Santosh Khunteta v. ITO

Case snapshot

Sections / provisions: 147; 148

Questions before the Court / Tribunal

• AO did not possess investigation information when section 148 notice was issued: The reported Tribunal ruling quashes reassessment where the sole information relied upon was not actually in the Assessing Officer's possession on the date the notice was issued, undermining the formation of the requisite belief.

Material facts and background

Brief facts of the case are that, the assessee is a medical

practitioner, filed his return for Assessment Year 2010-11 declaring an income of Rs. 5,46,080/-. The case was reopened u/s 147 of the Income Tax Act, 1961 (‘Act’ for short) and the A.O. vide assessment order dated 29/12/2017 made addition of Rs. 8,15,000/- u/s 56 which was routed through the Demat accounts and then claimed as Long Term Capital Gain, addition of Rs. 22,38,000/- made u/s 56 of the Act as the same was unexplained, further made addition of Rs. 20,70,000/- u/s 56 of the Act as income from other sources not disclosed to the Department.

dated 29/12/2017, the assessee preferred an Appeal before the

ITA No. 3139/Del/2023 Santosh Khunteta Vs. ITO

CIT(A). The Ld. CIT(A) vide order dated 11/09/2023, sustained the additions of Rs. 8,15,000/- made by the A.O. as undisclosed income u/s 56 of the Act on the ground that the sale proceeds of equity shares are unexplained. Further, upheld the addition of Rs. 22,38,000/- made u/s 56 of the Act and also confirmed the addition of Rs. 20,70,000/- made as undisclosed income u/s 56 of the Act. Aggrieved by the order of the CIT(A) dated 11/09/2023, the assessee preferred the present Appeal on the grounds mentioned above. 4.

The Ground No. 1 is regarding the legal/technical issue of

defective notice issued u/s 148 of the Act. The Ld. Counsel for the assessee submitted that the issuance of notice u/s 148 of the Act dated 29/03/2017 by the A.O. without having any information, material or evidence in his possession so as to reason to believe that any income of the assessee for the Assessment Year 2010-11 had escaped assessment, so as to reopen the case of the assessee. The Ld. Counsel drawn our attention to the notice dated 29/03/2017 and also Reasons for reopening of the assessment wherein the A.O. received the information only on 30/03/2017, i.e. subsequent to the issuance of notice u/s 148 of the Act.

Appellant / assessee submissions

defective notice issued u/s 148 of the Act. The Ld. Counsel for the assessee submitted that the issuance of notice u/s 148 of the Act dated 29/03/2017 by the A.O. without having any information, material or evidence in his possession so as to reason to believe that any income of the assessee for the Assessment Year 2010-11 had escaped assessment, so as to reopen the case of the assessee. The Ld. Counsel drawn our attention to the notice dated 29/03/2017 and also Reasons for reopening of the assessment wherein the A.O. received the information only on 30/03/2017, i.e. subsequent to the issuance of notice u/s 148 of the Act.

Ld. Counsel for the Assessee submitted that A.O. as on the date of issuing the notice dated 29/03/2017 had no information or material in his possession to reason to believe that any income of the Assessee for the year under consideration had escaped assessment. The assessment u/s 147 of the Act for reopening of the assessment or reassessing the income can be exercised by the A.O. only on the information of a reason to believe that any income of the assessee has escaped assessment and in the absence of formation of such reason to believe by the A.O, provisions of Section 147 cannot be invoked.

Revenue / respondent submissions

Per contra, the Ld. Departmental Representative submitted

said contention of the Ld. Departmental Representative cannot be accepted as even the e-mail sent on 31st March, 2017 was having an attachment that of the very same notice dated ‘29/03/2017’ which can be corroborated from the screen shot of the e-mail produced by the downloaded

Court / Tribunal analysis and reasoning

that the notice dated 31st March, 2010 has been issued u/s 148 of the Act by rectifying the mistakes in issuing the notice dated 29/03/2010 and the subsequent notice dated 31/03/2010 was issued well within the limitation and mere by issuing the second notice, no prejudice was caused to the assessee and mistake or the error mentioning the date in the earlier notice was a technical defect, which has been corrected. Further submitted that it is not the case of the assessee that no notice was served and the assessee has availed the opportunity of being heard during the course of the assessment proceedings and the assessment order has been passed after hearing the assessee, therefore, the Ground No. 1 of the assessee deserves to be dismissed. 6.

Act dated 29/03/2017, the Ld. A.O. was not having any information, material or evidence in his possession so as to form a Reason to Believe that any income of the assessee for the year under consideration had escaped assessment. It is the case of the Department that there was mistake in mentioning the date as ‘29/03/2017’ in the notice issued u/s 148 of the Act, therefore, by rectifying the said error another notice was issued again on 31st March, 2017 replacing the notice that suffered from defect.

Operative decision and relief

Since we have allowed the Ground No. 1 and set aside the assessment order and the order of the Ld. CIT(A) other Grounds raised by the Assessee are not adjudicated. 8.

Order pronounced in open Court on Sd/(S. RIFAUR RAHMAN) ACCOUNTANT MEMBER Dated: 13/06/2024 R.N, Sr.ps

Authorities and precedents appearing in the judgment

• Johri Lal (HUF) vs. CIT
• Sheo Nath Singh vs. AAC
• Ganga Saran & Sons (P) Ltd. vs. ITO
• ITO vs. Lakhmani Mewal Das
• CIT vs Insecticides India Ltd 357 ITR 330
• CIT vs SFIL Stock Broking Ltd 325 ITR 285
• Sarthak Securities Co. (P).Ltd vs ITO
• PCIT vs RMG Poly Vinyl (1) Ltd Delhi High Court
• Oriental Insurance Company Limited v. Commissioner of Income Tax

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on AO did not possess investigation information when section 148 notice was issued. The operative result is classified as Quashed Or Set Aside. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with AO did not possess investigation information when section 148 notice was issued. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Reconstruct the reassessment timeline: original assessment, section 148A notice/reply, approval authority, notice date and the applicable section 149 limitation window.
• Preserve the complete response to section 148A(b), objections and proof of disposal; jurisdictional defects are often decided from the documentary chronology.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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