The Tribunal’s ruling addressed the primary ground of appeal regarding the legality of the re-opening, effectively favoring the assessee

The Delhi Bench of Income Tax Appellate Tribunal( ITAT ) quashed a reassessment order under Section 147 of the Income Tax Act,1961 ruling that the Assessing Officer ( AO ) cannot issue a reassessment notice while the original return is still pending. Rajesh Kumar,  appellant-assessee,the revenue-respondent filed  an appeal challenging the order passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the assessment year (AY) 2018-19, dated 31.10.2022. Get a Copy of Income Tax Act, Click here The revenue raised several grounds in its appeal, challenging the assessment proceedings on various legal and procedural bases. It argued that the initiation of proceedings under Section 147 of the act was unjustified since the original return filed under Section 139(1) had not been processed, and contended that a notice under Section 148 cannot be issued without disposing of the original return. Additionally, the revenue claimed that the AO violated the principles of natural justice by completing the assessment without providing the assessee a proper opportunity to present its case, noting that the deadline for submission fell on a Sunday,22nd December 2019, after which the portal was closed. The AO’s disallowance of Rs.4,55,92,801 as 50% of “mitti” expenses, along with the addition of Rs.3,40,55,423 out of sundry creditors, was deemed adhoc and legally flawed. The Revenue also contested the AO’s treatment of an outstanding loan of Rs.40,00,000 as income under Section 41(1), and the classification of Rs.1,03,80,925 of mitti expenses as bogus, arguing that party-wise details were provided. Further objections were raised against the AO’s disallowance of Rs.8,56,214 under Section 40(a)(i) and Rs.6,46,805 out of interest expenses, as well as the addition of Rs.1,32,19,450 under Section 43B towards Goods and Service Tax(GST) payable, all of which the revenue claimed were unjustified. Get a Copy of Income Tax Act, Click here Lastly, the revenue-respondent opposed the disallowance of Rs.5,67,25,700 out of total expenses, considering it based on presumptions, and highlighted the incorrect addition of the full amount of Rs.9,11,85,602 of mitti expenses to the assessed income, despite a 50% disallowance already being made. The Tribunal cited decisions in CIT vs. Ved Pal & Co. [2008] 302 ITR 328 (Del.) and Super Spinning Mills Ltd. to support its ruling. These decisions established that reassessment proceedings could not be initiated while a valid return was still pending and that no reassessment notice could be issued without a prior assessment. Consequently, as the assessment order was found to be contrary to the established principles, it was quashed. The two-member bench of Kul Bharat (Judicial Member) and Avdhesh Mishra (Accountant Member) concluded that, since the Revenue’s appeal was no longer relevant due to the ruling, it was dismissed and the grounds of appeal were left open.