proceedings against all alleged members, was clearly contrary to law.
Accordingly, the Tribunal quashed the reassessment order passed under Sections 144/147 as invalid and deleted the entire addition of ₹1.08 crore. Since the appeal was allowed on this legal issue alone, the Tribunal held that it was unnecessary to examine the merits of the addition. In the result, the appeal filed by the assessee was allowed, and the reassessment order was set aside as bad in law.
Cause Title: Late Shri Duleechanda Versus ITO
Case No: ITA No. 1353/DEL/2025 [A.Y 2010-11]
Coram: Anubhav Sharma, Judicial Member, and Naveen Chandra, Accountant Member
