ACIT221, MUMBAI vs. AARTI KHOSLA, MUMBAI

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ITA 2967/MUM/2026Status: DisposedITAT Mumbai10 September 2026AY 2016-1711 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings were void ab initio because the notice under section 148 was issued without obtaining the required sanction from the Principal Chief Commissioner of Income Tax, as the reopening was beyond three years. Consequently, the addition made by the Assessing Officer was not adjudicated on merits.

What were the facts?

The Assessing Officer made an addition of Rs. 2,80,00,000/- based on seized Excel sheets and statements, alleging unexplained cash loans advanced by the assessee. The assessee denied the transactions and challenged the validity of reassessment proceedings due to improper sanction for issuing the notice.

What were the issues?

Whether the reassessment proceedings are valid when the notice under section 148 was issued without the requisite sanction from the competent authority as per section 151, and whether the seized Excel sheets and statements constitute sufficient evidence for addition under section 69.

Which sections of the Income-tax Act were involved?

Section 69,Section 132(4),Section 132(4A),Section 148,Section 148A,Section 151,Section 292C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI SIDDHARTHA NAUTIYAL

Heard together (2 matters)

ITA 2967/MUM/2026
CO 278/MUM/2026

Read from the judgment's own cause title. This page is filed under one of them.

PER SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER: The captioned appeal by the Revenue and cross objection by the assessee are directed against the order dated 19.01.2026 passed by the Commissioner of Income-tax (Appeals)-51, Mumbai {in short the ld CIT(A)] for assessment year 2016-17. The relevant grounds raised by the Revenue in its appeal are reproduced as under:

1.

Whether on the facts and in the circumstances of the case and in law, the Ld. ClT(A) has erred in deleting the addition of Rs.2,80,00,000/- mode under section 69 of the lncome Tax Act, 1961, without appreciating thot the addition was based on incriminating material in the form of Excel sheets seized during the course of search proceedings and corroborated by sworn statements establishing unexplained investment made by the assesse. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. ClT(A) has erred in holding that the seized Excel sheets recovered during search proceedings did not constitute valid evidence against the assessee, without appreciating that the said documents were seized during search and ore covered by statutory presumption under sections 132(4A) and 292C of the lncome Tax Act, 1967. 3. Whether on the facts and in the circumstances of the case and in low, the Ld. CIT(A) hos erred in ignoring the evidentiary value of the statement recorded on oath under section 132(4) of the lncome Tax Act, 1,961, wherein the intermediary, Shri Devendro Noroin, categorically admitted to facilitating cash loon transactions and specifically identified the assessee as one of the persons who advanced cash loans through him. 4. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) hos erred in accepting the denial and affidavit filed by the assessee without appreciating thot the assessee failed to discharge the burden of proof cost upon her under section 69 of the lncome Tax Act, 7961, to satisfactorily explain the nature and source of the unexplained investment reflected in the seized material. 5. Whether on the facts and in the circumstances of the case and in law, the order of the Ld.C1T(A) is erroneous and unsustainable in law and on facts and is liable to be set aside and the order of the Assessing Officer restored' 6. The Appellant craves leave to add, amend, alter, vary or withdraw any of the above grounds of appeal at or before the time of hearing.

2.

The assessee, inter alia, has challenged the validity of the reassessment proceedings on the ground that the notice under section 148 of the Income-tax Act, 1961 (“the Act”) was issued without obtaining the sanction of the competent authority as prescribed under section 151 of the Act. Grounds raised by the assessee in CO 278/Mum/2026 are reproduced as under:

“1. That on the facts and circumstances of the case, the Ld. CIT (A), has passed the order as per provisions of the Act and hence the appeal filed by the department is not maintainable. 2. Whereas, the Learned ACIT, Circle 22(1), Mumbai (AO) erred in law and on facts in assuming jurisdiction in conducting the reassessment proceedings. The Learned AO had obtained the approval/sanction of PCIT-20, Mumbai instead of PCCIT, Mumbai, thereby rendering the entire proceedings as invalid and void-ab- initio. The Appellant prays for relief. 3. That on the facts and circumstances of the case, the Ld. CIT (A), had passed the order without addressing the grounds pertaining to validity of notice u/s. 148 of the Act whereby the consequential order u/s. 147 of the Act would stand nullified and hence the appeal filed by the department is not maintainable.” 3. Briefly stated, the facts of the case are that the assessee filed her return of income on 15.10.2016 declaring total income of ₹79,82,290/-, comprising salary income from Global Logistics Solution India Pvt. Ltd., interest income, and share of profit and remuneration from the partnership firm, A212 Associates. The return was selected for scrutiny and the assessment under section 143(3) of the Income-tax Act, 1961 (in short, “the Act”) was completed on 18.12.2018, accepting the returned income. 4. Subsequently, information was received from the DCIT, CC- 6(2), Mumbai, regarding a search conducted under section 132 of the Act in the case of M/s Ahuja Properties & Realtors Pvt. Ltd., during which the residential premises of Shri Devendra Narain were also covered. A separate survey was conducted at the

premises of Narains Corporate Real Estate India LLP, being the office premises of Shri Devendra Narain and his sons. During the search, a pen drive containing Excel sheets recording details of cash loans allegedly advanced to various builders and developers, along with the names of the lender parties, was seized from the residential premises. Identical data was also found at the office premises. Shri Devendra Narain admitted that he and his sons were acting as brokers in arranging and facilitating cash loans/investments to builders and developers and that the seized Excel sheets contained details of clients who had provided such cash loans. He also furnished the names, addresses, PANs and mobile numbers of the persons whose names appeared in the said records.

5.

On the basis of the information so received, the Assessing Officer noticed that the assessee was stated to have advanced cash loans aggregating to ₹2,80,00,000/- to various builders through Shri Devendra Narain. Since no such transaction was reflected in the assessee’s return of income, the Assessing Officer formed a belief that income amounting to ₹2,80,00,000/- had escaped assessment. Accordingly, notice under section 148 of the Act was issued on 19.04.2021 under the then prevailing provisions of section 148. Subsequently, pursuant to the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal, the Assessing Officer issued a notice under section 148A(b) of the Act on 26.05.2022, communicating the information and the basis for the proposed reassessment. The assessee filed her objections vide letter dated 09.06.2022. The

Assessing Officer disposed of the objections by an order dated 29.07.2022 passed under section 148A(d) of the Act and issued notice under section 148 of the Act.

6.

In the reassessment proceedings, the learned Assessing Officer, relying upon the seized Excel sheets and the statements recorded on oath, observed that the assessee had allegedly advanced cash loans aggregating to ₹2,80,00,000/- to various builders, comprising ₹75,00,000/- to Satellite Developers Ltd. on 01.04.2015, ₹1,00,00,000/- to Ahuja Construction Company on 31.08.2015 and ₹1,05,00,000/- to Kanani Developers on 16.09.2015. According to the Assessing Officer, these entries stood corroborated by the statements of Shri Devendra Narain, his son Shri Chetan Narain, who had explained the abbreviations used in the Excel sheets, and Shri Vikas Sadh. It was stated that all three persons had confirmed that the Excel data represented the names, dates and amounts of cash loans advanced to builders through them. 7. During the reassessment proceedings, the assessee was confronted with the aforesaid material. She categorically denied having entered into any such transactions and furnished an affidavit in support thereof. She also sought cross-examination of Shri Devendra Narain. The Assessing Officer observed that, although opportunities for cross-examination were afforded, the same could not be concluded on account of non-attendance. The Assessing Officer did not accept the assessee’s reliance upon the statement of Shri Vikas Sadh or the affidavit furnished by her. According to him, the documentary material and statements recorded on oath established the assessee’s connection with the transactions, particularly since Shri Devendra Narain had furnished her PAN, address and mobile number. He further observed that an affidavit could not prevail over contrary documentary and oral evidence. Accordingly, holding that the material on record constituted credible and corroborative evidence of the alleged transactions, the Assessing Officer treated the sum of ₹2,80,00,000/- as unexplained investment under section 69 of the Act, determining the total income at ₹3,59,82,290/-.

8.

Aggrieved, the assessee carried the matter in appeal before the learned CIT(A), who deleted the aforesaid addition, principally on the ground that the seized material recovered from a third party was not supported by independent and corroborative evidence establishing a direct nexus between the assessee and the alleged transactions. The learned CIT(A) observed as under:

“6.1 The facts of the case have been considered. The genesis of the addition done by the AO is the search conducted in the case of M/s Ahuja Properties & Realtors P Ltd wherein the residential and office premises of one Shri Devendra Narain was also covered. A pen drive containing various excel sheet was found from the premises of Shri Narain wherein Shri Narayan accepted that he was working as broker and had advanced cash loans to various builders. Shri Narain in his statement also admitted that the excel sheets found on the pen drive contained the transaction details of various persons who had used his services to forward cash loan. Shri Narain thereafter furnished the full name, address, PAN and mobile number of such persons whose names appeared in the excel sheet and who as per him have forwarded cash loan as detailed in the said excel sheet. It was found that the name of the assessee, Smt Aarti Khosla, was also appearing in the excel sheet and based on the excel sheet in conjunction with the statement of Shri Narain, the AO has come to a finding that the assessee has forwarded cash loan of Rs.2,80,00,000/- and has made the addition. 6.2 The appellant on the other hand has refuted the finding of the AO and has denied to giving any such cash loan. The appellant submits that the addition of Rs.2,80,00,000/- made U/s 69 of the Act is wholly unjustified, as it is based merely on third-party statements and alleged Excel sheets, without any substantive or corroborative evidence establishing that she had advanced cash loans through Shri Devendra Narain. The Appellant categorically denies having any cash dealings whatsoever, stating that she neither possessed such cash nor engaged in any cash transactions with the alleged parties. It is contended that the statutory conditions of section 69 are not satisfied, since there is no evidence of any investment made by the appellant, nor do the statements relied upon by the AO even mention her name. The Excel sheets, being unverified third-party documents, cannot form the basis of such a serious allegation in the absence of cogent and reliable material, and reliance on them violates principles of natural justice. The Appellant places reliance on the decision of the Hon’ble Delhi High Court in Movish Realtech (P.) Ltd. v. DCIT, wherein reassessment based solely on third-party statements without underlying material was held to be invalid. Further, the appellant highlights that on identical facts for A.Y. 2015-16, the AO himself accepted her explanation and affidavit and refrained from making any addition, observing that an Excel sheet merely mentioning the assessee’s name, without supporting evidence, was insufficient to sustain an addition.

6.3 Upon perusal of the assessment order and the relevant statements it is clear that the pen drive was found from the premises of Shri Devendra Narain which contained some abbreviations and also some names with some number in 2 digits written against it. It is also clear that Shri Devendra Narain admitted of acting as a broker for arranging cash loan for various builders. Shri Devendra Narain in his statement has helped decipher the abbreviations mentioned in the excel sheet and also indicate that the numbers are written with a suppression of digits. The excel sheet read in conjunction with his statement therefore clearly outline his activity as a loan broker. The issue to be decided is whether these excel sheets and the statement is sufficient to hold that the appellant whose name features in the excel sheet can be held to have undertaken the transaction written therein. It is also to be noted that the only link that the appellant has with the seized excel sheet is established by way of details furnished by Shri Devendra Narain. It is also to be noted that even from the premises of Shri Devendra Narain no further material was found that could help identify the identity of the alleged loan givers.

6.4 It is a settled judicial principle that in cases where additions are sought to be made on the basis of documents or statements seized from a third party, the presence of corroborative evidence assumes critical importance, as it is the only means by which a legally sustainable nexus can be established between the assessee and the alleged transaction. On examination of the seized Excel sheets that forms an annexure to the statement of Shri Devendra Narain, it is seen that it contains certain names or abbreviated names, dates, and amounts, without any narration explaining the nature of the transactions. It is also noted that the excel sheets were recovered from the premises of a third party, namely the broker, and not from the possession or control of the appellant. The sheets appear to be internal working records maintained by the broker in the course of his activities and do not have any indication of the source of funds, or confirmation of execution by the persons named therein. The documents do not bear the appellant’s signature, handwriting, instructions, or acknowledgment, nor do they evidence any actual movement of cash from the appellant, such as cash withdrawals, availability of funds, or confirmations from the alleged recipient builders. On an objective reading, it cannot be conclusively said that these Excel sheets constitute evidence that the appellant herself forwarded cash loans. At best, these documents reflect internal records maintained by the broker in the course of his own activities of arranging and rotating funds for various clients and builders. 6.5 Therefore in my considered view, in the present case, there is no material on record that establishes any direct or proximate connection between the appellant and the seized documents relied upon by the AO. The Excel sheets were admittedly recovered from the premises of a third party and not from the possession or control of the appellant. There is nothing to indicate that the appellant authored the documents, had custody or knowledge of them, or had ever acknowledged the entries recorded therein. The documents do not bear the appellant’s signature, handwriting, instructions, or any form of confirmation, nor are they supported by any independent evidence found from the appellant herself. In these circumstances, the seized documents, by themselves, can at best indicate the activities of the broker and do not conclusively establish, in the absence of any corroboration, that the appellant advanced cash loans as alleged. 6.6 For reasons as stated above, the addition done by the AO amounting to Rs.2,80,00,000/- is deleted and the ground of appeal is allowed.”

9.

The Ld. CIT(A) did not adjudicate upon the grounds challenging validity of the notice u/sec. 148. Before us the Learned counsel for the assessee has challenged the validity of the reassessment on the ground that sanction for reopening was not obtained from the appropriate authority. This ground has been raised by way of cross objection.

10.

Before us, the learned counsel for the assessee referred to paperbook page 4 which is a copy of the notice u/sec. 148 issued. In last para of the said notice it is recorded that the said notice was issued after obtaining prior approval of Principal Commissioner of Income Tax -20, (Mumbai). The learned counsel submitted that reopening has been made beyond the period of three years from the end of the relevant assessment year and therefore, notice could have been issued with prior sanction or approval of the Ld. Principal Chief Commissioner of Income Tax as per provisions of section 151 of the Act, therefore, the notice issued after obtaining sanction by Ld. Principal Commissioner of Income Tax, is invalid in law.

11.

We have considered the rival submissions and perused the material available on record. The issue that arises for our consideration is whether the notice under section 148, having been issued beyond the prescribed period of three years, was preceded by the sanction of the authority competent under section 151 of the Act. The Section 151 prescribes the authority competent to grant sanction for issuance of notice under section 148. Where the notice is issued beyond the period of three years from the end of the relevant assessment year, the sanction of the authority specified by the statute is a condition precedent to the assumption of jurisdiction under section 148. As per section 151 of the Act for reopening of the assessment beyond three years sanction or approval of the Ld. Principal Chief Commissioner of Income Tax is required. For ready reference said provision is reproduced as under: “ 151. Specified authority for the purposes of section 148 and section 148A shall be,- (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or 79a[***] Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year:]” 9

12.

In the present case, the notice under section 148, placed at page 4 of the paper book, records that approval of the Principal Commissioner of Income Tax-20, Mumbai was obtained. Since the notice was issued beyond three years from the end of the relevant assessment year, the statutory requirement of sanction by the competent authority under section 151 was required to be satisfied. The approval reflected in the notice, therefore, does not constitute the sanction contemplated by the applicable provision. The jurisdictional requirement having not been fulfilled, the notice issued under section 148 and the reassessment proceedings founded thereon cannot be sustained in law. Consequently, the reassessment proceedings are liable to be treated as void ab initio. 13. Having reached the above conclusion on the jurisdictional issue, the grounds raised by the Revenue on the merits of the addition have become academic and, therefore, do not call for adjudication.

14.

In the result, the cross-objection filed by the assessee is allowed and the appeal filed by the Revenue is dismissed.

Order is pronounced in the open Court on the 10th day of September 2026 Sd/- Sd/-

SIDDHARTHA NAUTIYAL OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai Dated: 10/09/2026 Saumya, Sr.PS

Copy to:

ACIT221, 322 PIRMAL CHAMBERS LALABAUG, 1 MUMBAI-400012, MAHARASHTRA

AARTI KHOSLA, 2 801 801 , SEA HILL CHS PALI HILL, KHAR, MUMBAI-400052, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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