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Judgment
PER ANUBHAV SHARMA, JM:
This appeal preferred by the assessee against the order dated 09.06.2025 of Ld. National Faceless Appeal Centre (NFAC) (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN & Order No : ITBA/NFAC/S/250/2025-26/1076810285(1)arising out of the assessment order dated 26.12.2019 u/s 147/143 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ITO, Ward 47(3) New Delhifor AY: 2012-13.
The Appellant is an individual. The AO had received information that the appellant has made a payment for purchase of property during the period 01.04.2011 to 31.03.2012. The AO initiated proceedings u/s 147 of the Act and issued notice u/s 148 of the Act on 30.03.2019. In response to the said notice, the appellant has filed return of income for A.Y.2012-13 on 29.04.2019 declaring total income of Rs.8,07,790/-. The AO passed order u/s 143(3)/147 of the Act on 26.12.2019 determining total assessed income at Rs.2,08,07,790/-. The AO made addition of Rs.2,00,00,000/- on account of un-explained money.
Being aggrieved by the above addition, the appellant is in appeal against the said order under section 143(3) r.w.s 147 of the IT Act, 1961.
At the time of argument ld. Counsel primarily stressed on the disposal of the ground No. 1 by which the reopening itself stand challenged on the basis that without there being verifiable information and without disposing of the objections of the assessee reopening stand initiated and concluded.
The Ld. DR has however opposed the same and submitted that in the reasons of reopening, necessary facts have been incorporated and it was assessee’s own admission which became foundation for reopening. As with regard to this aspect we find that in para 6, while dealing with ground No. 1 ld. CIT(A) has observed as follows:
“1.GROUND No.1:- In law, facts and in the circumstances of the case the learned Assessing Officer erred in initiating proceedings under sec 147 148 of the Income Tax Act to do a reassessment without verification in the original stages and sharing complete information or even without disposing off the assesses objections to the reopening.
1.1I have carefully considered the facts of the case, the assessment order and the submissions of the appellant. In the appellant's case the belief formed by AO and reasons recorded are not vague, it is bonafide and based on specific information.The reassessment can be initiated only when the Assessing Officer has "reason to believe" that "income chargeable to tax has escaped assessment" for relevant assessment year. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded reason.
There should be a link between the reasons and the evidence/material available with the Assessing Officer. The 'reason to believe' would plainly mean basic cause or justification for the Assessing Officer to initiate proceedings. The Assessing officer may, on the basis of 'information' received from external sources, form the belief of escapement. Therefore, it is held that the reasons recorded by the AO have a live link and close nexus to the determination of assessable income and income that has escaped assessment. Therefore, this argument that there exists no reason to initiate reassessment proceedings is misplaced and hence dismissed.”
As we go through the copy of reasons for reopening provided at page 18-19 of the paper book, we find that the ld. AO merely mentions that department having information from ITD system that assessee made cash payment of Rs.2 crores for purchase of property. However, any further detail, what o ever, with regard to said transaction was not available.
It is alleged that 2 crores were paid for purchase of property from Rajesh Malhotra. Now, when we go through the facts we find that in fact one FIR No. 0461 dated 25.08.2016 was registered at PS Kotwali, Delhi North, by the assessee against claim Rajesh Malhotra and Shri Surende Sarren, that these two persons were property dealer and have been cheated him. A copy of this FIR is available at page No. 22-23 of the paper book and same when perused shows that allegation is that around 3 years back Rajesh Malhotra had defrauded the assessee by asking for money to be invested in the property and thereafter money was not returned and when assessee asked for money he was threatened and also some forged documents were prepared. If this FIR was relied for considering the alleged transaction of purchase of property from Rajesh Malhotra, as mentioned, in the reopening alleged payment is not of relevant Assessment Year 2012-13 in FIR as it is mentioned that some payments were made 3 years back.
Then, there is no specific admission of any payment of Rs.2 crores being made and there is no indication of specific property being sought to be purchased.
As from the material on record we find the order of Hon’ble Delhi High Court, available at page 28-29 of the paper book, which shows that this FIR No. 461/2016 PS Kotwali North Delhi stand quashed on the basis of settlement arrived between the assessee and the alleged accused Rajesh Malhotra and another, wherein memorandum of understanding dated 19.09.2017 was reached and Rs.10,00,000/- were received by the assessee in the full and final settlement of his claim.
This certainly indicates that the question of investment of Rs.2 crores, had no substratum, as recorded in the reasons and otherwise too, we are of the considered view that when the source of information was FIR, then without any verification, in any form from the investigating agency, the same cannot form basis to draw a live link for the purpose of assumption of jurisdiction for the purpose of Section 147/148 of the Act.
Further, ld. Counsel has drawn our attention to the issue of non-disposal of the objections raised by the assessee to the reopening of the case before concluding the assessment and in this regard certainly in the assessment order there is no mention of the disposal of objections filed by the assessee for its disposal.
In this regard, ld. DR has submitted that even though if that is the case, matter can be restored to ld. AO to give fresh opportunity. We find that Hon’ble Supreme Court in the case of G.K.N Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR 19 (SC) has held as follows:
“…………………...we clarify that when a notice under Section 148 of the Incometax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years.”
Further, following G.K.N Driveshafts (India) Ltd (supra) directions of Hon’ble Supreme Court, the Hon’ble Delhi High Court in the case of PCIT Vs. Tupperware India Pvt. Ltd. 284 CTR 68 has quashed the assessment in a case where the assessment was passed without clearing the objection of the assessee. This is what the Hon’ble Court observed in Tupperware India Pvt. Ltd. (supra) in para 6 of the judgment, the relevant part of judgment is as follows:
“…………The Court is of the considered view that after having correctly understood the decision of the Supreme Court in G.K.N. Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections of the reopening order with a speaking order, the CIT(A) committed an error in not quashing the reopening order and the consequent assessment.”
Similarly, the Coordinate Bench in the case of M/s Meramandali Finvest Vs. ITO vide ITA No. 7258/Del/2025 order dated 09.07.2026 has quashed the assessment with following relevant findings:
10.From the aforesaid remand report, we find that the Id. Assessing Officer holds that considering the assessee’s objections, in the body of assessment order, is sufficient compliance of the Supreme Court laid law and there is no requirement of separate distinct order for disposing of objections. We are of the considered view that the stand of the ld AO is contrary to the law laid down on this subject. It is now settled law by a series of judicial precedents that the failure of the Assessing Officer to dispose of objections filed by the assessee against the reopening notice by passing a speaking order, becomes fatal to the assumption of jurisdiction under Section 147 and renders any reassessment order passed thereafter null and void. The Hon’ble Delhi High Court in Pr. CIT v. Tupperware India (P) Ltd. [(284 CTR 68)] and Samsung India Electronics Pvt. Ltd. v. DCIT [(362 ITR 460)] has reiterated that non-compliance with the mandatory procedure laid down in GKN Driveshafts renders the entire reassessment processinvalid. The Hon’ble Delhi High Court in Pr. CIT v. Tupperware India (P) Ltd had held as follows:
“The CIT (A) accordingly held that by stating that no objections had been filed, the AO had "very conveniently disregarded the guidelines" laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963. The CIT (A), therefore, agreed with the Assessee that since the procedure laid down by the SC in the aforementioned decision was mandatory, the AO had in fact not disposed of the objections by a speaking order. Nevertheless, the CIT (A) held that the said defect "does not make the assessment order illegal and hence it cannot be quashed. It is a technical mistake which is curable."
6.The Court is of the considered view that after having correctly understood the decision of the Supreme Court in GKN Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment.” The above view has been reiterated by various other High Courts such as Mphasis Ltd v ACIT, [(2019) 104 taxman.com 62 (Karnataka)], Deepak Extensions (P) Ltd v DCIT [(2017) 80 taxmann.com 77 (Karnataka), Allana Cold Storage Ltd. v. ITO [(287 ITR 1) (Bom)], CIT v. Trend Electronics [(379 ITR 456) (Bom)] and General Motors India v. DCIT [(257 CTR 123)(Guj)],
11.From the order of the CIT(A), we note that the CIT(A) dismissed this ground of assessee on the pretext that the assessee could not file the copy of objection before the CIT(A). We find that the CIT(A) has ignored the explicit comment of the AO in the remand report, as noted above, wherein the AO had commented on the disposal of the objections. The CIT(A) also conveniently ignored the assessee’s requestthat CIT(A) may obtain the objections from the AO which he could easily have obtained from the AO. In such facts and circumstances, the only inference we can draw from the remand report of the AO is that assessee had filed an objection before the AO against the issuance of notice u/s 148 which remained undisposed off as mandated by law. As such therefore, the ld. AO has committed a fatal legal and procedural error in as much as the reassessment was framed without disposing of the objections, as per law and as also affirmed by various judicial authorities. In view of the discussion as above, it is held that in the instant case wherein the objections filed on behalf of the assessee to the issue of notice u/s 148 were not disposed off vide a distinct and separate order, the issue of notice u/s 148 of the Act and the consequent reassessment framed u/s 143(3)/147 is bad in law, void-ab-initio and unsustainable in law. Ground 4 is allowed.”
In the light of aforesaid discussion we are of the considered view that there was fatal error on the part of the AO in not taking into consideration objection or disposing them off by speaking order to be communicated to the assessee in some form. Thus, the consequent proceedings and the assessment order get vitiated.
In the light of aforesaid we are inclined to hold that assumption of jurisdiction was vitiated on the basis of reasons lacking live link and so also the non disposal of objection of assessee also made the impugned reassessment proceedings and consequent assessment order not sustainable in law. Thus Ground No. 1 is sustained. The appeal of the assessee is allowed. Impugned assessment order is quashed.