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Facts
A survey was conducted on the assessee concerning demonetization period cash deposits. Allegations arose about two individuals providing accommodation entries. The Assessing Officer (AO) initiated reassessment proceedings under Section 147/148 by issuing a notice dated 27.04.2021, which was later treated as a show cause notice under Section 148A(b). The AO's order included an addition of Rs. 4,11,56,500/-.
Held
The Tribunal held that the reopening notice dated 27.04.2021 for AY 2017-18 was issued beyond the three-year period from the end of the assessment year. Consequently, the approval for reopening should have been obtained from the Principal Chief Commissioner or equivalent authority, not the Principal Commissioner, making the approval invalid. The reassessment proceedings were deemed bad in law.
Key Issues
Whether the reassessment proceedings initiated by the AO were valid, specifically concerning the timely issuance of notice and obtaining of proper approval from the competent authority as per Section 151 of the Income Tax Act, 1961, especially when the notice was issued after a period of three years from the end of the assessment year.
Sections Cited
148, 148A, 151, 68, 69C, 142(1), 144B, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the Department of Revenue and Cross-Objections filed by the assessee are against order dated 10.03.2025 of Learned Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 (hereinafter referred as “the Act”) arising out of Assessment Order dated 29.05.2023 of the Learned Assessing Officer/Assessment Unit (hereinafter referred as “the Ld. AO”) under Sections 147 read with section 144B of the Act for AY 2017-18.
Brief facts of the case are that the assessee filed return of income on 28.07.2017 declaring total income of Rs.60,96,993/-. A survey action was conducted on 27.04.2018 on M/s. Sarvroopey Vyapar Pvt. Ltd. at Sector 23 Dwarka and M/s. Shashi Sales & Marketing Pvt. L Astral Food Pvt Ltd & Rabik Exports Ltd. at G-10 Padma Tower, Rajendra Place, Delhi. Information in this case was received that during demonetization huge amount of cash was deposited in the accounts of entities. However, during the course of the survey and from post survey proceedings it was alleged that there were two main persons namely Smt. Rani Sharma and Shri Yash Pal Gupta, who were involved in providing accommodation entries of sale & purchase bills to various beneficiaries from many paper entities deposited in the bank accounts of these .2025 & CO No.210/Del/2025 entities. Initial, notice dated 27.04.2021 with approval of "Range 19, Delhi" was issued under Section 148 of the Act, however, the same was treated as a show cause notice under section 148A(b) of the Act by virtue of a letter dated 26.05.2022 issued to the assessee along with reasons for reopening of assessment which includes bogus sales amounting to Rs.4,11,56,500/-. The assessee, on 23.12.2021, filed objection to the reopening of the assessment u/s 147/148 and hence, notice issued u/s 148A(b) of the Act is bad in law and the same is liable to be dropped. An order under Section 148A(d) of the Act was passed on 30.07.2022, whereby the objections of the assessee was considered untenable by taking approval of Principal commissioner of Income tax-7, Delhi which is not in accordance with section 151(ii) of the Act. Notice under Section 148 of the Act was issued on 30.07.2022 whereby reassessment proceedings were initiated. Appellant has filed a Return of Income on 04.10.2022 declaring total Income as Nil. Accordingly, information was sought from the assessee vide notice dated 20.02.2023 issued under section 142(1) of the Act, wherein, assesse in response to same submitted copy of Balance Sheet, Profit & Loss Account, along with copy of notes/ schedules, copy of sale invoices, ledger confirmations, copy of bank statements, details regarding corresponding purchases made against alleged sales along with copy of purchase invoices. On completion of proceedings, Ld. AO vide order dated 29.05.2023 made addition of Rs.4,11,56,500/-.
.2025 & CO No.210/Del/2025 3. Against order dated 29.05.2023 of Ld. AO, the appellant/assessee preferred appeal before the Ld. CIT(A) which was partly allowed vide order dated 10.03.2025. 4. Being aggrieved, the appellant/revenue preferred present appeal and assessee filed cross-objections. 5. In Department of Revenue pleaded following grounds: “
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs. 4,11,56,500/- to Rs.43,09,085/- U/s 68 of the Act, 1961 merely on the ground that the AO has not disputed the books of accounts whereas the AO has made the addition on account of beneficiaries of accommodation entries particularly.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.8,23,130/- made by AO u/s 69C without considering the fact that the assessee has incurred commission expenses to bogus entities.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition without appreciating the fact that Smt. Rani Sharma and Sh. Yashpal Gupta in their statements recorded during survey on oath clearly admitted that the both alleged entities were amongst the several entities managed and controlled by them and their associates and these entities are merely used for providing accommodation entries.
4. The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or amend any of the ground(s) of appeal.”
6. In Cross-objection No. 210/Del/2025, assessee pleaded following objections:
.2025 & CO No.210/Del/2025 “1. That the Ld. CIT(A) has erred in law as well as on facts by restricting the addition to Rs. 43,09,085/-, without proper appreciation of the facts of the case.
2. That the Ld. AO has erred in law and on facts in computing the EBITDA without rejecting the books of account under section 145(3) of the Act, thereby rendering the computation arbitrary and unjustified.
That the respondent reserves the right to add, delete, amend, modify the grounds of cross objections”.
Learned Authorized Representative for assessee submitted that there is delay of 15 days in filing Cross-objections due time taken in engagement of a counsel. The explanation does not smack of mala fide as respondent-assessee has not gained anything by not filing cross-objection within the period of limitation. Therefore, delay of 15 days in filing cross-objection due to time taken in engagement of counsel is condoned. Application for condonation of delay of 15 days filing cross-objection is allowed.
Learned Authorized Representative for the Department of Revenue submitted that Ld. CIT(A) erred in restricting addition of Rs.4,11,56,500/- to Rs.43,09,085/- under Section 68 of the Act on the ground that Ld. AO has not disputed books of accounts whereas Ld. AO had made the addition on account of beneficiaries of accommodation entries. Ld. AO erred in deleting addition of Rs.8,23,130/- made by Ld. CIT(A) under Section 69C of the Act without considering the fact that the assessee has incurred commission expenses to bogus entities.
Learned Authorized Representative for the assessee submitted that the first notice under Section 148 of the Act was issued on 27.04.2021 for ITA No. 3073/Del.2025 & CO No.210/Del/2025 assessment year 2017-18 at page 1 of the paper books. Notice dated 26.05.2022 under Section 148A(b) of the Act, page nos. 2-3 of paper books. Order dated 30.07.2022 under Section 148A(d) of the Act is at page no. 4.8 of paper books. Notice dated 30.07.2022 under Section 148 of the Act is at page no.9 of paper books. 9.1 The case of assessee relates to assessment year 2017-18 and notice dated 27.04.2021 was issued after a period of three years of relevant assessment years. The sanctioning authority should have been Principal Chief Commissioner of Income Tax or Principal Director General or Chief Commissioner but in this case the approval has been obtained from the Pr. Commissioner of Income Tax, which is not the competent authority to grant the permission. This issue is squarely covered by the Judgment of Hon'ble Jurisdictional High Court of Delhi in the case of Communist Party of India (Maxist) V. CIT(E) WP 9031/2023 dated 28.04.2024 and the case of Sampartk Management Consultancy LLP v. DCIT, Curcle-5(2)(1) Noida & 6026/Del/2024 dated June 25, 2025. Reliance was placed on para 5 to 7 of order dated 27.08.2025 in titled as “Upneet Singh Arneja Vs. ITO”.
On examination of record in light of above said rival contentions, it is crystal clear that notice dated 27.04.2021 under Section 148 of the Act was issued for assessment year 2017-18 at page no.1 of the paper books. After obtaining necessary satisfaction of the Range-19, Delhi. Notice dated 26.5.2 CO No.210/Del/2025 under Section 148A(d) of the Act at pages 2 and 3 of paper books. Notice dated 30.07.2022 under Section 148 of the Act was issued after obtaining prior approval of Ld. PCIT, Delhi accorded on 29.07.2022 (page no. 9 of the paper books).
A Co-ordinate Bench in titled as “Upneet Singh Arneja vs. ITO, Ward 45(1), New Delhi, order dated 27.08.2025 paras 5 to 7 has held as under: “5. Ld. Counsel for the assessee has raised the legal ground no.6 and stated that first notice u/s 148 was issued on 2805-2021for the A.Y. 2016- 17 under the old reassessment 5 tax regime, however due to the introduction of new reassessment tax regime from 01-04-2021 and in the compliance of the Hon’ble Supreme Court Order in the case of Ashish Agarwal notice u/s 148A(b) of the Act was issued on 18-05-2022 and consequent order under section 148A(d) of the Act on 28-07-2022 was issued. The case of the assessee relates to the A.Y. 2017-17 and the notice /order was issued on 28-07-2022 after a period of three years from the end of o relevant assessment Year, the sanctioning authority should have been Principal Chief Commissioner or Principal Director General or Chief commissioner but in this case the approval has been obtained from the Pr. Commissioner of Income Tax, which is not the competent authority to grant the permission. This issue is squarely covered by the Judgement of Hon’ble Jurisdictional Delhi High Court in the case of Communist Party of India (Maxist) V. CIT(Ex) WP 9031/2023 dated 28-04-2025 and the case of Sampark Management Consultancy LLP v. DCIT, Circle 5(2) (1) Noida & 6026 /Del/2024 dated June 25, 2025. In the case of Sampark Management Consultancy LLP v. DCIT, Circle -5(2) (1) Noida the Co-ordinate bench held as under: “3. We find that section 148 of the Act was substituted by the Finance Act, 2021 wet. 01.04.2021. Notice 14 of the Act as per the old provisions of section 148 of the Act applicable till 31.03.2021 should have been issued only upto 31.03.2021. The issue stands settled by the Hon'ble Supreme Court in Union of India vs Ashish Agarwal, 444 ITR 1 (SC) The assessee company was part of the litigations. The AO has issued notice u/s 148A(b) on 27.05.2 CO No.210/Del/2025 and on 28.07.2021 order was passed u/s 148A(d) and issued notice is 148 of the Act on the same date, i.e, on 28.07.2022 in AY 2016- 17 and while in AY 2017-18 on 27.07.2022 order was passed u/s 148A(d) and issued notice w/s 148 of the Act on 28.07.2022. This notice dated 28.07.2022 u/s 148 of the Act, available at page 14-15 of the paper book for AY 2016-17 and on pages 16-17 for PB for AY 2017-18, and same are shown to be issued after obtaining approval of Principal Commissioner of Income-tax, Noida. This approval is contrary to the provisions of section 151 of the Act as amended/substituted by the Finance Act, 2021 because, as per section 151 of the Act, if more than three years have lapsed from the end of the relevant assessment year, approval of Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General was required to be obtained. In the present assessment years, notices u/s 148 have been issued on 28.07.2022 after expiry of three years from the end of relevant assessment years. Accordingly, sanction/ approval of Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General was required to be obtained. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in Union of India vs. Rajeev Bansal, 2024 (10) TMI 264 SUPREME COURT) and various decisions. Thus, the approval is not sustainable under law. The grounds as raised deserves to be sustained. Consequently, the appeals of the assessee are allowed.”
The Ld. Sr. DR has relied the order of the lower authorities and submitted that the notice/ order was issued after taking the prior approval from the authority as per the directions of the Hon’ble Supreme Court in the case of Ashish Agarwal [2022] 444 ITR 1 SC. In the present case the notice was issued on 28-07-2022 for the A.Y. 2016-17 from the prior approval of the Pr. Commissioner, without, the approval of the authority specified u/s 151 of the Act. The notice was issued beyond the period of three years from the end of the relevant assessment year, thus in term of section 151(ii) of the Act the sanction was required to be approved by the Principal Chief Commissioner or Principal Director General or where there is no such authority, by Chief Commissioner or Director General. Respectfully following the decision of the Hon’ble High Cort and the Coordinate Bench we allowed the appeal of the assessee and quashed the assessment order dated 20-04-2023.
.2025 & CO No.210/Del/2025 7. We allowed the appeal of the assessee on legal ground the other grounds have become academic and keep them open for adjudication.”
In light of above material facts, by following the principles of judicial precedents, it is held that the reopening notice dated 27.04.2021 under Section 148 of the Act for assessment year 2017-18 is beyond period of three years from the end of assessment year. So, the approval/sanction was required to be approved by the Principal Chief Commissioner or Principal Director General or Chief Commissioner but in present case, the same was obtained from the Principal Commissioner of Income Tax which is not competent authority. Therefore, impugned orders of Ld. CIT(A) and Ld. AO are set aside.
The findings on pure legal question have rendered adjudication of grounds of appeal
of the Revenue and Cross-Objection filed by the assessee as academic.