Pawan Kumar Khandelwal Vs ITO ()
Summary: The Income Tax Appellate Tribunal (ITAT), Ranchi Bench, in Pawan Kumar Khandelwal Vs ITO Ward-3(4), Giridih, allowed three appeals filed by the assessee relating to Assessment Years 2014-15, 2015-16 and 2016-17, holding that the reassessment notices issued under Section 148 of the Income-tax Act, 1961, were contrary to the instructions issued by the Central Board of Direct Taxes (CBDT) on 4 March 2021 and 12 March 2021. The Tribunal found that the Assessing Officer had initiated reassessment proceedings on the basis of information physically received from the Investigation Wing before 4 March 2021, whereas the Revenue attempted to justify the notices by relying upon information subsequently uploaded to the Income Tax Department’s Insight Portal.
The Tribunal examined the chronology of the information received by the Assessing Officer, the categories of cases covered by the CBDT instructions, the reasons recorded for reopening the assessments and the discrepancies between the figures appearing in the physical investigation report and those uploaded to the Insight Portal. It concluded that the recorded reasons were based on the earlier physical information rather than the subsequent electronic information relied upon by the Revenue.
Consequently, the Tribunal quashed the reassessment notices dated 26 March 2021 and 27 March 2021, together with the consequential assessments for all three assessment years. The appeals were allowed on the additional legal ground challenging the validity of the reassessment proceedings, without adjudicating the assessee’s remaining grounds.
1. Background of the Dispute
The assessee, Pawan Kumar Khandelwal, challenged three separate appellate orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 28 September 2023. The appeals concerned reassessment proceedings initiated for AYs 2014-15, 2015-16 and 2016-17.
The dispute arose from information collected by the Directorate of Income Tax (Investigation), Dhanbad, regarding the assessee’s financial transactions, including banking transactions and alleged discrepancies between the income disclosed and information gathered during investigation.
The Investigation Wing forwarded its findings to the jurisdictional Assessing Officer through a communication dated 29 January 2021, which was received in the Assessing Officer’s office on 2 February 2021.
Subsequently, the Assessing Officer issued reassessment notices under Section 148 on the following dates:
| Assessment year | Date of Section 148 notice |
|---|---|
| 2014-15 | 26 March 2021 |
| 2015-16 | 27 March 2021 |
| 2016-17 | 27 March 2021 |
These notices were issued shortly before the end of March 2021, during the period covered by the CBDT’s administrative instructions concerning the identification of potential reassessment cases.
The assessee challenged the resulting reassessments before the CIT(A), NFAC, but the appellate proceedings did not result in the relief subsequently granted by the Tribunal.
Before the ITAT, the assessee raised an additional legal ground questioning the very jurisdiction of the Assessing Officer to initiate the reassessment proceedings.
This additional ground became decisive because, if the notices initiating the proceedings were invalid, the consequential assessments could not survive.
2. Additional Legal Ground Raised Before the Tribunal
The assessee contended that the reassessment notices were invalid because the Assessing Officer had acted contrary to CBDT Instruction F. No. 225/40/2021/ITA-II dated 4 March 2021, read with the subsequent clarification dated 12 March 2021.
According to the assessee, these instructions prescribed the categories of cases that could be considered for action under Section 148 by 31 March 2021.
The information relied upon by the Assessing Officer had already been received physically on 2 February 2021, before the CBDT issued its instruction on 4 March 2021.
The assessee maintained that the subsequent uploading or flagging of information on the Insight Portal could not retrospectively change the nature or timing of the information on which the Assessing Officer had actually relied.
The additional ground was essentially jurisdictional. It did not merely question the amount of income alleged to have escaped assessment or the correctness of individual additions. Instead, it challenged the legal validity of the reassessment proceedings themselves.
The assessee also submitted that the required approval contemplated under the CBDT instructions was not available on record. The Tribunal’s ultimate decision, however, rested on the source and timing of the information used for reopening and the resulting violation of the instructions.
3. CBDT Instruction Dated 4 March 2021
A central issue was the interpretation and application of CBDT Instruction F. No. 225/40/2021/ITA-II dated 4 March 2021.
The instruction dealt with the categories of potential cases that could be considered for action under Section 148 by 31 March 2021 for AYs 2013-14 to 2017-18.
As reproduced and discussed in the Tribunal’s order, the instruction identified specified categories, including information originating from:
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The Directorate of Income Tax (Investigation).
-
The Directorate of Intelligence and Criminal Investigation.
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The Non-Filer Management System and other cases flagged by the Directorate of Income Tax (Systems) through risk profiling.
The assessee particularly relied upon the restriction contained in paragraph 2 of the instruction, under which cases outside the specified categories were not to be considered for action under Section 148 by the jurisdictional Assessing Officer.
The assessee argued that the instruction imposed a binding administrative framework for selecting cases for reassessment during the relevant period.
The subsequent clarification dated 12 March 2021 was also important. The assessee interpreted the clarification as requiring the relevant cases under the specified category to have been flagged by the Directorate of Income Tax (Systems) after 4 March 2021.
Accordingly, the assessee submitted that information already communicated physically to the Assessing Officer before 4 March 2021 could not be treated as qualifying merely because similar information was later entered into an electronic system.
The Tribunal accepted the assessee’s challenge in the factual circumstances of the case.
Importantly, the ruling concerns the application of these particular CBDT instructions to reassessment notices issued in March 2021. It should not be read as laying down an unrestricted proposition that every reassessment based on an earlier investigation report is automatically invalid.
4. Revenue’s Defence Based on the Insight Portal
The Revenue disputed the assessee’s contention and attempted to establish that the reassessment notices were based on information uploaded to the Income Tax Department’s Insight Portal after 4 March 2021.
The Departmental Representative submitted that the Investigation Wing had uploaded the relevant information on 7 March 2021. Since this upload occurred after the CBDT instruction dated 4 March 2021, the Revenue argued that the reassessment notices were covered by the permitted categories of cases.
The Revenue also produced verification details from the Insight Portal for the three assessment years.
Its position was that the date on which the information was electronically uploaded was relevant for determining whether the reassessment action complied with the CBDT instructions.
However, the Tribunal found that the Revenue’s explanation did not adequately address the relationship between the information uploaded to the Insight Portal and the actual reasons recorded by the Assessing Officer.
The distinction was significant because the validity of the reassessment notices depended upon the information that had actually formed the basis of the Assessing Officer’s decision.
The mere existence of information on the Insight Portal was insufficient to establish that the Assessing Officer had relied upon that information when recording the reasons for reopening.
5. Tribunal Directs Revenue to Produce Relevant Records
The proceedings before the Tribunal involved examination of the Department’s explanations and supporting records over several hearings.
After receiving the additional ground, the Tribunal sought the Revenue’s response through an order-sheet entry dated 6 January 2026.
The assessee filed written submissions on 8 January 2026, while the Revenue submitted its response on 15 April 2026.
The Tribunal found that the Revenue’s initial response did not adequately address the specific issue raised by the assessee. Accordingly, on 9 July 2026, it directed the Department to furnish a fresh report.
A further response was submitted on 29 July 2026.
These proceedings demonstrate that the Tribunal did not decide the jurisdictional challenge merely on the basis of the assessee’s assertions. It called upon the Revenue to explain the information trail and examined the relevant records before reaching its conclusion.
The Tribunal also considered the CBDT instructions, the physical investigation report, the Insight Portal verification details and the reasons recorded for reopening each assessment year.
6. Natural Justice and Disclosure of Insight Portal Information
An important aspect of the order concerns the Departmental Representative’s initial reluctance to provide the Insight Portal verification details to the assessee.
The Revenue had produced these documents before the Tribunal but initially declined to share them with the assessee, stating that they were Insight Portal documents.
The Tribunal rejected this approach.
It observed that where information is proposed to be used in adjudicating a dispute, the principles of natural justice require that the information be made available to the parties concerned.
Accordingly, the Tribunal directed the Departmental Representative to provide the information to the assessee, and the direction was complied with.
This observation is significant because information maintained in departmental electronic systems may become relevant in reassessment disputes.
Where the Revenue relies upon such information to justify its action, the taxpayer must have a fair opportunity to examine and respond to the material being relied upon.
The Tribunal did not accept the proposition that the departmental character of an electronic record was, by itself, sufficient reason to withhold it from the assessee during adjudication.
7. Material Discrepancies Between Recorded Reasons and Insight Portal Figures
The decisive factual issue emerged when the Tribunal compared the amounts mentioned in the reasons recorded for reopening with the amounts reflected in the Insight Portal.
The discrepancies were substantial.
| Assessment year | Income alleged in recorded reasons | Income reflected in Insight Portal |
|---|---|---|
| 2014-15 | ₹1,41,89,843 | ₹1,08,74,913 |
| 2015-16 | ₹54,73,670 | ₹92,04,260 |
| 2016-17 | ₹66,63,818 | ₹29,48,292 |
For AY 2014-15, the Tribunal observed that the reasons recorded referred to alleged escaped income of ₹1,41,89,843, whereas the Insight Portal reflected ₹1,08,74,913. The Tribunal also noted that the Section 148 notice itself did not mention any amount.
For AY 2015-16, the reasons recorded mentioned ₹54,73,670, while the electronic record reflected ₹92,04,260.
Similarly, for AY 2016-17, the reasons recorded mentioned ₹66,63,818, whereas the Insight Portal showed ₹29,48,292.
These discrepancies undermined the Revenue’s contention that the Assessing Officer had relied upon the information uploaded to the Insight Portal.
The Tribunal then examined the physical investigation report dated 29 January 2021.
It found that the amounts mentioned in the recorded reasons matched the figures appearing in the physical information supplied by the Investigation Wing.
This correspondence established the factual connection between the recorded reasons and the earlier physical report.
Conversely, the differences between the recorded reasons and the Insight Portal figures weakened the Department’s attempt to connect the reassessment notices with the subsequent electronic upload.
The Tribunal therefore concluded that the actual basis of the reopening was the information physically received by the Assessing Officer on 2 February 2021.
8. Revenue’s Explanation Regarding an Additional PDF
During dictation of the order in open court, the Departmental Representative submitted that the Insight Portal also referred to a PDF document.
The Revenue suggested that the amounts appearing in the recorded reasons might be contained in that PDF.
However, the Tribunal observed that the PDF had neither been produced before the Bench nor shown earlier during the proceedings.
The Tribunal was therefore unable to accept the explanation as establishing the necessary connection between the recorded reasons and the Insight Portal information.
It further observed that even if the PDF contained the figures relied upon by the Revenue, questions would remain concerning the discrepancy between those figures and the amounts actually displayed on the Insight Portal.
The Revenue’s explanation did not displace the evidence that the recorded reasons corresponded with the earlier physical investigation report.
The Tribunal accordingly rejected the Department’s attempt to justify the reassessment notices on this basis.
9. Additional Legal Grounds Can Be Raised Before ITAT
The Revenue also relied upon the Delhi High Court decision in CIT v. Safetag International India Pvt. Ltd., reported in 332 ITR 622, to contend that the assessee could not raise an objection at the appellate stage when it had not been raised during the assessment proceedings.
The Tribunal did not accept this objection in the circumstances of the case.
It held that the additional ground raised by the assessee was a legal ground going to the root of the assessments.
The Tribunal referred to the Supreme Court’s decision in National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC), which recognises the Tribunal’s jurisdiction to entertain an additional question of law arising from facts already available on record, even if the question was not raised before the lower authorities.
The Tribunal observed that income-tax law is complex and that different interpretations may arise depending upon the statutory provisions and the facts of individual cases.
It therefore considered it appropriate to examine the jurisdictional objection raised by the assessee.
The decision reinforces the distinction between a new factual claim requiring investigation and an additional legal ground that can be adjudicated using existing records.
A taxpayer’s failure to raise a jurisdictional objection at an earlier stage does not necessarily prevent the Tribunal from considering that objection when the relevant facts are already available and the conditions governing admission of additional grounds are satisfied.
A related discussion of this principle is available in TaxGuru’s coverage of admission of additional legal grounds under the NTPC ruling.
10. Tribunal’s Finding on the Actual Basis of Reassessment
After examining the evidence, the Tribunal reached the conclusion that the recorded reasons were not based on the Insight Portal information.
It specifically noted that the reasons recorded for reopening did not refer to the Insight Portal.
The amounts appearing in those reasons also did not match the electronic information relied upon by the Revenue.
On the other hand, the amounts corresponded with the physical information communicated by the Investigation Wing through its letter dated 29 January 2021.
The Tribunal therefore held that the reopening had been initiated on the basis of the physical information received by the Assessing Officer on 2 February 2021.
Since that information had been received before 4 March 2021, the Tribunal held that the notices issued on 26 and 27 March 2021 violated the CBDT instructions dated 4 March 2021, read with the clarification dated 12 March 2021.
This finding was decisive.
The Tribunal did not merely hold that there were discrepancies in the figures or that the Insight Portal records were incomplete. It used those discrepancies to identify the actual source of the information on which the Assessing Officer had relied.
Having identified that source, the Tribunal applied the CBDT instructions and held that the reassessment notices could not be sustained.
11. Reassessment Notices and Consequential Assessments Quashed
The Tribunal allowed the assessee’s additional legal ground and quashed the reassessment notices issued under Section 148 for all three assessment years.
Since the notices initiating the proceedings were held invalid, the consequential assessments were also quashed.
The Tribunal did not examine the remaining grounds of appeal because the jurisdictional issue had already resulted in the annulment of the assessments.
Accordingly, all three appeals filed by the assessee were allowed.
The decision was pronounced in open court on 31 July 2026.
The operative result was not a remand for reconsideration of the additions or a direction to recompute income. The Tribunal annulled the reassessment proceedings themselves.
12. Legal Significance of the Decision
The ruling highlights the importance of establishing the actual information on which a reassessment notice is founded.
The Department may possess information from several sources, including investigation reports, electronic databases and risk-management systems. However, when the validity of a reassessment is challenged, the material relied upon by the Assessing Officer must be capable of being identified and reconciled with the recorded reasons.
The case also demonstrates that the date on which information is uploaded to an electronic portal does not necessarily establish that the uploaded information was the actual basis of the Assessing Officer’s decision.
In the present case, the recorded reasons matched the earlier physical report, while the electronic information contained different figures.
That factual distinction was central to the Tribunal’s decision.
The order is particularly relevant to disputes involving reassessment notices issued in March 2021 under the then-applicable provisions of the Income-tax Act, 1961.
Its application to other cases will depend upon the relevant CBDT instructions, the source of information, the recorded reasons and the documentary evidence available in the assessment record.
The decision should also be distinguished from cases arising under the subsequently introduced reassessment framework involving Section 148A. The procedural requirements and statutory context may differ.
For related discussions, see TaxGuru’s coverage of invalid reassessment approval under Section 151 and the statutory opportunity required under Section 148A(b). These concern separate procedural defects and should not be treated as identical factual situations.
13. Practical Implications for Taxpayers and Tax Professionals
The ruling provides several practical lessons for handling reassessment litigation.
First, taxpayers should obtain and examine the reasons recorded for reopening and compare them with the investigation reports or electronic information relied upon by the Assessing Officer.
Second, where the Department relies upon Insight Portal information, the relevant verification details, upload dates and supporting records may be important in establishing whether the information actually formed the basis of the reassessment.
Third, discrepancies between the recorded reasons and the departmental information should be examined carefully. Such discrepancies do not automatically invalidate a reassessment, but they may become material where they demonstrate that the Assessing Officer relied upon a different source of information.
Fourth, the applicable CBDT instructions should be examined with reference to the date of the notice and the statutory framework then in force.
Fifth, where a jurisdictional defect becomes apparent during appellate proceedings, the taxpayer may consider raising an additional legal ground, subject to the principles laid down by the Supreme Court in NTPC Ltd. v. CIT.
Finally, where the Revenue relies upon departmental electronic records during adjudication, the assessee should seek an opportunity to examine and respond to those records in accordance with the principles of natural justice.
The significance of the present decision is further illustrated by subsequent TaxGuru coverage of another ITAT Ranchi matter, Old Investigation Report Cannot Support March 2021 Reopening, in which the Bench referred to Pawan Kumar Khandelwal while examining a comparable dispute concerning earlier investigation information and subsequent electronic uploading.
14. Conclusion
The ITAT Ranchi held that the reassessment notices issued to Pawan Kumar Khandelwal for AYs 2014-15, 2015-16 and 2016-17 were invalid because the Assessing Officer had relied upon physical information received from the Investigation Wing before 4 March 2021, contrary to the applicable CBDT instructions as interpreted and applied by the Tribunal.
The Revenue’s reliance upon information uploaded to the Insight Portal on 7 March 2021 was rejected because the recorded reasons did not refer to that information and the amounts reflected in the portal differed from those used by the Assessing Officer.
The Tribunal also recognised the assessee’s right to raise an additional jurisdictional ground based on existing records and emphasised the requirement to disclose material relied upon during adjudication.
The reassessment notices and consequential assessments for all three assessment years were quashed, and the assessee’s appeals were allowed.
The ruling underlines that the legality of reassessment proceedings must be tested against the actual recorded reasons, the supporting information and the applicable legal and administrative requirements, rather than being justified merely by the subsequent availability of information in a departmental electronic system.
Cases Discussed
- National Thermal Power Co. Ltd. v. CIT, (1998) 229 ITR 383 (SC) — applied for admission of an additional pure question of law.
- CIT v. Safetag International India Pvt. Ltd., (2011) 332 ITR 622 (Delhi) — cited by Revenue concerning objections not raised during assessment.
