DCIT CENTRAL CIRCLE- 7(1), MUMBAI, MUMBAI vs. SUNFLOWER BROKING PRIVATE LIMITED, RAJKOT

आदेश / ORDER PER BENCH: These cross appeals by the Revenue and the Cross Objections by the assessee are directed against the separate orders passed by the Learned Commissioner of Income-tax (Appeals) - 49, Mumbai [hereinafter referred to as “Ld.CIT(A)”], dated 28/11/2025 for A.Ys. 2016-17 and 2017-18 and dated 27/11/2025 for A.Y. 2018-19.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED legal issue going to the root of the assessment, challenging the validity of approval granted by the appropriate authority for AY 2016-17 and 2017-18. Since the said issue has a bearing on the very jurisdiction and validity of the assessment proceedings, we first take up the Cross Objection filed by the assessee for A.Y. 2017-18.

4.1. In the condonation petition, it has been submitted that Shri Bhavik Prafulchandra Vora, Director of the assessee company, who was exclusively handling taxation matters, legal proceedings and coordination with authorized representatives, had been suffering from health issues during the relevant period and was under active medical treatment, due to which he was unable to attend professional matters. It has further been submitted that immediately upon partial recovery and becoming aware of the delay, prompt steps were taken for filing the present Cross Objection. It has also been stated that the delay was neither deliberate nor intentional and that substantial prejudice would be caused to the assessee if the delay is not condoned.

We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.

4.2. We note that the assessee has duly explained the cause for delay by way of a detailed petition supported by affidavit. The reasons stated therein demonstrate that the delay had occurred on

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED account of circumstances beyond the control of the assessee. It is well settled that while considering an application for condonation of delay, a liberal approach is to be adopted so as to advance substantial justice.

4.3. In the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. reported in 167 ITR 471 (SC), the Hon’ble Supreme Court held that substantial justice deserves to be preferred over technical considerations and that a litigant ordinarily does not stand to benefit by lodging an appeal belatedly. Similarly, in N. Balakrishnan vs. M. Krishnamurthy reported in (1998) 7 SCC 123, the Hon’ble Apex Court held that length of delay is not material and acceptability of the explanation is the only criterion for condonation of delay.

4.4. Further, the Hon’ble Supreme Court in Improvement Trust, Ludhiana vs. Ujagar Singh & Ors. reported in (2010) 6 SCC 786 reiterated that courts should adopt a justice-oriented approach while considering applications for condonation of delay and that substantial justice should not be defeated on technical grounds.

4.5. Considering the facts placed on record, the short duration of delay involved, and respectfully following the ratio laid down in the above decisions, we are satisfied that the assessee was prevented by sufficient and reasonable cause from filing the Cross Objection within the prescribed period.

Accordingly, the delay of 10 days in filing the Cross Objection is condoned and the Cross Objection for A.Y. 2017-18 is admitted for adjudication.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED 5. The Cross Objection filed by the assessee for A.Y. 2017-18 raises legal grounds challenging the validity of reassessment proceedings initiated u/s 147 of the Act. Since these issues go to the root of the matter challenging the jurisdiction assumed by the Ld. AO, the same are adjudicated first.

6.1 Before us, the Ld. AR submitted that the original notice u/s 148 under the old regime had been issued on 12/04/2021 for reopening the assessment for A.Y. 2017-18. Subsequently, pursuant to the judgment of the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal reported in 444 ITR 1 (SC), the said notice was treated as deemed notice u/s 148A(b) under the new regime.

6.1.1. Thereafter, show cause notice u/s 148A(b) was issued on 27/05/2022 and thereafter order u/s 148A(d) and notice u/s 148 were issued on 30/07/2022.

6.2. The Ld. AR submitted that the reassessment notice dated 30/07/2022 had admittedly been issued beyond three years from the end of the relevant assessment year. Referring to section 151(ii) of the Act as substituted by the Finance Act, 2021, the Ld. AR submitted that in cases where more than three years have elapsed from the end of the relevant assessment year, prior approval for issuance of notice u/s 148 is required to be obtained from the

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

6.2.1. The Ld. AR submitted that in the present case, approval had admittedly been obtained only from PCIT-1 and not from PCCIT. The Ld. AR submitted that for A.Y. 2017-18, the alleged escaped income was Rs.68 lakhs and therefore reopening beyond three years could only be done after obtaining approval from PCCIT as contemplated u/s 151(ii) of the Act.

6.3. The Ld. AR further submitted that approval by an authority not prescribed under the statute is not a curable defect and goes to the very root of jurisdiction. The Ld. AR placed reliance on the following judicial precedents in support of the contention that reassessment notice issued beyond three years without approval from the competent authority prescribed u/s 151(ii) renders the reassessment proceedings invalid in law:

• Union of India & Ors. vs. Rajeev Bansal reported in [2024] 469 ITR 46 (SC);

• Alag Property Construction Private Limited vs. ACIT (Bombay High Court) Writ Petition No. 3938 of 2022 for A.Y. 2017-18;

• Vodafone Idea Limited vs. Deputy Commissioner of Income Tax, Circle-5(2)(1), Mumbai & Ors. (Bom. HC) Writ Petition No. 2768 of 2022 dated 07/02/2024 for A.Y. 2018-19;

• Ratan N. Motwani (HUF) vs. ITO, Ward 23(3)(1) in ITA No.5532/Mum/2025 dated 17/11/2025 for A.Y. 2017-18 (Mumbai ITAT);

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED • ACIT(32)(1) vs. Ms. Asha P. Kedia in ITA No.3672/Mum/2024 dated 28/03/2025 for A.Y. 2017-18 (Mumbai ITAT);

• Aakruti Ketan Mehta vs. National Faceless Assessment Centre in ITA No.3477/Mum/2024 for A.Y. 2016-17 (Mumbai ITAT);

• DCIT Central Circle-7(1) vs. Bhavik Prafulchandra Vora in ITA No.7602/Mum/2025 dated 13/02/2026 for A.Y. 2016-17 (Mumbai ITAT);

• DCIT Central Circle-7(1) vs. Bhavik Prafulchandra Vora in ITA No.8891/Mum/2025 dated 18/03/2026 for A.Y. 2017-18 (Mumbai ITAT).

6.4. The Ld. DR relied upon the orders passed by the authorities below. He submitted that reassessment proceedings had been initiated based on information received during search proceedings indicating escapement of income in the hands of the assessee. The Ld. DR submitted that approval had been duly obtained from the PCIT before issuance of notice u/s 148 and, therefore, substantial compliance with section 151 of the Act stood satisfied. It was further submitted that the defect, if any, was merely procedural and would not invalidate the reassessment proceedings.

We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED Finance Act, 2021. Thereafter, show cause notice u/s 148A(b) was issued on 27/05/2022 and subsequently order u/s 148A(d) and notice u/s 148 were issued on 30/07/2022. Admittedly, the notice dated 30/07/2022 had been issued beyond three years from the end of the relevant assessment year.

7.1. For ready reference, Section 151(ii) of the Act provides that where more than three years have elapsed from the end of the relevant assessment year, no notice u/s 148 shall be issued unless prior approval is obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Thus, the statute specifically mandates approval from PCCIT/PDGIT/CCIT/DGIT in cases where reassessment notice is issued beyond three years.

From the chart of notices placed before us, it is evident that approval for issuance of notice dated 30/07/2022 had been obtained from “PCIT-1”. Thus, there remains no dispute that approval had not been obtained from the competent authority prescribed u/s 151(ii) of the Act.

7.2. At this stage, it would be relevant to refer to the observations of the Hon’ble Supreme Court in Union of India vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70 (SC), wherein the Hon’ble Supreme Court held as under:

“Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.” 7.2.1. The Hon’ble Supreme Court further held that section 151 of the new regime links the time limits with jurisdiction of the authority granting sanction and non-compliance with the

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED prescribed requirement affects the jurisdiction of the Assessing Officer to issue notice u/s 148.

Further, the Ld.AR particularly relied upon the following decisions:

• In Alag Property Construction Private Limited vs. ACIT (Bombay High Court) Writ Petition No.3938 of 2022 for A.Y. 2017-18, the Hon’ble Bombay High Court held that where reassessment notice was issued beyond the prescribed period without complying with the mandatory conditions stipulated under the substituted provisions of sections 149 and 151 of the Act, the reopening proceedings could not be sustained in law.

• In Vodafone Idea Limited vs. Deputy Commissioner of Income Tax, Circle-5(2)(1), Mumbai & Ors. (Bombay High Court) Writ Petition No.2768 of 2022 dated 07/02/2024 for A.Y. 2018-19, the Hon’ble Jurisdictional High Court reiterated that reassessment proceedings initiated under the new regime are required to strictly comply with the statutory safeguards introduced by the Finance Act, 2021 and failure to obtain approval from the competent authority prescribed u/s 151 vitiates the assumption of jurisdiction.

• In Ratan N. Motwani (HUF) vs. ITO, Ward 23(3)(1) in ITA No.5532/Mum/2025 dated 17/11/2025 for A.Y. 2017-18, the Coordinate Bench of this Tribunal held that where notice u/s 148 had been issued beyond three years from the end of the relevant assessment year without sanction from the authority prescribed u/s 151(ii), the reassessment proceedings were void ab initio and liable to be quashed.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED 8. We are unable to accept the contention of the Revenue that approval by PCIT constitutes substantial compliance. When the statute specifically prescribes a particular authority for grant of approval, sanction by any other authority would be wholly without jurisdiction. It is a settled proposition of law that where a statute prescribes that a particular act has to be done in a particular manner, it has to be done in that manner alone.

8.1. In the present case, since the notice u/s 148 dated 30/07/2022 had admittedly been issued beyond three years from the end of the relevant assessment year and the alleged escaped income exceeded Rs.50 lakhs, prior approval ought to have been obtained from PCCIT/PDGIT/CCIT/DGIT as mandated u/s 151(ii) of the Act. Admittedly, approval has been obtained only from “PCIT- 1”. Therefore, non-compliance with the mandatory requirement of section 151(ii) renders the notice issued u/s 148 dated 30/07/2022 invalid in law.

Accordingly, we hold that the reassessment proceedings initiated u/s 147 pursuant to notice issued u/s 148 dated 30/07/2022 are bad in law and liable to be quashed.

Thus, legal grounds raised by the assessee in the Cross Objection for A.Y. 2017-18 stand allowed.

Accordingly, the reassessment proceedings for A.Y. 2016-17 are also held to be invalid in law and liable to be quashed.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED Since the reassessment proceedings themselves stand quashed on legal grounds, the remaining grounds raised by the assessee as well as grounds raised by the Revenue on merits are rendered academic and, therefore, require no adjudication.

Now, we take up the revenue’s appeal and assessee’s cross objection for AY 2018-19 for adjudication.

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,18,05,000/- u/s 68 without appreciating that the assessee failed to discharge the primary onus of proving the identity, creditworthiness and genuineness of the creditors, especially in light of the conclusive findings of the Search & Seizure action on the Jignesh Shah-Sanjay Shah (JSSS) Group. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in considering that the alleged clients from whom the funds were received were found during search and investigation to be name lenders with no financial capacity, and the assessee did not produce any reliable evidence to prove the genuine source of these credits. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in accepting the assessee’s explanation solely on the basis of ledger entries, KYC documents and banking channels without verifying the true nature and source of the funds reflected in the assessee’s books. 4. The appellant craves leave to add, amend, alter or withdraw any of the above grounds of appeal at or before the time of hearing.” 10.1. Brief facts of the case are as under:-

The assessee filed its return of income electronically for A.Y. 2018- 19 on 26/10/2018 declaring total income at Rs.10,88,400/-. Subsequently, based on information uploaded on the Insight Portal by DDIT (Inv.)-1(3), Ahmedabad, it was observed that a search action u/s 132 of the Act had been conducted on 11/09/2018 in the case of Jignesh Shah and Sanjay Shah Group, wherein the said

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED group was allegedly found to be engaged in providing accommodation entries.

10.2. As per the information received, the assessee had allegedly carried out transactions amounting to Rs.1,00,00,000/- with Jignesh Shah and Sanjay Shah during F.Y. 2017-18 and was stated to have benefited from accommodation entries. Based on the said information, the case of the assessee was reopened by issuance of notice u/s 148 dated 29/03/2022. In response thereto, the assessee filed return of income on 30/08/2022 declaring the same income of Rs.10,88,400/-.

10.3. Subsequently, a search and seizure action u/s 132/133A of the Act was conducted on 28/07/2022 in the case of Shri Viresh Joshi, Shri Vipul Joshi, M/s Vibgyor Capital Holding Pvt. Ltd. and others, wherein the assessee was also covered. Thereafter, assessment was completed u/s 143(3) r.w.s. 147 of the Act vide order dated 27/09/2023 determining total income at Rs.1,10,88,400/- by making addition on account of alleged accommodation entries.

Aggrieved by the order of Ld.AO, assessee preferred appeal before the Ld.CIT(A).

Aggrieved by the order of Ld.CIT(A), the revenue is in appeal before this Tribunal.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED 12. Ground Nos.1-3 raised by the Revenue are interconnected and pertain to the deletion of addition made u/s 68 of the Act amounting to Rs.1,18,05,000/-.

12.1. Before us, the Ld.DR relied upon the findings and observations of the Ld.AO as contained in the assessment order. He submitted that the information received from the Investigation Wing pursuant to search action conducted in the case of Jignesh Shah and Sanjay Shah Group clearly established that the said entities were engaged in providing accommodation entries. The Ld.DR submitted that the assessee had failed to conclusively establish the genuineness of the transactions and the real source of funds received. He thus supported the addition made by the Ld.AO u/s 68 of the Act and prayed for restoration of the assessment order.

12.2. Per contra, the Ld.AR submitted that the reopening itself had been initiated on incorrect facts inasmuch as the information referred to transactions of Rs.1,00,00,000/-, whereas the assessee had actually received only Rs.50,00,000/- from Kanungo Financers Ltd. The Ld.AR submitted that the amount of Rs.50,00,000/- had been received through normal banking channels on 14/06/2017 in the ordinary course of business. Referring to the bank statement placed in the paper book, the Ld.AR submitted that the transaction was duly reflected in the regular books of account.

12.3. It was submitted that the assessee is a registered stock broker with National Stock Exchange and Bombay Stock Exchange and is engaged in the business of purchase and sale of securities through stock exchanges. The amount received from Kanungo 14

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED Financers Ltd. was towards carrying out transactions in stock exchange on behalf of the said client. The Ld. AR further submitted that Kanungo Financers Ltd. is duly assessed to tax and regularly filing return of income having PAN AABCK1251B. Copy of PAN details and return acknowledgements were placed on record. The Ld.AR submitted that the amount received from the said party had been returned on 19/06/2017, i.e., within a short span of five days and no transaction had ultimately been carried out on behalf of the said client. Attention was drawn to the ledger account and bank statement evidencing repayment through banking channels.

12.4. The Ld.AR thus submitted that the assessee had duly discharged the primary onus cast upon it u/s 68 of the Act by establishing the identity of the party, genuineness of the transaction and creditworthiness of the creditor through documentary evidences including PAN, bank statements, ledger accounts and return particulars. It was, therefore, submitted that the Ld.CIT(A) was justified in deleting the addition made u/s 68 of the Act and prayed that the same be upheld.

We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED details and return particulars of the lender in support of the transaction.

13.1. We note that the Ld.CIT(A), upon examination of the bank statements and ledger confirmations, recorded a categorical finding that the actual amount received from M/s Kanungo Financiers Ltd. was only Rs.50 lakhs and not Rs.1 crore as alleged by the Ld. AO. It is observed that the figure of Rs.1 crore had been arrived at by considering both receipt as well as repayment entries. It is further noted that the lender was duly assessed to tax and the entire transaction had been carried out through normal banking channels. More importantly, the amount of Rs.50 lakhs received by the assessee had been repaid within five days and the account stood squared up.

13.2. We note that section 68 of the Act empowers the Assessing Officer to make addition where the assessee fails to satisfactorily explain the nature and source of credits appearing in its books. Once the assessee furnishes documentary evidences establishing the identity of the creditor, genuineness of the transaction and creditworthiness of the lender, the initial onus cast upon the assessee stands discharged and the burden shifts upon the Revenue to rebut the same with cogent material.

13.3. In the present case, except relying upon the findings of the Investigation Wing in the case of Jignesh Shah and Sanjay Shah Group, no independent material has been brought on record by the Ld.AO to establish that the impugned funds represented unaccounted money of the assessee routed through accommodation entries. No direct nexus or fund trail has been

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED established by the Revenue linking the assessee’s own undisclosed income with the impugned transaction.

13.4. We further note that the Ld.AO has not recorded any adverse finding on the documentary evidences furnished by the assessee. The addition has been made merely on general observations that the lender company was allegedly controlled by JSSS Group and engaged in providing accommodation entries.

13.5. In our considered view, in absence of any specific incriminating material against the assessee and in absence of any material demonstrating that the assessee had routed its own funds through the lender entity, the addition made u/s 68 cannot be sustained merely on the basis of generalized investigation findings. We thus find no infirmity in the findings rendered by the Ld.CIT(A) in deleting the addition.

Accordingly, the order of the Ld.CIT(A) is upheld and grounds raised by the Revenue are dismissed.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED In the result, the appeals filed by the Revenue for A.Ys. 2016- 17 and 2017-18 are dismissed and the Cross Objections filed by the assessee for A.Ys. 2016-17 and 2017-18 are allowed.

Further, the appeal filed by the Revenue for A.Y. 2018-19 is dismissed and the Cross Objection filed by the assessee for A.Y. 2018-19 is dismissed as infructuous.

Order pronounced in the open court on 7th May, 2026.

Sd/- Sd/-

JAGADISH BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 07/05/2026 SC. Sr. P.S.

ITA 8885/MUM/2025 & Ors. SUNFLOWER BROKING PRIVATE LIMITED Copy to:

DCIT CENTRAL CIRCLE- 7(1), MUMBAI, ROOM NO.653, 6TH FLOOR, AAYAKAR BHAWAN, MAHARSHI KARVE 1 ROAD, MUMBAI, MUMBAI-400020, MAHARASHTRA SUNFLOWER BROKING PRIVATE LIMITED, 2 3RD FLOOR, SUNFLOWER HOUSE, NEAR BHAKTINAGAR CIRCLE, BHAKTINAGAR S.O, RAJKOT, RAJKOT-360002, GUJARAT

3 THE PCIT / CIT,

4 THE D.R., ITAT, MUMBAI BENCH

5 GUARD FILE