ITAT Mumbai Affirms Best-Judgment Reassessment Despite Same-Day Filing of Return

Overview of the Dispute

The Income Tax Appellate Tribunal, Mumbai Bench “C”, in the case of Pallavi Kamal Shah Vs ITO (ITA No. 6317/Mum/2024, A.Y. 2013-14), examined whether a reassessment framed under Section 144 r.w.s. Section 147 could be invalidated solely because the assessee filed her return of income on the very same date on which the reassessment order was passed.

The assessee argued multiple legal grounds against the reassessment, including:

  • Alleged lack of jurisdiction in view of the faceless assessment scheme under Section 144B
  • Non-issuance of mandatory notice under Section 143(2)
  • Failure to pass a draft assessment order under Section 144B(1)(xiv)
  • Violation of principles of natural justice and denial of effective opportunity
  • Incorrect addition of the entire share transaction value of ₹4.48 crore as undisclosed income u/s Section 69A

The Tribunal, however, upheld the validity of the reassessment and dismissed the appeal.

Factual Matrix

Trigger for Reopening

  1. The assessee, an individual, had not filed any return of income originally for A.Y. 2013-14.
  2. The Assessing Officer (AO) received information that the assessee had engaged in share transactions aggregating to ₹4.48 crore.
  3. On the basis of this information, the AO formed a belief that income chargeable to tax had escaped assessment and accordingly:
    • Recorded reasons for reopening, and
    • Issued notice under Section 148 dated 18.02.2020.

Non-Compliance and Best-Judgment Assessment

  • According to the AO, no response was received to the Section 148 notice.
  • The AO issued a final show cause under Section 142(1) dated 17.09.2021, granting a last opportunity and clearly intimating that if the assessee failed to comply, assessment would be completed under Section 144.
  • The AO noted that no required details were submitted within the stipulated time and, therefore, proceeded to:
    • Complete the reassessment under Section 144 r.w.s. Section 147 on 24.09.2021, and
    • Treat the entire amount of ₹4.48 crore as unexplained share trading receipts, making an addition under Section 69A.
  • Simultaneously, the AO initiated:
    • Penalty proceedings under Section 271F for failure to file return,
    • Penalty under Section 271(1)(c) for concealment of income, and
    • Penalty under Section 271(1)(b) for non-compliance with statutory notices.

Filing of Return on the Date of Assessment

The assessee eventually filed:

  • Return of income for A.Y. 2013-14 on 24.09.2021,
  • Along with certain details online on the same date.

Thus, the filing of return and passing of the assessment order both took place on 24.09.2021. This timing was central to the dispute regarding the requirement of notice under Section 143(2).

Proceedings Before the CIT(A) / NFAC

Grounds Initially Raised

The assessee challenged the assessment before the ld. CIT(A) / NFAC mainly on:

  • Merits of the addition of ₹4.48 crore
  • Non-consideration of her return and supporting documents
  • Alleged lack of sufficient opportunity

Subsequently, she raised additional/revised legal grounds, including:

  • The reassessment order was passed without jurisdiction by the Jurisdictional Assessing Officer (JAO) instead of by the faceless unit, contrary to Section 144B.
  • Non-passing of a draft order as mandated under Section 144B(1)(xiv).
  • Assessment under Section 144 was invalid as the necessary preconditions were not satisfied.

Assessee’s Explanation Before CIT(A)