Vikas Arolkar Vs ITO (ITAT Panaji)
Reassessment Validity Challenged First Before ITAT: Panaji Bench Admits Legal Ground, Remands Appeal to CIT(A)
The Income Tax Appellate Tribunal, Panaji Bench, in Vikas Arolkar v. Income Tax Officer, ITA No. 269/PAN/2025, admitted a legal challenge to reassessment proceedings raised for the first time before it. The Tribunal held that the issue went to the root of the reassessment and did not require investigation of fresh facts. However, it remitted the legal grounds and other issues to the Commissioner of Income Tax (Appeals) for adjudication.
The order, pronounced on 22 October 2026, concerned Assessment Year 2017–18. The Bench comprised Dr. Manish Borad, Accountant Member, and Shri Vinay Bhamore, Judicial Member. The appeal was allowed for statistical purposes, without a final decision on reassessment validity or the disputed addition.
Background of the Assessment and Appeal
The assessee, an individual, filed a return on 28 January 2023 in response to a notice under Section 148 of the Income-tax Act, 1961, declaring income of Rs. 8,95,440.
The reassessment culminated in an order dated 13 May 2023, passed under Section 147 read with Section 144B. The Assessing Officer made an addition of Rs. 95,30,000 as unexplained money under Section 69A read with Section 115BBE, determining total income at Rs. 1,04,25,440.
The assessee challenged the assessment before the first appellate authority but did not succeed. The order of NFAC, Delhi, dated 31 July 2025, was consequently challenged before the Tribunal.
Alongside the dispute concerning the addition, the assessee raised objections questioning the jurisdictional foundation of the reassessment proceedings.
Grounds Challenging the Reassessment Proceedings
The assessee contended that proceedings purportedly undertaken pursuant to the Supreme Court’s decision in Union of India v. Ashish Agarwal (2022) 444 ITR 1 were without jurisdiction.
According to the ground reproduced in the Tribunal’s order, no prior notice under Section 148 had been issued for the assessment year during 1 April 2021 to 4 May 2022, the period referred to in that ground.
The assessee further alleged that the notice under Section 148 contravened CBDT Circular No. 19 of 2019.
Another objection concerned alleged non-compliance with the Faceless Jurisdiction of Income-tax Authorities Scheme, 2022, and the e-Assessment of Income Escaping Assessment Scheme, 2022.
These were the assessee’s contentions requiring adjudication. The Tribunal did not decide that the notice contravened these requirements, nor did it declare the reassessment void.
Request to Admit the Additional Legal Issue
At the hearing, the assessee’s representative explained that the challenge concerning the validity of the Section 148 notice, particularly the faceless jurisdiction requirements, was being raised for the first time before the Tribunal.
The representative requested admission of the legal issue and expressed no objection to its restoration to the CIT(A) for necessary adjudication.
The Departmental Representative supported the first appellate authority’s order.
The Tribunal therefore considered whether the additional legal challenge could be entertained and which authority should examine the grounds in the circumstances.
Tribunal Applies the NTPC Principle
The Tribunal observed that the legal issue went to the root of the reassessment proceedings. It also recorded that no fresh facts required investigation.
Relying on National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), the Bench admitted the issue. Its reasoning recognised that a legal question satisfying these conditions could be raised at the Tribunal stage, despite not having been raised earlier.
The admission was procedural. It enabled consideration of the jurisdictional objection but did not establish that the objection was correct.
This distinction matters because admission of an additional ground and allowing that ground on merits are separate steps. In this case, the Tribunal completed the former and directed further adjudication.
Why the Matter Was Remitted to CIT(A)
The Bench additionally found that the CIT(A) had not adjudicated some legal issues raised before it.
It referred to the Delhi High Court’s decision in Divine Infracon Pvt. Ltd. v. PCIT [2025] 171 taxmann.com 92 (Delhi). As recorded in the order, the Tribunal understood that decision as restricting its jurisdiction to decide a ground that did not arise from the first appellate authority’s impugned order, irrespective of whether it had been raised in the first appeal.
Considering the newly admitted challenge and the unadjudicated legal issues, the Tribunal set aside the CIT(A)’s order. It remitted the legal issues along with the other issues to the first appellate authority.
Consequently, the dispute over the Rs. 95.30 lakh addition also remained open for adjudication.
Directions and Final Outcome
The Tribunal directed the assessee to provide the Department with his latest email address and contact details to receive notices through the ITBA portal.
It also directed him to remain vigilant and avoid seeking adjournments unless supported by reasonable cause.
The appeal was ultimately allowed for statistical purposes. The order provides an opportunity for adjudication of the jurisdictional objections and other grounds before the CIT(A); it does not delete the addition on merits or finally invalidate the reassessment.
Cases Discussed
- Union of India Vs Ashish Agarwal (Supreme Court); (2022) 444 ITR 1; 04.05.2022 — Cited in connection with the assessee’s challenge to the jurisdictional foundation of reassessment proceedings. Related TaxGuru discussion.
- National Thermal Power Co. Ltd. Vs CIT (Supreme Court); (1998) 229 ITR 383 — Relied upon for admitting an additional legal ground that goes to the root of the proceedings and requires no fresh factual investigation. Related TaxGuru discussion.
- Divine Infracon Pvt. Ltd. Vs PCIT (Delhi High Court); [2025] 171 taxmann.com 92 — Referred to regarding the Tribunal’s jurisdiction to adjudicate a ground not arising from the first appellate order. Related TaxGuru discussion.
FULL TEXT OF THE ORDER OF ITAT PANAJI
The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 31.07.2025 of ld. NFAC, Delhi emanating out of Assessment Order dated 13.05.2023 passed u/s.147 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).
2. On merits, the assessee has challenged the finding of ld.CIT(A) confirming the addition made by the Assessing Officer at Rs.95,30,000/- for unexplained money u/s.69A r.w.s.115BBE of the Act.
3. Further, a legal issue challenging the validity of notice u/s.148 of the Act has been raised for the first time before this Tribunal placing reliance on judgment of Hon’ble Apex Court in the case of Union of India Vs. Ashish Agarwal (2022) 444 ITR 1. At the outset, ld. Counsel for the assessee submitted that the legal issue challenging the validity of notice u/s.148 of the Act allegedly been issued in contravention of Faceless jurisdiction of the Income Tax Authorities Scheme 2022 and e-assessment of Income Escaping Assessment Scheme 2022 has been raised for the first time before this Tribunal. Only prayer made to admit the same, however, raised no objection if the same is restored to the file of ld.CIT(A) for necessary adjudication.
4. On the other hand, ld. DR supported the order of ld.CIT(A)
5. We have heard the rival submissions and perused the record placed before us. The assessee is an individual and filed the return of income for A.Y. 2017-18 in response to notice u/s.148 of the Act on 28.01.2023 declaring income of Rs.8,95,440/-. Thereafter, notice u/s.148 of the Act issued for carrying out the reassessment proceedings and finally addition u/s.69A r.w.s.115BBE of the Act made at Rs.95,30,000/- assessing the income at Rs.1,04,25,440/-. Subsequently, assessee preferred appeal before ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal raising one of the legal issue challenging the reassessment which reads as under :
“2. The Learned Commissioner of Income Tax (Appeals) has erred in not declaring the assessment proceedings and assessment order as Null and void and without jurisdiction in spite of the fact that
a. The proceedings taken purportedly as per the directions of the honourable Supreme Court in Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC) having been without jurisdiction as there was no prior notice u/s 148 issued for the assessment year under appeal during the period from 1-4-2021 till 4-5-2022 covered by the aforesaid order of the honourable Apex Court;
b. The proceedings having been based on a notice u/s 148 issued in contravention of the CBDT circular 19 of 2019.
c. The proceedings having been based on a notice u/s 148 issued in contravention of the ‘Faceless Jurisdiction of Income-tax Authorities Scheme, 2022’ and ‘e-Assessment of Income Escaping Assessment Scheme, 2022’”
6. The above legal issue stands raised for the first time before this Tribunal and the same goes to the root cause of the reassessment proceedings. Since the legal issue can be raised at any stage and no fresh facts are required to be investigated, we therefore placing reliance on the judgment of Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. CIT (SC) (229 ITR 383) admit the same. We also find that ld.CIT(A) has not adjudicated some of the legal issues raised before it. In the light of these facts, we are of the considered view that the legal issues along with other issues are remitted back to the file of ld.CIT(A) by virtue of judgment of Hon’ble Delhi High Court in the case of ‘Divine Infracon Pvt. Ltd. Vs PCIT’ [2025, 171 taxmann.com 92 (Del)], wherein their Hon’ble Lordship vide para 13 have categorically held that, the Tribunal has no jurisdiction to proceed to decide the ground which did not arise from the impugned order passed by first appellate authority, irrespective of such ground was raised in first appeal or not. Order of ld.CIT(A) is set aside and the grounds of appeal raised by the assessee are allowed for statistical purposes. Assessee is directed to provide latest email id and contact detail to the Department for receiving the notices from ITBA portal. Assessee is also directed to remain vigilant and not to take adjournment unless otherwise required for reasonable cause.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 22nd October 2026 under Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963.
