ITAT Rajkot quashes reassessment for invalid mechanical sanction under Section 148

1. Background and appeal structure

The Rajkot Bench of the Income Tax Appellate Tribunal dealt with four connected appeals filed by the same assessee, Vidhi Build Corn, for Assessment Years 2019-20 to 2022-23. Each appeal arose from separate orders passed under Section 250 of the Income Tax Act 1961 by the National Faceless Appeal Centre (NFAC), Delhi / Commissioner of Income Tax (Appeals).

Those appellate orders, in turn, stemmed from reassessment orders framed under Section 143(3) read with Section 147 by the Assessing Officer (AO).

As the factual matrix and legal issues across all four years were essentially identical, the Tribunal:

  • Clubbed all four appeals,
  • Heard them together, and
  • Disposed them off through a consolidated order.

For convenience, the Tribunal treated ITA No. 575/Rjt/2025 (A.Y. 2019-20) as the lead case, and the facts and grounds in that appeal were used as the basis for deciding all appeals en masse.

2. Grounds of appeal before the Tribunal

In the lead appeal for A.Y. 2019-20, the assessee raised several grounds, which were similarly worded for the other years. In substance, the assessee challenged:

  1. Jurisdictional validity of the notice issued under Section 148 and the consequent reassessment under Section 147.
  2. Denial of cross-examination of individuals belonging to the searched group whose material was relied upon.
  3. Addition of alleged on-money cash receipts of Rs. 40,00,000/- as unexplained income in the hands of the assessee.
  4. Without prejudice, the estimation of profit at 12.5% (Rs. 14,00,000/-) as arbitrary and excessive.
  5. A general right to add, modify, or withdraw grounds before conclusion of the appeal.

Ultimately, the Tribunal found it sufficient to adjudicate only the first ground relating to the validity of reopening under Section 148, rendering the remaining grounds academic.

3. Delay in filing appeals and condonation

At the outset of hearing, the assessee’s counsel informed the Tribunal that all four appeals had been filed with a delay of 231 days and were thus barred by limitation to that extent.

  • The assessee moved separate condonation petitions in each appeal, supported by affidavits, setting out reasons for the delay.
  • The key reasons advanced were:
    • Lapse and mistake on part of the erstwhile advocate dealing with the matter, and
    • Personal preoccupation of the assessee due to a family marriage, leading to a lapse in diligently pursuing the appellate remedy.

The Departmental Representative (DR) opposed condonation and sought dismissal of the appeals purely on limitation.

After examining the affidavits and hearing both sides, the Tribunal recorded that:

  • The explanation revealed mitigating circumstances,
  • There existed sufficient cause for not filing the appeals within the statutory time, and
  • The assessee should not suffer for professional error or personal circumstances beyond reasonable control.

Tribunal’s view on limitation:
The delay of 231 days in all four appeals was condoned, and the appeals were admitted for adjudication on merits.

4. Brief facts of the case and basis of reassessment

4.1 Assessee’s business and original return

The assessee is a partnership firm engaged in civil construction contracts. For A.Y. 2019-20, the assessee filed its return of income on 30.07.2019, declaring a total income of Rs. 33,74,948/-. The assessee maintained regular books of account, which were statutorily audited.

4.2 Search action on third party and seized material

A Search, Seizure and Survey operation under the Income Tax provisions was conducted by the office of the DDIT (Inv.), Unit-1, Rajkot on 24.08.2021 in cases of leading real estate developers of Rajkot and associated persons. Four groups were covered: