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Income Tax Appellate Tribunal, DELHI BENCHES ‘C’: NEW DELHI.
(Assessment Year: 2015-16) Umar Daraj, vs. ITO, Ward 1(2)(4), 153/1, Hapur Road, Meerut. Umar Nagar, Meerut – 250 001 (Uttar Pradesh). (PAN : AINPD8766H) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Sumit Lal Chandani, Advocate REVENUE BY : Shri Dayainder Singh Sidhu, CITDR Date of Hearing : 17.09.2025 Date of Order : 10.12.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 14.02.2025 for the Assessment Year 2015-16.
2. At the time of filing of appeal, the Registry has pointed out a defect that appeal is time barred by 8 days. In response thereof, the ld. AR of the assessee submitted that the delay is for meagre 8 days and the delay was not intentional and beyond the control of the assessee as well as the assessee could not get any benefit in delay filing the same. Accordingly, he prayed that the delay in filing the appeal be condoned.
We have heard both the counsels on the issue of condonation of delay. In our considered opinion, there was only 8 days delay in filing the appeal and assessee is not able to get any benefit in filing the same delayed. Therefore, we condone the delay in filing the appeal before the Tribunal.
Brief facts of the case are, the assessee filed its original return of income on 20.09.2015 declaring total income of Rs.7,66,440/-. The case of the assessee was reopened by issue of notice under section 148 of the Income-tax Act, 1961 (for short ‘the Act’) dated 30.03.2021 after obtaining approval from the competent authorities. In response, assessee submitted its return of income on 04.10.2021 declaring same income as per original return of income. Accordingly, notices u/s 143(3) of the Act and reasons for reopening of the assessment along with approval u/s 151 of the Act were provided to the assessee on 14.10.2021. The assessee raised objections against the reopening proceedings vide letter dated 30.11.2021. The AO discussed all the objections on 29.12.2021. Subsequently, notice u/s 142(1) was issued and served on the assessee. The case was reopened for the following reasons :- (i) Cash payments of Rs.82.89 crores made for purchase of live stock (buffaloes); (ii) Excess claim of Rs.23,66,900/- made in respect of salary/wages paid; (iii) Claim of interest paid on car loan of Rs.50,141/- car loan of Rs.50,141/- and depreciation claimed on car of Rs.1,20,932/- though not used for business purpose.
5. In response, assessee submitted that assessee is engaged in the sale and purchase of live buffaloes. During the year, assessee has purchased live buffaloes and made the payments in cash amounting to Rs.82,89 crores. It was further submitted that assessee buys strictly from farmers or pashu painth dealers in different villages and were supplying them to slaughter houses. Payment to farmers were made in cash and the above cash payments are exempt under Rule 6DD (c)(ii). Further assessee submitted some purchase memo stating that live animals were purchased from individual farmers and cash payments are exempt under Rule 6DD. The AO observed that no documentary evidence in respect of payments claimed to be made by cheque viz. details of the parties with their name and PAN, their ledger account along with the payments highlighted in the bank account have been furnished. He observed that on verification of the bank statement, no cheque payments whatsoever have been made. Since the assessee submitted few receipts and no books of account have been furnished too viz. no stock register, purchase register, no cash flow statement, no cash book, etc. Accordingly, further notices were issued to the assessee. Therefore, not satisfied with the submissions of the assessee, the AO proceeded to make the addition of Rs.82,89 crores in the hands of the assessee.
6. Aggrieved assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions. After considering the detailed submissions of the assessee, ld. CIT (A) relied on the CBDT Circular No.4 of 2006 dated 29.03.2006, as per which Board is allowed and clarified the expression ‘the produce of animal husbandry’ used in sub-clause (ii) of clause (f) of Rule 6DD of the Income-tax Rules, 1962 would include live stock and meat and in a case where payment exceeding Rs.20,000/- is made to a producer of the product of animal husbandry including live stock and meat, hides and skins otherwise than buying a crossed cheque drawn on a bank or by a crossed bank draft for the purchase of such produce, no disallowance should be attracted u/s 40A (3) read with Rule 6DD. In the same circular, it was clarified that exception will not be available on the payment for the purchase of live stock, meat, hides and skins from a person who is not proved to be the purchaser of these goods and it is only a trader, broker or any other middleman by whatever name called. Ld. CIT (A) further relied on the Circular No.8 of 2006 dated 06.10.2006 wherein further clarification for the expression ‘the produce of animal husbandry’ was issued in which it was clarified that a declaration from the person receiving the payment that he is a purchaser of meat is one of the clarification. By relying on the above circulars, he observed that the exception is available to the purchaser of meat who can be treated as purchaser of meat was further clarified by the circulars. The assessee has furnished his Trading and Profit & Loss account for the year which ld. CIT (A) has reproduced in his order at page 14. He observed that from the above, it is evident that assessee is not a manufacturer of meat product but only a trader of cattle. It is an undisputed fact that assessee is not the producer of meat, therefore, the exception provided by Rule 6DD not available to the assessee. Accordingly, he sustained the additions made by the AO.
Aggrieved, the assessee is in appeal before us and raised following grounds of appeal :-
1. That the notice dated 30.03.2021 issued under Section 148 of the Income Tax Act, 1961 ('the Act') and the assessment order dated 10.03.2022 passed are illegal, bad in law, without jurisdiction and not in accordance with the provisions of the Act.
2. That the order dated 14.02.2025 passed under Section 250 of the Act by CIT(A) confirming legality of the notice and the additions made by ITO Delhi is illegal, and bad in law.
3. 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 147 to section 151 of Act and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed.
4. That the approval granted under Section 151 of the Act is mechanical and without independent satisfaction of the sanctioning authority, vitiating the reassessment proceedings. The Commissioner of Income Tax (Appeals) has erred in failing to appreciate this defect and in upholding the reassessment order.
5. That the reasons recorded for reopening the assessment do not establish a live nexus between the material relied upon and the formation of belief of escapement of income, making the assumption of jurisdiction under Section 147 unsustainable in law. The Commissioner of Income Tax (Appeals) has erred in disregarding this fundamental defect and in upholding the reassessment order.
6. That the reassessment proceedings are based on borrowed satisfaction derived from an Investigation Wing report without independent verification by the Assessing Officer, which is contrary to the settled legal principles governing reopening of assessments. CIT(A) has erred in overlooking this jurisdictional flaw and in sustaining the reassessment order.
7. That CIT(A) has erred in confirming the reassessment order without addressing the detailed written submissions, thereby violating the principles of natural justice and rendering the appellate order perverse and unsustainable in law.
8. That the Assessing Officer has erred in making an addition of Rs.82,89,00,000/- under Section 40A(3) of the Act without appreciating that the appellant qualifies for exemption under Rule 6DD(e)(ii), and that the payments made to fanners and livestock traders are covered under the said rule. CIT(A) has further erred in upholding the disallowance despite the clear applicability of the exemption.
9. That the Assessing Officer has incorrectly characterized the appellant's business activities and failed to appreciate that the nature of transactions falls within the scope of Rule 6DD, thereby making the disallowance under Section 40A(3) legally untenable. CIT(A) has erred in not properly analyzing the appellant's submissions and in sustaining the disallowance.
10. That the reassessment proceedings have been carried out in violation of the principles of natural justice, as the Assessing Officer/CTT(A) failed to provide reasonable opportunity to the appellant.
11. That CIT(A) has erred in rejecting the additional evidence submitted under Rule 46A without proper examination and without recording a valid reason, thereby depriving the appellant of a fair hearing and violating the principles of natural justice.
12. That the impugned order passed CIT(A) is bad in law as it fails to deal with the specific legal contentions and documentary evidence submitted by the appellant, making the appellate findings unsustainable.”
At the time of hearing, ld. AR of the assessee submitted as under :-
A. THE REASSESSMENT FOR AY 2015–16 IS ARBITRARY AND UNSUSTAINABLE AS THE AO, ON IDENTICAL FACTS, ACCEPTED THE POSITION IN AYs 2013–14 & 2014–15 BUT TOOK A CONTRARY VIEW IN AY 2015–16 WITHOUT REASONS — VIOLATING THE DOCTRINE OF CONSISTENCY AND PRINCIPLES OF NON- ARBITRARINESS 1. It is a matter of undisputed record that the Appellant’s cases for AYs 2013–14, 2014–15, and 2015–16 were reopened on the very same date 30.03.2021, by the same Jurisdictional AO, and with the sanction of the same Approving Authority i.e. PCIT, Ghaziabad.
The reasons recorded in each year are also materially similar all flow from the same information of alleged suspicious transactions arising out of bank credits in the accounts of M/s Al Khair Traders, the Appellant’s proprietorship concern. Pertinently, there is no change in the nature of business or modus operandi of the assessee across these three assessment years. Copies of notices issued under Section 148 for AY 2013–14 (PB Pg. 7), AY 2014–15 (PB Pg. 17), and AY 2015–16 (PB Pg. 28) clearly demonstrate this fact. The reasons for reopening in each of the three years (PB Pgs. 8–11 for AY 2013–14; Pgs. 18– 22 for AY 2014–15; Pgs. 29–32 for AY 2015–16) also establish that all three reopening of assessments flowed from the same STR-based information regarding high-value banking transactions in the accounts of M/s Al Khair Traders.
3. Undisputedly, the Appellant is consistently engaged in livestock trading, and the replies/objections filed across the years were of similar tenor and content, enclosing comparable documentary evidence such as purchase memos, bank statements, and confirmations. In each of the three years, the assessee has consistently carried on business of trading in livestock (buffaloes), purchased in cash at Pashu Painths/Mandis and sold onward to established processors/slaughterhouses. This fact is evident from the audited financial statements placed at PB Pgs. 14–16 (AY 2013–14) and PB Pgs. 25–27 (AY 2014–15). The line of activity and method of operation are identical.
4. Despite this uniformity of facts and responses, the AO accepted the position in AYs 2013– 14 and 2014–15, dropping and not sustaining the additions, whereas for AY 2015–16, the AO proceeded to frame an adverse reassessment order with substantial additions.
This inconsistent approach, without recording any cogent reasoning for the deviation in AY 2015–16, vitiates reassessment proceedings and impugned order. The Hon’ble Delhi High Court in Prem Kumar Chopra v. ACIT [2023] 456 ITR 8 (Delhi) held that where the same AO, confronted with identical facts and replies for different assessment years, accepted the explanation in one year but proceeded adversely in another year without furnishing any justification, the action is arbitrary and unsustainable in law. The Court emphasized that while res judicata per se does not apply to income-tax proceedings, the principle of consistency binds the revenue authorities and any departure from a settled position in identical circumstances must be backed by cogent and rational reasons. In absence thereof, such divergent action is hit by arbitrariness and non-application of mind.
That the principle of consistency is a well-recognized doctrine in tax law, distinct from res judicata, which restrains the Revenue from adopting divergent positions in facts which are identical. The Supreme Court in C.K. Gangadharan & Anr. v. CIT (2008) 8 SCC 739 held (paras 21–23) that once Revenue has accepted a particular treatment, it cannot, in a subsequent year, selectively appeal or deviate without proper reasons or fresh material.
Similarly, in Berger Paints India Ltd. v. CIT (2004) 266 ITR 99, the Supreme Court upheld that the Revenue cannot later take a conflicting stand from what it had earlier accepted, unless compelling justification is recorded. These principles have been repeatedly followed by Tribunals and High Courts to strike down arbitrary reassessments that depart from earlier accepted positions without explanation.
7. Applying the said ratio, the Appellant submits that the assessment order for AY 2015–16 suffers from the very infirmity identified by the Delhi High Court namely, taking a view wholly inconsistent with earlier years under identical facts, without assigning any reason. On this short ground alone, the reassessment deserves to be quashed. This argument was specifically taken before CIT(A). However, same stands rejected without assigning any reasons. B. THE IMPUGNED PROCEEDINGS AND ADDITION OF UNDER SECTION 40A(3) IS ILLEGAL AND UNSUSTAINABLE SINCE THE AO HAD EXAMINED AND ACCEPTED THE IDENTICAL BUSINESS PRACTICE IN AY 2011–12 SCRUTINY ASSESSMENT, AND NO NEW MATERIAL OR CHANGE IN FACTS/LAW EXISTS — REASSESSMENT IS THUS A MERE CHANGE OF OPINION BARRED BY SUPREME COURT IN KELVINATOR OF INDIA LTD. (320 ITR 561) 8. It is further submitted that the assessee’s case was also earlier scrutinized for AY 2011–12 and the assessment order dated 07.12.2018 (PB Pgs. 33–34) forms part of the record. In that order, the Assessing Officer examined the very same business model of the assessee, namely purchase of livestock from farmers and traders at Pashu Mandis in cash and onward sale to established slaughterhouses and processors through banking channels. The AO categorically noted that the assessee was engaged in the trade of buffaloes, that purchases were supported by memos from the Pashu Painths, and that the payments were made in cash due to the peculiar nature of the trade. Despite this, no disallowance under Section 40A(3) was invoked, and the business model of the assessee was accepted as genuine. This departmental acceptance in a completed scrutiny assessment clearly establishes that the Revenue has itself recognized that cash payments in this line of trade are unavoidable and fall within the framework of law, including the exceptions carved out under Rule 6DD. Significantly, there has been no change either in facts or in law between AY 2011–12 and AY 2015–16; the assessee’s business operations, method of purchase, manner of sale, and supporting documentation remain identical, as is borne out by the financials, purchase memos, and confirmations from buyers filed for AY 2015–16. In these circumstances, the sudden and mechanical invocation of Section 40A(3) in AY 2015–16, resulting in an addition of Rs. 82.89 crores, is wholly arbitrary and bad in law. The Revenue, having consciously accepted the very same modus operandi in AY 2011–12 and having not made any such disallowance in AYs 2013–14 and 2014–15 either, cannot, without any cogent reasoning or fresh material, adopt a diametrically opposite view in AY 2015–16.
9. It is respectfully submitted that the present reassessment is nothing but a change of opinion. The assessee’s business model trading in livestock through Pashu Mandis involving cash purchases from farmers and sales to established buyers has been consistently on record and even accepted by the Department in earlier scrutiny and reassessment proceedings. In the impugned year, however, the Assessing Officer has sought to take a contrary view on the very same set of facts, without bringing on record any fresh material or changed circumstances.
10. The Hon’ble Supreme Court in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) has held that reassessment cannot be initiated on a mere change of opinion, since the AO has the power to reassess but not to review.
Thus, the Revenue’s attempt to apply Section 40A(3) of the Act in AY 2015–16, despite having accepted the same business practice in earlier years, is not only inconsistent but squarely hit by the doctrine of change of opinion, which by settled law cannot form the basis of reassessment. This principle applies with equal force where the Revenue seeks to alter its stand across different years on identical facts, without assigning any cogent or distinguishing reasons. The law does not permit the Department to approbate and reprobate at will what has been examined and accepted in earlier years cannot be arbitrarily discarded in a subsequent year in the absence of fresh material or change in law. Such a shift in approach is not merely inconsistent, but in substance amounts to a change of opinion, which the Hon’ble Supreme Court in Kelvinator of India Ltd. (320 ITR 561) has held to be impermissible. It is asserted that where a fundamental aspect permeates multiple years, consistency is required, otherwise, arbitrary departures by the Revenue erode certainty and fairness in tax administration. Therefore, once the modus operandi of the assessee’s business stood accepted in earlier assessments, any contrary stand in later years in the absence of new facts or law is legally untenable and vitiates the reassessment.
“C. REASSESSMENT FOR AY 2015–16 IS VOID AB INITIO AS SANCTION UNDER SECTION 151 WAS GRANTED BY THE WRONG AUTHORITY (PCIT INSTEAD OF JCIT) AND IN A MECHANICAL MANNER; APPROVAL BEING JURISDICTIONALLY DEFECTIVE, THE NOTICE DATED 30.03.2021 IS NON EST IN LAW 14. It is respectfully submitted that the reassessment initiated for AY 2015-16 is void ab initio, as the approval granted under Section 151 is both illegal and mechanically accorded. The notice under Section 148 was issued on 30.03.2021, i.e. prior to 01.04.2021, and therefore the governing law was the pre-Finance Act 2021 regime. In terms of Section 151(2), as it then stood, approval of the Joint Commissioner of Income Tax (JCIT) was mandatory. Instead, the record demonstrates that approval was obtained from the Principal Commissioner of Income Tax. Such approval is without jurisdiction and renders the notice non est in law.
15. The Hon’ble Supreme Court in Union of India v. Rajeev Bansal (C.A. 8629 of 2024, judgment dated 01.04.2025) has conclusively settled this issue. The Court, while analysing the interplay of the TOLA relaxations and Section 151 approvals, categorically held (paras 73, 74, 77 and 114(e)) that the extended timelines under TOLA applied only to approvals under Section 151(1), not to Section 151(2). For approvals under the old Section 151(2), the time limit expired on 31.03.2021, and only the JCIT was the competent authority. The Court clarified: “… if the time limit of four years from the end of the assessment year falls between 20.03.2020 and 31.03.2021, then the specified authority under Section 151(2) has time only till 31.03.2021 to grant approval. The time limit under Section 151 of the old regime therefore expires on 31.03.2021, because the new regime comes into effect from 01.04.2021.”
16. This position was reiterated in para 114(e), where the Supreme Court expressly ruled that approvals under Section 151(2) could not spill over 31.03.2021 and had to emanate from the JCIT. In the facts of the present case It is submitted that in the present case, the approval obtained for issuance of notice under Section 148 dated 30.03.2021 is jurisdictionally defective. The record reveals that the proposal was put up by the Assessing Officer, and while the column requiring “satisfaction of the sanctioning authority” is filled, it is only with a mechanical endorsement by the Principal Commissioner of Income Tax. There is no independent recording of reasons, nor is there any indication of application of mind by the JCIT, who alone was the competent authority under the unamended Section 151(2). Thus, the approval is not only by the wrong authority but is also nothing more than a perfunctory endorsement.
The illegality is squarely covered by the recent judgment of the Hon’ble Bombay High Court in Prabhakar Nerulkar v. PCIT, Panaji (W.P. No. 443 of 2024, decided on 21.07.2025). In that case, too, the approval form disclosed that the date of proposal was 27.03.2021 and in Column No. 3 (remarks of the recommending authority), the JCIT merely noted: “The reasons recorded by the AO is seen. I am satisfied that it is a fit case for reopening the assessment. Accordingly, recommended for approval.” The actual “approval” column thereafter contained only the endorsement of the Principal Commissioner. The High Court noted (para 30) that in terms of Section 151(2), it was the JCIT alone who had the jurisdiction to grant approval prior to 31.03.2021, and an endorsement by the PCIT was a complete nullity. The Court further held that when the Act mandates satisfaction by the JCIT, an endorsement by the PCIT cannot be treated as compliance, as it reflects not an exercise of jurisdiction but an absence of jurisdiction.
The facts in the present case are identical. The notice under Section 148 of the Act was issued on 30.03.2021; the proposal and reasons were put up by the AO; and the so called approval demonstrates only a recommendation followed by an endorsement of the PCIT. There is no approval by the JCIT. The only statutory authority competent to act under Section 151(2) for notices issued prior to 01.04.2021. Thus, just as in Prabhakar Nerulkar, the approval here is vitiated as it is nothing but an endorsement by the PCIT. It will not be out of place to refer to judgment rendered in the case of Ghanshyam K. Khabrani v. ACIT (2012) 346 ITR 443 (Bom) and reaffirmed in Pr. CIT v. Khushbu Industries (Bombay HC, ITXA 1035/2017, judgment dated 11.11.2019) wherein it was held that sanction by a higher authority cannot substitute the satisfaction of the statutorily designated authority under Section 151 of the Act. Thus, the notice dated 30.03.2021, having been approved by the wrong authority and in a wholly mechanical manner, is jurisdictionally void. The defect goes to the root of the matter and cannot be cured by acquiescence or subsequent proceedings. The entire reassessment framed for AY 2015-16 is therefore bad in law and liable to be quashed.
It is pertinent to note that while the Hon’ble Delhi High Court in Abhinav Jindal HUF v. ITO (W.P.(C) 2698/2022, judgment dated 20.09.2024) had earlier taken a contrary view (albeit in favour of the assessee), holding that approval by the JCIT was not valid, this position no longer holds the field. The Hon’ble Supreme Court in. Rajeev Bansal (supra) has conclusively settled the legal position that, under the pre-Finance Act 2021 regime, approval under Section 151(2) could only be granted by the JCIT and not by the Principal Commissioner. Consequently, the ratio of Abhinav Jindal HUF stands impliedly overruled. This interpretation has since been followed and applied by the Hon’ble Bombay High Court in Prabhakar Nerulkar (supra) on precisely identical facts. In any event, even assuming arguendo that divergent High Court views subsist, the settled principle laid down by the Hon’ble Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) mandates that where two interpretations are possible, the one favourable to the assessee must be adopted. This proposition has been consistently followed, inter alia, by the Special Bench of the ITAT in Narang Overseas (P) Ltd. v. Asstt. CIT [2008] 111 ITD 1 (Mum.) (SB), which held that where conflicting High Court decisions exist and the jurisdictional High Court has not pronounced on the issue, the interpretation favourable to the assessee must prevail. D. THERE ARE DISCREPANCIES BETWEEN THE REASONS ON THE BASIS OF WHICH REASSESSMENT PROCEEDINGS WERE INITIATED AND THE REASONS ON THE BASIS OF WHICH ASSESSMENT HAS BEEN COMPLETED, THEREFORE, THE IMPUGNED ORDER IS LIABLE TO BE QUASHED AS THE Ld. AO IS NOT ALLOWED TO TRAVEL BEYOND THE REASONS RECORDED FOR MAKING THE REASSESSMENT 20. It is respectfully submitted that the entire reassessment for AY 2015–16 is invalid, as there is a substantial and impermissible change between the reasons recorded for reopening and the basis ultimately adopted in the impugned assessment order dated 31.03.2022. The jurisdiction assumed under Section 147 must stand or fall only on the reasons recorded at the time of issue of notice under Section 148, and once those reasons change, the very foundation of the reassessment collapses.
First, there are contradictory findings on the appellant’s business activities. In the reasons attached with the sanction under Section 151 dated 29.03.2021, it was specifically stated that the assessee’s cash purchases were made from “cattle merchants” and not from farmers/agriculturists, and for that reason the case did not fall within Rule 6DD. The relevant extract reads: “It is clear that the key distinction which completely negate the covering of the cash purchases under exceptions as provided in Rule 6DD in the case under hands is that purchase of live stock is made from cattle merchants and not from farmers/agriculturists.” However, in the final assessment order dated 31.03.2022, the AO completely altered this reasoning. At para 6.5–6.6, he recorded that the assessee was engaged in trading live buffaloes and could not be considered a “producer” within the meaning of CBDT Circular No. 8/2006, and therefore Rule 6DD did not apply. The shift from alleging payments to cattle merchants to denying the assessee the character of “producer” shows that the AO changed the very nature of the inquiry.
22. Second, there is a clear shift in focus from the initial reasons to the final additions. The reopening was triggered on the suspicion of high-value RTGS/NEFT credits and cash withdrawals from the assessee’s bank accounts, coupled with a finding that purchases from cattle merchants were not exempt under Rule 6DD. However, when completing the assessment, the AO accepted that the purchases were indeed from farmers but changed track to hold that since the assessee was not himself a “producer,” the exemption under Rule 6DD was not available. This amounts to a fundamental departure from the reasons originally recorded and is beyond jurisdiction.
Third, there are differences in the amounts of disallowance. The reasons recorded with sanction under Section 151 estimated escapement at Rs. 85.42 crore, which included not only cash purchases but also disallowances in respect of salary/wages and car-related expenses (interest and depreciation). However, in the impugned order, the AO restricted his conclusion almost entirely to disallowance of Rs. 82.89 crores under Section 40A(3) on account of cash payments for livestock purchases, without sustaining the other grounds mentioned in the reasons. This also evidences that the final order travelled beyond and departed from the recorded reasons.
On a comparative reading of the reasons recorded and the assessment order, it is thus clear that the AO has completely shifted grounds from “payments to cattle merchants” in the reasons, to “assessee not being a producer” in the order; from “multiple heads of escapement” totalling ₹85.42 crores in the sanction, to a sole disallowance of ₹82.89 crores in the order. Such material change of stance strikes at the root of jurisdiction under Section 147.
The law in this regard is well settled. The Hon’ble Delhi High Court has consistently held that reassessment cannot be sustained where the additions made in the final order are at variance with the reasons recorded for reopening. In the regard, reliance is placed on Northern Exim (P.) Ltd v. DCIT [2024] 166 taxmann.com 61 (Delhi)[18-07-2024]; ATS Infrastructure Ltd v. ACIT [2024] 166 taxmann.com 61 (Delhi)[18-07-2024]. Accordingly, in the present case, the complete departure in reasoning and basis of addition between the sanction order and the final assessment renders the reassessment proceedings without jurisdiction and void ab initio. ……..
F. PAYMENTS ARE MADE IN CASH FOR THE PURCHASE OF LIVESTOCK DIRECTLY FROM FARMERS; THE CASE OF THE APPELLANT IS SQUARELY COVERED UNDER RULE 6DD(e)(ii) AND THEREFORE, NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(3) OF THE ACT 12. It is respectfully submitted that the disallowance under Section 40A(3) is wholly misconceived in view of the express provisions of Rule 6DD(e)(ii). The appellant is engaged in the business of purchasing live animals (buffaloes) directly from farmers or Pashu Painth dealers in village markets, and thereafter supplying them to slaughterhouses.
These Pashu Mandis are temporary village markets where individual farmers bring their livestock for sale, often without access to banking facilities. The factual matrix of the appellant’s case, supported by documents and submissions placed on record clearly demonstrates that all purchases were made from farmers and cultivators of livestock, which constitutes the producer of “animal husbandry.” This fact has also been adverted to and accepted in the assessment order itself, where the Assessing Officer noted that “the assessee has made cash payments of Rs.82.89 crores for purchase of live buffaloes”. Having accepted that the payments were made for livestock, the AO nonetheless proceeded to disallow the expenditure on the ground that the appellant was a “trader” and not a “producer,” thereby grossly misinterpreting the CBDT circular.
13. It is submitted that Section 40A(3) is not absolute, and by virtue of its proviso, no disallowance can be made if the case is covered by the exceptions prescribed in Rule 6DD. Rule 6DD, as amended by Notification No. SO 1044(E) dated 27.06.2007, specifically provides under clause (e)(ii) that payments made for the purchase of “the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming” to the cultivator, grower, or producer of such produce shall not attract disallowance under Section 40A(3). The term “animal husbandry” has been consistently defined in authoritative dictionaries as the branch of agriculture dealing with the breeding, raising and care of animals for meat, milk, eggs, hides and other agricultural products. Livestock itself is expressly included within the ambit of “animal husbandry.” Thus, buffaloes being agricultural produce of animal husbandry, payments made to farmers or cultivators for the purchase of livestock are squarely within the protection of Rule 6DD(e)(ii).
14. Therefore, the appellant fulfils all conditions of the Rule. The livestock was directly procured from farmers and cultivators in Pashu Mandis, the payments were genuine and accepted as such by the AO, and the very nature of the trade made cash payments unavoidable. Once it is accepted by the AO that the assessee made payments for the purchase of live buffaloes, the disallowance under Section 40A(3) cannot survive. The appellant’s case thus falls squarely within Rule 6DD(e)(ii), and the impugned disallowance of Rs. 82.89 crores is illegal, contrary to law, and liable to be deleted.”
On the other hand, ld. DR of the Revenue submitted that Rule 6DD is not applicable in the present case. In this regard, he brought to our notice page 3 of assessment order and page 3 of appellate order With regard to other issues raised by the ld. AR, he relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. First we deal with the issue of approval u/s 151 of the Act. We observe that the reassessment initiated for AY 2015-16 is void ab initio, as the approval Section 151 is both illegal and mechanically accorded. We observe that the notice under Section 148 was issued on 30.03.2021, i.e. prior to 01.04.2021, and therefore the governing law was the pre-Finance Act 2021 regime and in terms of Section 151(2), as it then stood, approval of the Joint Commissioner of Income Tax (JCIT) was mandatory, instead, the record demonstrates that approval was obtained from the Principal Commissioner of Income Tax. Such approval is without jurisdiction and renders the notice non est in law. We therefore observe that the instant case is covered on the jurisdictional aspect i.e., no notice under section 148 of the Act can be issued for AY 2015-16 as the same is issued without prior approval of the specified authority under the new regime in view of the judgement rendered by Hon’ble Supreme Court in the case of ‘Union of India and Others vs. Rajeev Bansal 2024 SCC OnLine SC 2693 wherein it is held as under :- “73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments. 128 A table representing the prescription under the old and new regime is set out below:
Regime Time limits Specified authority Section 151(2) of Before expiry of four Joint the old regime years from the end of the Commissioner relevant assessment year Section 151(1) of After expiry of four years from Principal Chief Commissioner or the old regime the end of the relevant Chief Commissioner or Principal assessment years Commissioner or Commissioner Section 151(i) of the Three years or less than three Principal Commissioner or new regime years from the end of the Principal Director or relevant assessment year Commissioner or Director Section 151(ii) of More than three years have Principal Chief Commissioner or the new regime elapsed from the end of the Principal Director General or relevant assessment year Chief 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.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. 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 April 2021, the prior approval must be obtained from the 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 PART E 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.
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. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non- compliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.
Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre- conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will PART E accordingly extend the time limit for the grant Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.”
11. In this regard, we observe that the notice dated 30.03.2021 issued by the AO under section 148 of the Act is illegal, bad in law, and without jurisdiction as the same has been issued without taking the valid approval/satisfaction from the prescribed authority mentioned under Section 151 of the Act.
Further we observe that since more than 3 years have elapsed while issuing notice for the year under consideration, i.e., AY 2015-16, hence, the alleged approval has to be obtained from PCCIT or PDGIT, and if there is no PCCIT or PDGIT, then from CCIT or DGIT under the provisions of Section 151(b) of the Act. Further, as is evident from the aforesaid provisions of Section 151 of the Act, the procedures prescribed thereunder are mandatory in nature and Assessing Officers are bound to follow the procedure in letter and spirit.
It is well settled that the failure of an assessing officer to obtain the previous sanction of the specified authority vitiates the entire proceedings and the notice cannot be regarded as valid. A Power which is conferred upon a particular authority has to be exercised by that authority only and the satisfaction which the statute mandates of a distinct authority cannot be substituted by the satisfaction of another.
We further observe that in the present case, as approval is not from the 'specified authority' in terms of section 151(ii) of the Act, the impugned notice is without jurisdiction, invalid, unlawful, and is liable to be quashed. We also noted that the question as to which is the specified authority whose approval is mandatory, would depend on whether the notice under Section 148 of the Act was issued within a period of three years from the end of the relevant assessment year or thereafter. We further find force from the order rendered by Hon’ble ITAT, Delhi in the case of Genpact India Holdings v. ACIT,Circle-1(3)(1), ITA No. 1527/Del/2024.
Further, we observe that it is trite law, that grant of the sanction by the authority under Section 151 of the Act, is not a mechanical act on his part but it requires due application of mind to the reasons recorded before granting the sanction and this has been provided so as to safeguard against issue of reopening notice (which seek to disturb the settled position) to ensure that assessee is not troubled with reopening issues without satisfactory reasons. Therefore, it must pass muster of the Superior Officer in the context of Sections 147 and 148 of the Act, before it is issued to the party.
Accordingly, in view of our above findings, we observe that in the present case, the mandatory and binding provision of erstwhile Section 151 of the Act has not been followed and the approval has not been taken from the appropriate authority. Thus, the notice issued without a valid approval is illegal, bad in law and without jurisdiction and we quash the assessment on this ground alone.
17. Since we have quashed the assessment order on the jurisdictional issue, the other grounds raised
by the assessee were not adjudicated at this stage and the same are kept open.
18. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 10th day of December, 2025.