TRDP HAPPY WORLD PVT. LTD ,DELHI vs. DCIT, CENTRAL CIRCEL-19 , DELHI

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ITA 6120/DEL/2025Status: DisposedITAT Delhi19 May 2026AY 2018-199 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice under Section 148 was invalid as the conditions stipulated in Section 149(1)(b) were not met. The estimated income did not fall under the categories of 'asset', 'expenditure', or 'entry in books of account'.

What were the facts?

The assessee's appeal challenges a reassessment order. The primary issue revolves around the validity of the notice issued under Section 148, which was issued more than three years after the relevant assessment year.

What were the issues?

Whether the notice issued under Section 148 after the expiry of three years from the end of the relevant assessment year is valid when the conditions of Section 149(1)(b) are not satisfied.

Which sections of the Income-tax Act were involved?

Section 148,Section 149(1),Section 147,Section 151

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: YOGESH KUMAR U.S. & SHRI MANISH AGARWAL

For Appellant: CA & Sh. Pranav Yadav, Adv
Hearing: 24/03/2026Pronounced: 19/05/2026

1 ITA No. 6120/Del/2025 TRDP Happy World Pvt. Ltd.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI BENCH ‘C’: NEW DELHI BEFORE YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER

ITA No. 6120/Del/2025 (A.Y 2018-19) TRDP Happy World Pvt.Ltd. Vs Deputy Commissioner of 92, Chanderlok, Pitampura, New Income Tax, E-2, ARA Centre, DelhiPAN: AAGCA5328L Jhandewalan Extension, Delhi

Appellant Respondent Assessee by Sh. Amit Goel, CA & Sh. Pranav Yadav, Adv Revenue by Sh. Dayainder Singh Sidhu, CIT (DR) Date of Hearing 24/03/2026 Date of Pronouncement 19/05/2026

ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of Ld.

Commissioner of Income Tax (Appeals)-27, (‘Ld. CIT(A)/NFAC’ for short),

New Delhi dated 29/08/2025 for the Assessment Year 2018-19.

2.

The grounds of Appeal are as under:-

“1. On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, illegal, without jurisdiction and barred by limitation and, therefore, the said notice u/s 148 along with assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

2.

On the facts and circumstances of the case and in law, the reassessment proceedings initiated are contrary to the provisions of law including the specific provisions of section

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147 to section 151 of Income Tax Act, 1961 and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed and CIT(A) erred in not holding so.

3.

On the facts and circumstances of the case and in law, the order passed by the learned assessing officer and the addition made therein is bad-in-law and CIT(A) erred in not holding so.

4.

On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 65,81,611/- on account of unexplained cash receipts.

5.

On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act, 1961.”

3.

The Ld. Counsel for the Assessee canvassing on Ground No. 1 to 3

submitted that the notice u/s 148 of the Income Tax Act, 1961 ('Act' for

short) was issued after the expiry of three years from the end of relevant

Assessment Year on 20/10/2023 without fulfilling the conditions as

specified u/s 149(1)(b) of the Act. Therefore, sought for allowing Ground

No. 1 to 3. The Ld. Counsel has also relied on order of the Co-ordinate

Bench of Hyderabad Tribunal in the case of M/s ACE Tyres (P) Ltd.

Hyderabad vs. ACIT, Central Circle 1(2) Hyderabad, 2025 (10) TMI 936.

4.

Per contra, the Ld. Departmental Representative relying on the

orders of the Lower Authorities, submitted that the notice u/s 148 of the

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Act has been issuedwell within the period of limitation and the ground

No. 1 to 3 of the Assessee are hyper technical and the additionmade on

its merit cannot be deletedon the said count. Thus, sought for dismissal

of Ground No. 1 to 3 of the Assessee.

5.

We have heard both the parties and perused the material available

on record. It is evident from the assessment order that, A.O. has

estimated the business income/profit which according to A.O. himself

were in respect of unaccounted transaction. Such estimated income

does not fall in any category specified in Clause b of Section 149(1) of the

Act. For the sake of ready reference Section 149(1)is reproduced as

under:

“Section 149(1) in The Income Tax Act, 1961 (1)No notice under section 148 shall be issued for the relevant assessment year,— (a)if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); [(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i)an asset; (ii)expenditure in respect of a transaction or in relation to an event or occasion; or (iii)an entry or entries in the books of account,which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] ******** ****** ****** ******** ****** ******

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******** ****** ****** Explanation.—For the purposes of clause (b) of this subsection, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.”

6.

In an identical case in the case of M/s ACE Tyres (P) Ltd

Hyderabad Vs. ACIT Central Circle 1(2) Hyderabad, 2025 (10) ΤΜΙ 936 –

ITAT Hyderabad, wherein it was held as under: -

“22. Section 149 of the Act stipulates the limitation for issuing notice u/s 148. The normal time limit as provided u/s 149(1)(a) is 3 years from the end of the relevant A.Y. However, if the case which fall in the ambit of sub clause (b) of section 149(1) of the Act, the time limit is extended upto 10 years from the end of the relevant A.Y subject to the condition that material in the possession of the Assessing Officer including the books of account or other documents or evidence reveals that the income chargeable to tax is represented in the form of an asset, expenditure in respect of transaction or in relation to an event or an occasion, or an entry or entries in the books of account and further such income which has escaped the assessment amount to or likely amounts to fifty lakh rupees or more. In the case in hand, undisputedly the notice issued u/s 148 of the Act for the A.Y 2014-15 to 2018-19 were issued after 3 years from the end of the relevant A.Y. Therefore, until and unless the conditions as stipulated in clause (b) of section 149(1) of the Act are satisfied, the notice issued u/s 148 of the Act would be invalid being bartred by limitation provided u/s 149(1) of the Act. 23. The Assessing Officer in the reasons recorded for reopening of the assessment stated that the income chargeable to tax represented in the form of an asset and an entry/entries in the books of account as per the provisions of section 149(1)(b) of the Act. Therefore, the Assessing Officer proposed to bring the case of the assessee in sub-clause(i) and sub-clause (iii) of clause (b) of section 149(1) of the Act. From the details of the transactions as found in the Laptop, it is clear that these are receipts and payments in cash and no corresponding cash or

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any other assets were found during the coruse of search and seizure action representing these entries. It is not the case of either party that these transactions as found in the Laptop in question are in respect of purchase or acquisition of any asset. Therefore, the business transactions of sale of scrap or commission income etc, as well as the expenditure incurred in relation to the business activity would not constitute of an asset in terms of section 149(1)(b) of the Act. It is also a matter of fact and record that these transactions as found in the Laptop in a software FOCUS 5.5 are not in the nature of any accounts much less the books of account. These are the simple details of cash receipts and cash payments in respect of the transaction of scrap sale etc, as well as payment towards expenditure and that too the consolidated details of the entire Exel Group not a separate account of each company is maintained. Further, these are only the details of selective transaction in cash and not the transactions of other then cash. Therefore, these details found in the Laptop of the Sr. Accounts Manager, Shri Ramesh Kumar Sanaka would not constitute the books of account or parallel/duplicate books of account and consequently would not fall in the ambit of sub clause (iii) of clause (b) of section 149(1) of the I.T. Act.

24.

Once the case of the assessee does not fall in the ambit of clause (b) of section 149(1) of the Act, then the reasons recorded by the Assessing Officer for reopening of the assessment giving the details of undisclosed income as quantified by the ADIT (Inv) Unit- I, reveals that the Assessing Officer has recorded his satisfaction in the reasons mechanically without application of mind so far as the correct amount of escaped income for each of the years and each of the companies. This non-application of mind at the time of recording the reasons also corroborated by the fact that in the assessment order, the Assessing Officer has determined the different amount of escaped income for each A.Y which is estimated in the ratio of turnover of each of the group companies from the total amount of cash receipts found in the Laptop of Shri Ramesh Kumar Sanaka, pertaining to the entire group. Even if for the sake of argument, it is presumed that the quantum of escaped income for each A.Y was more than Rs.50 lakhs and the Assessing Officer at the time of recording the reasons was not supposed to undertake a detailed or depth

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examination of evidence collected during the search, the prima facie undisputed fact is that the details of unaccounted cash receipts and cash payments found during the course of search & seizure action were not specifically attributed to each of the group companies and further only the receipts found in the said seized material are taken into consideration for arriving to the conclusion that the income of more than Rs. 50 lakhs for each of the companies has escaped assessment. The Assessing Officer has proceeded on the basis of the details provided by the ADIT (Inv) and not proceeded on the basis of the seized material containingthese transactions of unaccounted cash receipts and payments. The reasons recorded by the Assessing Officer manifest that no such minimum verification was done by the Assessing Officer regarding the nature of the transaction, the net outcome of the receipt and payment as recorded in the said seized material, apportionment of the amounts of receipts and payments to each of the group companies to quantify the income escaped assessment for the A.Ys 2014-15 to 2018-19. Thus it is a simple case of non- application of mind and a borrowed satisfaction on the part of the Assessing Officer while recording the reasons for reopening.

25.

Apart from the non-application of mind regarding the nature of the transaction, quantification of the income and allocation of the amounts of receipts and payment to each of the group companies, the Assessing Officer has though recorded that the income chargeable to tax represented in the form of an asset and an entry or entries in the books of account as per the provisions of section 149(1)(b) of the Act. However, not a single word is stated by the Assessing Officer either in the reasons recorded for reopening of the assessment or in the assessment order to prima facie show that the income escaped assessment represents an asset and further what kind of an asset. Similarly, these details as recorded in the software Focus 5.5 in the Laptop of Shri Ramesh Kumar Sanaka do not constitute the entries in the books of account, therefore, two statement of the Assessing Officer in the reasons recorded for reopening of the assessment is very vague and without any basis. The Assessing Officer ought to have given the minimum description of the assets and the nature of the entries in the books of account so as to bring the case in the ambit of section

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149(1)(b) of the Act, to the extent that the conditions provided in sub clause (i) and sub clause (iii) of clause (b) of section 149(1) of the Act satisfied. It is pertinent to note that the seized material in question is only a print out of the details found in the Laptop of Shri Ramesh Kumar Sanaka and none of the transactions as found in the seized material is representing any asset in existence at the time of the search & seizure action or even at the time of the assessment. It is not the case of the Department that any cash equivalent to the alleged undisclosed income/income escaped assessment was either found or converted into any other asset. Therefore, the Assessing Officer has completely failed to bring the case of the assessee in the ambit of sub clause (i) of clause (b) of section 149(1) of the I.T. Act. Further, the seized material is not in the nature of books of account, therefore, the details recorded in the seized material would not constitute as entry or entries in the books of account.

- - - - - - - - - - - - - - - - - - - - 41. Therefore, in view of the fact that notice issued u/s 148 of the Act in respect of A.Ys 2014-15 to 2018-19 after the expiry of 3 years from the end of the A.Y, the approval of the specified authority granted in a mechanical way renders the reopening of the assessment itself bad in law. Accordingly, in view of the facts and circumstances as cited above and various decisions as stated above, we hold that the reopening of the assessment is not validand liable to be set aside. Apart from the invalid approval/sanction u/s 151 of the Act, the Assessing Officer has also failed to bring the case in the category where mandatory conditions u/s 149(1)(b) of the Act are satisfied for initiation of proceedings u/s 147/148 of the Act after the expiry of 3 years from the end of the relevant A.Ys and therefore, the reopening of the assessment for want of the satisfaction of mandatory condition u/s 149(1)(b) of the Act is also invalid and liable to be quashed. We order accordingly.”

7.

Considering the fact that the A.O. has estimated the business

income/profit, which according to A.O. himself were in respect of

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unaccounted transaction, the requisite condition as per Clause (b) of

Section 149(1) has not been fulfilled. As the alleged income escaping

assessment for which the A.O. has made the addition is neither

represented in the form of ‘an asset’ nor any expenditure in respect of

transaction or in relation to an event or occasion nor any entry/entries in

the books of account. Thus, by relying on the order of the Co-ordinate

Bench of the Tribunal in the case of M/s ACE Tyres (P) Ltd. Hyderabad

(supra) we find merit in Ground No. 1 to 3 of the Assessee, accordingly

Ground No. 1 to 3 of the Assessee are allowed and the assessment order

which has been confirmed by the Ld. CIT(A) is herby quashed.

8.

In the result, Appeal of the Assessee is allowed.

Order pronounced in the open court on 19th May, 2026

Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 19 .05.2026 Reshma Naheed, Sr.P.S Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT, NEW DELHI

9 ITA No. 6120/Del/2025 TRDP Happy World Pvt. Ltd.

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