Nadia Shahvir Nooreyezdan Vs ITO (ITAT Mumbai)
INSIGHT Portal Data Cannot Trigger Automatic Reopening: Mumbai ITAT Quashes ₹47.33-Lakh Property Addition for Bypassing Section 148A
The assessee purchased an immovable property for ₹1.40 crore, against a stamp-duty value of ₹3.14 crore. Based solely on information generated through the INSIGHT Portal/e-Verification Scheme under Section 135A, the Assessing Officer issued notice under Section 148 without following the procedure prescribed under Section 148A. Following a DVO reference, the property was valued at ₹1.87 crore, and the difference of ₹47.33 lakh was added under Section 56(2)(vii).
The Mumbai ITAT held that portal-generated information merely indicating a valuation mismatch cannot automatically establish escapement of income. The AO must verify the information, conduct an independent enquiry and apply his own mind before assuming reassessment jurisdiction.
The Tribunal noted that the AO had completely bypassed the mandatory safeguards of Section 148A—no enquiry under clause (a), no show-cause notice under clause (b), no consideration of the assessee’s response under clause (c), and no order under clause (d). The conditional observation that information suggesting escapement would be “deemed” to exist if approval were granted also demonstrated borrowed and mechanical satisfaction.
Following the Bombay High Court ruling in Benaifer Vispi Patel v. ITO and the Supreme Court decision in Union of India v. Ashish Agarwal, the Tribunal held that Section 135A cannot override or dispense with Section 148A.
Accordingly, the notice under Section 148, the reassessment proceedings and the consequential ₹47.33-lakh addition were quashed as void ab initio.
List of Cases Discussed / Relied Upon
- Benaifer Vispi Patel v. ITO — Bombay High Court.
- Union of India v. Ashish Agarwal (2022) 444 ITR 1 (SC).
- Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr — Supreme Court, 187 ITR 688.
- NTPC v. CIT, 229 ITR 383.
- PCIT v. Shodiman Investments Pvt. Ltd. (2018) 93 taxmann.com 153 (Bom. HC).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of NATIONAL FACELESS APPEAL CENTRE (NFAC), NEW DELHI vide DIN: ITBA/NFAC/S/250/2025-26/1083692963(1) dated 30-Dec-2025 for the Assessment Year 2020-21.
2. At the outset, we noticed that the assessee has filed an application for admission of additional grounds, the contents of which are reproduced hereinbelow:
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3. After having heard the learned counsels for both the parties and perusing the said application, we find that the same is legal in nature and goes to the root of the case. Therefore, while following the principles laid down in the decisions of the Hon’ble Supreme Court in the cases of Jute Corporation of India Ltd. v. CIT, 187 ITR 688, and NTPC v. CIT, 229 ITR 383, and also considering the facts of the present case, we allow the application for raising the additional ground and, consequently, the said ground is admitted to be heard on merits.
4. Since we have allowed the application for raising the additional ground, we shall first adjudicate the additional ground raised by the assessee, as the same is a legal issue and goes to the root of the case.
5. Ground No. 13 raised by the assessee relates to challenging the order of the Assessing Officer, thereby alleging that the AO had invalidly assumed jurisdiction, as there was total non-compliance with the provisions of section 148A of the Income-tax Act, and, thus, the reopening based on the portal information is bad in law.
6. In this regard, we have heard the learned counsels for both the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. As per the facts of the present case, the assessee had filed its return of income for the year under consideration, which was processed under section 143(1) of the Income-tax Act. However, subsequently, reassessment proceedings were initiated under section 147 based on information available on the INSIGHT Portal, alleging that the assessee had purchased an immovable property for ₹1 crore 40 lakhs, whereas the stamp duty value of the said property was ₹3,14,44,653. In this regard, notice under section 148 dated 29.03.2024 was issued. During the reassessment proceedings, the property was referred to the Departmental Valuation Officer to determine the valuation of the said property, which was determined at ₹1,87,33,000. Thus, the AO treated the difference of ₹47,33,000 as income of the assessee under section 56(2)(vii) of the Income- tax Act, which was also confirmed by the CIT(A).
7. The assessee, by raising the additional ground, more particularly Ground No. 13, has submitted that, on the facts and circumstances of the case and in law, the reassessment proceedings initiated by issuance of notice dated 29.03.2024 under section 148 of the Act are void ab initio and without jurisdiction, as the mandatory procedure prescribed under section 148A of the Income-tax Act was not followed at all by the Assessing Officer.
8. On the contrary, the learned DR, while placing reliance on the orders passed by the lower authorities, submitted that the arguments raised by the assessee are not sustainable in view of the fact that the AO had properly followed the entire procedure.
9. After having heard the learned counsels for both the parties at length and on perusal of the material placed on record, on an overall consideration of the facts and circumstances before us, we find that, in the present case, the reassessment proceedings were initiated under section 147 of the Act based on information available on the INSIGHT Portal, and the said information was derived from the e-Verification Scheme under section 135A of the Income-tax Act without any independent application of mind.
10. In our view, as per the scheme of reassessment introduced by the Finance Act, 2021, the AO is mandatorily required to follow the procedure prescribed under section 148A of the Income-tax Act, which includes:
a) conducting an enquiry, if required, under section 148A(a);
b) issuing a show-cause notice under section 148A(b);
c) considering the assessee’s reply under section 148A(c); and
d) passing an order under section 148A(d) before issuing notice under section 148.
11. In the present case, the AO has relied solely on portal-generated information received under the e-Verification Scheme notified under section 135A of the Income-tax Act. Thus, under these circumstances, we are of the view that such electronic information cannot be blindly relied upon by the AO, and the Assessing Officer should have verified the information and applied his/her independent mind before issuing notice under section 148 of the Income-tax Act. Failure to do so, in our view, renders the notice arbitrary and liable to be quashed.
12. Admittedly, there is no dispute to the fact that the reassessment proceedings in the present case were initiated solely on the basis of information received on the INSIGHT Portal under the e-Verification Scheme, and the assessment order itself records that the alleged escapement of income arose on account of the difference between the purchase consideration of the property and the stamp duty value, leading to the presumption that income chargeable to tax had escaped assessment. Thus, in this way, the entire reopening is based on system-generated data relating to the valuation difference. Such information, in our view, merely indicates a possible mismatch in valuation and does not constitute conclusive material suggesting escapement of income.
13. Even otherwise, the alleged information relied upon by the Assessing Officer merely indicated that the property was purchased for ₹1 crore 40 lakhs and the stamp duty value of the same was ₹3,14,44,653. However, the property, according to the assessee, was purchased through a registered sale deed on which stamp duty was paid on the higher value determined by the stamp authorities, and the transaction was fully disclosed in the return of income. Thus, in this way, the alleged difference between the purchase value and the stamp duty value cannot automatically lead to a presumption of escapement of income, and, at the best, such information can only justify verification, but not an immediate presumption of jurisdiction under section 147 of the Income-tax Act.
14. After evaluating the entire records, we notice that the Assessing Officer did not conduct any independent enquiry before issuing the notice. Instead, the reopening is based entirely on:
a) Preliminary Verification Report (PVR) generated under the e-Verification Scheme; and
b) algorithm-based information available on the INSIGHT Portal.
15. The reopening is based on a conditional and deemed satisfaction recorded in the approval note stating that “if approval is granted, the undersigned shall be deemed to have information suggesting escapement,” which demonstrates the absence of independent formation of belief under section 147. Such mechanical and conditional assumption of jurisdiction renders the notice under section 148 invalid.
16. For the above proposition, we rely upon the decision of the Hon’ble Bombay High Court in the case of Benaifer Vispi Patel v. ITO, wherein the Court examined a similar situation where reopening was initiated solely on the basis of information received through the e-Verification mechanism under section 135A. The Court held that:
a) Electronic information generated through the portal cannot be presumed to be free from defects, and the Assessing Officer must verify such information before issuing notice under section 148.
b) The Assessing Officer must apply his mind to the information available on record and verify the correctness of the electronic data before initiating reassessment proceedings.
In the absence of such verification, the notice under section 148 is liable to be quashed for non-application of mind.
17. Since, after evaluating the entire facts, we are of the view that the mandatory procedure under section 148A was completely bypassed, and as no enquiry under section 148A(a) was conducted, nor notice under section 148A(b) was issued, nor the reply from the assessee was considered, the statutory safeguards introduced by Parliament have been completely overlooked and bypassed.
18. In our view, even otherwise, the delegated scheme under section 135A cannot override the statutory safeguards, as section 135A merely enables the Government to introduce a scheme for faceless collection and verification of information. However, it does not:
- authorize automatic reopening;
- override the statutory mandate of section 148A; or
- dispense with the requirement of application of mind by the Assessing Officer.
19. Therefore, reliance on section 135A to bypass the safeguards under section 148A is legally unsustainable.
20. Accordingly, in our view, the notice issued under section 148 and the consequent reassessment order passed under section 147 read with section 144B are hereby quashed as void ab initio. In this regard, reliance has been placed on the decisions in the cases of:
a) Benaifer Vispi Patel v. Income-tax Officer [2024] 165 taxmann.com 5 (Bombay) / [2024] 300 Taxman 248 (Bombay) / [2025] 475 ITR 704 (Bombay), dated 15.07.2024.
Section 148, read with sections 148A and 135A, of the Income-tax Act, 1961 — Income escaping assessment — Issue of notice for (Electronic information) — Assessment year 2020-21: The Assessing Officer dispensed with the applicability of section 148A on the ground that information with respect to discrepancies in interest income was received as per the scheme notified under section 135A, which provided for faceless collection of information. The assessee contended that the information referred to by the Assessing Officer was incorrect and that interest income from bank deposits was correctly disclosed in the return. However, the Assessing Officer, without dealing with the said remarks, issued the reopening notice.
The Hon’ble Court held that it could not be conceived that, at all material times, information available in the electronic mechanism/system would be free from errors and defects. Once a defect was pointed out in the information available on the portal, it was the duty of the Assessing Officer to examine the version of the assessee pointing out that the information was not correct, and the same would require due consideration before taking any further action for issuing notice under section 148. The Court further held that, where electronic information was available under a faceless mechanism and there was other material available, as may be gathered by the Assessing Officer or furnished by the assessee, it was incumbent upon the Assessing Officer to apply his mind to all such material and only thereafter take a well-considered view before issuing notice under section 148 by dispensing with the provisions of section 148A. The impugned reopening notice was, therefore, held to be arbitrary and vitiated by non-application of mind and was set aside. [Paras 23, 25, 26 and 29] [In favour of assessee]
The Bombay High Court held that mere information received under the faceless e- Verification Scheme under section 135A cannot automatically justify issuance of notice under section 148 without proper application of mind.
The Court observed that the Assessing Officer must verify electronic information and apply his mind before issuing notice under section 148. The Court emphasized that portal-generated information may contain errors and cannot be blindly relied upon.
The High Court clearly held that electronic information available under section 135A cannot be presumed to be defect-free and that the Assessing Officer must verify such information with the available material before issuing notice under section 148.
This observation is relevant to the present case because the reassessment proceedings were also initiated purely on the basis of INSIGHT Portal/e- Verification data.
The Bombay High Court further held that it is the duty of the Assessing Officer to cross-check electronic information with the material furnished by the assessee before issuing notice under section 148. Failure to do so results in:
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- non-application of mind; and
- arbitrary reopening.
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The High Court concluded that the notice issued under section 148 was arbitrary and vitiated by non-application of mind and was liable to be quashed. Thus, the High Court set aside the notice issued under section 148.
b) Union of India v. Ashish Agarwal (2022) 444 ITR 1 (SC) —
The Hon’ble Supreme Court held that the procedure introduced by section 148A is mandatory and forms an integral safeguard in reassessment proceedings.
Under the substituted provisions of the Income-tax Act, introduced by the Finance Act, 2021, the procedure prescribed under section 148A was required to be followed before issuance of notice under section 148. Along with the notice under section 148, the Assessing Officer was required to serve the order passed under section 148A. Section 148A is a new provision which is in the nature of a condition precedent. [Para 6.2]
The new provisions substituted by the Finance Act, 2021, being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interests of the assessee as well as being in public interest, the respective High Courts had rightly held that the benefit of the new provisions would be available even in respect of proceedings relating to past assessment years, provided the notice under section 148 had been issued on or after 01.04.2021. The view taken by the various High Courts in holding so was agreed with. [Para 7]
c) PCIT v. Shodiman Investments Pvt. Ltd. (2018) 93 taxmann.com 153 (Bom. HC)
Section 147 of the Income-tax Act, 1961 — Income escaping assessment — Non- disclosure of primary facts — Information — Assessment year 2003-04: Whether, where the Assessing Officer had merely issued a reassessment notice on the basis of an intimation regarding reopening from the DDIT (Inv.), this was clearly in breach of the settled position in law that the reopening notice had to be issued by the Assessing Officer on his own satisfaction and not on borrowed satisfaction — Held, yes.
Whether, where the reasons made available to the assessee for reopening the assessment merely indicated information received from the Director (Investigation) about a particular entity entering into suspicious transactions, and such material was not further linked by any reason to come to the conclusion that the assessee had indulged in any activity which could give rise to a reason to believe on the part of the Assessing Officer that income chargeable to tax had escaped assessment, the reassessment was an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax had escaped assessment — Held, yes. [Paras 13 and 14] [In favour of assessee]
21. Therefore, in view of the above facts and the settled legal position, the notice under section 148 and the consequent reassessment proceedings initiated under section 147 are held to be without jurisdiction and are quashed.
22. Since we have already quashed the notice and the consequent proceedings, there is no need to adjudicate the other additional grounds and the original grounds raised by the assessee.
23. In the result, the appeal of the assessee stands partly allowed.
Order pronounced in the open court on 20.08.2026.
