ITAT Quashes Reassessment Proceedings for Non-Furnishing of Reopening Reasons; Rs. 73 Lakh Additions Deleted

ITAT Pune quashed the entire reassessment proceedings on the grounds that the AO failed to supply the recorded reopening reasons despite a special request. Accordingly, deleted Rs. 73 lakh additions made by the Assessing Officer (AO) and allowed the assessee’s appeal in full.

Suresh Vitthalrao Barge has filed the current appeal in ITAT Pune, challenging an order dated March 18, 2025, passed by the CIT(A)/NFAC Delhi under section 250 of the Income Tax Act, 1961. The case is related to the Assessment Year 2015-16.

Initially, the assessee filed its income tax return, declaring total income at Rs. 5.61 lakh. Later, the Assessing Officer (AO) reopened the case of the assessee, raising allegations of income evasion. In conclusion to the reassessment proceedings, the AO made additions of Rs. 47.74 lakh under section 69 and Rs. 25.25 lakh on grounds of difference in stamp duty value, completed the reassessment, and declared the total income of the assessee at Rs. 78.60 lakh. The aggrieved assessee challenged these additions and the validity of the reassessment before the CIT(A)/NFAC Delhi.

The assessee raised the key argument that, despite making a specific request, the AO failed to provide recorded reasons for reopening the assessment. When the CIT(A) analysed the facts of the case, it resulted in confirming the addition of Rs 25,25,041, holding the provisions of section 56(2)(viib) applicable to stock in trade. Further confirmed the addition of Rs 47,74,213 under the head income from other sources, holding that the appellant is not carrying on a business of plotting and advances from prospective buyers are not covered under section 44AD of the IT Act, 1961.

The assessee, not satisfied with the ruling of the CIT(A), thereafter filed an appeal before the ITAT Pune. The tribunal noted that providing reasons for reopening is mandatory and is a jurisdictional requirement. Citing an earlier Bombay High Court judgment in Trend Electronics’s case, the tribunal held that failure to furnish the recorded reasons, despite a specific request, makes the entire reassessment proceedings invalid as per the law. Since the AO did not comply with the requirement, the tribunal quashed the entire reassessment proceedings. Accordingly, all the additions made by the AO were deleted. As a result, the appeal of the assessee was allowed.