Reassessment Quashed by Bangalore ITAT: AO's Failure to Pass Speaking Order on Objections Invalidates ₹1.67 Crore Addition Under Section 68
Overview of the Decision
The Bangalore bench of the Income Tax Appellate Tribunal rendered a significant ruling in the matter of Nisha Dudheria Vs ITO (ITAT Bangalore), concerning Assessment Year 2015-16. The Tribunal set aside reassessment proceedings that had culminated in an addition of ₹1.67 crore under Section 68 of the Income Tax Act, 1961. The core basis for this outcome was the Assessing Officer's failure to dispose of the assessee's objections to reopening through a dedicated speaking order — a step that has been declared mandatory under the procedure established by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO reported at (2003) 259 ITR 19 (SC).
The Tribunal also reversed the order of the National Faceless Appeal Centre, Delhi (CIT(A)) dated 04.02.2025, which had upheld both the validity of the reassessment and the addition on merits.
Background: Who Is the Assessee and What Was Assessed?
The assessee, Ms. Nisha Dudheria, is an individual deriving income from salary and business operations. For Assessment Year 2015-16, she filed her return of income on 31.08.2015, declaring a total income of ₹19,91,870. This return was processed under Section 143(1) of the Income Tax Act, 1961 without any scrutiny assessment being undertaken at that stage.
The case was subsequently flagged by the Investigation Wing, which shared information with the Assessing Officer suggesting that the assessee had earned long-term capital gains from transactions in shares of certain companies. Acting on this intelligence, the Assessing Officer issued a notice under Section 148 of the Income Tax Act, 1961 on 31.03.2018, thereby initiating proceedings for reopening of the assessment.
Sequence of Events Leading to Reassessment
The procedural chronology in this matter is critical to understanding why the Tribunal intervened:
- 31.08.2015 — Assessee files original return of income declaring total income of ₹19,91,870; processed under
Section 143(1). - 31.03.2018 — Notice under
Section 148issued by the Assessing Officer based on Investigation Wing report. - 20.04.2018 — Assessee, by letter, requests that the originally filed return be treated as the return submitted in response to the
Section 148notice. - 07.05.2018 — Assessee formally requests the recorded reasons for reopening.
- 08.05.2018 — Reasons for reopening supplied to the assessee.
- 09.05.2018 — Notice under
Section 143(2)issued to the assessee. - 12.12.2018 — Notice under
Section 142(1)issued. - 21.12.2018 — Assessee submits a detailed letter raising two important points: (a) the profit from the relevant share transactions was approximately ₹1.67 crore, not ₹1.34 crore as reflected in the recorded reasons; and (b) formal objections to the validity of the reopening proceedings.
- 28.12.2018 — Assessing Officer passes the reassessment order under
Section 143(3)read withSection 147, determining total income at ₹1,87,46,474 as against the returned income of ₹19,91,872, and making an addition of ₹1.67 crore underSection 68.
A Notable Factual Point: The Assessee Corrected Her Own Figure
An unusual aspect of this case is that the assessee herself, in her letter dated 21.12.2018, pointed out that the figure of ₹1.34 crore mentioned in the reasons recorded for reopening was understated. She clarified that the actual profit from the share transactions was ₹1.67 crore. This correction, however, was made within the same letter in which she also raised her objections to the reopening. The Assessing Officer, instead of first disposing of those objections through a speaking order, proceeded to frame the reassessment order just seven days later on 28.12.2018 — adopting the corrected figure of ₹1.67 crore as an addition under Section 68.