The Income Tax Appellate Tribunal, Delhi, has reinforced a foundational principle in direct tax jurisprudence: when identical facts and circumstances persist across assessment years, the revenue cannot arbitrarily alter its prior position without justification. This judgment provides critical clarity for taxpayers and assessors alike on the limits of reassessment powers.
Background & Facts
The Dispute
The dispute arose from the reassessment of the assessee’s income for Assessment Year 2013-14 under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961. The assessee, an individual operating under the name M/s. Neno Computer, had not filed a return of income for the year. The Assessing Officer (AO) discovered cash deposits exceeding ₹14 crores in the assessee’s bank accounts during FY 2012-13, along with TDS of ₹49,040 under Section 194H. In the absence of a return or any explanation, the AO made a blanket addition of the entire ₹14,08,85,390 as unexplained income.
Key Facts
- The assessee was engaged in the consignment business of 'Khal Binola' on behalf of manufacturers in Haryana, selling to Rajasthan, under the name Sri Enterprises from October 2011 to November 2012.
- Prior to this, the assessee ran a small computer repair shop in Vaishali Sabha Market, Delhi, which he closed due to personal reasons in FY 2012-13.
- He resumed computer repair work in Hansi, Haryana, during FY 2012-13.
- In the immediately preceding Assessment Year 2012-13, the AO had assessed the assessee under Section 143(3) read with Section 147, applying a net profit rate of 1% on the gross bank deposits, recognizing the assessee as a commission agent.
- TDS of ₹49,040 under Section 194H was deducted on commission payments received by the assessee during FY 2012-13.
- The assessee made no fresh claims or disclosures in AY 2013-14 beyond what was previously disclosed and accepted.
Procedural History
- 16.12.2019: Assessment order passed for AY 2012-13, adding income at 1% of gross bank transactions.
- 29.03.2022: Reassessment order issued for AY 2013-14, adding ₹14,08,85,390 as unexplained income.
- 09.06.2025: Ld. Commissioner of Income Tax (Appeals) [NFAC, Delhi] allowed the assessee’s appeal, upholding the 1% profit rate and deleting the balance addition.
- 16.03.2026: Hearing held before ITAT Delhi.
- 27.05.2026: ITAT Delhi delivered judgment dismissing the Revenue’s appeal.
Relief Sought
The Revenue sought to restore the original addition of ₹14,08,85,390, arguing that the 1% profit rate applied in AY 2012-13 could not bind the assessment for AY 2013-14. The assessee sought confirmation of the Ld. CIT(A)’s order.
The Legal Issue
The central question was whether the principle of consistency, though not res judicata, requires the revenue to maintain a uniform approach when identical facts and circumstances prevail across consecutive assessment years, and whether the reopening of an assessment under Section 147 is valid merely because no return was filed, absent any change in underlying facts.
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that each assessment year is a separate unit and the doctrine of res judicata does not apply to income tax proceedings, as held in Radhasoami Satsang v. CIT. It argued that the assessee had failed to provide any documentary evidence of commission income or business records in AY 2013-14, and that the mere fact of TDS deduction under Section 194H was insufficient to substantiate the 1% profit rate. It further asserted that the Ld. CIT(A) erred in relying on the previous year’s assessment, which itself was an addition based on best judgment, and that allowing such reliance would encourage tax evasion.
For the Respondent (Assessee)
The assessee argued that the facts in AY 2013-14 were identical to those in AY 2012-13: same business activity, same nature of bank deposits, same TDS deduction under Section 194H, and no change in the assessee’s conduct or business structure. He relied on CIT Central-III v. M/s Excel Industries Ltd. and Radhasoami Satsang, emphasizing that while res judicata does not strictly apply, the principle of consistency must govern tax administration to prevent arbitrary and harassing reassessments. He submitted that the AO’s own prior assessment had already accepted the commission agent model, and there was no material to suggest a change in circumstances.
The Court's Analysis
The Tribunal examined the precedents cited by both parties, particularly Radhasoami Satsang v. CIT and CIT v. Excel Industries Ltd., and clarified the nuanced distinction between res judicata and the doctrine of consistency in tax law. It observed that while each assessment year is a separate entity, the law does not permit the revenue to adopt contradictory positions on identical facts without justification.
"Where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year."
The Tribunal noted that the AO himself had, in the preceding year, accepted the assessee’s role as a commission agent and applied a 1% profit rate on gross bank deposits - a rate consistent with the TDS deducted under Section 194H. The Revenue had not challenged that assessment. In the absence of any new evidence, change in business model, or indication of concealment, the Tribunal held that the Ld. CIT(A) was fully justified in applying the same methodology.
The Tribunal rejected the Revenue’s argument that non-filing of a return in AY 2013-14 justified a blanket addition. It emphasized that the burden of proof under Section 68 or Section 115BBE does not shift to the assessee merely because a return is not filed - the revenue must still establish a prima facie case of unexplained income. Here, the bank deposits were not unexplained; they were explained by the prior year’s consistent assessment and corroborated by TDS records.
The Tribunal further held that the Revenue’s attempt to reopen the matter was an abuse of process, designed to circumvent the settled position of the AO’s own assessment. The principle of consistency, though not a statutory doctrine, is an essential component of fair tax administration and rule of law.
The Verdict
The Revenue’s appeal was dismissed. The Tribunal upheld the order of the Ld. CIT(A) dated 09.06.2025, confirming the addition of income at 1% of the gross bank deposits amounting to ₹1,40,88,539, and deleting the balance addition of ₹12,67,96,851. No interest or costs were awarded. The order was pronounced on 27.05.2026.
What This Means For Similar Cases
Consistency Overrides Technical Non-Filing
- Practitioners must argue that non-filing of a return does not automatically validate a blanket addition if the underlying facts were previously accepted by the revenue.
- Where TDS records and prior assessments corroborate the nature of income, the revenue must justify any deviation with concrete evidence of changed circumstances.
Precedent-Based Assessments Are Binding in Practice
- Even if a prior assessment was made under best judgment, if the revenue did not challenge it and the facts remain unchanged, it forms a de facto precedent for subsequent years.
- Taxpayers can rely on prior year’s treatment to resist arbitrary reassessments, especially in commission-based or cash-intensive businesses.
Revenue Must Justify Reopening with New Material
- Reopening under Section 147 requires tangible reasons beyond mere non-filing or desire to reassess.
- The ITAT has now clarified that the absence of a change in facts or discovery of new information renders a reopening legally unsustainable, even if the return was not filed.
