USHA AGARWAL LEAGL HEIR OF MAHENDRA KUMAR GARG,AGRA vs. ITO, WARD-2(1)(1), AGRA

The appeal in ITA No. 273/AGR/2026 for AY 2019-20, arises out of the order of the ld National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 29.01.2026 against the order of assessment passed u/s 147 r.w.s. 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 13.12.2024 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’).

Ground Nos. 1 to 3 raised by the assessee are challenging the very assumption of jurisdiction u/s 147 of the Act and consequential framing of reassessment order by the ld AO.

Ground Nos. 4 to 11 raised by the assessee are challenging the addition of ₹1,00,00,000 received from Shri Vikash Garg (son of the assessee) treating it as unexplained cash credit.

We have heard the rival submissions and perused the material available on record. The assessee being an individual had filed his original return of income for the AY 2019-20 on 24.08.2019 declaring total income of Rs. 8,97,100/-. No scrutiny assessment was framed on the said return. The case of the assessee was sought to be reopened by the ld AO by issuing show cause notice u/s 148A(b) of the Act dated 29.03.2023, wherein it was stated that the assessee’s income of ₹14,27,60,000/- had escaped assessment and seeking details for the same thereon. The breakup of the said sum are as under:-

It is pertinent to note that the salary of Rs. 12 lakhs has been already disclosed by the assessee in the regular return filed on 24.08.2019. The assessee in response to the said show cause notice vide letter dated 10.04.2023 replied that there was no transaction carried out by the assessee for Rs. 14,15,60,000/- by him and requested the AO to provide the data as to how the said figure of Rs. 14,15,60,000/- was arrived at. In other words, the assessee completely denied having carried out any transaction either singly or cumulatively to the tune of Rs. 14,15,60,000/-. The assessee enclosed the complete bank statement of SBI A/c No. 65153705661 before the ld AO. Further the assessee also gave explanation for each and every debit and credit Page | 2 transaction of the State Bank account together with complete narration. This is enclosed in page 18 of the paper book. The assessee also enclosed the ledger account of salary in the books of MKG Computers Private Limited, evidencing the payment of ₹12 lakhs to the assessee, which had already been duly offered to tax in the original return. Accordingly, it was pleaded that proceedings initiated u/s 148A required to be dropped. The ld AO however, made a proposal for seeking approval u/s 151 of the Act from ld PCIT-1, Agra, who accorded approval u/s 151 of the Act stating that a sum of Rs. 14,27,60,000, which is the same figure as was mentioned in the show cause notice issued u/s 148A(b) of the Act, had escaped assessment. Thereafter, an order u/s 148A(d) of the Act stood passed on 12.04.2023 partially agreeing to the contention of the assessee and ultimately the ld AO concluded that only a sum of Rs. 1 crore being the gift amount received from Vikas Garg constitute income escaping assessment in the hands of the assessee and issued notice u/s 148 of the Act on 12.04.2023. We find in the said order passed u/s 148A(d) of the act, there is absolutely no reasoning given by the ld AO for arriving at the conclusion that the gift amount received of Rs. 1 crore from Shri Vikas Garg (son of the assessee) constitute income in the hands of the assessee which had escaped assessment. For the sake of convenience, the conclusion drawn by the AO in this regard is reproduced below:-

It is pertinent to note that Section 151 approval has been given by the PCIT for Rs. 14,27,60,000/- whereas the ld AO had passed an order u/s 148A(d) of the Act on 12.04.2023 stating only Rs. 1 crore had escaped. Hence, the said order passed u/s 148 A(d) of the Act is not in consonance with the approval given by the ld PCIT-1, Agra u/s 151 of the Act. The entire order passed u/s 148A(d) of the act is merely a mechanical reproduction of investigation inputs and contents. No independent reasoning, satisfaction, examination/analysis was made by the ld AO. The non-application of mind on the part of the ld AO, while issuing the show cause notice u/s 148A(b) of the Act and the subsequent passing of an order u/s 148A(d) of the Act for a different figure of income alleged to have escaped assessment, is writ large. There is absolutely no prima facie material available with the ld AO or any tangible material or information in his possession, which would enable him to form a belief that receipt of Rs. 1 crore from Shri Vikas Garg constitute income in the hands of the assessee. The ld AO after receiving the replies of the assessee had not even resorted to make any further enquiry from Shri Vikas Garg to understand the sources for advancing Rs. 1 crore gift to the assessee. The assessee was never called upon to explain the veracity of the gifts of Rs. 1 crore received from Shri Vikas Garg in the show cause issued u/s 148A(b) of the Act dated 29.03.2023. Hence, assessee can never be faulted for the same. Considering the reply of the assessee dated 10.04.2023, in response to notice issued u/s 148 A(b) of the Act, the ld AO should have made further enquiries with the donor (i.e. Shri Vikash Garg) or should have sought for further details from the assessee. Both were not done by the ld AO in the instant case, which makes the entire assumption of jurisdiction u/s 148 totally flawed. Reliance in this regard has been rightly placed by the ld AR on the decision of the Hon’ble Rajasthan High Court in the case of Multi Metals Ltd vs DCIT dated 19.03.2025 reported in (2025) (3)TMI 1498.

Without providing the actual material available in the possession of the ld AO to come to a prime facie conclusion that assessee income had escaped assessment to the tune of Rs. 1 crore, the same would be in direct violation of the guidelines and the requirements articulated by the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Aggarwal reported in 138 taxmann.com 64 (SC), which states that assessee must be furnished with the information and the materials relied upon so as to enable and effective reply to the show cause notice. Providing only the bare information without the underlying material would leave the assessee handicapped in making an effective response and would render the entire procedure envisaged u/s 148A(b) of the Act ineffective. On this procedural shortcoming, the Hon’ble Bombay High Court in the case of Anurag Gupta Vs. ITO reported in 454 ITR 326 (Bombay) had held that the reassessment proceedings are unsustainable in the eyes of law and quashed the order passed u/s 148A(b) of the Act. Respectfully following the aforesaid judicial precedents, we quash the order passed u/s 148A(d) of the Act dated 12.04.2023 by holding that the very assumption of jurisdiction is totally flawed and consequential framing of reassessment as void ab initio. Since, the entire reassessment is quashed, the grounds raised by the assessee on merits need not be gone into and they are left often.

In the result, the appeal of the assessee is partly allowed.