Paras Polycab Pvt. Ltd. Vs ITO (ITAT Delhi)
Delhi ITAT Quashes Reassessment of ₹1.88 Crore Bogus Purchases: Reopening Beyond 4 Years Invalid When Purchases Were Fully Examined in Original Scrutiny
The Delhi ITAT quashed reassessment proceedings initiated under section 147, holding that where the assessee had fully disclosed the relevant purchase transactions and the AO had specifically examined them during the original scrutiny assessment, the same matter could not be reopened beyond four years without establishing failure by the assessee to disclose fully and truly all material facts.
The original assessment had been completed under section 143(3) after accepting the returned income. Subsequently, on information alleging that Surbhi Impex was providing accommodation entries/bogus purchase bills, the AO reopened the assessment and treated purchases of ₹1,88,48,833 as bogus, besides making a further addition of about ₹3.77 lakh towards alleged 2% commission for obtaining such accommodation entries.
However, the Tribunal found that during the original scrutiny the AO had specifically called for purchase details and the assessee had furnished complete purchase details relating to Surbhi Impex, confirmations, ledger accounts, bank statements, purchase invoices and other supporting material.
The ITAT observed that the original AO had examined the purchase details, stock registers, bank statements and balance confirmations and accepted the purchases as genuine. The subsequent reopening was based solely upon information received, without examining it in the context of material already available on record. Significantly, despite repeated requests, the recorded reasons for reopening were never supplied to the assessee.
Since reopening occurred after expiry of four years, the first proviso to the erstwhile section 147 required the AO to establish failure on the assessee’s part to disclose fully and truly all material facts. The Tribunal found precisely the opposite—the assessee had furnished “every possible detail” concerning the purchases from Surbhi Impex. Relying upon Kelvinator of India Ltd., it reiterated that a completed assessment cannot be reopened merely on a change of opinion.
Following the Supreme Court ruling in NDTV v. DCIT (424 ITR 607) and Kelvinator, the ITAT held that all material facts had already been disclosed, no new fact was brought on record, and the recorded reasons were never supplied to the assessee. Consequently, the reassessment proceedings and the resultant reassessment order were quashed in entirety. The remaining grounds became academic.
The Tribunal also separately condoned a substantial 515-day delay in filing the ITAT appeal, considering the serious illness of the company’s director and following the Supreme Court’s liberal approach in Collector, Land Acquisition v. Mst. Katiji.
Cases Discussed
- NDTV vs DCIT (SC), 424 ITR 607
- Commissioner of Income Tax v. Kelvinator of India Ltd. (Delhi HC), [(2002) 256 ITR 1]
- Collector, Land Acquisition Vs. Mst. Katiji & Ors. (SC), 167 ITR 471
- Calcutta Discount Co. Ltd. vs. Income tax Officer, Companies District I, Calcutta and Another (SC), AIR 1961 SC 372
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal is filed by assessee against the order dated 05.06.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-7/11295/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 16.12.2014 passed u/s 143(3) of the Act pertaining to Assessment Year 2012-13.
2. It is observed that the appeal was filed delayed by 515 days. Before us, an application for condonation of delay was filed by the Director of the assessee company wherein it is stated that the assessee was facing ill-health due to heart attack in 2019 and then paralysis in June 2025, the assessee could not file appeal within stipulated time limit. The appeal was decided ex-parte by ld. CIT(A). Due to these circumstances, the appeal was filed delayed before the Tribunal. The relevant contents of the application for condonation of delay are reproduced as under:-
“I, Subhash Jindal S/o Sh. Moti Ram Jindal aged 69 years R/o HN-65, Rajdhani Enclave, Pitampura, Delhi 110034, director of Paras Polycab P. Ltd, do hereby affirm on behalf of M/s Paras Polycab (P) Ltd as under:
1) That I am director of M/s Paras Polycab P. Ltd.
2) That the company, M/s Paras Polycab (P) Ltd is a regular Income Tax Assessee with PAN No. AACCP7629K and have filed its Return of Income for A.Y 2012-13 with ITO Ward 19(3), New Delhi on 28.09.2012.
3) That the Income Tax case of the Company for A.Y 2012-13 was selected for scrutiny and assessed u/s 143(3) vide order dated 16.12.2014 at returned income of Rs.3,44,770/-.
4) That the case was again reopened vide notice u/s 148 dated 31.03.2019 and the Ld.AO completed the assessment vide order dated 13.12.2019 at total Income of Rs. 1,95,70,580/- and initiated the penalty proceedings vide notice dated 21.12.2019 u/s 271(1)(c).
5) That against the assessment order the assessee company filed an appeal before the Ld. CIT(A) on 20.03.2020 and the Ld. CIT(A) passed the appellate order u/s 250 on 05.06.2024 ex party as assessee company could not respond to notices issued u/s 250 due to illness of directors.
6) That after the appellate orders the Ld.AO issued notice u/s 271(1)(c) on 07.04.2025 and thereafter penalty was imposed vide order dated 27.06.2025.
7) That the due date for filing the appeal before the Learned Commissioner of Income Tax (Appeals) was thus 26.07.2025.
8) That I was advised by my legal consultant to file an appeal before the Learned Commissioner of Income Tax Appeals for relief but the same already become barred by time limitation. Nevertheless, the he advised to file the appeal with request of condonation of delay.
9) That in this way there is a delay of 182 condonation of delay is being filed along-with an application for memorandum of appeal.
10) That delay in filing the appeal is because of mine continues ill health due to heart attack in 2019 and then paralysis in June 2025.
11) That delay in filing the appeal is because of a genuine difficulty and your good self is requested to condone the delay in filing the appeal.
12) That delay in filing of appeal is not deliberate as by delaying in filing the appeal does not stand to take any benefit.”
2.1. It is thus, requested that the delay was neither intentional nor willful and occurred due to circumstances beyond the control of the assessee and has bonafide reason thus, delay be condoned and decide the appeal on merits. Reliance was placed on the judgement of Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. Mst. Katiji & Ors. reported in 167 ITR 471 (SC).
3. Per contra, Ld. Sr. DR vehemently opposed to the request of the assessee for condonation of delay in filing the appeal by the assessee.
4. Having considered the arguments of both the parties. We find that there is a reasonable and sufficient cause with the assessee in filing the appeal delayed by 515 days as its director was seriously ill. It must be remembered that in every case of delay, there can be some lapses on the part of the litigant concerned however, that alone is not enough to turn down the plea of assessee and to shut the doors against it. When the explanation does not smack of mala fide or it is not put forth as a part of dilatory strategy, the Courts must give utmost consideration to such litigant and its right of hearing of appeal on merit ought not to be rejected. Considering the overall facts and circumstances of the case and in the larger interest of justice and by respectfully following the judgement of hon’ble Supreme court in the case of Mst. Katiji (Supra), delay in filling the appeal is hereby condoned and appeal of the assessee is taken for adjudication on merits.
5. Brief facts of the case are that assessee company has filed its return of income on 17.09.2012, declaring total income of INR 3,44,765/- which was taken up for scrutiny and after considering the submissions and details, in terms of the order passed u/s 143(3) of the Act dated 16.12.2014 income declared was accepted. Thereafter, the case of the assessee was re-opened based on the information stated to have been received that one Shri Rakesh Kumar in the name of M/s. Surbhi Impex who is also proprietor of M/s. Astha Impex and Prabhat Engineering Works, engaged in the business of providing accommodation entries of bogus bills and purchases and sales through above named firms. The AO observed that during the year under appeal, assessee has carried out total transactions of INR 1,88,48,833/- from M/s Surbhi Impex which remained unexplained and therefore, proceedings u/s 147 were initiated and notice u/s 148 was issued on 31.03.2019 after taking approval from the Competent Authority. Thereafter, the assessment order was passed wherein addition of INR 1,88,48,833/- was made by holding the said purchase as bogus and further addition of INR 3,76,9977/- was made alleging the same as commission @ 2% paid to obtain the accommodation entries of bogus purchases.
6. Aggrieved by the said order, the assessee preferred an appeal before the ld. CIT(A) who vide impugned order dated 05.06.2024, has dismissed the appeal of the assessee as the assessee has failed to file any submissions in support of Grounds of appeal.
4. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo which inter-alia includes Ground of appeal No.2 wherein the assessee has challenged the re-opening of assessment on the ground that there was no failure on the part of the assessee of disclosing truly and fully all material facts necessary for assessment. Since it is a legal ground, therefore, we decide the same at this stage though ld. CIT(A) has not decided the appeal of the assessee on merits.
8. Before us, ld. AR submits that during the course of original assessment proceedings, necessary enquiry was carried out by the AO in terms of the notice issued on 29.01.2014 u/s 142(1) of the Act wherein the AO has asked the assessee to file complete details of purchases. The copy of the same are placed at page 40 to 41 of the Paper Book. In reply, vide letter dated 29.02.2014, assessee has filed complete details with respect to the purchases vide Annexure – 9 placed at pages 105 to 108 of the Paper Book. Ld. AR drew our attention to these details which include complete details of purchases made from M/s. Surbhi Impex on monthly basis. Thereafter, vide letter date 08.05.2014, the assessee has filed the copy of the confirmation from the parties which includes confirmation of the purchases made from M/s. Surbhi Impex. Ld.AR submits that necessary confirmations of the closing balance of M/s. Surbhi Impex is placed at page 111 of the Paper Book. Ld. AR further drew our attention to the copy of the ledger account of M/s. Surbhi Impex wherein the assessee was having regular transactions with the said party on year to year basis. Ld.AR further submits that assessee had filed all the relevant details alongwith copy of bank statement, purchase invoices and details of purchases made before the AO during the course of original assessment proceedings and therefore, re-opening of the assessment based on the same material without recording the satisfaction that assessee has failed to disclose fully and truly all the material facts necessary for the assessment as provided in Proviso (1) to erstwhile section 147 of the Act. He, further submits that the case of the assessee was re-opened u/s 147 after the expiry of the four [04] years as the assessment was already completed u/s 143(3) of the Act. Therefore, it is the duty of the AO to record the satisfaction that the assessee has failed to disclose fully and truly all material facts which has not been done in the instant case and therefore, the proceedings initiated u/s 148 deserves to be hold as bad in law and consequent order passed be quashed.
9. On the other hand, ld. Sr. DR for the Revenue supported the orders of the lower authorities and submits that in the order passed u/s 143(3), there was no discussion about the examination/verification carried out by the then AO with respect to the purchases made by the assessee and therefore, he vehemently supported the orders of the lower authorities in re-opening the assessment by holding that the assessee has not disclosed all the facts necessary for the assessment.
10. Heard the contentions of both the parties at length and perused the material available on record. In the instant case, assessment was originally completed u/s 143(3) of the Act in terms of the order passed on 16.12.2014. From the perusal of Paper Book filed by the assessee, it is observed that during the course of assessment proceedings, AO has made specific query with respect to the purchases made by the assessee and after considering the submissions filed by the assessee including the details of purchases, stock registers, bank statement and the balance confirmations, AO has reached to the conclusion that purchases declared by the assessee was genuine purchases and no adverse inference was drawn against any of the purchases declared. It is further observed that the case of the assessee was re-opened solely on the basis of alleged information received without examining the same in the light of material available on record. It is a matter of fact that despite of the repeated requests, the assessee was never provided the copy of the reasons recorded before the re-opening of the assessment though the assessee has duly filed the return of income in response to notice u/s 148 of the Act. From the perusal of the assessment order, it is observed that the reasons have been recoded alleging that the assessee has made purchases from M/s. Surbhi Impex. It is further observed that in the reasons recorded satisfaction was recorded that the assessee has declared meager income of INR 3,44,770/- ignoring the fact that the same income was already assessed u/s 143(3) of the Act where the AO has accepted the same after making verification of the facts. The case of the assessee is re-opened after the expiry of four [04] years from the end of the relevant AY and therefore, as per First proviso of erstwhile section 147, the AO should record the satisfaction that assessee has failed to disclose truly and fully all material facts necessary for the assessments. As observed above in the instant case, the assessee has filed every possible detail with respect to the purchases made from M/s. Surbhi Impex and, therefore, the assessee has discharged the burden casted upon it. The Hon’ble Delhi High Court in the case of Commissioner of Income Tax v. Kelvinator of India Ltd. reported in [(2002) 256 ITR 1], wherein Hon’ble Delhi High Court held that “an Assessing Officer cannot reopen a finalized assessment under Section 147 of the Income Tax Act based on a “mere change of opinion”.”
11. In the instant case, not only all the material facts were truly and fully disclosed by the assessee but also they were examined by the AO in the order passed u/s 143(3) of the Act and placing reliance on the same material without recording the satisfaction as provided in Proviso (1) of section 147 of the Act is bad in law. The Hon’ble Apex Court in the case of NDTV vs DCIT reported in 424 ITR 607 has held as under:-
31. “The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 08.04.2011 NNPLC had sent a communication to the Deputy Director of Income Tax (Investigation), wherein it had not only disclosed the names of all the bond holders but also their addresses; number of bonds along with the total consideration received. This chart forms part of the assessment orders dated 03.08.2012 in the case of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. The said two assessment orders were passed by the same officer who had passed the assessment order in the case of the assessee on the same date itself. Therefore, the entire material was available with the revenue.
32. A number of decisions have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. vs. Income tax Officer, Companies District I, Calcutta and Another5 , wherein it was held as follows :
“(8)…The words used are “omission or failure to disclose fully and truly all material facts necessary for his assessment for that year”. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise — the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an 5 AIR 1961 SC 372 assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be.
(9) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example — “I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account books and the documents.” His omission to bring to the assessing authority’s attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to “omission to disclose fully and truly all material facts necessary for his assessment.” Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee’s duty to disclose all of them — including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed.
(10) Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else — far less the assessee — to tell the assessing authority what inferences — whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences — whether of facts or law — he would draw from the primary facts.
(11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn?” A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Non disclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present case.
33. In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuineness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No.1. However, that cannot lead to the conclusion that there is nondisclosure of true and material facts by the assessee.”
12. In view of the aforesaid facts and by respectfully following the judgement of Hon’ble Supreme Court In the case of NDTV vs. DCIT (supra) and judgement of Hon’ble High Court in the case of Kelvinator of India Ltd. (supra), we hold that the action of the AO in invoking the provisions of section 147 of the Act by ignoring the fact that all the material facts were disclosed during the course of original assessment proceedings and no new fact was brought on record nor the reasons recorded were ever supplied to the assessee. Therefore, re-assessment proceedings initiated is bad in law and consequent reassessment order passed, is hereby quashed. Accordingly, Ground of appeal No.2 raised by the assessee is allowed.
13. Since we have already allowed Ground of appeal No.2 raised by the assessee, the remaining Grounds of appeal became academic hence, not adjudicated.
14. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 07.08.2026.
