ITAT Delhi Quashed Reassessment For Wrong Assumption of Facts

Summary: The ITAT Delhi in Dinesh Babu Saxena Vs. ITO, quashed reassessment proceedings initiated under sections 147/148 after holding that the reopening was founded on a demonstrably incorrect assumption of fact. The Assessing Officer relied on information relating to the purchase of immovable property and proceeded on the premise that the assessee had not filed a return of income for the relevant year. This assumption was factually wrong, as a valid return had been filed within time, a fact even acknowledged by the Assessing Officer in the reassessment order. The Tribunal reiterated that recorded “reasons to believe” are jurisdictional and form the very foundation of reassessment proceedings. If those reasons are based on non-existent or false facts, the entire reassessment collapses and cannot be cured by subsequent realization of the correct position. Accordingly, the reopening and the consequential assessment order were held void ab initio. The decision reinforces strict limits on reassessment powers and emphasizes careful scrutiny of information-based reopenings.

Key Facts

• Reassessment proceedings were initiated under sections 147/148 on the basis of AIR information regarding purchase of immovable property worth ₹63 lakh.
• The sole foundation of reopening was the AO’s assumption that the assessee had not filed a return of income for the relevant assessment year.
• Contrary to this assumption:
  • The assessee had filed his return on 26.12.2008, declaring income of ₹3,88,845.
  • The AO himself acknowledged the existence of the return in the opening paragraph of the reassessment order.

Condonation of Delay

• Delay of 108 days in filing appeal before ITAT was condoned.
• Medical records constituted a bonafide and reasonable cause, satisfying principles of natural justice.

Core Legal Issue

Whether reassessment proceedings can survive when the “reasons to believe” are founded on a demonstrably incorrect and non-existent fact.

Tribunal’s Findings

1. “Reasons to Believe” are Jurisdictional

• The Tribunal reiterated that reasons recorded under section 147 are the very foundation and jurisdictional sine qua non of reassessment proceedings.
• If the foundation fails, the entire superstructure collapses.
  • Wrong Assumption of Facts is Fatal
    • The AO proceeded on the factually incorrect premise that no return had been filed.
    • Once this premise was disproved, the recorded reasons ceased to exist in law.
  • Subsequent Knowledge Cannot Cure Defective Reasons
    • Even though the AO later acknowledged the filed return, such post-facto awareness cannot validate an inherently defective reopening.

Ratio Decidendi

Reassessment proceedings initiated on the basis of incorrect, non-existent, or factually false assumptions are void ab initio and unsustainable in law.

Final Verdict

• Reopening under sections 147/148 was quashed.
• Assessment order passed pursuant thereto was set aside.
• Appeal of the assessee was allowed.

Practical Tax Planning & Litigation Takeaway

• AIR/Information-based reopenings must pass strict factual verification.
• Existence of a return on record nullifies reopening grounded on non-filing.
• Always scrutinize recorded reasons—even a single incorrect assumption can invalidate the entire reassessment.
• Strong authority for challenging mechanical or careless reopenings.

ITA/3874DEL/2025 pronounced on 26.11.2025

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Author: Prahlad Rajesh & Co (Chartered Accountants) | CA Prahlad R Hathwal | 8054-706-020 | prahladhathwal09.ca@gmail.com