Reassessment orders are null and void due to failure to provide reasons and applying unamended provisions.

By | May 19, 2026
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Reassessment orders are null and void due to failure to provide reasons and applying unamended provisions.

Issue

Whether the reassessment orders passed under the Income-tax Act are legally sustainable when the Assessing Officer (AO) failed to provide the recorded reasons for reopening the assessment despite repeated requests, and issued Section 148 notices on 01.04.2021 following the old, unamended procedural law instead of the newly enforced reassessment regime.

Facts

  • The cases of the assessee for Assessment Years 2016-17 and 2017-18 were reopened based on allegations that clients’ securities were misused for the benefit of the assessee and its group entities to secure bank loans.

  • During the reassessment proceedings, the Assessing Officer (AO) claimed lack of access to certain records but still concluded that the securities had been misused.

  • The assessee persistently and repeatedly requested copies of the reasons recorded by the AO for reopening the assessments.

  • The AO completely denied the requests, failed to furnish the recorded reasons, and improperly proceeded with the reassessment process.

  • On 01.04.2021, the AO issued notices under Section 148 of the Income-tax Act, 1961 for both assessment years.

  • Despite the issuance date of 01.04.2021 triggering the newly amended statutory system for reassessment (which requires compliance with Section 148A), the AO continued to follow the old, unamended provisions of the law.

Decision

  • Illegal Assumption of Jurisdiction: The court held that since the assessee persistently demanded the reasons for reopening and the AO denied them, the assumption of jurisdiction by the AO was entirely illegal.

  • Violation of the New Reassessment Regime: Notices issued on or after 01.04.2021 are mandatorily governed by the newly substituted reassessment provisions. By persisting with the unamended legacy provisions, the AO committed a fundamental procedural illegality.

  • Assessment Orders Quashed: Because of the dual illegalities—failure to supply the recorded reasons and applying the incorrect, obsolete law—the resultant reassessment orders for both assessment years were declared null and void and were struck down.

  • Ruling in Favour of Assessee: The entire issue was decided conclusively in favour of the assessee.

Key Takeaways

  • Mandatory Supply of Reasons: Providing the recorded reasons for reopening an assessment to the assessee is a strict jurisdictional prerequisite. Failing to supply them upon request invalidates the entire reassessment exercise.

  • Strict Adherence to Timelines for Amended Law: Any reassessment notice issued under Section 148 on or after April 1, 2021, must strictly follow the new regime (incorporating Section 148A mechanics). A revenue officer cannot arbitrarily choose to apply the older, unamended provisions.

  • Procedural Flaws Fatal to Revenue: Even if there are substantive allegations of financial misuse (like misappropriating client securities for loans), fundamental procedural and statutory deviations by the tax department will render the final tax assessment completely void.

IN THE ITAT DELHI BENCH ‘F’
R.K. Stockholding (P.) Ltd.
v.
ACIT*
Challa Nagendra Prasad, Judicial Member
and Sanjay Awasthi, Accountant Member
IT Appeal Nos. 8020 and 8021 (Delhi) of 2025
[Assessment Years 2016-17 and 2017-18]
MAY  13, 2026
Piyush Kaushik, Adv. for the Appellant. Ms. Monika Singh, CIT DR for the Respondent.
ORDER
Sanjay Awasthi, Accountant Member. – 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 Pr. CIT v. Jagat Talkies Distributors 398 ITR 13 (Delhi) 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. v. Union of India 444 ITR 41 (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 Jagat Talkies Distributors (supra), which itself follows the mandate given by the GKN Driveshafts (India) Ltd. v. ITO/[2003] 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.