Case Law Details
R.K. Stockholding Private Ltd Vs ACIT (ITAT Delhi)
In a batch of two appeals concerning Assessment Years 2016-17 and 2017-18, the ITAT Delhi allowed the appeals filed by the assessee and held the reassessment orders to be illegal. The cases had been reopened on allegations that the assessee misused clients’ securities for obtaining loans for itself and group entities. During assessment proceedings, the Assessing Officer stated that ledger accounts, bank statements, and details of pledged securities could not be accessed and concluded that the securities had been misused.
The assessee consistently sought copies of the reasons recorded for reopening under Section 148 of the Income Tax Act, but the reasons were not supplied either during assessment proceedings or before the CIT(A). The assessee also argued that notices under Section 148, though dated 31.03.2021, were actually issued on 01.04.2021 as reflected on the ITBA portal. According to the assessee, reassessment proceedings initiated on 01.04.2021 required compliance with the new reassessment procedure, which had not been followed.
The Tribunal observed that the assessee had persistently requested the recorded reasons and relied on the decision in Jaggat Talkies, which followed the Supreme Court ruling in GKN Driveshafts. It held that failure to provide the recorded reasons rendered the reassessment orders invalid. The Tribunal further held that notices issued on 01.04.2021 attracted the amended reassessment regime, but the Assessing Officer continued under the unamended provisions. This was also held to be an illegality rendering the assessment orders null and void. Accordingly, both appeals were allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. These are a batch of two appeals pertaining to the same assessee and for the sake of convenience these two appeals are being disposed of through a single order.
ITA No.8020/Del/2025 (AY 2016-17) arises from order dated 06.11.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC, Delhi. ITA No.8021/Del/2025 (AY 2017-18) arises from order dated 06.11.2025, passed u/s 250 of the Act, by Ld. CIT(A)-NFAC, Delhi.
2. The assessee’s cases were reopened for both the years under consideration on account of an allegation that the assessee misused securities of clients for the benefit of itself and other group entities. During the course of assessment proceedings, the AO could not access ledger accounts, bank statements and details of securities pledged by clients and thereafter he concluded that indeed the securities pledged by the clients had been misused and utilized for the purposes of obtaining loans from banks, etc. It is a matter of record that the assessee has been asking for copies of reasons recorded prior to the issue of notice u/s 148 of the Act and the Ld. AO has not obliged him with a copy of the same. It is also seen that the assessee has reported his request for reasons for reopening even before the Ld. CIT(A) but the same have not been provided at either of the two stages. Needless to say, the Ld. CIT(A) has upheld the Ld. AO’s order and dismissed the appeal of the assessee.
2.1 Aggrieved with this action of the Ld. CIT(A), the assessee has approached the ITAT with grounds which are extremely detailed and argumentative and thus, they are not extracted here. Suffice it to say that the assessee has challenged the assumption of jurisdiction by saying that the same is illegal considering that the reasons for reopening have not been supplied to him. Also, the assessee has stated that the notice u/s 148 has been issued for both the years on 01.04.2021 instead of 31.03.2021. It is the contention through the grounds that once notices are seen to be issued on 01.04.2021 then the Ld. AO was legally bound to follow the new procedure of reassessment, which was not done.
3. Before us the Ld. AR argued with the help of a detailed paper book through which he demonstrated that the Ld. AO was repeatedly asked to provide the reasons for reopening (page 9 of the PB, regarding submission dated 26.03.2022 for AY 2016-17) and submission dated 11.08.2021 for AY 2017-18 through which the reasons for reopening have been asked to be shared with the assessee. The Ld. AR pointed out that even before the Ld. CIT(A) this issue was raised but was unfortunately summarily dismissed. The Ld. AR also placed on record screenshots from ITBA Portal (pages 72 and 76 of the Paper Book) where it is clearly shown that the notices dated 31.03.2021 have been issued on 01.04.2021. It was the submission that if the notices were to be treated as valid for the years under consideration then the Ld. AO was duty bound to adopt the new procedure for reassessment. The Ld. AR relied on the case of Jaggat Talkies Distributors reported in 85 taxmann.com 189 (Del.) to canvass the point that non supplying of the reasons to the assessee would render the resultant assessment order null and void in the eyes of law. Regarding the issue of service of notice u/s 148 of the Act, the Ld. AR relied on the case of Daujee Abhushan Bhandar (P) Ltd. reported in 136 taxmann.com 246 (All.). The point brought to our notice here through this case law was that the notices should have been issued on 31.03.2021 and should have gone out of the control of the Ld. AO within 31.03.2021 itself. It was argued that merely signing of notice is not issuance of the same but issue of the notice would be considered when the same would go out of the control of the Assessing Officer. It was the submission that on two counts, as discussed, the Ld. AO did not assume jurisdiction legally.
3.1 The Ld. DR relied on the orders of the authorities below.
4. We have carefully considered the submissions of Ld. AR/DR. We find that indeed the assessee has persistently asked for reasons and the same have been denied to him. Following the case of Jaggat Talkies (supra), which itself follows the mandate given by the GKN Driveshaft case reported in 259 ITR 19 (SC), we are duty bound to strike down an assessment order which does not follow this directive. We find that a similar situation arises in the present appeal and this fact itself would render both the assessment orders invalid. Secondly, the issue of notice u/s 148 of the Act, for both the years, on 01.04.2021 would tend to trigger the new system of reassessment but it is seen that the Ld. AO has persisted with the un-amended provisions. This also is an illegality, which renders the resultant assessment order null and void. For the reasons mentioned above, the assessment orders in both the cases deserve to be stuck down as illegal.
5. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 13.05.2026.
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