INCOME TAX OFFICER, DELHI vs. VSM TOWNSHIP INDIA PRIVATE LIMITED, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. Raj Kumar Chauhan, Judicial Member & Smt. Renu Jauhri, Accountant Member ITA No. 7526/Del/2025 : Asstt. Year: 2016-17 Income Tax Officer, Vs VSM Township India Pvt. Ward-26(3), Ltd. 2/37, Basement, Ansari Room No. 194A, 1st Floor, C. R. Road, Daryaganj, Building, I. P. Estate, New Delhi-110002 New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AADCV7450K & CO No. 116/Del/2026 : Asstt. Year: 2016-17 VSM Township India Pvt. Ltd. Vs Income Tax Officer, 2/37, Basement, Ansari Road, Ward-26(3), Room No. 194A, 1st Floor, C. R. Daryaganj, New Delhi-110002 Building, I. P. Estate, New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AADCV7450K Assessee by: Sh. Lalit Mohan, Adv. & Sh. Ankit Kumar, Adv. Revenue by: Ms. Ankush Kalra, Sr. DR Date of Hearing: 26.05.2026 Date of Pronouncement: 03.06.2026 ORDER Per Raj Kumar Chauhan, Judicial Member: The appeal of the Revenue and cross objection by the assessee is directed against the order 22.09.2025, passed by CIT(A)/NFAC u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) wherein, the addition of Rs. 54,60,000/- u/s 68 of the Act made by the AO vide assessment order dated 22.05.2023 was deleted.

2 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. 2. The facts in brief as culled out from para 2 of the impugned order are as under: “2. The brief facts of the case are that the appellant filed its return of income for the year under consideration on 16.08.2016 declaring total income of NIL. Subsequently, as per the information available with the department, search and survey action under sections 132 and 133A of the Income Tax Act, 1961 was carried out on 08.03.2017 at the residential and office premises of Shri Puneet Kulthia, C.A., located at 54, Model Town, North- Ex., Delhi-110009 and at No. 7, Model Town, North-Ex., Basement Floor, New Delhi-110009 respectively. During the course of the search and the post-search proceedings in the case of the Puneet Kulthia group, it was revealed that Shri Puneet Kulthia was engaged in providing accommodation entries to various persons for channelizing their unaccounted income back into their business, in the guise of raising capital through bogus sales, unsecured loans and other such means. On the basis of these findings, it came to light that the appellant had taken accommodation entries amounting to Rs.54,60,000/- from a paper/shell company, namely M/s Golden Vyapaar (P) Ltd., which was controlled directly or indirectly by Shri Puneet Kulthia, his wife Smt. Shweta Kulthia, or his accountant Shri Yogendra Singh. Therefore, proceedings in this case were initiated u/s 147 of the Act and notice u/s 148 of the Act was issued to the appellant on 13.07.2022. In response the appellant filed its ITR on 10.08.2022 declaring total income of NIL. Assessment in this case was completed u/s 147 r.w.s. 144B of the Act at an assessed income of Rs. 54,60,000/- against the returned income of NIL by making an addition of Rs. 54,60,000/- by invoking the provisions of Section 68 of the Act.” 3. Aggrieved by the impugned order of the ld. CIT(A), the Revenue is in appeal before the Tribunal and raising following grounds: “1. Whether on the facts and circumstances of the case, ld. CIT(A) erred in deleting the addition of Rs.54,60,000/- made by the Assessing Officer without appreciating the fact that Mr. PuneetKulthia, CA in his statement recorded on oath u/s 131(1A) of the Income

3 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. Tax Act, 1961 clearly admitted that the alleged accommodation entries were provided by him and his associates to the several entities including the assessee.” 4. The assessee has raised following grounds of cross objection in CO No.116/Del/2026: “1 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/144B of the Act without appreciating that the same were without jurisdiction and hence deserved to be quashed as such. 1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no tangible material on record in the form of specified information to suggest that income of the appellant had escaped assessment and in view thereof the proceedings initiated were illegal, untenable and therefore unsustainable. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that initiation of proceedings was mechanical and without any application of mind much less independent application of mind, therefore the notices issued u/s 148A(b) of the Act; and u/s 148 of the Act were invalid notice; and also order u/s 148A(d) of the Act was an invalid order and thus assumption u/s 147 of the Act was without jurisdiction. 1.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that notice issued u/s 148 of the Act after three years have elapsed from the end of the relevant assessment year in absence of possession of books of account or other documents or evidence which reveal that the income chargeable to tax represent in the form of ‘asset’, which has escaped assessment amounting to or is likely to amount to fifty lakh rupees or more for that year in view of provisions of section 149(1)(b) of the Act. 1.4 That notice u/s 148A(b) of the Act was issued based on factually incorrect assumptions and presumptions and therefore such a notice being highly cryptic vague could not legally and logically be made a basis for assumption of jurisdiction and therefore deserves to be quashed as such.

4 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. 1.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that order dated 13.7.2022 u/s 148A(d) of the Act and, notice dated 13.7.2022 u/s 148 of the Act issued without validly complying section 151 of the Act were also without jurisdiction. 2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since Document Identification Number (“DIN”) is absence in notice dated 13.7.2022 u/s 148 of the Act and therefore the proceedings initiated u/s 147 of the Act was invalid and assumption of jurisdiction u/s 147/143(3) of the Act was without jurisdiction and consequently order of assessment dated 22.5.2023 u/s 147/144B of the Act, the same was invalid and deserves to be quashed as such. 3 That notice dated 7.12.2022 u/s 143(2) of the Act issued by the learned Assessment Unit, Income Tax Department is illegal, invalid and without jurisdiction and therefore deserves to be quashed as such and consequently impugned order of assessment dated 22.5.2023 u/s 147/144B of the Act is without jurisdiction and deserves to be quashed as such. 4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that various adverse findings and conclusions recorded in the order of assessment dated 22.5.2023 u/s 147/144B of the Act without confronting the material and, without providing cross examination were vitiated in law and, hence illegal, invalid and untenable. It is therefore, prayed that action u/s 147 sustained by Commissioner of Income Tax (Appeals) may kindly be held to be without jurisdiction and cross-objection of the assessee be allowed.” 5. We first deal with the cross objection of the assessee. At the outset, ld. AR has submitted that the notice dated 13.7.2022 u/s 148 of the Act was issued without validly complying with section 151 of the Act is not in accordance with law. In this regard, following chart of relevant dates has been

5 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. filed by the ld. ARwhich is placed at page 4 of the written submission are as under: Sr. Particulars Assessee’s Approval by No. case (pages of Paper Book) i) Assessment Year 2016-17 ii) Notice issued u/s 148 of the 19.4.2021 Range-25, Delhi Act iii) Notice issued u/s 148A(b) of 25.5.2022 the Act in terms of direction by Hon’ble Supreme Court in case of UOI v. Ashish Agarwal iv) Notice u/s 148A(d) of the Act 13.7.2022 Principal Commissioner of Income Tax-7, v) Notice u/s 148 of the Act 13.7.2022 New Delhi

6 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. 4. Galax Minerals Pvt. Ltd. Vs. ITO ITA No. 994/Del/2026 dated 29.04.2026 - Delhi ITAT 5. Saif Ali Mansoor Ali Khan Pataudi v. ACIT, Circle-16 (1), Mumbai ITA No. 2131/MUM/2025 - Mumbai ITAT 6. M/s RS Construction v. ITO Ward 41(3)(3), Mumbai ITA No. 4918/Mum/2025 - Mumbai ITAT 7. On the other hand, ld. DR has strongly relied on the orders of the lower authorities.

7 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. Regime Time limits Specified authority Section Before expiry of Joint Commissioner 151(2)of the four years from old regime the end of the relevant assessment year Section After expiry of Principal Chief 151(1)of the four years from Commissioner or old regime the end of the Chief Commissioner relevant or Principal assessment year Commissioner or Commissioner Section Three years or less Principal 151(i)of the than three years Commissioner or new regime from the end of Principal Director the relevant or Commissioner or assessment year Director Section More than three Principal Chief 151(ii)of the years have elapsed Commissioner or new regime from the end of Principal Director the relevant General or Chief assessment year Commissioner or Director General 74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under section151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April2021, the prior approval must be obtained from the

8 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be, issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.” 9. In view of above factual matrix and respectfully following the aforesaid decisions, we hold that the notice issued u/s 148 of the Act is bad in law and thus invalid, hence, the same is quashed and accordingly, the consequent assessment order is also quashed. Resultantly, the cross objection filed by the assessee is allowed in the aforesaid manner.

9 ITA No. 7526/Del/2025 CO No. 116/Del/2026 VSM Township India Pvt. Ltd. 11. In the result, the appeal of the Revenue is dismissed and the CO of the assessee is allowed. Order Pronounced in the Open Court on 03/06/2026. Sd/- Sd/- (Renu Jauhri) (Raj Kumar Chauhan) Accountant Member Judicial Member Dated: 03/06/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR