DCIT v Rakesh Kumar Pandey: ITAT Lucknow on Search-Based Sec 143(3) Additions

This case study examines a consolidated ITAT Lucknow order disposing of multiple cross-appeals and cross-objections between DCIT, Central Circle-2, Lucknow and Rakesh Kumar Pandey, a proprietor of a government-contracting business, spanning assessment years 2014-15 through 2022-23 following a search action under Section 132. The order is a useful illustration of how Section 143(3) assessments built on general tax-audit-report qualifications, rather than transaction-specific defects, fare before the Tribunal across several years in a single consolidated proceeding.

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: DCIT, Central Circle-2, Lucknow vs Rakesh Kumar Pandey, Gonda UP
• Bench: Income Tax Appellate Tribunal - Lucknow
• Date: 11 December 2025
• Court level: Tribunal (ITAT)
• Sections engaged: 132, 143(3)
• Outcome: Partial relief

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Facts of the case

A search and seizure operation under Section 132 was carried out on 5 February 2022 on the business and residential premises of M/s Alok Construction, the proprietary concern of Rakesh Kumar Pandey, a government contractor engaged in road construction work for the UPPWD. The consolidated proceedings before the Tribunal covered assessee appeals (ITA Nos. 347 to 353/Lkw/2025) for AY 2014-15 to 2019-20 and AY 2022-23, Revenue appeals (ITA Nos. 398, 399, 402, 405/Lkw/2025, I.T.(SS)A. No. 460/Lkw/2025, and ITA Nos. 557 & 608/Lkw/2024), and two cross-objections filed by the assessee (CO Nos. 27 and 28/Lkw/2024) for AY 2020-21 and 2021-22.

Per the consolidated synopsis filed on behalf of the assessee, books of account for the relevant years were stated to have been regularly maintained and audited, with returns and tax audit reports filed within due dates. During the search, in a statement recorded under Section 132(4), the assessee is recorded as having admitted that the net profit percentage shown by the business (approximately 6%) was below the usual profit in similar businesses (approximately 8%), attributed to deficiencies/incompleteness of records, and offered additional income for AY 2021-22 and 2022-23 (aggregating approximately Rs. 16-17 crore) to cover deficiencies in records for that year and preceding years, including unproven sundry creditors and investment in properties.

The assessing officer, relying on general observations recorded by the tax auditor in Form 3CB — such as the absence of proper stock records, inability to verify personal-nature expenses, and the GP ratio not being ascertainable — proceeded to estimate the assessee's income at higher profit rates (around 11%) for several years, as against profit rates of roughly 1.65% to 6.6% declared by the assessee. The first appellate authority had, in at least one year (AY 2018-19), already granted relief against the original assessment, and the synopsis records that additions on account of "extra profit" were deleted for AY 2021-22 and 2022-23.

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Issues raised

• Whether the assessing officer was justified in estimating income under Section 143(3) based on general qualifications recorded by the tax auditor in Form 3CB, without specific adverse findings on particular transactions or figures.
• Whether the additional income admitted in the Section 132(4) statement for AY 2021-22 and 2022-23 could be extrapolated to sustain additions in the earlier assessment years under appeal.
• Whether the relief already granted by the first appellate authority in certain years (including the deletion of additions) was sustainable on further appeal by the Revenue.
• Whether the delay in filing the cross-objection for AY 2020-21 (CO No. 28/Lkw/2024), filed beyond the limitation period, merited condonation.

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What the court held

On the threshold procedural point, the Tribunal condoned the delay in filing CO No. 28/Lkw/2024, noting that the assessee's application pleaded the delay was unintentional and beyond its control, and that the Departmental Representative did not object to condonation; the cross-objection was accordingly admitted for hearing on merits.

On the substantive additions, the outcome across the nine assessment years under consolidated appeal was mixed. Per the source, the assessee obtained relief on some issues — including the deletion of an addition in at least one assessment year — while additions were sustained in other years, producing a partial outcome rather than a blanket win for either side. The reasoning draws on the tax auditor's Form 3CB observations for each year being general in character (non-maintenance of stock records, inability to verify personal expenses, GP ratio not ascertainable, and similar qualifications) rather than findings tied to specific transactions, which was central to how the additions for different years were evaluated.

Because the proceedings bundled together assessee appeals, Revenue appeals, and cross-objections touching nine different assessment years, the Tribunal's consolidated order necessarily produced year-specific outcomes rather than a single uniform result — consistent with the "partial relief" classification recorded for the case as a whole.

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Strategy observations

1. The assessee filed a single consolidated synopsis covering all nine appeals and both cross-objections, organised issue-wise across assessment years rather than year-by-year — a format that allowed common arguments (on the nature of the Form 3CB observations) to be presented once across the consolidated proceeding, per source.
2. The synopsis drew a distinction between general auditor qualifications (e.g., GP ratio not ascertainable, stock records not maintained) and specific adverse findings on particular transactions, framing the former as an insufficient basis for income estimation — a distinction recorded in the source preview.
3. The synopsis explicitly flagged that additional income admitted during the search for AY 2021-22 and 2022-23 should not create an adverse inference for extra profits in earlier years, addressing the extrapolation issue directly in the submissions before the Tribunal.
4. On the limitation point for CO No. 28/Lkw/2024, the assessee's application for condonation characterised the delay as unintentional, and the absence of objection from the Departmental Representative was recorded by the Tribunal as a factor in the condonation being granted.
5. Given that the order disposes of appeals and cross-objections spanning AY 2014-15 to 2022-23 together, researchers tracking this matter should treat the year-wise outcomes as distinct rather than assuming a single result applies uniformly across all nine years.

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Why this case matters

The order is a useful illustration of how search-triggered scrutiny assessments under Section 132 and Section 143(3) are tested, year by year, against the specificity (or lack of it) in the qualifications recorded by tax auditors in Form 3CB. Where such qualifications are general observations about record-keeping rather than findings on identified transactions, the consolidated treatment of multiple assessment years in a single Tribunal order allows for differentiated outcomes — relief in some years, sustained additions in others — rather than a single determinative finding governing the entire search assessment cycle.

The case also reflects a recurring procedural feature of search-based litigation: multiple appeals and cross-objections by both the assessee and the Revenue, spanning several assessment years, being clubbed for disposal through one consolidated order, with condonation-of-delay questions on cross-objections resolved as a preliminary matter before the substantive additions are addressed.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/124011679/