Sanjay Singh vs ITO

PER MANISH AGARWAL, AM :

The present appeal is filed by the assessee against the order dated 22.10.2025 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2013-14/10261146 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 30.05.2023 passed u/s 147 r.w.s. 144B of the Act pertaining to Assessment Year 2014-15.

Brief facts of the case are that assessee is an individual, filed his return of income on 27.08.2022, declaring total income of INR 1,11,94,490/-. The case was selected for scrutiny and the assessment order was passed u/s 143(3) of the Act dated 21.12.2016 wherein an addition of INR 1,00,89,598/- was made by disallowing the loss on trading of agricultural commodities treated by the assessee as business loss. Accordingly, the total income of the assessee was assessed at INR 2,12,84,080/-.

Against the said order, assessee has settled the dispute under Vivad Se Vishwas Scheme, 2020 in terms of Form No. 5 issued by Ld. PCIT-10, Delhi dated 05.04.2021. Thereafter, the case of the assessee was re-opened and notice u/s 148 of the Act was issued on 06.04.2021 and in terms of order of Hon’ble Supreme Court in the case of Union of India & Ors. Vs Ashish Agarwal in Civil Appeal No.3005/2022 where said notices were treated as the information u/s 148A(b) of the Act, the assessee was asked to file the necessary reply. After considering the reply filed by the assessee, the order passed u/s 148A(d) of the Act was passed on 23.07.2022 and notice u/s 148 was issued on the same day after obtaining approval from Ld. PCCIT. In response to the notice, the assessee has filed return of income on 27.08.2022 disclosing the total income at INR 1,11,94,490/- as was declared in the return of income filed u/s 139(1) of the Act. Thereafter the AO has passed the re-assessment order wherein the AO hold that assessee has obtained fictitious loss by trading in illiquid stocks and disallowed the loss claimed at INR 3,46,59,858/-. The AO further made addition of INR 5,80,383/- by holding that the assessee has paid commission @ 2% for obtaining bogus loss from trading in illiquid stocks. It is relevant to state here that out of addition of INR 3,46,59,858/- made by the AO, an addition of INR 1,00,89,598/- on account of loss from trading in agricultural commodities was already disallowed by the AO in the order passed u/s 143(3) of the Act and said dispute was already settled under Vivad se Vishwas Scheme, 2020.

Aggrieved by the said order, the assessee filed appeal before Ld. CIT(A) who decided the appeal of the assessee ex-parte due to non-prosecution on the part of the assessee though the Ld. CIT(A) has also decided the Grounds of appeal taken by the assessee on merits.

Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

During the course of hearing, Ld.AR for the assessee submits that though the order was passed by Ld. CIT(A) ex-parte however, he pressed Ground of appeal No.2 which is a legal ground of appeal taken wherein the assessee has challenged the assumption of jurisdiction by the AO without issuing of notice u/s 143(2) of the Act when return of income was filed by the assessee in response to notice u/s 148 of the Act. Before us, Ld. AR submits that in response to notice u/s 148 dated 23.07.2022, the assessee has filed the return of income on 27.08.2022 which has been taken on record by the AO as could be seen from the observations made by the AO in para 3 at page 3 of the assessment order. Ld. AR submits that after filing the return of income, AO has not issued any notice u/s 143(2) and from time to time, had issued notices u/s 142(1) of the Act. In support of this contention, assessee has produced the e-assessment proceedings as per e-filing portal which is placed at pages 36 to 45 of the Paper Book. Ld.AR submits that the return of income filed by the assessee in response to notice issued u/s 148 has never been rejected and was successfully uploaded and e-verified. Therefore, it cannot be said that said return was invalid return of income. Ld.AR further drew our attention to the assessment order where while computing the income of the assessee, the AO has started the computation by taking income as per the order passed u/s 143(3) of the Act at INR 2,12,84,080/- which includes the income declared by the assessee of IR 1,11,94,490/- in the return of income filed. He further submits that Ld. CIT(A) in para 3 at page 31 of the order, wrongly observed that the assessee of income filed in response to the notice issued u/s 148 was after the stipulated period of 30 days and therefore, the same is invalid return of income. Ld.AR submits that AO nowhere in the assessment order shas treated the return of income filed in response to notice u/s 148 of the Act as invalid and therefore, such observations of Ld. CIT(A) deserve to be excluded and submits that once the order is passed without issue of notice u/s 143(2), the consequent proceeding deserves to be bad in law. For this, he placed reliance on the judgment of CIT vs Laxman Das Khandelwal reported in [2019] 417 ITR 325 (SC) and following various cases reproduced as under:-

On the other hand, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that Ld. CIT(A) has observed that the assessee has filed the return of income in response to notice issued u/s 148 belatedly and the same return was treated as nonest therefore, there was no requirement to issue notice u/s 143(2) of the Act and he therefore, submits that AO has rightly passed the order by not accepting the return of income filed by the assessee as a valid return. He thus request to confirm the re-assessment proceedings so completed.

Heard the contentions of both parties at length and perused the material available on record. In the instant case, it is an undisputed fact that the assessee has filed the return of income in response to notice u/s 148 on 27.08.2022, declaring total income at INR 1,11,94,490/-. From the perusal of e-assessment proceedings as per ITBA Portal, the assessee has filed the copy of ITR at page 44 where return of income so filed was successfully e-verified and was treated as a valid return by the Revenue. This could be verified from the relevant screenshot which is reproduced as under:-

It is further observed that the AO has taken note of this return in para 3 at page 3 of the assessment order and nowhere in the assessment order, the AO has held the said return as nonest being filed beyond the stipulated time period. The duty of the AO is that in case he is not accepting the return filed by the assessee in response to notice issued u/s 148 for any reason, he should record his finding in assessment order and in absence of such findings, it has to be presumed that the return filed by the assessee was accepted and taken due cognizance. Ld. CIT(A) has observed that return was invalid being filed beyond the stipulated time period cannot be accepted as the issue raised by the assessee for non-issuance of notice u/s 143(2) is fatal and has to be seen from the order of the AO. As observed above, AO has not treated the return of income as invalid therefore, it is the duty of the AO to issue notice u/s 143(2) before assuming jurisdiction to complete the re-assessment proceedings. As could be observed from the facts and circumstances of the case and copy of e-filing proceedings taken from e-filing portal by the assessee and placed at pages 36 to 45 of PB, no such notice u/s 143(2) was ever issued by the AO therefore, the consequent reassessment proceedings completed are not valid.

The Hon’ble Supreme Court in the case of CIT vs Laxman Das Khandelwal (supra) which further supported by the judgement of Hon’ble Supreme Court in the case of ACIT & Anr. vs M/s. Hotel Blue Moon reported in [2010] 321 ITR 362 (SC) has held that notice us 143(2) is mandatorily required when the assessee has filed the return of income. Further, the Hon’ble Jurisdictional High Court in the case of PCIT vs Shri Shiv Shankar Traders Pvt. Ltd. reported in [2016] 383 ITR 448 (Del.) has held that where the assessee has filed the return of income at the fag-end of the proceedings even then the AO is duty bound to issue notice u/s 143(2) of the Act before completing the assessment proceedings.

In view of the above facts and circumstances and by respectfully following the judgements of Hon’ble Supreme Court and Hon’ble High Court (supra), we hold that AO has failed to assume the jurisdiction by issue of notice u/s 143(2) of the Act and therefore, consequent re-assessment order passed is bad in law and is thus quashed. Ground of appeal No. 2 raised by the assessee is allowed.

The other Grounds of appeal taken by the assessee became academic hence, not adjudicated.

In the result, the appeal of the assessee is allowed.