ARORA ALLOYS LTD., LUDHIANA,LUDHIANA vs. JAO DCIT, CIRCLE-1, LUDHIANA, LUDHIANA

PER LALIET KUMAR, JM

This appeal filed by the assessee is directed against the order dated 19.02.2026 passed by the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [“Ld. CIT(A)”], under Section 250 of the Income Tax Act, 1961 (“the Act”), for Assessment Year 2018-19, arising out of the reassessment order passed by the Assessing Officer (“AO”) under section 147 read with section 44B/143(3) of the Act, whereby the addition of Rs.

ITA 429/CHD/2026 A.Y. 2018-19 2 45,70,245/- made under Section 69C read with section 115BBE of the Act has been confirmed. 2. Briefly stated, the case of the assessee was reopened under section 147 of the Act on the basis of information that the assessee had entered into bogus purchase/sale transactions aggregating to Rs. 45,70,245/- with M/s G.S. Industries, a proprietary concern of Sh. Deepak Sharma. After following the procedure prescribed under section 148A of the Act, an order under section 148A(d) was passed on 07.04.2022 and notice under section 148 was issued on the same date. In response, the assessee e-filed its return of income on 05.05.2022. In the course of reassessment, the AO treated the purchases from M/s G.S. Industries as non-genuine and made an addition of Rs. 45,70,245/- under section 69C of the Act, with consequential application of section 115BBE and initiation of penalty proceedings under section 271AAC, assessing the total income at Rs. 55,33,854/-. 3. Aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A), inter alia, on the grounds that the reopening was based on factually incorrect reasons and without valid approval under section 151; that the sale corresponding to the impugned purchases had already been credited in the books, so that a further addition amounted to double taxation of the same transaction; that payments were made through banking channels out of regular business receipts; and that no opportunity of cross-examination of Sh. Deepak

ITA 429/CHD/2026 A.Y. 2018-19 3 Sharma was afforded. A remand report was called for, and the assessee filed a rejoinder dated 09.02.2026 controverting its findings. By the impugned order, the Ld. CIT(A) rejected all the grounds and confirmed the addition in its entirety, holding, inter alia, that the reopening was founded on tangible information with approval obtained at the stage of the order under section 148A(d), and that the addition on merits rested on the totality of the material and verification outcomes and not solely on the statement of the concerned party. 4. Aggrieved, the assessee is in further appeal before this Tribunal on the following revised grounds of appeal : 1. That the Ld. CIT(A) has erred in confirming the assessment as framed by the Assessing Officer u/s 147 of the Act at an Income of Rs.55,33,854/- as against the returned income of Rs. 9,63,609/-. 2.a). That the Ld.CIT(A) has erred in confirming the action of the Assessing Officer in reopening of the case u/s 148 of the Act both on the basis of not obtaining the necessary approval from the competent authorities i.e. Pr. Chief Commissioner of Income Tax and further the copy of the approval as obtained had not been provided to the assessee nor there is anything mentioned in the approval sought from the competent authorities. b). That the Ld. CIT(A) has erred in reopening the case u/s 148 on the basis of factual incorrect reason of making the bogus sales transactions and not forming the correct reason to believe, since the formation of reason to believe is on the wrong facts and the same cannot stand to the test of scrutiny as per the binding judgment of Jurisdictional Chandigarh Bench of the ITAT in the case of Skycity Builders and Promoters (Pvt.) Ltd. in ITA No. 1066/Chd/2025, where the earlier judgment of M/s Taj Land Developers and Promoters have been followed. c). That further, the CIT(A) has erred in not considering the fact that no document has been provided to the assessee for forming the reason to believe and not giving the copy of such

ITA 429/CHD/2026 A.Y. 2018-19 4 material at the time of issuing the show cause notice u/s 148(A)(b) and neither the same was provided throughout assessment proceedings, which is against the binding instruction of CBDT bearing No.01/2022. 3. Notwithstanding the above said ground of appeal, the Ld. CIT(A) has erred in confirming the addition of Rs. 45,70,245/- on account of unexplained alleged cash credit, because of the following reasons:- a). That the ld.CIT (A) has failed to consider and appreciate that the confirmed copy of Account of M/s G.S. Industries alongwith sale invoices had been filed and also the payments have been made through banking channel and such purchases are reflected in the GST return of the assessee and such evidences have been ignored summarily. b). That the Ld. CIT(A) has failed to consider and appreciate that the scrap as purchased from M/s G.S. Industries, the same has been used in the production/consumption of ingots and no defects have been pointed out in day to day consumption of scrap, stock register, production register, and, as such, the confirmation of addition of Rs. 45,70,245/- is bad in law. c). That the confirmation of addition is also not valid, since the sales against the above said consumption of raw material have been accepted and, as such, the making of addition of Rs. 45,70,245/- is against the facts and circumstances of the case and no case of unexplained investment can be made. 4. That the confirmation of addition is bad in law as no opportunity of cross examination of Sh. Deepak Sharma Prop. M/s G.S. Industries was never provided to the assessee and his statement recorded at the back of the assessee has been used for making so called addition u/s 69 C of the Act in the case of assessee.” 5. The ld. counsel for the assessee submitted that reopening is bad in law as it is based on borrowed satisfaction. The AO merely reproduced Investigation-wing information without independently examining it qua the assessee or recording any live link between the material and the belief of escapement of income, as held by the Chandigarh Bench of the Tribunal in Akbar Ali, ITA No.

ITA 429/CHD/2026 A.Y. 2018-19 5 868/Chd/2025, dated 27.11.2025. It was further submitted that no copy of the approval obtained under section 151 of the Act has ever been furnished to the assessee, and the assessment order is silent on the approval having been sought from the competent authority, which vitiates the reopening as approval is a mandatory jurisdictional safeguard. The ld. counsel for the assessee submitted that the scrap purchased from M/s G.S. Industries stands duly reflected in the day-to-day stock and consumption register, has been consumed in the manufacture of ingots, and no defect has been pointed out in this register. The corresponding sale of finished ingots has been accepted as genuine and credited in the books. Doubting only the purchase, without disturbing the accepted sale, results in double taxation of the same transaction. It was also submitted that the payments for the purchases were made through normal banking channels out of regular, disclosed business receipts and this is not a case of application of unaccounted income, and invoking Section 69C on facts of the present nature is misconceived.

ITA 429/CHD/2026 A.Y. 2018-19 6 ever granted to cross-examine Sh. Deepak Sharma, Prop. M/s G.S. Industries, though his statement/verification outcome forms the very foundation of the adverse inference. Relying on Andaman Timber Industries v. CCE, 281 CTR 241 (SC), it was submitted that denial of cross-examination in such circumstances is a serious flaw amounting to violation of the principles of natural justice, rendering the addition unsustainable.

7.1 The ld. DR submitted that the procedure under Section 148A was duly followed, a show-cause notice under section 148A(b) was issued, the assessee's reply was considered, and a speaking order under Section 148A(d) was passed after obtaining the approval of the specified/competent authority as required under Section 151. It was stated that the record itself reflects such approval, and mere non- supply of a separate copy does not, by itself, invalidate the reopening.

ITA 429/CHD/2026 A.Y. 2018-19 7 7.2 The learned AR submitted that the reassessment proceedings culminating in the assessment order dated 09.03.2024 were legally unsustainable both on jurisdictional grounds and on merits.

7.3 It was submitted that the assessee’s case was reopened on the basis of information allegedly received consequent to the search action conducted under section 132 in the case of Deepak Sharma Group of Mandi Gobindgarh. According to the information shared with the assessee vide notice issued under section 148A(b) dated 14.03.2022, the alleged issue related to bogus purchases amounting to Rs.45,70,245/- stated to have been made from M/s G.S. Industries, Prop. Deepak Sharma.

7.4 The learned AR drew attention to the reasons recorded under section 148A(d) dated 07.04.2022, particularly the observation made by the Assessing Officer that the information available on the Insight Portal revealed that Shri Deepak Sharma and his group concerns were not carrying out genuine business activities and were allegedly engaged only in providing accommodation entries. On this basis, the Assessing Officer proceeded to form a view that the transactions entered into by the assessee with Shri Deepak Sharma represented unaccounted money of the assessee to the extent of Rs.45,70,245/-.

ITA 429/CHD/2026 A.Y. 2018-19 8 7.5 The learned AR, however, submitted that the very assumption of jurisdiction under section 148 was bad in law. It was pointed out that the assessment year involved was AY 2018-19 and the notice under section 148 was issued on 07.04.2022, i.e., beyond three years from the end of the relevant assessment year. Under the statutory scheme applicable with effect from 01.04.2021, where the reopening of an assessment is sought to be made beyond three years from the end of the relevant assessment year, the specified authority competent to grant approval is the Principal Chief Commissioner of Income-tax/Chief Commissioner of Income- tax/Principal Director General of Income-tax/Director General of Income-tax, as prescribed under the Act.

7.6 It was submitted that, in the present case, the approval for issuance of notice under section 148 was granted by the Principal Commissioner of Income-tax (PCIT) and not by the authority statutorily prescribed for a case where the reopening was beyond three years. The relevant approval is placed at pages 27 to 29 of the Paper Book.

7.7 The learned AR therefore contended that the sanction granted by the PCIT was without jurisdiction and contrary to the express statutory requirement. According to him, the defect goes to the very root of the assumption of jurisdiction by the Assessing Officer and cannot be treated as a mere procedural irregularity or technical

ITA 429/CHD/2026 A.Y. 2018-19 9 lapse. Consequently, the notice issued under section 148 and the proceedings flowing therefrom, including the reassessment order, were liable to be quashed on this ground alone.

7.8 Without prejudice to the above jurisdictional objection, the learned AR submitted that the addition of Rs.45,70,245/- was also not sustainable on merits. It was contended that the Assessing Officer had proceeded primarily on the basis of information arising from the search conducted in the case of the Deepak Sharma Group and the general allegation that the group concerns were providing accommodation entries. The mere fact that a third party was allegedly engaged in accommodation entries could not, by itself, establish that the purchases recorded by the assessee were bogus or that the corresponding amount constituted unexplained expenditure/investment in the hands of the assessee.

7.9 The learned AR accordingly submitted that the reassessment proceedings deserved to be held invalid for want of proper statutory approval and, consequently, the addition made by the Assessing Officer and sustained by the learned CIT(A) deserved to be deleted. In the alternative, the addition was also liable to be deleted on merits for want of cogent and independent material establishing that the assessee had made unexplained expenditure or had introduced its own unaccounted money in the guise of the alleged purchases.

ITA 429/CHD/2026 A.Y. 2018-19 10 8. On merits, ld. Sr.DR contended that verification conducted qua M/s G.S. Industries/Sh. Deepak Sharma revealed non-availability and non-traceability of the party at the given address. The adverse inference was drawn on the totality of the surrounding circumstances and verification outcomes, and not solely on any statement, distinguishing the case from Andaman Timber Industries; reliance was placed on Pr. CIT v. NRA Iron & Steel (P) Ltd., (2019) 412 ITR 161 (SC) for the proposition that banking- channel payment alone is not conclusive of genuineness where the very identity and existence of the payee is in doubt. It was submitted that the onus lies on the assessee to establish the genuineness of the transaction through credible, independently verifiable evidence, which has not been discharged merely by producing internal stock records and banking instruments once the supplier is shown to be non-existent/non-traceable. No double addition arises, as the purchase has been treated as bogus and disallowed as unexplained expenditure, a matter distinct from the sales declared by the assessee. It was accordingly prayed that the order of the Ld. CIT(A) be upheld and the appeal be dismissed.

ITA 429/CHD/2026 A.Y. 2018-19 11 9.1 At the outset, it would be appropriate for us to consider the ground No.2 raised by the ld. AR in the present appeal. The short question which arises for our consideration is whether the approval granted by the Principal Commissioner of Income-tax was sufficient compliance with the requirement of section 151 of the Act for issuance of notice under section 148 in the facts of the present case.

ITA 429/CHD/2026 A.Y. 2018-19 12 12. We find merit in the aforesaid contention. The relevant assessment year is A.Y. 2018-19 and the assessment year ended on 31.03.2019. The order under section 148A(d), as well as the consequential notice under section 148, were issued on 07.04.2022. Thus, on the relevant date, more than three years had elapsed from the end of A.Y. 2018-19. Section 148A(d), as applicable to the proceedings, mandates that the Assessing Officer shall, on the basis of the material available on record and after considering the reply of the assessee, decide whether it is a fit case to issue a notice under section 148, with the prior approval of the specified authority. The expression "specified authority" is required to be understood with reference to section 151 of the Act.

ITA 429/CHD/2026 A.Y. 2018-19 13 section 151(ii) for granting the approval contemplated under section 148A(d). The competent authority was the authority specified under clause (ii) of section 151. The importance of this requirement is further evident from the chronology of the proceedings. The order under section 148A(d) itself was passed on 07.04.2022, and the approval relied upon by the Department was also obtained from the Pr. Commissioner of Income Tax on the same date. Thus, the defect, if established from the original record, goes to the very foundation of the assumption of jurisdiction under section 148 and is not merely an irregularity in the subsequent issuance of notice.

ITA 429/CHD/2026 A.Y. 2018-19 14 authority specified under section 151(ii), the statutory condition precedent for passing the order under section 148A(d) was not fulfilled.

ITA 429/CHD/2026 A.Y. 2018-19 15 High Court as well as by the Chandigarh Bench and Bombay Bench of the Tribunal.

ITA 429/CHD/2026 A.Y. 2018-19 16

the case falls within the period beyond three years, approval by the Principal Commissioner cannot be treated as the approval contemplated under section 151(ii).

ITA 429/CHD/2026 A.Y. 2018-19 17

approval granted by an authority not competent under the statutory provision cannot cure the jurisdictional defect or validate the assumption of jurisdiction under section 148.

ITA 429/CHD/2026 A.Y. 2018-19 18 merits, have become academic. We, therefore, refrain from adjudicating upon the same.

Order pronounced on 01st September,2026.

Sd/- Sd/- (VIJAY VARMA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER “Poonam”

आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�/ CIT 3. 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File

Assistant Registrar Income Tax Appellate Tribunal Kendriya Sadan, Sector 9-A, Chandigarh.