Pranav B Prem

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment order after holding that the reopening was initiated on a fundamentally incorrect assumption that the assessee had not filed his return of income for Assessment Year (AY) 2008–09. The bench comprising Vikas Awasthy (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) found that the very foundation for issuing notice under Sections 147/148 of the Income Tax Act, 1961, was defective, thereby vitiating the entire reassessment proceedings.

Also Read: Sale of Unlisted Start-Up Shares Valid When Valuation Follows NAV/DCF Method; Delhi ITAT Deletes ₹52 Crore Addition

The appeal had been filed with a delay of 108 days, which the Tribunal condoned after being satisfied that the delay was bona fide and supported by medical records. Thereafter, the matter was taken up on merits. The reasons recorded by the Assessing Officer (AO) for reopening were based on Annual Information Return (AIR) data showing that the assessee had purchased immovable property worth ₹63,00,000 on 1 February 2008 and that no return of income had been filed for AY 2008–09. Based on this assumption, the AO initiated reopening and issued notice under Section 148.

However, the assessee demonstrated that he had duly filed his return for the relevant assessment year on 26 December 2008, declaring taxable income of ₹3,88,845. This acknowledgement of filing formed part of the paper book before the ITAT. The Tribunal noted a crucial inconsistency—while the reasons recorded for reopening stated that no return had been filed, the reassessment order itself recorded that the assessee had indeed filed his return on 26 December 2008. The Tribunal held that such a contradiction in the foundational facts rendered the reopening invalid, as the statutory “reason to believe” must be based on true and correct facts and cannot later be amended or corrected.

Also Read: Incorrect Computation Of Deduction U/s 54F Not Misrepresentation Or Suppression Of Facts: ITAT Ahmedabad

The Department argued that the assessee had not disclosed his PAN at the time of the property purchase and that notices issued under Section 148 were returned unserved due to change of address. It was further submitted that an Inspector contacted the assessee telephonically and asked for his updated address, but the assessee discontinued the call without sharing the details. According to the Department, the AO was therefore compelled to complete reassessment ex parte under Section 144 read with Section 147. The Tribunal held, however, that once the foundational presumption—that the assessee had not filed his return—was factually incorrect, subsequent arguments relating to service of notice or conduct of the assessee in the reopening proceedings were irrelevant.

Also Read: Only Government Service Eligible For Full Leave Encashment Exemption; Chandigarh ITAT Grants Partial Relief To PSPCL Employee

The Tribunal observed that the reasons recorded under Section 148 form the “soul” of reassessment proceedings and cannot be altered, supplemented, or validated later on the basis of subsequently available information. Since the reopening was based on a wrong assumption of fact, the approval and proceedings arising therefrom stood vitiated. The Tribunal therefore found that the assessment order passed under Section 144 read with Section 147 had no legal standing. In conclusion, the ITAT allowed the assessee’s appeal and quashed both the reassessment and the rectification proceedings, granting complete relief to the taxpayer.

Appearance

Counsel For  Appellant: Sahil Sharma & Sanjay Parashar Advocates

Counsel For Respondent: Harpreet Kaur Hansra, Sr. DR

Cause Title: Dinesh Babu Saxena Versus ITO

Case No: ITA No.3874/DEL/2025

Coram: Vikas Awasthy (Judicial Member), Avdhesh Kumar Mishra (Accountant Member)