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Facts
The assessee, an LLP engaged in import and trading of diamonds, filed its return for AY 2018-19. Information received from the Investigation Wing led to the reopening of the assessment under Section 148, alleging that sale transactions were actually purchase transactions. The Assessing Officer made an addition of Rs. 8,68,28,328/- under Section 69C, which was confirmed by the CIT(A).
Held
The Tribunal held that the notice issued under Section 148 for Assessment Year 2018-19 was invalid because it was issued beyond the period of three years and the approval was obtained from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT), as required by Section 151(ii) of the Act. The assessment completed based on this invalid notice was therefore quashed.
Key Issues
Whether the reopening of assessment under Section 148 is valid when the approval for issuance of notice beyond three years was obtained from PCIT instead of PCCIT as per Section 151(ii) of the Income Tax Act, 1961.
Sections Cited
148, 147, 69C, 151, 148A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SMT. BEENA PILLAI, JM &
Shankeshwar Exim LLP, ITO – 19(3)(1), A43, Plot No. 290, Piramal Chambers, Pratik Arcade, Opera House, Vs. Mumbai-400013. Mumbai-400004. PAN: ADKFS4796E Assessee) : Revenue) : Shri Jayant R. Bhatt, CA Assessee by Revenue by : Shri Arun Kanti Datta, CIT-DR Date of Hearing 04.12.2025 : Date of Pronouncement : 05.12.2025 O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 30.06.2025 for Assessment Years (AY) 2018-19. The grounds raised by the assessee are as under:
Shankeshwar Exim LLP “1. Under the facts and circumstances of the case and in law reopening u/s 148 being bad in law on various counts and that the order passed in consequence there to should be annulled.
Under the facts and circumstances of the case and in law the Ld. CIT (A) has erred in conforming the action of the Ld. AO of reopening the assessment merely due to change in opinion, therefore bad-in-law.
3. Under the facts and circumstances of the case and in law the Ld. CIT (A) has erred in conforming the action of the Ld. AO in holding that appellant has carried out transaction of purchase with Antique Exim Pvt. Ltd. and associated parties without appreciating the fact that there was no transaction of purchase with Antique Exim Pvt. Ltd. and its associated parties.
4. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in conforming the action of the Ld. AO in making addition of Rs. 8,68,28,328/- as Unexplained Expenditure u/s 69C of the Income Tax Act, by treating the legitimate Sale transaction of appellant with M/s Shri Ratnraj Gems Pvt. Ltd., Suryakoti Trading Pvt. Ltd., Gurukul Exim Pvt. Ltd., Rouak Jain (Prop-Riddhi Gems) and Bhanwarlal Gurjar (Prop.-Nakoda International)as accommodation entry, merely en assumptions and presumptions, and by relying on the general information received from Investigation Wing, without appreciating that these are genuine sale transactions, done during the regular course of business, duly recorded in the books of accounts as well as the books of the respective party, and routed through proper banking channels i.e. through RTGS/Account payee cheques and already part of total sales shown by the appellant.
5. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in conforming the addition of Rs. 8,68,28,328/- as Unexplained Expenditure u/s 69C of the Income Tax Act, by treating the legitimate Sale transaction of appellant with M/s Shri Ratnraj Gems Pvt. Ltd., Suryakoti Trading Pvt. Lid., Gurukul Exim Pvt. Ltd., Ronak Jain (Prop-Riddhi Gems) and Bhanwarlal Gurjar (Prop. -Nakoda International)as accommodation entry, without appreciating the fact that said transactions are part of total sales of the appellant and the addition has resulted in double taxation of same amount.
6. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in conforming the action of the Ld. AO wherein he failed to appreciate that the Appellant had discharged the primary onus cast upon it by submitting the requisite documentary evidences in support of the Transactions with abovementioned parties, Shankeshwar Exim LLP such as Ledger Account Confirmation, Invoice of sales, Bank statement of Appellant highlighting transactions.
7. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in conforming the action of the Ld. AO in failing to provide the documents relied upon by the Ld. AO and failed to provide opportunity to cross examine to appellant with the evidence/person relied upon by Ld. AO and thereby contravening the principles of fair opportunity and natural justice ensured by our legal system.
8. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in conforming the action of the Ld. AO in making the additions merely on the basis of the information received from Investigation Report, without taking cognisance of the detailed submissions and requisite evidences filed by the Appellant in support thereof and not making independent enquiries OR bringing any corroborative material evidences on record to prove that the Sale transactions are non-genuine.
9. Under the facts and circumstances of the case and in law the Ld. CIT (A) has erred in conforming the action of the Ld. AO in making a perverse assessment by merely relying on the information from Investigation Wing, without proper application of mind, following principles of natural justice, making any independent enquiries and collating requisite evidences, and in thereby lending the assessment untenable in law and on facts.
The above grounds of appeal are without prejudice to one other. Further, the Appellant craves leaves to add, alter, vary, amend and /OR withdraw OR substitute any OR all of the above grounds of appeal.”
2. The assessee is an LLP engaged in the business of Import and Trading of Diamonds. The assessee filed the return of income for AY 2018-19 on 31-03-2019 declaring income at Rs. 1,08,041/-. Thereafter information was received by the Assessing Officer (AO) from Investigation Wing regarding assessee's transaction with certain parties and according assessee's case was reopened by issuing notice u/s 148 of the Act on 26-04-2022. The AO completed the assessment u/s 147 r.w.s 144B where the AO has treated the sale transaction of assessee with the parties as Purchase transaction to make an addition of Rs. 8,68,28,328/- u/s 69C of the Act. On further appeal the CIT(A) confirmed the addition.
3. The primary contention of the assessee is that the notice u/s. 148 dated 26.04.2022 issued by the AO is not valid for the reason that the AO has not obtained the approval from the appropriate authority as per section 151 of the Act. The ld. AR submitted that if the said ground is allowed then the grounds raised on merits would become academic.
4. We heard the parties and perused the material on record. The ld. AR submitted that the notice under section 148 dated 26.04.2022 is beyond the period of 3 years and therefore as per the provisions of Section 151 of the Act the AO should have obtained the approval from Principle Chief Commissioner of Income Tax (PCCIT). The ld AR further submitted that in the present case the AO has obtained approval from Principle Commissioner of Income Tax (PCIT) while issuing notice under section 148 and therefore the notice is invalid. In this regard, we notice that the Hon'ble Bombay High Court in the case of M/s. Vodafone Idea Limited Vs DCIT (WP No. 2768 of 2022 dated 06.02.2024) has considered and identical issue and held that- 1. Petitioner is impugning a notice dated 19th March 2022 issued under Section 148A(b) of the Income Tax Act, 1961 ("the Act"), the order passed under Section 148A(d) of the Act and the notice both dated 7th April 2022 issued under Section 148 of the Act. One of the grounds raised is that the sanction to pass the order under Section 148A(d) of the Act and issuance of notice under Section 148 of the Act is invalid inasmuch as the sanction has been admittedly issued by the Principal Commissioner of Income Tax ("PCIT") and not by the Principal Chief Commissioner of Income Tax (PCCIT").
2. Petitioner's request for a copy of the sanction has also been denied. Even in the affidavit in reply, the Department is refusing to give the sanction which makes us wonder what is the national secret involved in that, that Assessee is being refused what he is rightfully entitled to receive from the Department. In the affidavit in reply, the stand taken by the Revenue is it will be made available during the re- assessment proceeding.
Shankeshwar Exim LLP 3. The impugned order and the impugned notice both dated 7 April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai 5. The matter pertains to Assessment Year ("AY) 2018-19 and since the impugned order as well as the notice are issued on 7th April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section 151 (ii) of the Act. The provisio to Section 151 has been inserted only with effect from 1" April 2023 and, therefore, shall not be applicable to the matter at hand.
In this circumstances, as held by this Court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside.
The ratio laid down by the Hon'ble Jurisdictional High Court in the above case is that even in cases where the notice u/s. 148A(b) was issued before completion of 3 years, if the notice u/s. 148 is issued beyond 3 years the approval needs to be obtained from PCCIT as per Section 151(ii) of the Act.
In assessee's case the notice under section 148 has been issued on 26.04.2022. On perusal of the notice u/s. 148 we notice that the approval has been obtained from PCIT Mumbai-19. The relevant extract of the notice u/s. 148 is as under – “Notice under section 148 of the Income-tax Act, 1961 Sir/Madam/ M/s I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961 (here in after referred to as "the Act") for Assessment Year 2018-19 information flagged by the risk management strategy formulated in this regard suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section 148A of the Act has Shankeshwar Exim LLP been passed in such case vide DIN ITBA/AST/F/148A/2022-23/1042859139(1) dated 26/04/2022 and annexed herewith for reference, 2. 1, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other, allowance or deduction for the Assessment Year 2018-19 and I, hereby, require you to furnish, within 30 days from service of this notice, a return in the prescribed form of the Assessment Year 2018-19.
This notice is being issued after obtaining the prior approval of the PCIT, Mumbai-19 accorded on date 26/04/2022 vide Reference No: 100000028890453.
RAVIKIRAN MANOHARLAL KUMAR WARD 19(3)(1), MUMBA”
From the perusal of these facts, we are of the considered view that the ratio laid down by the Hon'ble High Court is applicable to the present case. Accordingly respectfully following the above decision of the Hon'ble Bombay High Court we hold that the notice issued by the AO u/s.148 beyond 3 years on 26.04.2022 with the approval of PCIT instead of PCCIT as per the provisions of section 151(ii) is not valid. Consequently the assessment completed based on the invalid notice is liable to be quashed.
Since we have considered the legal ground and allowed the appeal the rest of the grounds raised by the assessee have become academic and left open accordingly.
In the result, appeal of the assessee is allowed.