Income Tax Appellate Tribunal Ruling in Sunita Salhotra vs. ITO (ITA No. 4306/Del/2024)

Brief Information 
The case of Sunita Salhotra vs. Income Tax Officer (ITA No. 4306/Del/2024) pertains to the Assessment Year (AY) 2015-16 and was adjudicated by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’. The appeal was filed by the assessee, Sunita Salhotra, against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, dated 31/07/2024. The primary issue revolved around the validity of the notice issued under Section 148 of the Income Tax Act, 1961, and the subsequent additions made by the Assessing Officer (AO). The ITAT allowed the assessee’s appeal, quashing the reassessment notice and setting aside the additions.

Detailed About Case
The case originated when the Income Tax Department reopened the assessee’s case for AY 2015-16 under Section 148 of the Income Tax Act. The Assessing Officer completed the reassessment on 24/05/2023, determining the total income at ₹2,01,94,960, against the declared income of ₹3,60,790. The key additions included:

1. Addition of ₹1,92,56,476: This amount, accrued from the sale of shares of M/s Goldline International Finvest Ltd. (GIFL), a listed public limited company, was treated as income from other sources by the AO, despite the assessee’s claim that it was exempt under Section 10(38) of the Act.
2. Addition of ₹5,77,694: This was added under Section 69C of the Act on a presumptive basis, alleging unexplained expenditure.

The assessee appealed to the CIT(A), but the appeal was dismissed ex-parte due to non-compliance with hearing notices, as the assessee’s representative could not access the email account due to a forgotten password. The assessee then approached the ITAT, raising several grounds, including the invalidity of the Section 148 notice, procedural irregularities, and violation of natural justice principles.

The ITAT focused primarily on the legal issue of the validity of the notice issued under Section 148, particularly in light of the Supreme Court’s rulings in Union of India vs. Ashish Agarwal and Union of India vs. Rajiv Bansal.

View of Taxpayer
The assessee, represented by Shri Sanjay Sehgal, CA, raised the following key arguments:

1. Non-Compliance with Hearing Notices: The CIT(A) dismissed the appeal due to non-submission of responses to hearing notices. The assessee argued this was beyond their control, as the email account used for communication was inaccessible due to a forgotten password, which was later reset.
2. Invalidity of Section 148 Notice: The original notice issued on 30/06/2021 was invalid as it was time-barred under the old provisions of Section 149, which allowed notices to be issued within six years from the end of the relevant AY (i.e., by 31/03/2022 for AY 2015-16). The subsequent notice issued on 25/07/2022, following the Supreme Court’s decision in Ashish Agarwal, was also argued to be invalid, as it fell beyond the limitation period and did not comply with the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA).
3. Exemption of Capital Gains: The assessee contended that the ₹1,92,56,476 from the sale of GIFL shares was exempt under Section 10(38), as the shares were of a listed company, and the transaction was subject to Securities Transaction Tax (STT).
4. Unjust Additions: The addition of ₹5,77,694 under Section 69C was challenged as being based on presumptions without concrete evidence. The assessee also argued that the additions relied on third-party statements and investigation wing reports, which were not shared with the assessee, violating principles of natural justice.
5. Procedural Irregularities: The assessee argued that the notices under Sections 148A(b), 148A(d), and 148, issued by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO), were invalid under Section 151A read with Section 144B of the Act, which mandates faceless procedures.

The assessee sought quashing of the reassessment order and deletion of the additions or, alternatively, remanding the case back to the CIT(A) for fresh adjudication.

View of Department
The Income Tax Department, represented by Shri Sahil Kumar Bansal, Sr. DR, defended the actions of the AO and CIT(A):

1. Validity of Reassessment: The Department argued that the reassessment was valid, as the notice issued on 25/07/2022 complied with the Supreme Court’s directions in Ashish Agarwal, which allowed notices issued between 01/04/2021 and 30/06/2021 to be treated as show-cause notices under Section 148A(b). The subsequent notice was issued within the extended time limit provided by TOLA.
2. Justification of Additions: The Department supported the addition of ₹1,92,56,476, arguing that the income from the sale of GIFL shares was not exempt under Section 10(38) and was correctly classified as income from other sources. The addition of ₹5,77,694 under Section 69C was justified based on the investigation wing’s report and third-party statements.
3. Dismissal by CIT(A): The Department upheld the CIT(A)’s ex-parte dismissal, citing the assessee’s failure to respond to multiple hearing notices.
4. Reliance on Supreme Court Ruling: The Department urged the ITAT to decide the case in line with the Supreme Court’s ruling in Rajiv Bansal, asserting that TOLA extended the limitation period for issuing notices.

Status of Case
The ITAT allowed the assessee’s appeal on 12/02/2025, quashing the notice issued under Section 148 dated 25/07/2022 as time-barred. Consequently, the reassessment order and the additions made by the AO were set aside. The other grounds raised by the assessee regarding the merits of the additions were deemed academic and not adjudicated, as the legal issue of the notice’s validity was decisive.

Summary
The ITAT’s ruling in Sunita Salhotra vs. ITO hinged on the legal question of the validity of the Section 148 notice for AY 2015-16. The Tribunal relied on the Supreme Court’s decision in Union of India vs. Rajiv Bansal, where the Revenue conceded that notices issued on or after 01/04/2021 for AY 2015-16 were to be dropped, as they were beyond the limitation period under Section 149 and not covered by TOLA. The notice issued on 25/07/2022 was thus quashed, rendering the reassessment order invalid. This case underscores the importance of adhering to statutory limitation periods and the impact of judicial precedents on reassessment proceedings.

Court Order in Detail
The ITAT’s order, pronounced on 12/02/2025, is summarized as follows:

1. Background: The assessee’s case was reopened under Section 148, with the reassessment completed on 24/05/2023, adding ₹1,92,56,476 (from share sales) and ₹5,77,694 (unexplained expenditure). The CIT(A) dismissed the appeal ex-parte due to non-compliance.
2. Legal Issue: The ITAT focused on the validity of the Section 148 notice issued on 25/07/2022, following an earlier notice on 30/06/2021. The assessee argued that both notices were time-barred, as the limitation period for AY 2015-16 ended on 31/03/2022 under Section 149.
3. Supreme Court Precedent: The ITAT referred to the Supreme Court’s ruling in Union of India vs. Rajiv Bansal (Civil Appeal No. 8629/2024), where the Revenue conceded that notices for AY 2015-16 issued on or after 01/04/2021 were to be dropped. The Tribunal noted the Additional Solicitor General’s statement that TOLA did not extend the limitation for AY 2015-16.
4. Decision: The ITAT held that the notice issued on 25/07/2022 was beyond the six-year limitation period (ending 31/03/2022) and not covered by TOLA. Consequently, the notice was quashed, and the reassessment order was set aside.
5. Other Grounds: Since the legal ground was sufficient to resolve the appeal, the ITAT did not adjudicate the merits of the additions or procedural issues, deeming them academic.

Order PDF Link: ITAT Order - Sunita Salhotra vs. ITO 

Note: The link is illustrative, as the actual order PDF may not be publicly available. Please check the official ITAT website. 

Disclaimer: - The information provided in this blog is for educational and informational purposes only and is based on the publicly available details. It does not constitute legal, tax, or professional advice. Readers are encouraged to consult qualified professionals for advice tailored to their specific circumstances. The views expressed are derived from the ruling and do not reflect any endorsement or opinion by the blog author or website.